Internal Labor Market Description

Internal Labor Market Description

Markov Analysis and Forecasting

Internal Labor Market Description

Job Stability

Job stability refers to the degree of retaining ones functionality in a department or unit. For instance, remaining in full time sales, part time sales, assistant sales manager position or the regional managers position (Heneman& Kammeyer, 2012).  According to the probability figures, DoortoDoor sports Equipment Company experienced 50% to 80% employee stability.

Exit (Turnover Rates)

Turnover rates refer to the degree of employees exit from the company or shifts to other institutions for rudeness, poor performance, low appraisal ratings, undervaluing employees, lack of mentorship, poor decision making and ability inadequacy (Heneman & Kammeyer, 2012). The company experienced turnover rates ranging from 5% to 35%.

Promotion Paths

Promotion refers to the shift from a lower position to a higher position due to excellent performance ratings, proper decision making, mentorship and coaching (Heneman & Kammeyer, 2012). In accordance to DoortoDoor sports Equipment Company, there are three functional levels.  Shifts in position only occurred within assistant sales manager to regional sales manager (ASM to RSM), full time sales people to assistant sales manager (SF to ASM) and part time salespeople to assistant sales manager (SP to ASM).

Transfer Paths

Transfer refers to limited movement of employees within the same functional level (Heneman & Kammeyer, 2012). Movement only occurred within the first level where full time sale persons moved to the part time sales unit (SF to SP) and where employees from the part time sales unit moved to the fixed sales unit (SP to SF).

Demotion Path

Demotion refers to the shift from a higher function to a lower function in an organization. In DoortoDoor sports Equipment Company, only two movements occurred, that is, Regional sales manager to assistant sales manager (RSM to ASM), assistant sales manager to part time sales (ASM to SP) or assistant sales manager to full time sales unit (ASM to SF).

Number Forecast in the Different Doortodoor Job Groups In 2013

Transition Probability Matrix

Job Category Level SF SP        ASM           RSM            Exit
Sales, Full Time (SF) 1 0.50 0.10 0.05 0.00 0.35
Sales, Part Time (SP) 1 0.05 0.60 0.10 0.00 0.25
Ass Sales mgr (ASM) 2 0.05 0.00 0.80 0.10 0.05
Regional sales mgr (RSM) 3 0.00 0.00 0.00 0.70 0.30


In order to get the probable workforce outcome, multiply the current workforce by the column probability figures as illustrated on the table below.

Illustration of 2013 Forecast Manipulation



Current Workforce SF SP ASM RSM Exit
SF 500 500(0.50)=250 500(0.1)=50 500(0.05)=25 500(0)=0 500(0.35)=175
SP 150 150(0.05)=7.5 150(0.60)=90 150(0.10)=15 150(0)=0 150(0.25)=37.5
ASM 50 50(0.05)=2.5 50(0)=0 50(0.8)=40 50(0.1)=5 50(0.05)=2.5
RSM 30 30(0)=0 30(0)=0 30(0)=0 30(0.7)=21 30(0.3)=9


Sum up the figures at the end of the column to get SF (260), SP (140), ASM (80), RSM (26) and Exit (224). The employees amounting to two hundred and twenty four is predicted to leave the company and will not be available for 2013 operations.

Available Forecast

Job Category Current Workforce SF SP ASM RSM Exit
SF 500 250 50 25 0 175
SP 150 7.5 90 15 0 37.5
ASM 50 2.5 0 40 5 2.5
RSM 30 0 0 0 21 9
Sum 730 260 140 80 26 224


The constant percentage changes are as a result of human resource frameworks and protocols which were in operation between 2012 and 2013. The probability figures enable transitional forecasting for the organizational employees over the operational period.

Forecasted Shortages and Surplus in the Doortodoor Company

Job Category Current Number of Employees Forecasted Number of Employees
SF 500 260
SP 150 140
ASM 50 80
RSM 30 26

The sales full time forecast deviates from the current number of employees by 240 employees indicating a shortage, that is: 500-260=240 employees. The sales part time also forecasts a shortage of 10 employees, that is: 150-140=10 employees. The Assistant Sales Manager post indicates a surplus as 30 employees will be moving into the post, that is: 80-50=30 employees. The Regional Sales Manager position has a shortage of 4 employees, that is: 30-26=4 employees.

