Demand Forecasting PDF

UNIT 3 METHODS AND TECHNIQUES: DEMAND FORECASTING Structure 3.0 Objectives 3.1 Introduction 3.2 Some Conceptual Issues 3.3 Manpower Forecasts and Its Need 3.4 Types of Manpower Forecasts 3.5 Macro Forecasting 3.6 Micro Forecasting 3.7 Forecasting Tec...

UNIT 3 METHODS AND TECHNIQUES: DEMAND FORECASTING Structure 3.0 Objectives 3.1 Introduction 3.2 Some Conceptual Issues 3.3 Manpower Forecasts and Its Need 3.4 Types of Manpower Forecasts 3.5 Macro Forecasting 3.6 Micro Forecasting 3.7 Forecasting Techniques 3.8 Data Base for Manpower Forecasting 3.9 Let Us Sum Up 3.10 Clues to Answers 3.0 OBJECTIVES After reading this Unit, you should be able to understand the: concept of manpower demand, need for manpower demand forecasting and types of forecasts, methodologies of manpower demand forecasting at the macro and micro levels, and data base required for manpower demand forecasting at the macro and micro levels. 3.1 INTRODUCTION In spite of the universally accepted idea that a tourist not just buys the tourism product but also in a way buys the service skills and qualities of a wide range of humans who would contribute to the tourists holiday experience, we find that the growth and development of tourism is adversely affected due to lack of trained human resources. Shortages of skilled human resources frequent most of the destinations and sectors of the tourism industry. Where shortages are not there quality in service may be lacking and so on. There could be many reasons for this, varing from region to region or economy to economy. However, Tom Baum (1993) has pointed out that there is a “tendency to develop human resource policies, initiatives and remedial programmes that are reactive to what is currently happening rather than proactive to what is likely to occur.” He further stresses that, “as a general axiom, effective human resource strategies require considerable lead time in order to support tourism development and, ideally, should be in place well before the bulldozers and diggers move in”. This brings to fore the issue of manpower forecasting of both demand as well as supply. In this Unit we will discuss the various issues related to demand forecasting at a conceptual level which you will find useful for application in the tourism sector. 31 3.2 SOME CONCEPTUAL ISSUES There are some conceptual issues which need elaboration. The primary issue relates to manpower demand. The other issues concern the manpower forecasts, need for manpower forecasts and types of forecasts. Manpower Demand In manpower literature, there is considerable confusion concerning the precise meaning of the word ‘demand’, ‘need’ and ‘requirements’. Some writers have used the terms as synonymous. Others, on the other hand, have used them in distinct senses. ‘Demand’ for a particular category of manpower, from the economists angle, is a schedule of relationships between quantities of that particular category of manpower demanded and a series of possible wage rates. It is conceived here that the quantity of manpower demanded varies with the wage rates – more at a lower wage rate than at a higher one. Estimating future manpower ‘demand’ from the economists angle is not an easy job, as it calls for detailed knowledge about the established relationships between manpower demand and wage rates paid by category of manpower, and knowledge of the future pattern of relative wage rates for various occupations – reflecting the marginal productivity in value terms. ‘Need’ refers to the number of people required to provide an ideal level of service. What is ideal is never achieved, because of structural, technological and other constraints. For example, a country’s ‘need’ for education might be that every one should have education upto the secondary school level. However, because of socio-cultural constraints leading to discrimination against females and class distinction among various sections of social hierarchy, resource constraint, and inadequate infrastructure support like school buildings and teachers, it may not be feasible to plan to provide secondary school level of education to everyone. ‘Requirements’ are then the functional composition of employment that will be necessary to produce goods and services within the framework of social, cultural, economic and technological targets (or constraints) specified. They are more often described as technological requirements, because manpower requirements of any task performance are conditioned by the state of technology. In an extreme case, where the elasticity of substitution between different factors is zero or close to zero, any change in relative wages has either no effect or has insignificant effect on the ‘demand’ for manpower; and the level of employment resulting in such a situation is in fact technologically determined. Such a situation seems plausible in the short run; and it is unlikely to happen in the long run, because in the long run technologies might change giving rise to substitution possibilities. Likewise, ‘requirements’ – which are in fact ‘needs’ in a constrained situation – may conform to ‘need’, if the constraints are not binding at the time of estimation. In effect, ‘demand’, ‘requirements’ and ‘needs’ might mean the same if: there are no substitution possibilities among factors of production, and the constraints are not binding. The operative terms ‘manpower demand’ (or ‘manpower requirements’ or ‘manpower needs’) in the manpower literature implies manpower required to fulfill certain physical targets for Gross Domestic Product (GDP) or industrial output or socio-cultural status. 