Human Resource Environment

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Everything you need to know about human resource environment.

Human Resource Environment is a part of social environment
which includes the concept, viewpoints, work culture, attitudes,
efficiency, skills, productivity, nature and behaviour of HR,
employees’ demand and supply, motivational aspects,
compensation methods and industrial relation concerning of HR
practices.
With the growing and integrated role and perception of social and
human resource environmental factors, there is a transformation
process was emerged for the last two decades.
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The shift from manual process to machinery process, from

unskilled employees to the skilled employees, from manufacturing
economy to a service economy, from machine age to the autocratic
age have been accompanied by many transformations.
Learn about:-

1. Meaning of Human Resource Environment 2. Need to Study

Human Resource Environment 3. Factors Affecting 4. Changing
Environment 5. Trends, Practices and Perspective Viewpoints.

Human Resource Environment:

Meaning, Need, Factor Affecting, Trends
Practices and Perspective Viewpoints

Contents:
1. Meaning of Human Resource Environment
2. Need to Study Human Resource Environment
3. Factors Affecting Human Resource Environment
4. Changing Human Resource Environment
5. Trends, Practices and Perspective Viewpoints of Human
Resource Environment

Human Resource Environment – Meaning

Within HR scenario, the business environment have focus some
new aspects and avenues with some changing values. Presently the
people become the most valuable asset of the industry and there is
required to get new talented and technological based persons.
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The entire social as well as business environment duly effect to the

HR concepts, practices and performance in a wide range of
operations. Comprehensively the social environment have a wide
scope to influence and direct to HR scenario within economic and
industrial areas.

The Human Resource Environment is a part of social environment

which includes the concept, viewpoints, work culture, attitudes,
efficiency, skills, productivity, nature and behaviour of HR,
employees’ demand and supply, motivational aspects,
compensation methods and industrial relation concerning of HR
practices.
With the growing and integrated role and perception of social and
human resource environmental factors, there is a transformation
process was emerged for the last two decades. The shift from
manual process to machinery process, from unskilled employees to
the skilled employees, from manufacturing economy to a service
economy, from machine age to the autocratic age have been
accompanied by many transformations.

Human Resource Environment – Need to Study HR

Environment
Within the globalised economy, there are several significant
environmental trends and changes faced by HR managers and
employees that pose major challenges. Here, there is need to study
the HR environment in order to make proper awareness in HR
practices, to raise skills and efficiency, to uplift HR productivity and
to overcome the problems and challenges.
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The aspects as well as factors to be responsible to study

the human resource environment are as given here:
1. In order to create and develop intellectual capabilities among
employees, there is need to develop the learning and knowledge
attitudes among employees;
2. In order to determine and prepare social values, ethical norms
and several code of conducts within the purview of employees;
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3. In order to analyse and implement effectively and perceptively

the business and labour laws and provisions;
4. For strengthen and develop the work plan for productive and
constructive activities by the employees;
5. In order to make congenial and harmonious work-culture at work
places, there is need to analyse all the relevant aspects as arising out
of environmental studies;
6. In order to solve and overcome different societal issues, evils and
conflicts, there is need to analyse the social environment;
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7. For managing and organising the mechanical and technological

advancement as well as new and innovative methods at the work
place;
8. In order to take sound, rational and comprehensive decision
making invariably relating to HR practices;
9. In order to determine long term strategies for different internal
and external aspects of HRM as well as to develop HR efficacies;
and
10. In order to study, analyse and develop the personal skills and
efficiency, there is a need to study HR environment.

Human Resource Environment – 2 Major Factors

Affecting: External and Internal Forces
Environment is an important element in the HRM model and
therefore, it is necessary know what the environment is and how it
influences HR functions in an organization. Environment consists
of all those factors which have their bearing on the functioning of
the HR department.
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These forces are divided into external factors and internal factors.
External factor include political and legal, technological, economic
and cultural whereas internal factors include unions, organisational
culture and conflicts and professional bodies. Analysis of the
environment is essential for the HR manager and his/her team in
order to be proactive to the environment and not reactive to the
environment.
Following are the factors affecting human resource
environment:
Factor # A. External Forces:
These factors exist outside the organization and the organization
has least control over these factors.
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The external forces mainly include:

1. Political and Legal Environment:
The environment includes the impact of the political institutions on
the HRM department.
In a democratic set up like India which together constitute
the total political environment:
(a) Legislature – It is also called Parliament at the central level and
advisory at the state level. It is basically a law making body. The
various labour laws are enacted by this institution.
(b) Executive – It is also known as the government and it is a law
implementing body. It acts according to the decisions of the
legislature.
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(c) Judiciary – It plays the role of watchdog and ensures that both
legislature and executive work in the interest of public.
Political environment affect the labour through the labour laws.
There are many labour laws which are related to terms and
conditions of employment, work conditions, payment of wages,
industrial disputes, health, safety and welfare of the labour.
Effect of Political Environment on HRM:
All HR activities are affected in one way or other by the political
environment.
The following activities are mainly affected by the
constitutional provisions:
(a) HR Planning
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(b) Recruitment
(c) Selection
(d) Placement
(e) Training and development
(f) Employee Relations
(g) Separations
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2. Economic Environment:
Economic environment refers to all the economic factors which
directly or indirectly affect the HRM.
The following are the components of economic
environment:
(a) Suppliers:
Under HRM, the suppliers are the agencies or parties who make
available the human resources to the organization.
These agencies are as follows:
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(i) Employment Exchanges

(ii) Universities
(iii) Colleges
(iv) Training Institutes
(v) Casual Labour Contractors
(vi) Consulting firms
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The type of employees received by the organization depends on the