Possible Limitations to the Forecast

The following are the limitations associated with the above forecast.

Population Size

It is recommended to obtain   a number of employees exceeding twenty for each function in the organization as the figure is used in calculating transitional likelihoods. In cases where the numerator deviations are small, minute population sizes will have significant deviations in the transitional probability figures (Carpinone, Giorgio, Langella & Testa 2015). Thus, when forecasting future occurrences, manipulating probable change on minute population’s results in unstable forecasting which may not be reliable in decision making.

Interval Movement Ignorance

Markov analysis only concentrates on two periodical extremes, that is, t and t+1. It only looks at the workers positional changes at the start and end of the operational period. It ignores the fact that constant movements occur in between the operational period and thus minimizes reliability. In order to reduce the unnoticeable movements, the gaps between the periods should be minimized, for instance, less than two years.

Combining functions

An organization is characterized by an integration of different functions which operate to reach and attain similar goals. When determining the probable future outcomes, extreme functions may be used, for instance, Regional Senior Management and Sales Representatives part time and full time. Where these positions are distinct and have a difference of more than one level, utilizing the figures may disagree with stipulations and visions of the human resource and planning function (Carpinone et al., 2015).

Outcome Reflection

The resultant probabilities only show the likely movements of the workers in the organization. It fails to outline comprehensively the reasons for the positional changes. In calculating the probable forecast, all the workers are assigned the same probability of positional change. In reality, management takes into account several factors before making any decision to allow transfer, promotion, demotion or exit. Some of these factors include punctuality, job quality, personal presentation review results, and positive client response and individual appraisal outcomes (Carpinone et al., 2015).  Including these functions in decision making will differentiate the probabilities of positional change among the organizational employees.

Advantages of Internal Recruitment and Disadvantages of External Recruitment

When considering for internal recruitment, the organization benefits include:

Employee Turnover

Reassigning best performing employees into other functions within the organization motivates them which in turn improve their performance. The employees are able to develop their skill and abilities (Bayo-Moriones & Ortín-Ángel, 2006). On the other hand, sourcing externally will instead lower the morale of the current employees. They will feel unconsidered despite the hard work and effort they have put in to ensure performance.

Accuracy in Assessment

The human resource department always has a track record on the performance of the organizational employees. They already have clear information on the abilities and expertise. The interviewers have a guarantee on performance and behaviour of the candidates (Bayo-Moriones & Ortín-Ángel, 2006). On the other hand, external recruitment will require thorough assessment and the interviewers will only rely on the individuals documented achievements, certifications and eloquence. They do not have clear knowledge on the individual’s performance and behaviour.

Expenditure Position

When the organization has internal candidates who already qualify for a post, it does not have to advertise for the position which saves on advertising costs and time for interviews. The organization is thus able to utilize the funds in other viable areas. On the other hand, recruiting outsiders will incur costs for the organization, for instance costs for advertising job vacancies in newspapers and carrying out interviews (Bayo-Moriones & Ortín-Ángel, 2006)..

Advantages of External Recruitment and Disadvantages of Internal Recruitment

Talents and Abilities

When the company carries out interviews for top management positions, it is assured of experienced, skilled and knowledgeable professionals who are able to handle the positions better and have more expertise on the area. On the other hand, sourcing internally means limited knowledge and abilities. The internal candidates thus need close monitoring and exposure to be able to handle the position. The internal candidate is bound to follow what the former candidate used to do which inhibits change in the organization (Bayo-Moriones & Ortín-Ángel, 2006).


The business world always changes with time. As time passes, companies always adopt new ways of doing things and carrying out their operations. Sourcing externally assures the company gets fresh talent capable of instituting change into the work place (Bayo-Moriones & Ortín-Ángel, 2006). They bring in new people to help increase the levels of innovation and ease operations. Carrying out internal recruitment only stagnates the company in terms of ideas, operations and culture. The company becomes predictable and finds it hard to survive in a tough dynamic competitive industry.

Worker development

When company employees have knowledge of promotional opportunities on top positions, they may want to compete with the external candidates by taking part in training and development programs. The training programs will assure them an advantage over the external candidates. Training and development will thus be a gate way to better abilities and expertise. On the other hand, recruiting from within the organization will not allure the employees into bettering themselves. Lack of competition reduces the motivation of improving one’s self through development training (Bayo-Moriones & Ortín-Ángel, 2006)

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