Lecture 4 HR Demand - Topics include: - Forecasting methods (Quantitative and Qualitative) - Regression PDF

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Topics include:
- Forecasting methods (Quantitative and Qualitative)
- Regression Analysis explanation
- Delphi technique vs Nominal Group Technique...

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HR Demand Forecasting Methods Qualitative Methods Judgment Historical Analogy Focus Group Marker research Diffusion

Quantitative Methods Time Series Methods Causal Methods Moving Average Regression Exponential Smoothing Econometric Trend/Ratio Analysis Input-Output Decomposition Disaggregated Advanced Time Series Methods Neutral Nets Box-Jenkins (ARIMA) Markovian

Quantitative (compare and contrast, understand possible indices to use) Ratio Analysis (in-class exercise) Ratio Analysis: a quantitative approach to forecasting future human capital needs by analyzing the historical relationship between an operational index and the demand for labour – Ex. Ratio of sales to employees, – Other operation indices: units produced, clients serviced, production hours (direct labour) Can use to ascertain demand requirements for whole org, department/ operational subunit, direct labour, indirect labour – Direct labour – employees involved in directly producing good/service – Indirect labour – employees not involved in directly producing good/service (ex. HR staff) Usually involves only the relationship between a single business variable and demand for labour A single-variable relationship provides a relatively simplistic forecast A more comprehensive forecast reflects several business variables (ex. Consumer preference, interest rates, level of unemployment, consumer disposable income, etc.) 5 Steps to conducting an effective ratio analysis – Select the appropriate business/operational index o Must be readily available, known to have direct influence on org labour demand, subjected to future forecasting as a result of the normal business planning process – Track the operational index over time o Go back at least 4-5 most recent years, preferable last 10 years o Record the quantitative levels of the index over time (plot the data over time) – Track the workforce size over time o Record the historical figures of total number of employees (or direct/indirect labour) for exactly the same period used in tracking the operational index (step 2) – Calculate the average ratio of the operational index to the workforce size o Calculate the employee requirement ratio for each year of the historical data. Determine the average ratio based on the historical data that describes the relationship between the two variable over time o Employee requirement ratio = level of operational index / total # required employees that year  Ex. Level of sales 2010/# of employees required to produce level of sales 2010  Ex. $ 2M sales 2010/500 employees required to produce sales 2010 = 4000 This say that for every $4000 in sales, 1 employee is required

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Calculate the forecasted demand for labour o Forecasted annual demand for labour = Annual forecast for the operational index/avg employee requirement ratio for each future year o Ex. Obtain future sales forecast for next 5 years. For each year, calculate the forecasted sale by average employee requirement ratio (based on historical data) o Ex. Based on 10 year of data, average employee requirement ratio = 4000 Projected sale in 4 years = $5M Forecasted demand for labour = $5M / 4000 = 1250 employees required

Trend Analysis Trend Analysis: any quantitative approach to forecasting future human capital needs by extrapolating from historical trends in one or more organization indices – Ex. Plot previous levels of employment and use as index, assuming that future employee requirements will be quite similar to actual past needs Can be used to spot how changes in other attributes (ex. Sales, inventory levels, revenues, etc.) might correspond with changes in employee requirements Regression Analysis Presupposes that a linear relationship exists between one or more independent variables, which are predicted to affect the dependent variable Understanding Y=mx + b m = Y/x (change in labour); the linear relationship between x & Y b = y-intercept (when x=0); constant Descriptors of independent and dependent variables Y = dependent (target) variable – HR demand X = independent (causal) variable) – The index used (sales level) Scenario Planning Projections, or multiple-predictor estimates, of future demand for personnel predicted on a variety of differing assumptions about how future org events will unfold The method most often used to develop organizational strategy 3 possible future scenarios: – Optimistic – Realistic; most likely – Pessimistic How it works with regression analysis and budget/staffing tables Budget/staffing tables – Each scenario predicted has its own set of assumptions, resulting in different estimates presented in a single staffing table for each specific course of action. – Having an comprehensive set of staffing tables reflecting a wide variety of scenarios allows ready access to flexible, preplanned demand estimates Budgets/staffing tables HR Budgets: quantitative, operation, or short-run demand estimates that contain he number and types of jobs required by the organization as a whole and for each subunit, division, or department – The HR budget process produces a staffing table

Staffing table: Total HR demand requirement for operational or short-run time periods The distribution of all jobs/functions in org into 5 classifications: – Key – Core – Support for core – Essential but not core – Deadwood Qualitative (compare and contrast) Delphi Technique Forecasts and judgements of a selected group of experts are solicited and summarized in an attempt to determine future HR demand A carefully designed program of sequential, individual interrogations via questionnaires Members are selected and don’t meet face to face Project Coordinator manages and summarizes information from the experts Nominal Group Technique Long-run forecasting technique utilizing expert assessments Group meets fact to face after individual written prep work Individual demand estimates have been publicly tabled without discussion Each demand estimate is considered the property of the entire group – Minimizes potential dominance, personal attacks and defensive behaviour Forecast is determined by secret vote – Estimate with highest ranking during vote is deemed the group’s forecast Advantage: – Allows all participants to contribute at an equal level by reducing tendency for extroverts to dominate process...