32 3.3 MANPOWER FORECASTS AND ITS NEED In the context of manpower forecasting, there is a need to make a distinction between ‘projections’, ‘estimates’ and ‘forecasts’. ‘Projections’/predict the outcome of spontaneous forces, i.e., the outcome which is expected in the normal course of events and in the absence of external stimulus. They are mathematical extensions of data on manpower into the future ‘Estimates’ and are educated guesses based on experience. Forecasts, on the other hand, refer to a prediction of the outcome when normal course of events are influenced and altered by external forces. Forecasts usually take into account both the projections and the estimates. For example, in the macro context, forecasts could result in a statement of what would happen if economic growth was deliberately manipulated by government policy. Need for Manpower Forecasts The basic rationale for making manpower forecasts is the long gestation lags in the production of skilled professional people. Manpower forecasts made well in advance, facilitate planning of education/training is the effort to ensure that manpower required are available at the time when they are needed. The second major reason is the observed imperfections in the labour market. Markets for manpower with long lead time for production are characterised by cobweb cycles, because of long lags in the supply side and short lags, on the demand side. In the event supply is not planned to meet the requirement, cobweb cycles in the labour market may ultimately lead to distortions in occupation-education correspondence, the fallout of which could either result in huge educated unemployment or with people taking up occupations for which they are not adequately prepared or both. Manpower forecasts, it is expected, would facilitate correction of labour market distortions. The third major reason is that in the short-run at least, elasticities of substitution among various skills have been observed to be either zero or near zero. Production of goods and services, therefore, requires various categories of skilled manpower in fixed proportion. Shortage of any skilled category of manpower, in such a situation would adversely affect the production of goods and services within the economy. Manpower forecasts would help avoid such a situation by facilitating anticipation of skill shortages and planning skill supplies accordingly. The need for manpower forecasts in tourism is essentially linked with the overall tourism development and growth at both macro as well as micro levels. A variety of issues are to be addressed in this regard keeping in view the characteristics of the industry that need to be tackled in a coherent way. Both, the national tourism organisation and the private sector have to act in a coordinated manner or else face a decline. 3.4 TYPES OF MANPOWER FORECASTS Manpower forecasts could be categorised differently, depending on the purpose for which forecasts are made. Some of the major types of forecasts are briefly described here. 1) Short-Term Forecasts Short-term forecasts are usually made for a period not exceeding two years. Short-term manpower forecasts are made, primarily, to facilitate estimation of financial provision for 33 wages/salaries in the programmes/projects initiated or likely to be initiated in the immediate future. Short-term manpower forecasts are also useful in resource allocation among competing programmes to be taken up for implementation in the not too distant future. Short-term forecasts are very useful at the micro-level or we can also say, company level, e.g., a chain hotel makes financial statement for its expenditures keeping in view both the on going projects and the projects in the pipeline. The financial provisions have to be made for both the expected and unexpected expenditures. In tourism short-term forecasts also take account of sudden trends or tourism that is event based. For example, viewing of solar eclipse or a religious event would attract tourists to a particular destination, whose life as a destination may end after the event is over. 2) Medium-Term Forecasts For most countries medium term is about two to five years – the horizon for planning. Medium term forecasts are useful in those offices which are concerned with advising ministers or preparing contingency plans to meet the ‘twists and turns of economic circumstances or international events’. 3) Long-Term Forecasts Forecasts for a period more than five years are considered as long-term forecasts. How long a period beyond five years is involved in long-term planning will, however, vary from situation to situation. Long-term manpower forecasts are useful in educational planning, particularly relating to the highly skilled professional categories of manpower. They are also useful in the preparation of corporate plans incorporating productivity changes, technological changes and major organisational developments. For example, The Macro Level Planning in Indian Tourism Sector discussed in Unit 2 gives you an idea about long term forecasts. 4) Policy Conditional Forecasts Policy conditional manpower forecasts are those which are determined by the policy towards the factors which influence the demand for manpower. Such manpower forecasts may be based on a rule of thumb, or on professional judgement, or on an explicitly specified model or any combination of the three. 