suppliers to a large extent.
(b) Competitors:
Some of the HR functions or activities are influenced by the
competitors. This is because the number of organizations is
competing for the human resources, which increases the
importance of staffing function and its appraisal and compensation
activities.
Now the individual is offered job by many organizations and the
organization which provides him best terms and conditions wins
the competition. Therefore, when the employees from outside
become difficult to obtain, the organizations have to groom its own
employees with help of HR activities.
(c) Customers:
The Company’s personnel function is also influenced by the
customers. It is well known that customers want high quality
products at the reasonable prices and therefore, everybody in the
organization should strive to offer such products which provide
desired satisfaction to the customer.
(d) Industrial Labour:
Many changes have been taken place in the industrial labour
especially in the organized sector.
Some of these changes are:
(i) Level of Commitment:
Now the labour is committed to the industrial setting which leads to
the stabilization of the work force. The worker who joins the job in
an urban undertaking though linked with his village but it is
unlikely that he will go back. Therefore, the present generation of
young workers has accepted the industrial employment as a way of
life. But the true picture is that though the labour is committed to
industry but it is not committed to the work which leads to the low
productivity of our industrial labour.
(ii) Protective Legislation:
So many legislations have been enacted by the government from
time to time for protecting the interest of the workers. This has
resulted into 51 central acts spread over 2030 pages, and 103 state
laws covering approximately 2970 pages adding a total of 5000
pages of labour laws. So the working conditions, job security,
compensation, health and safety have been improved considerably
over the years.
(iii) Economic and Social Status:
The economic and social status of today’s workers has vastly
improved. Improved skill contents, matching educational and
training inputs, and increased emoluments have made the
industrial employment as the first attraction of the young job
seekers.
3. Globalisation:
India’s economy is gradually getting integrated with the global
economy.
Globalization has considerable influence on the HR
function which can explained as follows:
(a) Employee hiring, training, motivation, compensation, and
retaining are guided by the global perspective.
(b) The department can become the source of competitive
advantage for the company by discharging the HR functions
effectively and by helping the best qualified people execute the
company’s strategy on the global scale.
(c) A work force that is knowledgeable and skilled at doing complex
things keeps the company competitive and attracts foreign
investment.
(d) The benefits between globalization and workers are mutual.
(e) Every advanced nation is increasingly becoming globalized,
skills and cumulative learning of its work force becomes its
competitive assets.
4. Technological:
Technology affects the HR function in the following ways:
(a) With the advancement in technology jobs tend to become more
intellectual or upgraded. Now the jobs require the skills of educated
and knowledgeable workers.
(b) The introduction of new technology dislocates workers unless
they become well equipped to work on new machines which makes
obligatory on the part of HRM to train workers and to rehabilitate
those who are displaced or cannot be trained.
(c) Those employees who pick up and acquaint themselves with new
technology, the job will be challenging and rewarding.
(d) Technology also has its impact on human relations as
technology lays down the requirements for much of the human
interactions in the organizations.
5. Cultural Forces:
Culture includes knowledge, belief, art, morals, laws, customs, and
other capabilities and habits acquired by an individual as a member
of a society.
Culture influences the HR function as follows:
(a) The attitude of the worker towards his work depends upon his
cultural background. Our workers are known to have a deep seated
apathy towards work. Tasks are performed without any interest,
dedication, or pride. Further, there is indiscipline at all levels and
poor superior subordinate relationships.
(b) Culture trains people along particular lines, tending to put
personality stamp on them. When people with different cultural
backgrounds promote, own and manage organizations, they
themselves tend to acquire distinct culture.
(c) Time dimension which affects the HRM has its basis in culture.
Time orientation refers to the people’s orientation – past, present,
and future. HRM focuses on present and care more for employees
on the rolls. Employees are hired and maintained as long as they are
useful to the organization and dispensed as they cease to be so.
(d) Work ethics, effort reward expectations, and achievement needs
which are significant inputs determining the employee behaviour at
work are the results of the culture.
Factor # B. Internal Forces:
The HR activities are also influenced by the internal forces.
Prominent internal forces are:
1. Unions:
The firm’s personnel activities are influenced by its own union as
well as the unions of the other firms. A trade union is an association
of workers or management formed to protect their own individual
interests. The role of a union is too well known. All HR activities –
recruitment, selection, training, compensation, IR and separations
are carried out in consultation with the trade unions.
Few organizations are lucky to have one union. Encouraged by
ideological rifts and personal ambitions of leaders the organized
labour unions are splitting and there are multiple unions. The
Bokaro Steel Plant has for example 68 unions, and Calcutta
Corporation has 100 of them.
2. Organisational Culture and Conflict:
Every organization has its own culture. Organisational culture is the
result of all the organization’s features – its people, successes, and
its failures. Organisational culture shapes the future by reflecting
the past. Therefore, it becomes necessary for the HR specialists to
adjust proactively to the culture of the organization. The
organizational culture is shaped by its core values and beliefs.
For example the following cultures were adopted by
different organizations:
TATA – Get Best People and Set them Free
L&T – Professional Approach
Reliance Industries – Competitive Spirit
IBM – Service
GM – Product Innovation
There is often conflict between organisational culture and
employees’ attitude.
Following dualities are the reasons for conflicts:
(a) Personal Goal vs. Organisational Goals
(b) Personal Ethics vs. Organisational Ethics
(c) Rights vs. Duties
(d) Discipline vs. Autonomy
(e) Self Confidence vs. Arrogance
(f) Short Term vs. Long Term
(g) Leadership vs. Follower ship
(h) Delegation vs. Abdication
(i) Participation vs. Anarchy
(j) Doing vs. Becoming
(k) Feedback vs. Abuse
(l) Cleverness vs. Wisdom
HR department are required to develop and enforce policies in
these areas as these are not the hypothetical conflicts and they occur
daily in organizations.
3. Professional Bodies:
The impact of the apex body, National Institute of Personnel
Management (NIPM), on HR experts is minimal. The body has not
been able to prescribe its accreditation for the HR manager. Infact
the minimum professional qualification for HR professional is also
not defined by it. In spite of all this the role of NIPM in providing
the insights to the HR manager cannot be ignored. For the benefit
of HR experts the NIPM organizes the periodic training
programmes, seminars, and conferences.
The code of ethics is also formulated by NIPM and it also offers the
post graduate diploma in personnel management. The code on
ethics reminds HR people about their ethical obligations towards
the employees, organization, government, profession, and society.

