Farsight Analytics module is an excellent tool for HR professionals to manage their workforce well.

High Skill Equilibrium- Balancing Demand and Supply of the Workforce

Companies can utilize strategic human resource planning to predict current and future staffing needs using different techniques, but the ultimate goal is to limit exposure to surpluses or shortages of high skilled individuals in the workforce. Managers need to actively anticipate the continuous movement of people into, within and out of an organization. They also need to implement activities and processes that promote employee competencies within the specific framework provided by demand and supply estimates. It is extremely important to get the right balance between labor demand and supply, so as to ensure the availability of the right employees with the right skill at the right time.

Forecasting Labor Demand

Labor demand forecasting is very crucial, as businesses do not want a surplus of employees who are not being effectively and fully deployed, neither do they want gaps in their employee pool which can result in reduced productivity, performance and profitability. Labor supply, or the estimated amount of labor needed by a business to meet its business goals, can come from within the organization or from outside sources. Utilizing strategic human resource planning, a company can assess the level of skill and overall productivity within the business. It tends to be much more costly to hire new labor than to improve the existing skills set of employees, which means organization generally have a strong incentive to develop productivity internally as a first option. However, any change made to the human resources needs within the business, should be led by the strategic business plan and the goals for the business, not the other way around.

When forecasting labor demands, there tend to be two approaches, Qualitative and quantitative. The quantitative approach often times uses a variety of statistical and mathematical approaches to determine the needs, including indexation (forecasts determined in relation to one or more fixed organisational indices) or trend analysis (forecasts based on the study of past human resource growth). These are often times complex and expensive, but a real need, especially for larger organizations.

Usually, Small and medium sized businesses prefer to rely on qualitative approaches to determine labor demand. These approaches tend to use experts within the range of business to determine future need, that is, the employees, managers and business owners themselves. Popular approaches include the Delphi Technique which uses problem solving and expert consultation methods in a structured manner and managerial judgment i.e. business owners and managers assess their own labor requirements taking into account factors such as retirements, promotions, new technologies and the Nominal Group Technique, using group processes to compare predictions on the staffing needs for the future.

Majorly, the advantages of using qualitative methods, especially with SMEs are that the techniques used involve the people that are likely to be affected by any changes to the business in relation to human resources practices. Therefore, there would likely be greater commitment and acceptance of policies and practices by those involved. One of the downsides however is the time and cost of involving employees, business owners, and managers in the processes. Having a HR Consultant present at hand, able to lead the process and adopt the most appropriate processes to lead businesses through these processes, can help to achieve effective forecasting of future employee needs.

Labor Supply Analysis

Once a business has forecast what it’s future requirements are likely to become, it is then important and advisable to determine what number of employees will be needed, with what skills and when. Labor supply could come from within the organization or outside. The first step therefore, is to analysis the skills currently within the business. If skills are not available internally, then they may need to be sought externally. Also, externally factors, such as availability of skills within the job market will be a major consideration at the long run.

Balancing the Supply and Demand

If a business is short of employees to achieve the business objectives, devising effective recruitment strategies will be needed. Considerations will then be placed on job design, flexible work options, career development, remuneration and reward program. On the other hand If a business has too many employees, effective strategies will need to be created to manage retirements, redundancies and if appropriate, dismissals.


Finally, workforce planning is imperative to businesses wanting to plan their growth and limit situations where they are faced with too few or too many employees or the wrong skill sets. Workforce planning can actually help business owners see how their employees are operating by forecasting numbers of staff with specific skill and also help them achieve their strategic business objectives.

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