HR Demand Flashcards
HR demand
The firm’s future need for human capital, types of jobs, and the number of positions that must be filled to implement firm strategy
Ways to improve the accuracy of forecasts
- Include factors that contribute to changes in demand
- Like seasonal changes- let demand
forecasts follow sales changes with the
seasons
- Like seasonal changes- let demand
- Do research and analysis on several factors affecting demand- requires a longer time frame and more data sources
Quantitative Methods
Trend/Ratio Analysis
Time Series Models
Regression Analysis
Structural Equation Modelling
Trend analysis
Way of forecasting using historical changes in one or more organizational indices
- looks at employment changes in past
- more practical in static business environments
Ratio Analysis
method of
projecting HR demand
by analyzing the historical relationship
between an operational
index and the number
of employees required
-Compares the historical index to employees required
- Uses ratio as a base for future predictions
Steps in doing effective ratio analysis
- SELECT THE APPROPRIATE BUSINESS/OPERATIONAL INDEX- 1. one known to directly influence demand for labour and 2. requires future forecasting due to the normal business planning process
- TRACK THE OPERATIONAL INDEX OVER TIME- look back at least 4-5 years/ more than decade to get index levels over time
- TRACK THE WORKFORCE SIZE OVER TIME
- look at total number of employees/ amount of direct and indirect labour for same period as index - CALCULATE THE AVERAGE RATIO OF THE OPERATIONAL INDEX TO THE WORKFORCE SIZE
- level of index for year/number of employees required to produce the level of that index - CALCULATE THE FORECASTED DEMAND FOR LABOUR
annual forecast/average employee requirement ratio for each future year arrive
Forecast for future year/ average employee requirement for years past (can be most recent ratio or average of previous ratios)
Examples of Operational Indices
Sales
1) the number of units produced,
(2) the number of clients serviced, and
(3) the production (i.e., direct labour) hours. (so using hrs, it would be hours spent/number of employees in workforce to estimate hours per worker- which could determine full time vs part time)
Time series models
- uses past data to predict future demand
Regressional Analysis
Presupposed a linear relationship between one or more independent variables- causal/predictor variables predicted to affect the dependent variable(criterion variable)
- best shows the relationship between predictor and criterion
Variability- looking at how changes in one variable match up/can be explained by changes in the other variable
So x change in V1 explains/results in x change in V2
Regression value ranges from 0-1
Which variables to add?
Make an informed guess (using indices i suppose) until you can account for most of the variability
So if r=0.5 for one variable, find another. That other variable may have r=.3, and then another variable=.2 and so on. go until you can account for the variables
Avoiding redundant variables
- Can be spotted in the r result and the relationships between predictors
- So if two variables add up to the r value of 1 factor/ r value is very similar and are related, then one is unnecessary. chose the one that would include the other variable
Limitations of regression
- only good for linear relationships- straight increase and decrease. Not useful for when relationship between variables not clear cut
- require significant amounts of historical data- not very feasible for new/smaller firms
Structural Equation Modelling
-Like regression modelling but allows you to use more variables and creates more complex models.
- so it’s like creating a model with the variables and sub variables(that lead to main variables) that directly impact demand for labour
Disadvantage of SEM
requires more data and observations than regression
Qualitative Forecasting Techniques
Management Survey
Scenario Planning
Delphi Technique
Nominal Group Technique
Management Survey
- Using group of experts to make forecasting decisions; particularly line managers and HR
- Can use business consultants, financial anaylists, university lecturers
- Can also use govt agencies like those devoted to labour- Minsitry of Labour and social security
Scenario Planning
A method for imagining future possible organizational states and the
resulting in capabilities, activities, or strategies
that are necessary to be successful in those
future states
Steps to scenario planning
- Propose the forecasting question about future state of firm/environment- “How many households will own an electric car in 10 years?”