Human Resource Environment – Changing Human

Resource Environment
The human resource environment is changing very fast and the
changes are requiring it to play an ever more crucial role in
organizations. These trends include work force diversity,
technological trends, globalization and changes in the nature of jobs
and work.
Within the HR scenario, with the advent of globalisation and
technology, the pace and scope of change has increased
substantially. In high intensive of change environment, there are
new skills, integrated occupational designs, reengineering job
contents, technological advancement, organisational restructuring,
redeployment, outsourcing and downsizing etc., have become a way
of life and are accompanied by change.
In respect of HR scenario, the changes may be individual and group
level, proactive, organisational, structural, developmental,
occupational, incremental and transformational etc., may take
place.
1. Work Force Diversity:
The current decade is witnessing the changes in the composition of
the work force; specifically it will continues to become more diverse
as women, minority-group members, and older workers are joining
the work force. Changes in racial composition are even more
dramatic. The labor force is also getting older. Increased diversity
placing tremendous demand on the HR management function.
As the work force ages, employers will have to grapple with greater
health care costs and higher pension contribution. Some advanced
countries are facing a shortage of workers aged 25 to 34, while the
career opportunities in management for workers in the 35 to 44 age
cohort may be constrained by the abundance of more experienced
members of the 45 to 54 age cohort.
With more females in the work force, an upswing in the number of
dual-career couples will force more employers to establish child
care facilities on or near company premises and to accommodate
the travel, scheduling, and moving needs of dual-career employees.
2. Technological Trends:
Technological changes will continue to shift employment from some
occupations to others while continuing to a rise in productivity. For
example, telecommunication and internet has already made it
relatively easy for many to work at home. Computer-aided design/
computer aided manufacturing systems plus robotics continues to
increase.
Manufacturing advances are eliminating many blue-collar jobs,
replacing them with knowledge workers. Similar changes are taking
place in office automation, where personal computers, word
processing, and management information systems continue to
change the ways office work is done
Labour intensive jobs are decreasing while technical, managerial,
and professional jobs increasing. Jobs and organizational structures
are being redesigned, new incentive and compensation plans are
being instituted, new job descriptions written, and new employee
selection, evaluation, and training programmes instituted all with
the assistance of HR management.
Technology will also compel firms to become more competitive.
Information technology has also speeded the fall of hierarchy.
Managers now depend less and less on yesterday’s stick-to-the
chain of command approach to organizing. Every employee with a
personal computer on his desk can access the firm’s computer
network and get needed information. HR plays an integral role in
any such changes.
3. Globalization:
Finns are increasingly extending their sales or manufacturing to
new markets abroad, and, for businesses everywhere, the rate of
globalization in the past few years has been phenomenal.
Production is becoming globalized too, as manufacturers around
the world put manufacturing facilities where they find it most
advantageous.
This globalization of markets and manufacturing has vastly
increased international competition. Many firms have responded
successfully while others have bid farewell to the market.
4. Trends in the Nature of Work:
Technological changes and globalization are causing changes in the
nature of jobs and work. Technological changes have permitted
companies to move to locations with lower wages. There is also a
trend towards increased use of part-time and temporary workers.
However, the most notable trends in the nature of work are the
trends to service jobs, and to knowledge work and the stress on
human capital.
5. Shift from Manufacturing to Service:
An enormous shift from manufacturing jobs to service jobs is taking
place globally. These types of jobs will demand new types of
knowledge workers and new human resource management methods
to manage them.
6. Knowledge Work and Human Capital:
“The typical business is increasingly becoming knowledge-based, an
organization composed largely of specialists who direct and
discipline their own performance through organized feedback from
colleagues, customers and headquarters. For this reason,
organizations are becoming more information based.”
As a result, the distinguishing characteristics of companies today
and tomorrow, is the growing emphasis on human capital – the
knowledge, education, training, skills and expertise of a firm’s
workers, at the expense of physical capital like equipment,
machinery, and the physical plant.
The growing focus on education and human capital reflects several
social and economic factors. For managers, the challenge of
fostering intellectual or human capital lies in the fact that such
workers must be managed differently. New human resource
management systems and skills are required to select and train such
employees and to foster their self-discipline and commitment
Role and Responsibility of HR Professional in Changing
Environment:
In the context of changing environment led by globalization,
liberalization, and technological advances, the role of human
resources in creating and sustaining competitive advantage for
organizations has changed drastically. As a result, the role and
responsibility of HR professionals have changed.
Their changed role and responsibility are to focus on strategic HR
issues, designing and taking proactive actions, developing
integrated HR system, working as change agent, and marketing
HR’s potential contribution. Let us see what aspects are involved in
these.
i. Focus on Strategic HR Issues:
In this changing environment, there is a high need for focusing on
strategic HR issues; functional/operational issues will emerge out of
these. The earlier practice of HR has been to put emphasis on
functional/operational issues. As a result, HRM has not played its
role meaningfully and it was accorded the status of almost a second