5) Onlookers Forecasts An onlookers’ manpower forecasts are those which are derived by assuming that the factors influencing manpower demand behave in the future as they did in the past. Like in the case of policy conditional forecasts, onlooker’s forecasts are also obtained with the help of a rule of thumb, or professional judgement, or an explicitly specified model, or any combination of the three. 6) Optimising Forecasts Optimising manpower forecasts are those which are obtained as solutions to an optimising model in which numbers demanded of various categories of manpower are so determined that either the end benefits are maximised, or cost of resources used in achieving a pre-determined end objective is minimised. 7) Macro and Micro Forecasts You have read about micro and macro level planning in Unit 2. Here we are talking about micro and macro forecasts. It is important to make a distinction between these two other types of manpower forecasts, viz., macro and micro forecasts, primarily because of two reasons: First, the 34 end purposes of the two types of forecasts are different. Second, the methodologies employed and data base used are different. It is, however, possible that micro forecasts, if properly planned, might ultimately lead to macro forecasts but not vice-versa. Macro forecasts are done usually at the national, industry/sector and region/state levels. They are primarily used in: planning education and training facilities, decision making for the choice of industries for development, choice of location, technology, and size of organisation among industries selected, and determining order of priorities for creating and/or expanding economic and social infrastructure. Micro forecasts are made at the enterprise or department level. Micro manpower forecasts are needed primarily for planning recruitment, promotion, training and counselling in accordance with the plan for the development of enterprise or department concerned. Forecasts at this level are, therefore, required to be in greater details as well as precise. The micro forecasts are usually expressed in terms of numbers required for each occupation, source and stage of recruitment, and scheduling of training. The methods of forecasting at macro and micro levels are discussed in detail in the following sections. Check Your Progress–1 1) Explain how “demand”, “need” and “requirement” differ from each other. …………………………………………………………………………………………………. …………………………………………………………………………………………………. …………………………………………………………………………………………………. 2) What are different types of Manpower Forecasts?..........................................................................................................................................…...........................................................................................................................................…...........................................................................................................................................…. 3.5 MACRO FORECASTING Manpower demand forecasting techniques used at the macro level in different countries may be summarised under five types: Employers Opinion Method Normative Method Component Method International Comparisons Method Mediterranean Regional Project (MRP) Method 35 These five methods are discussed in brief, citing representative examples to illustrate the methods. 1) Employers Opinion Method Under this method employers are asked to give their assessment of future manpower needs in different categories in their respective establishments. Aggregating over all employers and making allowance for death, retirement, migration and occupational mobility, it is then possible to arrive at future manpower demand by skill category. This method has been used in a number of developed countries like the United States, United Kingdom, Canada, Sweden and France. The method has been found to be particularly useful in the case of highly skilled professional category of manpower where the occupation-education correspondence has been observed to be almost unique. It has also been observed that the method has been very useful in making short- term manpower forecasts than medium-term and long-term forecasts. However, the technique – even as a means of making short-term manpower forecasts – has been observed to be severely constrained. For instance, the technique assumes that employers are capable of making such forecasts. It might be true in the case of large corporate sector establishments with well-staffed personnel divisions. Likewise, the use of technique implies that manpower demand forecasts made by employers are linked to the production levels of their respective establishments. In an opinion survey, this is rarely done. Finally, even if the manpower forecasts are linked to production levels, employer’s expectations of production levels are never realised with the same degree of accuracy in an oligopolistic situation, because of stiff competition and market imperfections. In other words, where the market for goods and services are characterised by stiff competition, employer’s forecasts of manpower cannot be aggregated. 