HR forecasting: the starting point for effective recruitment

Business challenges may shift often. Just as financial forecasts are required for growing sustainably and reaching strategic goals, so are HR forecasts necessary for shedding light on human capital needs. At the same time, precise hiring plans and predictions help recruitment teams better prepare for hiring processes.

HR forecasting, in simple terms, is the process of predicting how a company’s staffing needs will change over time based on available data and current business strategy. There are several established methods for doing so.

Forecasting Methods:

Managerial judgment

As the name suggests, using this method, HR professionals rely on managers to decide the number of employees they’ll need in their respective teams and the skills they should possess based on the manager’s experience. Then it must be matched with the hiring budget. A simple yet highly subjective approach.

Delphi method / Brainstorming

The Delphi method is a process of first writing down participating parties, for example, upper management’s thoughts on future hiring needs anonymously, then reading them out aloud and repeating the cycle until the ideas are aligned within the group. Meanwhile, brainstorming is a group discussion to produce ideas or solve problems.

Both of these methods are good group exercises for uniting management teams. However, without additional data analysis, real insights can easily be missed.

Trend Analysis / Ratio Analysis / Mathematical Models

Trend and ratio analyses look at historical company data. The first is aimed at spotting productivity trends like sales volume upticks meanwhile ratio analysis focuses on finding the perfect ratios between employees and output, which can be especially useful in factories or fast food restaurants, for example. You can also try creating mathematical models that go further and include more data.

While these methods are useful for quantifying employee output, keep in mind that historic data does not always correlate with similar results in the future and the more sophisticated the nature of the work is, the more difficult it can be to quantify.

How to create your own HR forecasting process?

The established methods mentioned above can be a decent starting point. However, as you may have noticed, all of them have noteworthy shortcomings. What’s more, each company and industry is different so creating a universal HR forecasting methodology is an impossible task.

Therefore, your best bet is to create your own unique process combining elements of the established methods and applying them to the needs of your company. To do so:

1. Map out certainty and uncertainty

For example, the retirement age is a certainty - employees approaching it will highly likely retire when they reach it. Similarly, the turnover rate can serve as an indicator of how often a certain position will open up naturally. Identifying the certainties will allow you to calculate the frequency at which you will need to hire new employees if all other factors would stay the same.

Meanwhile, factors which will affect your company, but it’s yet unclear how exactly, fall under uncertainty. One example is the impact of AI technological advancements on employee productivity.

2. Define future business needs / open positions

Your company likely has defined short-term, mid-term and long-term goals. However, many organizations fail to clearly assign talent for reaching those goals. Looking at which departments are responsible for what achievements and using workload management metrics can help you spot potential imbalances before they turn into a crisis.

That also gives you time to train employees for specific senior roles that your company does not yet have but will need in the future instead of trying to hire for management roles externally, which can be a more expensive approach.

3. Update periodically

Outdated forecasts are the stale bread of the business world. For HR forecasts to be actionable, you have to keep them fresh so make sure this becomes a process, not a task and review your forecasts at least once a year.

In conclusion, HR forecasting serves as the starting point for effective recruitment, enabling you to align staffing needs with strategic goals. While various forecasting methods exist, each approach has its limitations, so it’s crucial for companies to create their own unique HR forecasting process tailored to their specific needs.

This involves mapping out certainties and uncertainties, defining future business needs and open positions, and periodically updating the forecasts to ensure their relevance. By adopting a proactive and customized approach to HR forecasting, you can optimize your recruitment efforts and build a strong foundation for sustainable growth.