For example, demand forecasts are estimates of future requirements, and these may be prepared on the basis of assumptions about the productivity of employees. But the supply forecast will also have to consider productivity trends and how they might affect the supply of people.A flow chart of the process of human resource planning is shown in Figure 29.1 and each of the main activities is described below.
Business PlanForecast of activitylevels Analysis of requirements: numbers, skills and behavioursDemand forecast Supply forecastForecast of futurerequirements Action planning:RecruitmentTrainingDownsizingIncreasing flexibilityFigure 1 Human resource planning flow chart
Scenario planningScenario planning is simply an assessment of the environmental changes that are likely toaffect the organization so that a prediction can be made of the possible situations that may have to be dealt with in the future. The scenario may list a range of predictions so that differentresponses can be considered. The scenario is best based on systematic environmental scanning,possibly using the PEST approach (an assessment of the political, economic, social and technological factors that might affect the organization). The implications of these factors on theorganization’s labour markets and what can be done about any human resource issues can then beconsidered.Demand forecastingDemand forecasting is the process of estimating the future numbers of people required and thelikely skills and competences they will need. The basis of the forecast is the annual budget andlonger-term business plan, translated into activity levels for each function and department ordecisions on ‘downsizing’. In a manufacturing company the sales budget would be translatedinto a manufacturing plan giving the numbers and types of products to be made in each period.From this information the number of hours to be worked by each skill category to make thequota for each period would be computed. Details are required of any organization plans thatwould result in increased or decreased demands for employees, for example setting up a newregional organization, creating a new sales department, decentralizing a head office function tothe regions. Plans and budgets for reducing employment costs and their implications on thefuture numbers of people to be employed would also have to be considered.The demand forecasting methods for estimating the numbers of people required are describedbelow.Managerial judgmentThe most typical method of forecasting used is managerial judgment. This simply requiresmanagers to sit down, think about their future workloads, and decide how many people theyneed. It might be done on a ‘bottom-up’ basis with line managers submitting proposals foragreement by senior management .
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