Demand forecasting is the process in which a business predicts the number and type of employees it requires in the future. Small businesses undertake demand forecasting to effectively meet business objectives, such as to increase production. The two general approaches to demand forecasting include statistical and judgmental methods. The most effective way of forecasting a firm’s demand for employees entails taking a multidimensional approach. This entails using both statistical and judgmental methods of forecasting to come to accurate conclusions.

Complete an Employee Allocation Status Report by summarizing details about employees in various departments. Fill in details, such as the number of employees in each department, the level of productivity, the employee tasks and the past performance of each employee.

Undertake a brainstorming session with a panel of experts, which includes the management. Utilize this technique to arrive at a demand forecast by taking into consideration factors, such as marketplace demands for the firm’s products and services, the percentage of the market that the organization will cater to and the availability of technology to meet this demand.

Conduct a trend analysis to determine how many employees the firm will need at the introduction of a new product. Use past trends in sales volume, production levels and customer needs and interests to determine the expected sales volume of a new product. Use this information on expected sales volumes to determine how many employees you need to meet these target sales volume.

Carry out a ratio analysis to determine future employee demand using exact ratios of business factors. Take for example a business factor such as sales volume of $10,000 compared to the number of current employees who add up to 50. Arrive at a ratio of 10,000 to 50. Note that a target to increase sales volume will lead to an increase in the demand for employees to meet the sales volume targets.

Use statistical human resource management systems software to conduct the regression technique, which provides the final and most accurate forecast of employee demand. Key in business factors, such as sales volume or productivity level, that you wish to measure against the current levels of employees.

Take note of the regression line created by the software. Realize that at each level or value of a business factor, such as sales revenue, the regression line indicates the number of employees needed to generate this amount of sales revenue.


Statistical methods of employee demand forecasting use figures and analytical techniques to arrive at more accurate predictions of employee demand. Judgmental methods utilize human judgment (management decision making) and expertise to arrive at predictions about employee demand. Statistical methods offer more accurate results.