Forecasting: An effective resource planning technique
JONCORP HOLDINGS* is dependent on resource planning for the organisational functioning of the company. The key factor is being able to predict future staff supply and demands as the company is highly labour dependent. Like all companies talent is in short supply - planning is essential for survival.
The challenge
When it comes to resource planning, there is a huge amount of criticism that it is based on the number of people who are employed, rather than placing emphasis on the effective contribution of each employee to the organisation. The belief is that resource planning’s focus is too quantitative and should be more qualitative. In terms of the future, the questions an organisation needs to ask are; what are the skills that will be required and do they have a large and skilled enough talent pool from which to acquire them? These questions require organisations to develop methods of forecasting future employment needs of the business so that they can face the ups and downs of employment supply and demand.
The solution
The evaluation of future needs at JONCORP HOLDINGS* had to be based on the analysis of current and future policies and growth trends. ‘Managing human resources within extension,’ by K, Vijayaragavan and Y, Singh, states that there are several forecasting techniques including: the expert formal survey; the Delphi technique; statistical analysis; computer models and planning budget analysis.
Forecasting employee demand involves analysing past and current information, estimating future staffing and predicting the future supply of workers with appropriate skills. It also entails an estimation of employees’ productivity, a computation of staff turnover and the use of business-management knowledge.
Forecasting at JONCORP HOLDINGS* is done in periods that are short-term (less than one year), intermediate (up to five years) and long range (over five years). Forecasting can refer to either an internal or external supply of labour.
Werther and Davis in their book Improving Agricultural Extension, state that the human resources audits give a report of the skills, abilities and performance of all employees of an organisation. If the organisation does not have this information, it won’t know how to improve. This knowledge will provide for better training and development policies, valuable Workplace Skills Plans, lowered training costs as training efforts are more focused, and greater productivity due to better employee-job matches.
In the article ‘Hr audit and basics,’ by Dr. S. David, a model is given as a means of estimating internal labour supply for a given unit in an organisation (unit: department or sector). It explains how the source of inflow of employees (such as internal transfers or promotions) and of outflow (demotions or retirements etc) affect the estimation of employee supply. The forecast model uses this logic: (Present Staff) – (projected outflows this year) + (projected inflows this year) = the unit’s projected internal supply for this time next year. This is just a model to give the organisation a rough guideline for forecasting. The company must also beware of external factors that can influence the forecasting such as technological developments, the number of graduates from schools and colleges, net migration of an area and economic forecasts.
JONCORP HOLDINGS* used this model to forecast their future labour supply. In January 2010, the company had a workforce of 500 people. From this number, they subtracted the projected outflow of employees which was 15 people (due to 10 terminations and 5 promotions). They predicted that their employee inflow would be 10 people (due to the skills the company predicted it would need). This means that JONCORP HOLDINGS projected internal labour supply for January 2011 was 495. In 2011, their actual labour supply was 490. This discrepancy was due to the influence of external factors.
Benefits of forecasting
According to the article ‘Meeting the challenge of HR Planning with Clarity 6’, by Gary Simon, human resources planning and in particular forecasting is “a highly demanding activity yet crucially important to organisations whose principal asset is their people." According to ‘Developing a National Skills Forecasting Tool for South Africa’, by Rob Wilson and others, forecasting is beneficial as it helps to inform the business about the economic forces that shape South Africa’s labour markets and the wide-ranging implications for the skills that will be needed.
Forecasting as a means of planning an organisation’s future workforce has the advantage of assisting in tailoring the talent requirements to meet the company’s short-term and long-term goals. This improves business planning and financial predictions. It can also establish data that can help those in main managerial positions discover key workforce issues. The more organisations are aware of and clued up on forecasting, the better they will be at addressing issues such as skills shortages and avoiding staff shortages.
*Not Real Name
Frew Murdoch is the assistant editor of HR Pulse. She has a BA degree in communications and English and a passion for HR technology. "I stumbled across your review of our Ethics Guide published 28 June 2012 and wish to thank you for the positive and complimentary comments made – this was a lovely surprise and most rewarding. I will certainly pass this on to all co-authors of the Guide."
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