class citizen in organizations.
Now, the situation is quite different. HRM has to play significant
role in corporate strategic management. Therefore, strategic HR
issues have to be identified and dealt with adequately. A strategic
HR issue is one that has long-term implications for HR practices as
well as for the organization as a whole.
One way of identifying strategic HR issues is to align HRM with
strategy of the organization and, then, to look at the HR issues
which are critical to implementation of the organizational strategy.
Not only that, HRM can even contribute to formulation of
organizational strategy by showing how an ensuing strategy will be
facilitated through the effective utilization of human resources.
Focusing on strategic HR issues has one basic in-built advantage. In
that it frees the top- level HR professionals from undertaking
functional/operational issues which can be taken care of a
comparatively lower levels or can be outsourced, a new practice in
HRM.
ii. Proactive Actions:
In order to counter environmental challenges, HR professionals
have to take actions on proactive basis rather than on reactive basis.
Taking actions on proactive basis involves identification of likely
changes in factors affecting HR practices, designing actions to meet
the requirements of the likely new scenario, and putting those
actions in practice before any issue becomes a problem for the
organization.
As against proactive actions, reactive actions are taken in the light
of the actual change in factors affecting HR practices. The process
goes like this- change takes place in a factor, creates problem for the
organization, HR professionals make efforts to tackle the problem.
This process of tackling a problem in HR area becomes quite costly
for organizations. For example, because of changed environment, if
an organization faces high rate of employee turnover and it devises
strategies to minimize employee turnover rate, it will lose precious
talents, its reputation in the human resource market will go down,
and it will become difficult for it to attract talents.
For taking actions on proactive basis, HR professionals need to keep
themselves abreast with the contemporary HR practices on global
basis. They have to interact with what is happening outside their
own organization; rather than looking inwardly, they have to
develop the liking for looking outwardly too.
iii. Developing Integrated HR System:
In order to meet environmental challenges, HR professionals must
develop integrated HR system. An integrated HR system is one that
has well-balanced subsystems continuously interacting among
themselves. Since in most of the organizations, HR functions
emerge and work on incremental basis, there is often a lack of
coherence in the functions.
In incremental approach, decision making is basically meant for
problem solving rather than going for new opportunities. When a
problem emerges, it is solved. When this problem becomes of
recurring nature, a new section is created. This process goes on
resulting in creation of several sections and sub-sections within a
department without caring for how these sections and sub-sections
contribute to each other and for the department as a whole.
As against the above, in an integrated system, each subsystem is
designed keeping in view how it contributes to total HR system;
how various subsystems interact among themselves to contribute
positively to each other; their placement and resources allocated
match with their contribution to HR system; and their roles and
norms are specifically prescribed.
As a result, HR system contributes much more positively to
organizational effectiveness as compared to any of the alternative
arrangements.
iv. Working as Change Agent:
In this dynamic environment, HR professionals must work as
change agent in the organization. A change agent is one who
perceives the need for and initiates change. Because of changing
environment, organizational change has become a more recurring
issue.
Such changes may be either of minor nature happening on regular
basis and brought about by internal organizational personnel or of
major nature necessitating the help of external consultants. In both
these cases, HR professionals have to play active role as any
organizational change has some HR issues, and without tackling HR
issues, no organizational change will be effective.
For managing minor organizational change, organization’s internal
personnel are sufficient to take up the various issues in which HR
professionals concentrate on HR issues. However, in the case of
major organizational change like designing a new course of strategy
which has very low linkage with the existing strategy external
consultant is required. He diagnoses the problem, analyses its root
causes, and suggests suitable actions.
This process takes long time in which internal personnel also work
as internal change agents. HR professionals have to work as internal
change agents on HR issues in such a case. However, they do not
have authority over those who are likely to be benefitted by
organizational change. Given the characteristics of organizational
life, HR professionals must negotiate, persuade, and mobilize
human resources of the organization.
v. Marketing HR’s Potential Contribution:
There is a tendency to put more emphasis on visible activities that
generate revenue to the business. From this point of view, HR
activities do not directly fit with business requirements. As a result,
HR profession has been facing an identity crisis throughout its
evolution.
Challenges before HR professionals in marketing HR’s potential
contribution are twofold. First, managers in the organization,
particularly line ones, may not believe that HR issues are so critical
for organizational effectiveness. Second, managers may believe that
even if some of the HR issues are critical to the organization, HR
professionals are ill-equipped to sort out such issues; at the best,
they can provide operational support.
Because of this state of affairs, HR professionals must market the
potential contribution of HR. Instead of tendering advice about HR
issues when sought by line people, HR professionals need to work in
partnership with these people and provide them customized HR
solutions having practical bias rather than having theoretical
orientation.
It is the responsibility of HR professionals to understand the
business processes of line people and identify how better they can
help these people by taking up HR issues in a much better way.

