HUMAN RESOURCE MANAGEMENT – BBC 1109 (2ND WEEK)

LECTURE NOTES

Forecasting External and Internal Labor Supply

External Labor Supply

The external supply of labor is a function of a range of economic and qualitative factors
including the availability of housing, transportation, the quality of life, and the number and
quality of local/regional educational and training educational institutions. Wages, competition for
labor, demographic and immigration trends, policies and individual preferences and perceptions
of utility as well as the structure of jobs will also impact the availability of labor and labor force
participation.

Important Barometers of Labor supply:

1. Net migration into and out of the area.

2. Education levels of workforce
3. Demographic changes in population.
4. Technological developments and shifts
5. Population Mobility
6. Demand for specific skills
7. National regional unemployment rates
8. Actions of competing employers
9. Government policies, regulations, pressures.
10. Economic Forecasts for the next few years.
11. The attractiveness of an area.
12. The attractiveness of an industry in a particular place.

Formulating HR plans

Organizations operate in a changing environment. Consequently Human resources

requirements also change continually. Changes in product mix, union agreements, competitive
actions are some of the important things that need special attention. The human resource
requirements identified along the procedure outlined in the above box need to be translated into
concrete HR plans backed up by detailed policies programs and strategies (for recruitment,
selection., training, promotion, retirement, replacement, etc.)

Internal Labor Supply

A profile of employees in terms of age, sex, education, training, experience, job level,
past performance, and future potential should be kept ready for use whenever required.
Requirements in terms of growth/diversification, and internal movement of employees (transfer,
promotions, retirement, etc.) must also be assessed in advance. The possibilities of absenteeism
and turnover should be kept in mind while preparing the workforce analysis. Through
replacement charts or succession plans, the organization can even find out the approximate
date(s) by which important positions may fall vacant. Frequent manpower audits may be carried
out to find out the available talent in terms of skills, performance, and potential.

EXTERNAL FACTORS AFFECTING HR SUPPLY FORECASTING

1. The external supply of human resources depends on some factors mentioned below.
2. Supply and demand of jobs.
3. Literacy rate of the nation.
4. Rate of population
5. Industry and expected growth rate and levels
6. Technological development.
7. The compensation system is based on education, experience, skill, and age.

INTERNAL FACTORS AFFECTING HR SUPPLY FORECASTING –

The internal supply of human resources depends on some factors mentioned below.

1. Organizational features (e.g., staffing capabilities).

2. Productivity - rates of productivity, productivity changes.
3. Rates of promotion, demotion, transfer, and Turnover

Methods of forecasting Internal Labor Supply

 The most important techniques for forecasting human resource supply are Succession
analysis and Markov analysis.

Succession analysis

Once a company has forecasted the demand for labor, it needs an indication of the firm's
labor supply. Determining the internal labor supply calls for a detailed analysis of how many
people are currently in various job categories or have specific skills within the organization. The
planner then modifies this analysis to reflect changes expected in the near future as a result of
retirements, promotions, transfers, voluntary turnover, and terminations.

Markov Analysis

Markov Analysis—transition probability matrix is developed to determine the

probabilities of job incumbents remaining in their jobs for the forecasting period.

The technique is named after Russian mathematician Andrei Andreyevich Markov,

A transition matrix, or Markov matrix, can be used to model the internal flow of human
resources. These matrices simply show as probabilities the average rate of historical movement
from one job to another. Figure 2-12 presents a very simple transition matrix. For a line worker,
for example, there is a 20% probability of being gone in 12 months, a 0% probability of
promotion to manager, a 15% probability of promotion to supervisor, and a 65% probability of
being a line worker this time next year. Such transition matrices form the bases for computer
simulations of the internal flow of people through a large organization over time

Concentration
The Concentration in Human Resource Management program provides the opportunity to
acquire human resource management skills and knowledge, and develop proficiency to
understand the importance and specific functions influencing and motivating an organization’s
Human Resources.

The concentration in human resource management prepares you to meet the challenges of
strategic and operational human resource roles.

Preparing You for Success

 Human resource management courses give you the analytical and interpersonal skills you
need to make personnel decisions for organizations. Discussions about labor relations,
employment law, and workplace environments show you how to navigate workplace challenges.
You complete the degree with a professional capstone project in which you work with a local
business or non-profit. A concentration strategy involves trying to compete successfully within a
single industry.

By the time you graduate, your experiences may include:

 Professional development and networking through the Society for Human

Resource Management, Women in Business, and Phi Chi Theta business
fraternity
 Mentoring relationships with faculty who are active in local business
development

Making Your Mark

Human resource management majors are valued in corporate and small business settings.
In recent years, almost all HRM students found jobs within six months of graduation. They’re
working at places such as Accenture, Aon Hewitt, OSF HealthCare, and PepsiCo.

