Chapter 6 – The Forecasting Process
HR forecasting: the heart of the HR planning process, can be defined as ascertaining the net
requirement for personnel by determining the demand for and supply of human resources now
and in the future
Transition based forecasting: forecasting that focuses in tracking internal change instituted by
the organization’s managers.
Event- based forecasting- forecasting concerned with changes in the external environment
Process-based forecasting: forecasting not focused in a specific internal organizational; events
but on the flow or sequence of several work activities.
Benefits of HR forecasting:
1. Reduces HR costs
2. Increases organizational flexibility
3. Ensures a close linkage to the macro business forecasting process
4. Ensures the organizational requirements take precedence over issues of resource
constraint and scarcity.
Human resource demand: the organizations projected requirement for human resources
Human resources supply: the source of workers to meet demand requirements, obtained either
internally (current workers/members of the organizations workforce) or from external
Key personnel analyses conducted HR Forecasters/personnel categories:
1. Specialist/technical/professional personnel
2. Employment equity-designated group membership
-designated groups: identifiable groups deemed to need special attention; in the case of
Canadian HR these are people of aboriginal descent, women, people with disabilities,
and members of visible minorities.
3. Managerial and executive personnel
To effectively obtain sufficient numbers of trained people, the forecasting process has
1. Identify organizational goals, objectives, and plans
2. Determine overall demand requirements for personnel
3. Assess in-house skills and other internal supply characteristics 4. Determine the net demand requirements that must be met from external,
environmental supply sources
5. Develop HR plans and programs to ensure that the right people are in the right place
Prediction: a single numerical estimate of HR requirements associated with a specific time
horizon and set of assumptions
Projections: several HR estimates based on a variety of assumptions
Envelope: an analogy in which one can easily visualize the corners o an envelope containing the
upper and lower limits or “bounds” of the various HR projections extending into the future
Scenarios: a proposed sequence of events with its own set of assumptions and associated
Contingency plans: plans to be implemented when severe, unanticipated changes to
organizational or environmental factors completely negate the usefulness of the existing HR
forecasting predictions or projections
Determining Net HR requirements:
1. Determine HR demand
2. Ascertain HR supply
internal supply: current members of the organizational workforce who can be retrained,
promoted, transferred, and so on to fill anticipated future HR requirements
External supply: potential employees who are currently undergoing training (uni
students) working for competitors, members of unions or professional associations, or
are in a transitional stage, between jobs, or unemployed.
3. Determine net HR requirements
4. Institute HR programs: HR deficit and HR surplus
HR deficit: when demand for HR exceeds the current personnel resources available in
the organization’s workforce (HR internal supply)
HR surplus: when the internal workforce supply exceeds the organization’s requirement
or demand for personnel
Job sharing: when two or more employees perform the duties of one full0time position,
each sharing the work activities on a part-time basis
Attrition: the process of reducing an HR surplus by allowing the size of the workforce to
decline naturally because of the normal pattern of losses associated with retirements,
deaths, voluntary turnover, and so on.
Hiring freeze: a prohibition on all external recruiting activities Chapter 7: HR Demand
Trend analysis: examining the relationship overtime between an operational index such as level
of scales and the demand for labour is a relatively straight forward quantitative demand
forecasting technique commonly used by many organizations.
5 steps to conducting an effective trend analysis:
1. select the appropriate business/operational index
2. track the business index overtime
3. track the workforce size overtime
4. calculate the average ratio of the business index
5. calculate the forecasted demand for labour
Delphi technique: a carefully designed program of sequential, individual interrogations (usually
conducted through questionnaires) interspersed with information and feedback on the
opinions expressed by the other participants in previous rounds.
Six steps to the Delphi technique:
1. Define and refine the issue or question
2. Identify the experts, team and time horizon
3. Orient the experts
4. Issue the first round questionnaire
5. Issue the first round questionnaire summary and second round questionnaires
6. Continue issuing questionnaires Chapter 13 – Outsourcing
Outsourcing: a contractual relationship for the provision of business services by an external
-surveys show that nearly all organizations have outsourced parts of their HR functions.
Functions most likely to be to be outsourced are temporary staffing, payroll, training, recruiting,
and benefits administration.
Three reasons why large corporations do not 100% outsource HRM:
1. The functions that are deemed most critical, such as recruitment, selection, and
performance management, are rarely outsourced.
2. Situations that are impossible to predict, such as industrial relations disputes, creates an
unpredictability that makes it difficult to develop a contractual arrangement.
3. The lack of providers of total HRM services.
-if an organization needs experts and cannot afford to hire or train them, outsourcing may be a
solution; it is becoming a more popular trend.
Six major reasons why organizations choose to outsource:
1. Financial savings: to save money, organizations believe that costs can be reduced by
outsourcing a function such as payroll. Cost control is also related to the issue of money
2. Strategic focus: outsourcing tasks that are non-core activities allow for in-house
employees to focus on their value-added roles. Example: Nike’s core competency is
product design, and the company outsources nearly everything else.
3. Advanced technology: because organizations want to improve technical services, and
may not be able to find technical talent, or they need quick and reliable access to new
technology, they may outsource this talent as well.
4. Improved service: quality improvement can also be a reason to outsource. Managers
can chose “best of breed” vendors that have outstanding track records and more
flexibility in hiring and rewarding their employees.
5. Specialized expertise: organizations who wish to specific expertise also to choose to
outsource. The motto is “outsource when someone can do it better than you”
6. Organizational politics: some organizations outsource to get rid of a troublesome
department. Risks and Limitations of outsourcing:
1. Projected benefits versus actual benefits: the incurred costs ended up being more than
the company expected, and at times, the company will not renew their outsourcing
arrangement as the saving costs were not achieved.
2. Service risks: if contract needs to be changed partially through, then the flexibility is lost,
the outsourced company may enter the market as a competitor. Companies can lessen
the risk of this by creating strategic blocks—terms in the contract that limit the
replication of certain competitive advantages, such as propriety technology, or also
spreading the outsourcing among many vendors.
3. Employee morale: can lead to disintegration of employee culture. When outsourcing is
discussed or decided upon, it decreases employee morale as people fear of job lossm
early retirement, much like downsizing. Outsourcing also may start talented employees
to start job searching or cause anxiety to other employees resulting in lost production.
4. Reduced value: extreme outsourcing can result in a company being empty, hollow like a
shell. Vendor may sell a company’s know how or secrets to a competitor.
Management of outsourcing: outsourcing must be subjected to a cost-benefit analysis. Then,
the following must occur:
Selecting the vendor:
1. Inform the staff of the affected function
2. Prepare a request for proposal (RFP) – describes the responsibilities to be
outsources and invites potential p