Top 10 Demand Forecasting Techniques in HRM

demand forecasting techniques in hrm

Running a business is not easy, especially in today’s ever-evolving market scenario, where, almost every day, new technology arrives or a new trend begins. This urges demand forecasting techniques in HRM to be essential for your company. 


With these methods, you can predict future workplace needs, identify skill gaps, plan training employees, and future-proof your business. What are these demand forecasting techniques? We will learn about them from this article. 

What are Demand Forecasting Techniques in HRM?

According to the World Economic Forum, one billion people must be reskilled by 2030 to cope with technological advancements. It is, therefore, vital for you to implement multiple demand forecasting techniques in HRM to understand these trends. 


They help you predict the future needs in the market and improve your recruitment. Additionally, you can also train your existing employees beforehand, such that when there’s a market change, they can fit into it. 


As your employees stay prepared for challenges, your chance of staying competitive and fulfilling consumer demands increases. 


In short, demand forecasting refers to predictive analytics that uses data and techniques to predict future events. It may predict changes within short to longer timeframes and make you prepare for any challenges in the long run. 


The demand forecasting methods in HRM depend on multiple factors, like


  • Employment trends
  • Replacement needs
  • Overall productivity
  • Absenteeism
  • Business expansion and growth 

Importance of Demand Forecasting Techniques in HRM

So, what are the benefits of HR forecasting in your organisation? It helps your organisation predict future human resource requirements and enables you to make informed decisions about your workforce. 


When you accurately forecast demands in your organisation, you can hire the correct number of employees with the proper skills and knowledge. 


Here are a few other reasons for demand forecasting in HRM, 


  • Estimating the jobs necessary to produce a given quantity of goods or provide certain services.
  • Determine the ideal worker mix for the future.
  • Evaluate the right workforce levels across your organisation to avoid unnecessary employee costs.
  • Reduce labour shortage.
  • Monitor your legal requirements for job reservation.

Best Demand Forecasting Techniques in HRM

Demand forecasting in HRM is a critical aspect of business operations that helps you predict future HR demands and improve employee skills. When you understand both qualitative and quantitative methods, you gain a competitive advantage and make informed decisions. Furthermore, these forecasts help you choose the best-fit candidates and prepare your existing workers for the future. 


We have listed below some of the top demand forecasting techniques in HRM.

Managerial Judgement

The managerial judgement technique in HRM is the most common demand forecasting method used in small to large-scale organisations. You need to follow two approaches: the bottom-up and the top-down approaches. 


  • Top-down approach: If you implement this approach in business, your top management begins the demand forecasting process. Once your HR forecasting is completed, the management sends the report to departments to analyse and accept it.
  • Bottom-up approach: Conversely, with the bottom-up approach, your demand forecasting process begins with line managers. They send your top management the need for human resources proposals. Then, the management forecasts your HR recruitment for the overall company.


However, it is good to combine both approaches as the ‘Participative Approach.’ Under this approach, your departmental heads and top management meet and decide about your future HR requirements. 

Ratio-Trend Analysis

It is the quickest demand forecasting technique in HRM that you can use in business to identify human resource demands. It considers the ratio of production/sales level and the human resources available to finish tasks smoothly and determines the demand for workers. 

Regression Analysis

Regression analysis in HR demand forecasting is similar to ratio-trend analysis, which depends on the ratio of sales volume and human resource availability. 


However, it is more sophisticated when drawing a diagram to illustrate the connection between sales and workforce availability. Then, you calculate a regression line that cuts through the centre of the points on your diagram and identifies the requirements for human resources against sales volume. 

Work-Study Technique

If your workload in business is easily measurable, you can use this technique, also known as workload analysis. The work-study approach estimates your total company production and activities for a certain future timeframe. 


Then, you can use that data and translate it to the number of man-hours required in producing per unit by considering your workforce capability. Thus, this technique identifies your human resource demands based on estimated total production and each employee’s contribution to producing one unit item. 

Econometrics Models

You can use an econometrics model to estimate your future demands that use mainly mathematical and statistical techniques. Under this approach, a relationship is established between the dependent variable, like human resources, to be predicted, and the independent variable, e.g., total production, sales, workload, etc.

The Markov Model

The HR department of your company can implement the Markov model to create a list of employees’ skills, education, work experience, etc. They then maintain these reports regularly and check for future talent and skill demands. 


Additionally, it helps recruiters to forecast demand probability and requirements for internal hires or transfers. They also forecast the internal supply of workforce available within your organisation. 

Trend Analysis

This strategy allows you to predict future needs by analysing your company’s past staffing historical data. Trend analysis compares your employee numbers at different times against factors critical to your business model. For example, a bike dealership might research past data to determine the number of salespersons related to the highest number of bikes sold per employee.


However, it may not provide you with the exact trend, but it can help you pay only for the labor you need while maintaining excellent service and selling inventory. 

Nominal Group Technique

NGT is one of the popular demand forecasting techniques in HRM that utilises expert assessments. You can identify your employees in key positions and create an expert panel to set questions related to human resource demands.


The solutions and ideas generated by this panel are collected anonymously and finalised unanimously, with panel votes on each idea.

Delphi Technique 

Delphi technique considers your current human resource inventory and their future availability to determine human resource needs. This method considers the HR requirements provided by a group of experts, e.g., managers.


These individuals collect the human resource needs, summarise various responses, and create a report. The Delphi technique will continue until all the experts on the panel agree on the HR requirements. 

Supply Forecasting 

Supply forecasting in HRM is a popular demand forecasting strategy where you analyse your internal and external access to qualified candidates. Internally, you can access multiple teams to determine who needs a promotion or transition into open rules.


Externally, your HR team can research the labour market and regulations to determine how they may impact your hiring. These professionals then update their cost estimation for acquiring new hires.


For example, if data indicates that entry-level marketer salaries have increased dramatically in recent years, your business may decide to hire one less new marketer than was otherwise planned. 

How 6 Pence Helps

Businesses need to implement demand forecasting techniques in HRM to stay prepared for future human resource requirements. Additionally, you can make sound decisions about your workforce, reduce skill gaps, train employees, hire required talents, and abide by regulations. 


Are you looking to hire top-quality candidates for your organisation, who can help you scale your operations and deliver better results? Connect with 6 Pence. We are one of the leading staff outsourcing agencies in Dubai, Oman, Bahrain, and Iraq. Our extensive candidate database, helps us fill open positions with the best candidates in the shortest time.


Also Read: 8 Effective Recruitment Strategies to Improve Your Talent Acquisition

Frequently Asked Questions

What is HR demand forecasting? 

HR demand forecasting is a process of estimating your future human resource requirements in the right quality and quantity. 

What are the five methods of demand forecasting? 

The five popular demand forecasting techniques in HRM include managerial judgment, trend analysis, regression analysis, Delphi method, and econometrics methods. 

What are the categories of HR forecasting activities?

The main categories of HR forecasting activities include current, short-run, medium-run, and long-run forecasting.

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