2) Normative Method Normative method uses norms for employing manpower to produce goods and services. The norms are usually expressed as ratios between manpower employed and the volume (or value) of goods and services produced. These ratios are based on either the existing situation or the desirable situation. Examples of the ratios are employment-output ratio, incremental employment-investment ratio, employment-fixed capital ratio, employment-value added ratio, medical doctor-population ratio, teacher-student ratio, nurse-medical doctor ratio, tourist guide-tourist ratio, and hotel staff-guest ratio, etc. As an illustration of the method, using employment-output norm, as a first step, the norm is evolved for a base year. Next, output projection is obtained for the target year. Then, the base year employment-output norm is applied to the target year’s estimated output to obtain employment forecasts in the target year. This normative approach has two basic limitations: One is that the method assumes that the norms are stable over a period of time. This can be overcome, if it is also possible to predict changes in the norms as between the base year and target year. The other limitation is that it uses a uniform norm for all components of a production process or for all regions within country. This limitation can again be overcome by using different norms for different components or regions, which is the component method. 3) Component Method In the component method requirements of any category of manpower are further sub-divided into various components and then a separate norm appropriate to each component is used in arriving at a forecast of manpower requirements for each component. Forecasts for all the components are 36 then aggregated to arrive at an estimate of future manpower requirements for the manpower category concerned. For instance, in the case of medical doctors, instead of using an overall norm such as the doctor- population ratio, the requirements of doctors are sub-divided into four components: Doctors required in hospitals and other health centres maintained by the government, Doctors required as teachers in medical colleges, Doctors required in the hospitals and health centres in the private corporate sector, Doctors required as private practitioners. In the case of first component, doctor-government health expenditure norm is used. Teacher- student ratio in medical colleges is used for the second component. Doctor-private corporate sector health expenditure norm (or any other norm prescribed by the concerned private corporate sector agency) is used in the case of the third component. In respect of the last component doctor- health expenditure (by the general public) norm is used. A variant of the component method is to use different norms for different categories of manpower for producing the same set of goods/services such as engineer-output ratio, scientists-output ratio, technician-output ratio, tour managers-output ratio, and supporting manpower-output ratio. The component approach is thus basically the normative approach. The difference lies basically in using different norms for different components. However, the primary problem associated with the normative approach–that of obtaining reliable norms which are stable over a period of time– still remains. 4) International Comparisons Method International comparisons sometimes facilitate use of stable norms. An Italian study conducted in 1960 forecast sectoral distribution of workers in 1975 assuming that the Italian labour productivities in 1975 would match the levels reached in France in 1960. There is a considerable subjective evaluation of international experiences in using the international comparisons method which is not always easy to justify on objective considerations. This method has, therefore, been not very popular. 5) MRP Method The MRP Method is designed to forecast manpower requirements by educational categories so that the forecasts are rendered directly relevant to educational planning exercises. Primarily, there are five steps involved in forecasting manpower requirements by education. The first step is to arrive at the largest year projections of GDP – exogenously determined by an economic plan in the case of planned economies. The second step involves the estimation of sectoral contributions to GDP in the target year by major sectors such as agriculture, manufacturing, transport and communication, trade and commerce, and services. At the third step, sector specific average employment-output ratios are applied to sectoral composition of GDP in the target year to arrive at estimates of employment in the target year by sector. Sectoral forecasts of employment thus obtained for the target year are then distributed among a number of mutually exclusive occupational categories using either the base year or any desirable sector-occupation distributions. 37 At the final step, occupational structure of manpower forecasts relating to the target year are translated into educational structure by applying a standard measure of the level of formal education/training required to successfully perform the tasks specified under each occupational title. This procedure gives the net manpower needs – net of replacement needs. Allowances are then made for death, retirement, migration and occupational mobility to estimate the replacement needs by the target year. Net manpower needs and the replacement manpower needs by education will together then yield the total manpower needs by education. The forecasts thus obtained are conditional on the achievement of GDP in the target year. MRP approach, though very comprehensive, suffers from three sets of limitations: First, forecasts are made separately in respects of GDP, employment-output ratio, occupational structure and educational structure. This implies they are all independent which is not realistic. Second, the method assumes that the occupational and educational structures used are stable over time, and that there are no substitutional possibilities between occupations and between different kinds of education/training. This is an unrealistic assumption, as it amounts to assuming that demand for manpower is independent of the supply. Third, MRP approach is fairly expensive, because it lays demand on a wide variety of data which are not always available in the published form. One may, therefore, be compelled to resort to primary data collection on many aspects. 