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How does supply and demand affect workforce planning?


Editorial Team
04/12/2019 5:33 PM

All
businesses regardless of their size and sector, depend on human capital to
succeed. Despite its importance, human capital is often not carefully planned,
measured or optimized. It is a common rule that workforce planning and
optimisation is one of the key roles of every leader.



Workforce planning is a term used to
describe the planning process
undertaken to ensure that an organisation has the right people with the right
skills at the right time performing the right tasks. It is simply a methodical
process that documents the directions in which an organisation is heading and
provides managers with a tool for making human resource decisions now and into
the future.



A
talented and aligned workforce is crucial for bringing strategy to life and
ensuring an organisation delivers on its objectives. Great workforce planning should balance both workforce demand and supply. There is a number of techniques used
to forecast both workforce demand and
supply but the overall goal is to
make sure you don’t have workforce
surpluses or shortages
.



Workforce demand forecasting is the process of estimating the future quantity and quality of manpower requirement. In demand forecasting, one should consider
product demand, economics, technology, financial resources, absenteeism,
turnover, organisational growth and philosophy.



Knowledge
of the present situation on manpower requirement is essential if a satisfactory
forecast is to be made. After knowledge of present situation, future forecasts can be made from long
term corporate plan which are translated into activity levels for each function
and department. 



For
example, in a manufacturing company, the sales budget would be translated into
a manufacturing plan, giving the numbers and types of products to be produced
in each period. From this information the number of man-hours, by skill and
personality categories, required to set the target for production would start
from the production plan setting out a programme for installing new machinery.
In an insurance company, forecasts of new business would be translated into the
number of proposals that would have to be processed by the underwriting
department. In a mail order company, forecasts would be made from the number of
orders that are to be processed, assembled and dispatched.



The
factors that influence workforce demand
include; External Environmental Challenges (challenges that arise from economic
developments, political, legal, social, technical changes, and the
competition.), Organisational decisions (the organization’s strategic plans,
sales and production forecasts and new ventures.), and Workforce Factors (for
example retirements, terminations, resignations, death and leave of absence,
among other reasons).



Once
an organization has forecast its future requirements for employees, it then
goes on to determine how it can fulfil its requirements. Workforce supply forecasting involves determining if there are
sufficient numbers and types of employees eligible for the positions in
question. It scans the internal and external environment for the best-fit
candidate for the positions in question.



Internal supply includes staffing
tables, markov analysis, skills inventories, management inventories,
replacement charts and succession planning. External supply includes
demographic changes, education of workforce, new graduates, labour mobility,
government policies and unemployment rate.



Gap
analysis is the process of comparing your current workforce supply to your workforce
demand
and identifying gaps (deficits or surpluses). The process of
identifying the differences between supply
and demand
establishes the roadmap for your organisation’s Workforce Action
Plan. One should prioritise those gaps that are critical to the delivery of
your organisation’s future goals. The focus should be on these gaps at least
initially.



Microsoft
and Shell Oil (which used to operate in Zimbabwe) are some of the organisations
that have a good reputation on workforce
planning
. For example, Shell in the 90s used scenario planning to generate a number of possible options for their
future workforce. This benefited them
in the next crisis that stroke the oil industry and most of their competitors
suffered because they were not prepared. 



In a nutshell, a balance between workforce demand and supply will allow
for a more effective and efficient workforce.
Well forecasted and planned supply helps an organisation to ensure that replacements
are available to fill important vacancies in the right time and with the right
skills.



After proper workforce
planning
, realistic budgets for recruitment, training or retraining,
development, career counselling and succession planning can easily be done.
Other activities such as restructuring, reducing or expanding your workforce
can be done objectively.



A
number of organisations are now starting to realise the value of workforce planning. The billionaire Bill
Gates once said, “Bringing together the right information with the right people will
dramatically improve a company’s ability to develop and act on strategic
business opportunities”.
It is time for organisations to utilise the
benefits of workforce planning.



Benjamin
Sombi is a Data Scientist, Entrepreneur, & Business Analytics Manager at
Industrial Psychology Consultants (Pvt) Ltd a management and human resources
consulting firm.


Editorial Team

This article was written by one of the consultants at IPC


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