Forecasting Techniques Used in HR
Human resources forecasting is critical for managing a fluid business environment and for supporting strategic business plans. While getting the right people in the right places at the right time can be a challenge for any size business, time and budget constraints can make HR forecasting especially trying for small-business owners. A small upfront investment of time and modified techniques that don’t require a large budget can make HR forecasting less difficult for a small business and still produce accurate results.
Small-business entrepreneurs often operate in a dynamic, forward-moving environment characterized by rapidly changing technologies, products and shifting markets. Although HR forecasting techniques still include both quantitative and qualitative assessments, techniques that focus on qualitative data are more flexible and allow small-business owners to respond more quickly to changing market conditions. Labor market forecasts are valuable external data sources when using HR forecasting techniques that focus on quantitative data.
Replacement planning, allocation planning and nominal group techniques often work in combination. Replacement planning is a charting technique that lists each business role according to department, notes whether the role is currently filled and if so, provides relevant information about the employee holding the position. Allocation planning looks to see if staffing needs can be met by reallocating current employees or if the business needs to access the external labor force. Nominal group is a team-oriented forecasting technique that provides the forecasting framework. For example, after conducting replacement and allocation planning, a team that includes the business owner and department managers can then hold a discussion about staffing requirements for the next reporting period and make forecasting decisions together.
Trend and ratio analyses are two of the most commonly used quantitative forecasting techniques. Trend analysis is a more suitable technique for an existing business, because it uses historical staffing and sales data to make forecasting predictions. Ratio analysis is a forecasting technique that new businesses or those having less than five years of historical staffing data often use. Ratio analysis uses sales or service projections to forecast future staffing needs. A business could determine, for example, it needs two sales associates for every 30 customers and base forecasting predictions on these numbers.
Large businesses most often conduct HR forecasting annually. This time frame can be difficult for small businesses that either measure growth using a shorter time period or do not have enough historical data to rely on to make long-range forecasting decisions. Adjusting the time frame so forecasting covers a three- or six-month period can help small businesses with special needs make more accurate HR forecasts. In addition, large-business HR forecasting techniques often use proprietary software packages and subscribe to national or international databases for making “numbers-oriented” quantitative forecasting assessments. Small-business owners can use the same techniques but at a reduced cost using manual calculations or spreadsheet software and by getting data from regional or local government offices.