3.6 MICRO FORECASTING Micro manpower forecasting (i.e., manpower forecasting at the enterprises or company level) involves estimation of manpower needs for a specified or anticipated workload structure. There are essentially three steps involved in the process: Evolving manning norms based on an analysis of workload structure, Forecasting Workloads, Relating Workloads to manning norms. 1) Evolving Manning Norms It starts with taking a comprehensive view of the work of an organisation which is first divided into functions. The functions are then sub-divided into tasks and work groups associated with each task are then identified. In respect of each workgroup: the levels and number of positions at each level, the job descriptions of each positions by level, and performance of incumbents to each position by level vis-à-vis job expectations, are analysed. Based on this analysis, number of levels and number of positions required at each level, skill gaps of incumbents to each position, and their education/training and experience requirements are worked out. The manning norms thus estimated for each workgroup are discussed with the employers and the employee unions to arrive at a set of desirable manning norms for the organisation as a whole relevant to the present workload pattern. Any changes in the workload pattern may result in a different set of manning norms for the organisation. Changes in workload pattern can come about either through technological change, or better manpower utilisation or both. Technological change could be labour saving – resulting in a reduction in the number of levels and/or number of positions at each level – ultimately leading to reduced 38 manpower requirements. Alternatively, technological change could also be capital-saving which may end up in increased manpower requirements by level and position. In either case, technological change causes a change in the manning norms. Better manpower utilisation is usually caused by better management, better organisation of work within each work group and among various work groups within the organisation, and better work- management cooperation. Better manpower utilisation normally results in improved labour productivity and hence a reduction in manpower requirements. Manpower forecasting process at the micro level, therefore, calls for a forecast and analysis of future workload patterns to arrive at appropriate manning norms. 2) Forecasting Workloads If ‘work’ consists of a single type of activity, then the total output is a measure of the amount of work. In areas such as provision of health care, workload often is a function of population. Population forecasts obtained by demographic techniques, in the provision of health care can be treated as workload forecasts. On the other hand, ‘work’ consists of a variety of tasks – the relative magnitudes of which vary with time, then one way is to predict workload of each task separately and aggregate the workloads of all tasks to arrive at a forecast of total workload. If the tasks are numerous then this procedure is very tedious. It is possible, however, that the numerous tasks are inter-correlated. Hence, it may be possible to reduce the dimensionality of the problem. In an extreme case, where all the tasks are perfectly correlated among themselves, it would suffice to take just one task – or an average of all tasks for projection purposes. Where the tasks are all not perfectly correlated, it is still possible to reduce the dimensionality through the use of one of the two statistical techniques: Principal Component Analysis and Factor Analysis. Principal Component Analysis is a descriptive technique which finds linear transformation of numerous tasks into a smaller number of indices (Principal Components) such that: the indices are all uncorrelated among themselves, and all the indices together summarise the information contained among the numerous tasks. Principal Components are then projected to arrive at forecasts of workloads. Factor Analysis, the aim of which is similar to that of Principal Component Analysis, uses a sophisticated statistical model. Here, some small number of factors are identified which have the potential to explain the behaviour of the numerous tasks. Then predicting the behaviour of individual factors, it is possible to arrive at forecasts of workload under each tasks and hence the forecast of total workload. The foregoing method assumed that the character of work in each task will not change significantly during the period of forecast, while technological change and/or manpower utilisation can change the character of work in any one or more tasks. It is possible to incorporate the effect of all the factors which affect the character of workload, it there is apriori information on the impact of each of the factors. An illustration, in this regard, based on the method outlined by I.G. Helps is presented in the Table-1 below: Table 1 Factor Affecting Improvement in Productivity Factor Giving Change in Productivity in Three Years (%) Manpower in Three Years 1 – (Improvement/100) a) New organisation Structure 6 0.94 b) Better equipment 6 0.95 c) New information requirements –8 1.08 39 d) Better manpower utilisation 10 0.90 e) Training 8 0.92 Combined total = 0.94 × 0.95 × 1.08 × 0.90 × 0.92 effect on productivity = 0.80 Thus the above five factors will reduce the workload by about 20 per cent for the same set of staff. 