Human Resource Environment – Trends, Practices

and Perspective Viewpoints
Within the HR environmental scenario, there are different trends
and practices have emerged. These practices have been emerged
with the concepts, methods, approaches and processes as follows by
HR management in any organisation. In industrial area there are
certain problems and challenges have been arising with the
changing and fast work behaviour. Here, the different perspective
viewpoints have also discussed to overcome the problems and
challenges as arising out of there HR trends.
There are different environmental trends incorporate the HR
practices. Somehow these practices may create some challenging
parts also.
Here, some of the perspective viewpoints to overcome the
HR challenges as arising out of them are briefly stating
here:
1. Outsourcing:
i. Developing core competencies
ii. Managing job security and employees’ job recognition
iii. Managing morale and productivity
2. Technological Advancements:
i. Managing employee alienation
ii. Developing training modules and conducting training
programmes
iii. Retaining present employees to manage obsolescence
iv. Organise a virtual workforce.
3. Workforce Composition:
i. Managing HR strategies for hiring, retaining and motivating
employees to different generations
ii. Develop a balancing part of life style driven for new employees
iii. Develop a better work culture with a balancing form.
4. Workforce Availability:
i. Develop and forecast a worthwhile HR supply and demand
forecasting
ii. Ensure proper availability of trained and skilled workforce
iii. Determine the number of workforce with other productive
resources.
5. Downsizing:
i. Managing morale and commitment with survive employees
ii. Better organisational culture
iii. Better behavioural relations with retained employees
iv. Provide counselling for better life style to employees who lose
their jobs.
6. Mergers and Acquisitions:
i. Provide job security during mergers
ii. Ensuring continued employees’ work performance
iii. Develop HR practices to accumulate the employees’ performance
iv. Provide motivational devices during employees’ transit period.
7. Competitive Advantages:
i. Develop training modules based on competencies
ii. Focus on new avenues of skills, knowledge and education of
employees
iii. Recruit trained and skill employees.
8. Knowledge Aspects:
i. To encourage employees for continuous learning
ii. To motivate and retained workers
iii. Facilitating sharing of knowledge within organisation
iv. Enhancing cross functional team behaviour and team work.
9. Motivational Aspects:
i. To build morale and enthusiasm
ii. To make team spirit
iii. To integrate the role of individual and groups
iv. Work recognition and determine work responsibilities.
10. Formal and Informal HR Interactions:
i. To make ideal and stable organisation
ii. To determine objective based HR groups
iii. To determine planned and strategical HR practices
iv. To develop informal coordination among employees.
11. Ageing Group of Workforce:
i. Managing the demand and supply gap for skilled and qualified
workforce
ii. Determine motivational retirement policies
iii. Determine a programme to retain skilled and experienced
employees.
12. Women in Workforce:
i. Strategizing to attract and retain educated and skilled women
workers
ii. Conducting programmes for women who opt for career breaks
iii. Providing facilities such as crèches and flexible working hours,
etc.
13. Societal Issues:
i. To encourage the employees for basic education
ii. To conduct social awareness and social upliftment programmes
iii. To aware about social responsibilities of employees
iv. To educate employees to become an ideal citizen.
14. Industrial Disputes:
i. To develop an amicable platform for collective bargaining
ii. Proper work recognition, motivational benefits and stimulate the
human aspects of employees.

