HR Demand

Learning Topics

 Demand forecasting
 Linkages between labour demand forecasting and the supply
 Various demand forecasting techniques

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 HR Demand

Projected human resources requirement

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 Methods of Forecasting
 Quantitative
 Trend Analysis
 Ratio Analysis
 Regression Analysis

 Qualitative
 Scenario Planning
 Impact Analysis
 Delphi Technique
 Nominal Group Technique
 Trend Analysis

 Historical relationship between a business index (e.g., sales,

contracts, units sold etc.) and the number of employees
required to achieve that index (labour demand)

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 Effective Trend Analysis

Five steps to conducting an effective index/trend analysis:

1. Select the appropriate business index
2. Track the index over time
3. Track the total number of employees over time
4. Calculate the average ratio of the business index to the total
number of employees
5. E.g. employee requirement ratio - the relationship between
the business index and the demand for labour
6. Calculate the Forecasted Demand for Labour

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 Ratio Analysis
 involves examining the relationship between
an operational index and the demand for
labor
 Others operational indices are …
 The number of units produced
 The number of client serviced
 The production (e.g. direct labor) hours
 Employee Requirement Ratio

Year Sales ($000) # of Employees Ratio (Sales/EE)

2007 $3,000 123 24.39

2008 3,200 155 20.65

Current Year 2009 3,300 170 19.41

2010 3,400 165 20.61

2011 3,560 180 19.78

2012 3,600 189 19.05

2013 3,800 190 20.00

2014 4,000 199 20.10

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 Steps for Delphi Technique

Sequential surveys with feedback on opinions in previous rounds

Define and refine the issue or question

Identify the experts, terms, and time horizon

Orient the experts

Issue the first-round questionnaire

Issue the first-round summary and second-round questionnaire

Continue issuing questionnaires

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 Steps for the Nominal Group Technique

Long-run forecasting technique utilizing expert assessments

Define and Refine the Issue or Question and the Relevant Time Horizon

Select the Experts

Issue the HR Demand Statement to the Experts

Apply Expert Knowledge, State Assumptions, and Prepare an Estimate

Meet Face-to-Face

Discuss the Demand Estimates and Assumptions

Vote Secretly to Determine the Expert Demand Assessment

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 HR Budgets

 Quantitative, operational or short-run demand estimates that

contain the number and types of personnel required by the
organization as a whole and for each subunit, division, or
department

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 HR Budgets: Staffing Table

Staff Demand Requirements Sales ($ Millions)

Executive Positions $1-10 >$10-25 >$25-50 >$50-75

President 1 1 1 1
Vice Presidents 1 1 2 3
Directors 3 3 4 5
Management Positions
HR 3 4 7 10
Financial 3 5 7 11
Operations 2 2 4 6
Marketing 1 2 2 3
Sales 2 2 3 4

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 Scenario Forecasts

Projections of future demand for human resources based on

differing assumptions about future events.

Optimistic
Sales

Normal

Pessimistic

Now T + 1 Year T + 2 Years T + 3 Years

Time
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 Regression Analysis

 Presupposes a linear relationship between independent (casual)

variables and dependent (target) variable, e.g., HR demand
 Linearity is the relationship between the independent and
dependent variables

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 Regression Analysis

Y = dependent variable (HR demand)

A = constant (Y intercept)
B = slope of linear relationship between X and Y
X = independent variable (e.g. level of sales)
Y – Dependent Variable

A
X – Independent Variable
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 Regression Prediction
Y = A + BX
Y = dependent variable (HR demand)
A = constant (Y intercept)
B = slope of linear relationship between X and Y
X = independent variable (e.g. level of sales)

Where

σ 𝑋𝑌 − 𝑁ሺ𝑋തሻ(𝑌ത)
𝐵=
σ (𝑋 2 ) − 𝑁(𝑋ത)2

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 Exercise
Data

X Y
Sales # of Marketing Personnel
($ Millions)
2.0 20
3.5 32
4.5 42
6.0 55
7.0 66

5 Sets of observations

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 Exercise Step 1
Calculate XY, X2, average X and average Y

X Y XY X2
Sales # of
($ Millions) Employees
2.0 25 50 4.00
2.5 28 70 6.25
3.5 30 105 12.25
5.0 38 190 25.00
6.5 54 351 42.25

19.5 175 766 89.75

Average X = 19.5/5 = 3.9 Average Y = 175/5 = 35

N=5

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 Exercise Step 2
Calculate the value of B (slope of the linear relationship between X and Y)

XY X2 N=5 Average X = 3.9 Average Y = 35

50 4.00
70 6.25
105 12.25
190 25.00
351 42.25

766 89.75

766 − 5ሺ3.9ሻ(35) 766 − 683

𝐵= 𝐵= 𝐵 = 6.09
89.75 − 5(3.9)2 89.75 − 76.05
σ 𝑋𝑌 − 𝑁ሺ𝑋തሻ(𝑌ത)
𝐵=
σ (𝑋 2 ) − 𝑁(𝑋ത)2
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 Exercise Step 3
Calculate A (constant or intercept)

Average X = 3.9 Average Y = 35 B = 6.09

IF AND
Y = A + BX A = 35 – (6.09)(3.9)
Then A = 11.23
𝐴 = 𝑌ത− 𝐵𝑋ത

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 Exercise Step 4
Determine the regression prediction equation

Y = A + BX Whew! So what?
A = 11.23 Independent causal variable X
B = 6.09 (e.g., sales) AND
Dependent variable Y
X = Dependent Variable (e.g., predicted # of personnel)
Y = 11.23 + (6.09)(X)
Even if sales are zero the value for A is
11.23 (round to 11.0) or 11 persons.

For every increase unit ($1 Million)

sales (X) there is a predicted increase
of 6.09 staff (Y) associated with that
change.

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 Exercise Step 5
Calculate predicted HR demand (Y) by inserting values for X

Predict the HR demand for personnel at $8 million and $10 million.

Y = A + BX $8 million $10 million

A = 11.23
B = 6.09
Y = A + BX Y = A + BX
X = Sales ($M) A = 11.23 A = 11.23
Y= 11.23 + (6.09)(X) B = 6.09 B = 6.09
X=8 X = 10
Y = 11.23 + (6.09)(8) Y = 11.23 + (6.09)(10)

Y = 59.99 Y = 72.18
60 Staff required 72/73 Staff required
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