Brianna has a masters of education in educational leadership, a DBA business management, and a BS in animal science.
What Is HR Forecasting?
Meet Laura! Laura works for a big company where they make sunglasses. Her company has many different departments, and Laura works in the human resource department. Her primary duties involve hiring new employees. While she has always been good at finding qualified employees, she struggles at knowing when she needs to hire them. Laura decided to do some research to see if there were any techniques or methods to help her learn how to predict when to hire new employees. It was at that time that Laura came across human resource forecasting, which can give her the tools to better understand the future needs of her company. Let's take a look.
Before we look at some of the techniques and methods of HR forecasting, lets define some basic terms. First human resources is the department in charge of recruiting, hiring, and training employees. This means they are in charge of staffing the company and fulfilling any employee needs. Human resource forecasting is the process of determining or predicting the needs of the company by means of data and models. Forecasting is used to understand the skills and performance level of the current staff to help identify any gaps where hiring or restructuring needs to occur. By looking at past data and company statistics, the HR department can determine future needs. For example, Laura might look at the trends of past years when the demand for sunglasses increased. If she notices that there is an increase in demand in the spring, she might realize that in the future she should plan to hire more staff at that time.
So, now we know that using past data and trends to help predict future needs is referred to as forecasting. But, how does a company do this? In this section, we will look at a step-by-step method that a company might use when forecasting human resource needs:
1. Create an overview of the company. Before you can predict future needs, you need to determine the current level of your company. This means understanding each job and the tasks that position is required to complete. You then need to determine the current output level as well as the desired output level. This will allow you to calculate the needed number of staff to reach the desired output level. So, if Laura determines that the company wants to sell more sunglasses during the Christmas season, she may determine current output levels at that time and desired output levels at Christmas, and then ramp up hiring to meet that desire.
2. Ask management to complete a survey and create a report based on their combined responses, known as the Delphi technique. Who better to ask about the needs of each department, then the managers that oversee each of them? By having management express their opinions about future needs of the company, the HR department will be better equipped with the knowledge of the departments that are struggling and the ones that are adequately staffed.
3. Using raw data, conduct calculations to determine the company's average statistics. For example, you might want to know how long the average employee works for the company and analyze how many employees are close to this limit. This data can help the HR department forecast the future needs.
4. Watch for industry trends. Sometimes what is happening in your company is also happening across the industry. Looking at the data of the overall trends in the industry can help the company narrow down where to start. For example, if Laura found out that the data from the sunglass industry suggests that more employees quit around summer, then she could use that data to possibly increase hiring during the end of spring to be prepared for this trend.
Now that we know the forecasting method, let's take a look at the techniques used by human resource personnel. Below you will find a list and how to use them:
1. Trend analysis: This is the technique where a company looks at past trends to predict future trends. For example, Laura might look at past sales of sunglasses to determine the times of year when sales were the highest. She can then use that information to increase the number of employees she hires during those peak times.
2. Ratio analysis: a company that uses this technique wants to calculate the number of employees needed based on a particular business variable. For Laura, her company uses production to determine the number of staff needed. For example, the company might need one production line operator for 100 pairs of sunglasses produced. So, if Laura's company determines that they will produce 800 pairs of sunglasses, there demand forecast states they will need 8 production line operators.
3. Management opinion: This is the technique when the company relies on the requirements of departmental managers. Based on these suggestions, a company might hire more employees. Perhaps, if Laura wanted to use this technique, she may gather information from each department manager, such as production, sales, shipping, etc., to determine when she should hire more employees.
The human resource department is responsible for recruiting and hiring employees. In order to determine when and how many to hire, human resource forecasting may be used. A step-by-step method for human resource forecasting includes:
- Looking at the company as a whole
- Asking managers to take surveys
- Conducting calculations
- Watching for industry trends
Many different techniques can be used to help predict the future needs of the company. Some more common techniques are:
- Trend analysis
- Ratio analysis
- Management opinions
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