Trend Analysis is a relatively straightforward quantitative demand forecasting technique that uses the historical relationship between the operational index (i.e. sales level) and the number of employees required by the organization (demand for labour) to forecast future requirements.
Steps involved in an effective index/trend analysis are:
- Select the appropriate business/operational index – The HR forecaster must select a readily available business index, such as sales level, that is (a) known to have a direct influces on the organizational demand for labour, and (b) subjected to future forecasting as a result of the normal business planning process.
- Track the business index over time – Once the index has been selected, it is necessary to go back in time for at least the four or five most recent years, but preferably for a decade or more, to record the quantitative or numerical levels of the index over time.
- Track the workforce size over time
- Calculate the average ratio of the business index to the workforce size. This ratio is the relationship between the operational index and the demand for labour
- Calculate the forecasted demand for labour