3) Relating Workload to Manning Norms If workload ‘W’ can be forecast by the methods discussed in the previous section, and productivity of workers ‘P’ – given as the ratio of workload to workers – can be estimated based on historical data and/or appriori information on factors affecting productivity, then manpower forecasts in terms of numbers required in future can be obtained as W number required in future = P 3.7 FORECASTING TECHNIQUES We shall now look at alternative way of forecasting future requirements. This can be done through various techniques. The process of estimating manpower demand consists of four steps: an approach, a basic factor, a method, and a technique. i) Approach There are eight possible approaches: 1) Subjective 2) Objective 3) Global 4) Component 5) Techno-economic 6) Non-economic 7) Deterministic 8) Probabilistic The order in which they are mentioned suggests the formation of four groups, each of which comprises two mutually exclusive approaches, e.g., (i) Subjective or Objective, (ii) Global or Component, etc. The groups, between themselves, are not quite mutually exclusive. A subjective approach to manpower demand estimation uses intuition, impression or judgement. Opposed to this, the objective approach tries to justify the estimate of demand on the basis of certain factors or logical explanations. A global approach would try to estimate manpower demand as an overall figure, directly for the entire problem under consideration, whereas a component approach would first estimate the 40 demand for segments of the problem and then aggregate it. The techno-economic approach combines the technological, economic and organisational considerations mentioned earlier, whereas the non-economic approach utilises only socio-political and other considerations. ii) Basic Factor A basic factor means a variable to which manpower demand can be related. The choice depends upon the number of considerations which together constitute the multi-dimensional framework of the particular problem facing us. iii) Methods According to Gareth Steiner, statements about the future can be made in two senses: What will occur? What should occur? According to Steiner, what is more significant than the time element is the way in which the change in one phenomenon, i.e., manpower, is associated with change in another (basic factor, which was mentioned earlier). The rate at which the change takes place exerts an influence on the frequency of measurement and forecasting required and affects the need for different kinds of feedback. In practice, what managers see as desirable will be influenced by past experiences. All these assessments involve making assumptions about managerial capacity, manpower utilisation or the rate of change in manpower. According to Steiner, the major advantages of manpower forecasting are: a) It corresponds to the way managers commonly think and talk about manpower. b) It encourages the recognition that, even where output is not readily measurable, we can still make good forecasts of manpower, provided we can quantify work done in some way. c) It highlights the way in which we have to control the effect by other inputs such as capital on manpower requirements. iv) Techniques In this context, therefore, one can outline a few specific techniques of manpower demand forecasting. a) Subjective The forecast here is made on the basis of estimates by experienced people whose experience has taught them what types of changes are important and the rates of change involved. Implicitly, however, subjective techniques involve subjective estimation of workload and manpower utilisation and their rate of change. The advantage lies in that no data collection is required and intangible factors like social opinion, fashion, etc. can be built in. However, the disadvantage lies in the errors of the human mind which can be perpetuated while carrying out the exercise of demand of estimation for manpower. Forecasts based entirely on subjective assessment are unlikely to give very good results. However, supplementing objective techniques with subjective estimates can be useful, e.g., through using subjective probabilities. b) Time Series Analysis 41 The time series extrapolation is a good method where it is sometimes not possible to take an overall view of a group of staff, to base a forecast on estimates for workload and manpower utilisation. There are four elements of the time series method: Trend (T1) Cyclical effect (C1) Seasonal effect (S1) Random effect (R1) These being multiplicative, we can get V1 = T1 × C1 × S1 × R1 Projections or extrapolations can be done on the basis of moving averages or exponential smoothing. Accuracy of Techniques No method of forecasting can be entirely without error. Some changes are unique (such as new legislation or a decision to close down an establishment) and hence are more or less unpredictable as to timing. Such errors are due to these unique changes which are unavoidable. In tourism industry also, it is not always