Forecasting HR demand

Demand forecasting is the process of estimating the future quantity and quality of people
required. The basis of the forecast must be the annual budget and long-term corporate plan,
translated into activity levels for each function and department. In a manufacturing company, the
sales budget would be translated into a production plan giving the number and type of products
to be produced in each period. From this information, the number of hours to be worked by each
skilled category to make the quota for each period would be computed. Once the hours are
available; determining the quality and quantity of personnel will be the logical step.

There are several good reasons to conduct demand forecasting. It can help

1. Quantify the jobs necessary for producing a given number of goods, or offering a
given amount of services.
2. Determine what staff mix is desirable in the future
Forecasting Techniques: Forecasting techniques vary from simple to sophisticated ones. Before
describing each technique, it may be stated that organizations generally follow more than one
technique. The techniques are:

 Managerial Judgement
 Ratio-Trend Analysis
 Regression Analysis
 Work-Study Techniques
 Delphi Technique
 Follow Models

Managerial Judgement: This technique is very simple. In this, managers sit together, discuss
and arrive at a figure which would be the future demand for labor. The Technique may involve a
“Bottom-Up” or a “Top-Down” approach.

Ratio-trend analysis: This is the quickest forecasting technique. The Technique involves
studying past ratios, say, between the number of workers and sales in an organization and
forecasting future ratios, making some allowance for changes in the organization or its methods.

Regression analysis: This is similar to ratio-trend analysis in that forecast is based on the
relationship between sales volume and employee size. However, regression analysis is more
statistically sophisticated.

Work-Study Techniques: It can be used when it is possible to apply work measurement to

calculate the length of operations and the amount of labor required.

Delphi Technique: The Delphi technique is a method of forecasting personnel needs. It solicits
estimates of personnel needs from a group of experts, usually managers.

Flow Model: Flow models are very frequently associated with forecasting personnel needs. The
simplest one is called the Markov Model.

HR points to plunder: Human resource planning

Human resource planning enables businesses to meet their current and future demands for
talent, allowing human resource managers to anticipate and develop the skills most valuable to
an organization, and providing the enterprise with the optimal balance of staff in terms of
available skill-sets and numbers of personnel. Proper planning also provides a path for future
development by establishing a reservoir of talent capable of filling leadership roles.

What Is Human Resource Planning?

Beyond a simple consideration as the workforce, the human resources of an organization

represent the sum of knowledge, skills, aptitude, creative abilities, and talents available to the
enterprise, in addition to the values, attitudes, and benefits that each individual contributes to the
business.

HR Planning Methodology

While forecasting workforce demand is at the heart of human resource planning, HR

professionals require a comprehensive and in-depth view of their organization and an
understanding of multiple factors to put together a plan. Smartsheet.com identifies seven key
steps in the planning process, which may be applied in terms of their relevance to the
circumstances of a specific enterprise:

Step One: Analyze the objectives of your organization

Step Two: Make an inventory of current human resources

Step Three: Forecast your HR demand

Step Four: Determine the number and extent of skills gaps

Step Five: Draw up an action plan

Step Six: Integrate and implement the plan

Step Seven: Monitoring, measurement, and feedback

Trending in HR: Outsourcing HR!

HR outsourcing is a contractual agreement between an employer and an external third-
party provider whereby the employer transfers the management of, and responsibility for, certain
HR functions to the external provider. Many types of HR outsourcing options are available to
employers. The options can be as specific as outsourcing one particular aspect of one HR
function—such as applicant tracking for affirmative action purposes—or as broad as outsourcing
the entire human resource department.

Advantages of outsourcing

There are many reasons why a business may choose to outsource a particular task, job or
process. For example, some of the recognised benefits of outsourcing include:

 Improved focus on core business activities

Outsourcing can free up your business to focus on its strengths, allowing your
staff to concentrate on their main tasks and on future strategy.
 Increased efficiency
Choosing an outsourcing company that specialises in the process or service you
want them to carry out for you can help you achieve a more productive, efficient service,
often of greater quality.
 Controlled costs
Cost savings achieved by outsourcing can help you release capital for investment
in other areas of your business.
 Increased reach
Outsourcing can give you access to capabilities and facilities otherwise not
accessible or affordable.
 Greater competitive advantage
Outsourcing can help you leverage knowledge and skills along with your
complete supply chain.

Disadvantages of outsourcing

Outsourcing involves handing over direct control over a business function or process to a
third party. As such, it comes with certain risks. For example, when outsourcing, you may
experience problems with:

 Service delivery - which may fall behind time or below expectation

 Confidentiality and security - which may be at risk
 Lack of flexibility - contract could prove too rigid to accommodate change
 Management difficulties - changes at the outsourcing company could lead to friction
 Instability - the outsourcing company could go out of business