- Generate list of factors likely to affect outcome in question- SWOT is useful here as it takes in political, environmental, competitive, social factors
- Sort factors into naturally occurring groups and rank in order of firm’s ability to control them(harder to control factors get higher rankings)
- Select the two groups of factors that are likely to have the strongest and most unpredictable impact on the question
- Narrate a description from each four “worlds” (represented by each quadrant)
- Suggest skills, competencies and other org requirements that would be necessary for the firm to be able to operate in each world
- Generare a demand forecast necessary to fill firm requirements in each world
Benefits and drawbacks of SP
- allows forecaster to understand most important assumptions that go into demand forecast
-potentially small changes to these assumptions could bear large differences in the demand estimates for employees. Scenario planning therefore assists planners in developing a variety of future demand scenarios, and helps
planners to understand how much leeway exists in any one demand forecast before that
forecast is no longer viable
- can have course of action for each “world”/scenario
Delphi technique
A process in which
the forecasts and
judgments of a
selected group of
experts are solicited
and summarized in an
attempt to determine
the future HR demand
Advantage of delphi technique
Avoids issues of face to face issues like:
reluctance on the part of individual experts
to participate due to
(1) shyness, (
2) perceived lower status or authority, (
3) perceived communication deficiencies,
(4) issues of individual dominance and groupthink (i.e.,
group conformity pressures), and so on
Disadvantages of Delphi technique
- higher costs dut to series of questionnaires needed
- process dependent on individual knowledge and commitment of each member
- insufficient attention paid to criteria for selecting experts, data may lack sufficient info to make decisions
Steps in delphi method
DEFINE AND REFINE THE ISSUE OR QUESTION
project coordinator works with HR to identify specific job/skill category/ activity that will be th e focus of the delphi technique
- IDENTIFY THE EXPERTS, TERMS, AND TIME HORIZON
- ORIENT THE EXPERTS- orientation process for experts includes an overview of the
demand forecasting decision process. The experts are told either that there will be a predetermined number of questionnaire iterations or that the sequence will continue until a majority opinion exists among the experts.
ISSUE THE FIRST-ROUND QUESTIONNAIRE-Typically, this first
questionnaire focuses on defining both the explicit assumptions made by each of the
experts and the background rationale supporting his or her particular demand estimate.
ISSUE THE FIRST-ROUND QUESTIONNAIRE SUMMARY AND THE SECOND
ROUND OF QUESTIONNAIRES- Getting summary of first round- identifies common and conflicting themes among responses
Continue Issuing questionnaires- until all predetermined stages are complete or until group response summary reaches clear majority decision
Nominal group Technique
Long run, qualitative demand forecasting method, like delphi method, but is done face to face only after individual written, preparatory work has been done and all the demand estimates (idea generation) have
been publicly tabled, or written on a flip
chart, without discussion
- seen as property of group and is impersonal, reducing dominance issues and such
-the expert forecast is
determined by a secret vote of all group
members on their choice of the tabled
demand forecasts. Majority vote gets it
primary advantage to NGT
allows all participants to contribute
to the process at an equal level by reducing
the tendency for more extroverted individuals to dominate the process.
HR BUDGETS
quantitative, operational, or short-run, demand estimates that contain the number and types of jobs or positions required by the organization as a whole and
for each subunit, division, or department
HR budgets, prepared by the
HR staff in conjunction with line managers, take into consideration
historical company staffing trends, competitor
staffing practices, industry and professional associations,
Staffing table
Total HR demand
requirement for operational or short-run time
periods
HR planners can determine short-run future demand
requirements for subunits and the organization as a whole. This
enables
budgeting processes to incorporate changes in compensation
costs linked to the level of future human capital demand.
COMBINING QUANTITATIVE AND
QUALITATIVE METHODS
If both methods arrive at
similar forecasts, then planners can be more certain of the results. However, if one
method leads to dramatically different results from the other, then it would be reasonable to question the assumptions of both methods to try to understand where differences in assumptions lead to discrepancies in the forecast
the different types of information that quantitative and qualitative
methods use as inputs to the forecast can arrive at complementary findings. By using
both methods of analysis, planners can arrive at a richer, more detailed understanding
of the demand for labour, and how the factors that affect demand can change those
estimates.
- leads to simulation method
Simulation
A blend of qualitative
and quantitative modelling that incorporates
a set of assumptions about relationships
among variables in a mathematical algorithm
= can model non-linear relationships
simulation process can be broken down into several steps:
- Using qualitative methods, collect the relevant variables.
- Describe how these variables interact together to by developing a process
model to map the relationships between variables. Line managers in an excellent position to provide insights to this process.
3.Use simulation software and develop the algorithms to estimate the model.
4.Test the model using historical data to validate the assumptions used in its
development.
5.Different assumptions can be easily tested in the model by inputting new
scenarios and re-running the simulation.
main benefit of simulation
developing a better understanding of what factors influence demand and supply, and what processes may be causing bottlenecks in the flow of
human capital- not necessarily accuracy
=In this sense simulation is considered to be more descriptive of processes
than prescriptive.2
The advantage of simulation is in providing knowledge around how
demand estimates might react to changes in environmental factors, or any other factor assumptoins
Note
HR practitioners in large organizations might be able to team with operations
and/ or the finance department to develop integrated simulation models that incorporate
product demand with manufacturing constraints and human capital demand and supply
to streamline the flow of resources across the firm. This kind of integration between customer needs and organizational resources can lead to faster response times for organizations to provide services or products to customers, which has the potential to provide a
source of competitive advantage through human capital planning