possible to forecast human resource demands accurately. The demand varies with the tourist traffic flow. The tourist traffic flow increases or decreases depending upon both predictable and unpredictable situations. For example, it is expected that tourists will arrive during a special sports event such as Olympics or that terrorist activities will refrain tourists from visiting a place. But sudden riots or natural calamities bring down tourist flow and it can’t be taken into account when one is forecasting human resource demand. There are also errors that are partly avoidable since they stem from inaccurate information or inappropriate techniques. Even where errors are theoretically avoidable, it is unrealistic to expect more than a proportion of error to be actually avoidable. However, a forecast, or any resulting objective, must be modified as soon as it seems that it no longer represents the most likely occurrence. Unfortunately, the people become emotionally attached to forecasts. We must remember, however, that errors have a cumulative effect over time. Taking the above factors into consideration, a corporate approach to manpower planning is to be developed. In doing so certain key considerations such as the following emerge: a) What positions and individuals are to be included in the planning effort? A simple rule of thumb is to include all positions which are critical to corporate performance and profits and/or pose recruitment problems. b) What is the appropriate manpower planning horizon? Experience shows that it can extend upto 4 or 5 years. Beyond 5 years, technical manpower forecasts have doubtful value due to pervasive imponderables and unpredictables in the environment. Within the planning period, there should be a formal method of review and assessment at least once every year. 42 c) With what business factors will manpower need be related? For a tour operating company, it could be tour packages, for tourist transporter, it could be the number of cars and coaches. For a retailer, it could be the rupee value of sales. To be useful, the predictor should meet at least two requirements: (a) it should be directly related to the essential nature of the business; (b) changes in the selected factor be proportional to changes in the manpower required. 3.8 DATA BASE FOR MANPOWER FORECASTING Data base has a crucial role to play in manpower forecasting, as it determines the methodologies that can be adopted and methodological refinements that can be effected. Keeping this in view, data requirements for manpower demand forecasting are discussed at macro and micro levels separately. 1) Data Base for Macro Forecasting For macro forecasting it would be ideal to have comparable data on the following items over a period of years in the past. Population Statistics: Data on population of the country by age, sex, education, economic activity status, migration, marital status, region, and rural-urban distribution are needed. Data on Economic Parameters: Economic parameters on which data are required on time- series basis are inputs, output, capital, investment, wages, productivity, value added and depreciation by industry; consumption, savings and expenditure on health by income strata of population in rural and urban areas of each region. Information on Technologies: Details about existing technologies are needed by industry specifying the implications of each technology for employment generation and investment. Similar information is also needed on emerging technologies by industry. 2) Database for Micro Forecasting For micro forecasting a well-defined Manpower Information System (MIS) is needed at the enterprise or company level. MIS may have the following modules: Personal Data Module: Identification particulars, educational particulars, educational qualifications, privileges, if any, such as, military training, handicapped, scheduled castes/schedules tribes, etc. Recruitment Module: Date of recruitment, grading in aptitude tests, grading in leadership tests, overall grading, job preferences and choices, if any. Job Experience Module: Placement history, grade promotions, tasks performed gradewise, significant contributions, etc. Performance Appraisal Module: Performance appraisal at each job held, job experience evaluated with the background of job description, communication rating, rating of inter- personal relationships, rating of behaviours in a group, commitment of corporate goals, etc. Training and Development Module: Nature of training received at each level, individuals evaluation of effectiveness of training, individual assessment of training needs vis-à-vis jobs currently being performed, etc. Training and Development Module: Nature of training received at each level, individuals evaluation of effectiveness of training, individual assessment of training needs vis-à-vis jobs currently being performed, etc. 43  Miscellaneous Module: Record of compensation and benefits received, health status, information relating to personal problems which calls for the attention by the authorities, security needs, etc. MIS is developed on the basis of personnel history records of each individual employee within the enterprise or company and is updated every year. Check Your Progress–2 1) What do you understand by Employers Opinion Method?..........................................................................................................................................