HUMAN RESOURCE DEMAND AND SUPPLY FORECASTING
Labour forecasting is key to an organization’s ability to achieve its operational, production,
and strategic goals.
Forecasting Human Resource Supply
The objective of identifying future Human Resource supply requirements is to determine
the number of employees in each job and their knowledge, skills, abilities, and other characteristics .
In addition, forecasting Human Resource supply is essential in determining the characteristics of
hiring sources within the predetermined planning horizon in order to establish whether future
Human Resource supply is sufficient to match future Human Resource demands. For this , an
organization needs to evaluate both their internal and external labour force. This step is dependent
on an accurate assessment of the current workforce situation. Forecasting Human Resource supply
involves an understanding of internal and external potential Human Resource supplies.
Forecasting External Human Resource Supply
There are multiple levels at which external Human Resource supply can be predicted.
Information that will help to develop an understanding of external Human Resource supply
• Supply and demand of jobs or skills
• Educational attainment levels within a region
• Compensation patterns based on experience, education, or occupation
• Immigration and emigration patterns within an area
• Forecasts of economic growth or decline
• Competition for talent
• Industry or occupational expected growth levels.
Forecasting Internal Human Resource Supply
By reviewing the data in the Human Resource audits, projections can be made for future
Human Resource supply. The internal labour force may be affected by temporary absences such as
leaves , permanent absences or turnover etc.
Turnover refers to the termination of an individual’s employment with an organization.
Total turnover is the total number of employees leaving an organization divided by the total
number of employees in an organization. Turnover can be classified into two sub groups—voluntary
and involuntary. Voluntary turnover is defined as employee-initiated turnover, mainly in the form
of quits or resignations. In this instance, the decision to terminate employment with the firm is made
by the employee, without management enticement. Involuntary turnover is defined as employerinitiated
turnover, mainly in the form of dismissals or layoffs.
Trend analysis is considered one of the simplest methods of forecasting future Human
Resource supply. It assumes that past trends and ratios in employee movement are stable and
indicative of future trends and ratios in employee movement. The information collected in the
Human Resource audit is used to identify labour patterns—hiring patterns, retirement patterns,
productivity patterns, and turnover patterns. By examining the trends of the past, the Human
Resource department can predict the effect of the same activity on the future of the organization,
because it is assumed that these patterns will remain stable.
Competency models focus on matching the right skills or competencies needed for each job
with the skills available within the organization. The competency models focus on identifying the
skills/competency supply within the organization, and helping focus future recruitment, selection,
retention, and training activity in core areas of key competencies needed for the organization to
A competency is a set of behaviours that encompass skills, knowledge, abilities,
and personal attributes, that taken together, are critical to successful work accomplishment.
The competency model is a future-oriented model that first reviews competencies that are
aligned with an organization’s mission, vision, and strategy, and then aims to identify an ideal
workforce in terms of those competencies.
A replacement chart is used to estimate vacancies in higher level jobs and identify how
potential Human Resource supply can fill these vacancies via internal movements from lower levels
jobs. A comprehensive replacement chart will include information regarding possible replacements
for vertical or horizontal movement. Generally, a replacement chart includes information about
employees’ performance, readiness to fill the position, and education.
A staffing table provides a clear graphical view of all organizational jobs and the current
number of employees at each job. It presents a simple visual understanding of an organization’s
staffing level within each department and the organization as a whole, in an effort to help
understand the combination of employees that make up an organization’s internal workforce. This
information is useful in evaluating staffing levels by department, branch, the types of staff at each
level and the combination of staff in all categories.
Forecasting Human Resource Demand Analysis
Demand analysis identifies the future human resource requirements needed to maintain the
organization’s mission and goals. The end result of a demand analysis is the identification of the
required number of employees in an organization and the necessary functions that the employee
must perform to meet organizational objectives. Due to the high number of factors that influence
demand, demand is often more difficult to predict than supply.
Factors that need to be considered when forecasting demand include the following:
1. Environmental scanning, including economic, legislative, and competitive pressures
2.The organization’s future strategic goals and plans
3. Expected demand for products or services, including expected sales (across the
organization or at the business unit level)
4. Estimated productivity measures of workforce (can be stable, increase, or decrease)
5. Organizational design or job design, including technological advancements and
6. Projected budgets or financial resource availability
7. New products/processes/ventures that the organization will be launching in the future.