…...........................................................................................................................................…...........................................................................................................................................…...........................................................................................................................................…...........................................................................................................................................…. 2) Explain the database for Micro Forecasting...........................................................................................................................................…...........................................................................................................................................…...........................................................................................................................................…...........................................................................................................................................…...........................................................................................................................................…. 3) Explain the process of estimating manpower demand...........................................................................................................................................…...........................................................................................................................................…...........................................................................................................................................…...........................................................................................................................................…...........................................................................................................................................…. 3.9 LET US SUM UP On the theoretical plane, there is considerable confusion regarding the concept of manpower demand. In practice, however, manpower demand implies functional or technological requirements of manpower that will be necessary to perform a given task. The primary rationale of manpower demand forecasts is the long gestation lags in the production of skilled professional people. Manpower demand forecasts are also needed to counter the influence of labour market influences, and to overcome technological rigidities at least in the short-run. The objectives and methodologies of manpower demand forecasting are different at macro and micro levels. At the macro level manpower demand forecasts are needed as a basis for educational planning; choice of location of industries, size of industries and technology, and determining priorities for creating and/or expanding economic and social infra-structure. The manpower demand forecasts may, therefore, need to be indicative in facilitating appropriate action. At the same time, macro demand forecasts are required to be comprehensive. The 44 methodologies of macro manpower demand forecasting are, therefore, complex and are often expensive because of the nature of techniques used and data base required. Micro level manpower demand forecasts are made at the enterprise or company level. At this level, the forecasts are needed for planning recruitment, promotion and training. Forecasts at this level will, therefore, have to be in greater detail as well as precise. A well defined Manpower Information System built up on the basis of personnel history record of each individual employee is a pre-requisite for making detailed and precise forecasts at the enterprise or Company level. 3.10 CLUES TO ANSWERS Check Your Progress–1 1) ‘Demand’ for a particular category of manpower, from the economists angle, is a schedule of relationships between quantities of that particular category of manpower demanded and a series of possible wage rates. ‘Need’ refers to the number of people required to provide an ideal level of service. What is ideal is never achieved, because of structural, technological and other constraints. ‘Requirements’ are then the functional composition of employment that will be necessary to produce goods and services within the framework of social, cultural, economic and technological targets (or constraints) specified. Read Sec. 3.2 to answer in detail. 2) The different types of Manpower Forecasts are: i) Short-term forecasts ii) Medium-term forecasts iii) Long-term forecasts iv) Policy conditional forecasts v) Onlookers forecasts vi) Optimising forecasts vii) Macro and micro forecasts. Study Sec. 3.3 to explain the above. Check Your Progress–2 1) Employers Opinion Method is a forecasting technique used at macro level. In this method employers are asked to give their assessment of future manpower needs in different categories in their respective establishments. Read Sec. 3.4 to answer in detail. 2) For micro-forecasting a well-defined Manpower Information System (MIS) is needed at the enterprise or company level. MIS may have the following module: i) Personal Data Module ii) Recruitment Module iii) Job Experience Module iv) Performance Appraisal Module v) Training and Development Module vi) Miscellaneous Module Read carefully Sec. 3.7 and answer in detail. 3) The process of estimating manpower demand consists of four steps: i) Approach, 45  ii) Basic factor, iii) Method, and iv) Technique. Read carefully Sec.3.7 and explain. 46