Factors Affecting Human

Resource Management
Everything you need to know about the various factors affecting
human resource management. Human resource management is a
subsystem of an organization as a system.
However, when a subsystem is taken for analysis, it is treated as a
system because it has the features of a system. A system works in
the context of its environment. Environment of a system consists of
all those factors which lie outside the system but affects working of
the system.
In the case of human resource management, there are two
categories of environmental factors-external and internal.
External factors are all those factors which lie outside an
organization and affect its working, including human resource
management. Internal factors are all those factors which lie
within the organization and affect human resource management.

Learn about the various external factors affecting human resource

management. They are: - 1. Economic Factors 2. Socio-Cultural
Factors 3. Technological Factors 4. Political-Legal Factors 5.
Growing Strength of Trade Unions 6. and Growth of Management
Theories and Approaches.

Also, learn about the various internal factors affecting human

resource management. They are: - 1. Organization’s Strategy 2.
Organizational Culture 3. Trade Unions and 4. Organization’s
Financial Position.

1. External Factors:
External factors affecting human resource management are
economic, socio-cultural, technological, political-legal, and
professional association. These factors have different types of
influences on human resource management.
I. Economic Factors:
Economic factors are those factors which give shape and form to the
development of economic activities and include factors like nature
of economic system, general economic conditions, various economic
policies, and various factors of production including human
resources.
Out of these, factors that influence human resource management
practices are population and workforce, workforce market
conditions, national income, and inflationary pressures.
Influence of these factors on human resource
management practices are as follows:
i. Population and Workforce:
Population and workforce influence human resource management
because these forms the basis for an organizations’ external supply
of human resources. While considering population and workforce as
a means for supply of external human resources, organizations
should differentiate between workforce and population because
only a part of the population is eligible to work.
Further, eligible workforce can be divided into two groups- the
workforce reserve (those not working for economic gain, for
example, homemakers, students, etc., and those who constitute
workforce. Out of this workforce, organizations can choose their
employees.
ii. Workforce Market Condition:
Workforce market condition shows demand and supply of
workforce. It influences human resource management practices
relating to recruitment and selection. Exchanges between employers
and potential employees occur in the workforce market. Since
workforce market includes all types of workforce, only relevant
workforce market is taken into account for searching potential
employees.
Three factors usually define the relevant workforce market- (a)
occupation — qualifications and skills required, (b) geography —
potential employees are willing to relocate or commute, and (c)
other employers that compete with similar products and services.
These three factors define the part of the workforce that is of
interest to a particular employer. In fact, human resource
professionals consider workforce market in terms of all three
factors.
iii. National Income:
National income, particularly measured in terms of per capita
income, affects wage/salary structure at the macro level. Each
employer has to align wage/salary structure with that operating at
the macro level. This is the reason for difference between
wage/salary structure of economically advanced countries and
developing countries.
iv. Inflationary Pressures:
Besides the national income, inflationary pressures in a country also
affect the payment to be made to employees. In most of the
countries, payment to employees is linked to cost of living either
directly or indirectly. As a result, when a country faces inflationary
pressures, its cost of living index goes up forcing employers to pay
more to employees.
For example, in India, dearness allowance, a part of the payment
made to employees, is linked with cost of living index. When this
index goes up, there is proportionate increase in the amount of
dearness allowance.
II. Socio-Cultural Factors:
Socio-cultural factors are quite comprehensive and affect various
aspects of organizational operations, including human resource
management. From human resource management point of view,
attitudes, beliefs, desires, expectations, and customs of the society
at a given point of time are important.
These factors determine- (i) expectations of the society from
organizations, (ii) views towards social status of jobs, (iii) views
towards achievement of work, (iv) views towards authority
structure, responsibility, and organizational positions, (v) workforce
mobility, and (vi) role of unions in managing human resources. In
the light of various socio- cultural factors, organizations can do
better if they follow human resource management practices in
accordance with the needs of these factors.
The socio-cultural factors affect human resource
management practices in the following ways:
a. Socio-cultural factors have direct impact on organizational
culture. If the organizational culture is not in accordance with socio-
cultural characteristics, it will not be effective even if organizations
offer higher monetary benefits. Since human resource management
practices are one of the prime constituents of organizational culture,
these practices have to be aligned to social expectations. In this
context, the role of human resource professionals is very important.
b. Socio-cultural factors determine what kind of role is to be, played
by unions in managing human resources. If the society views that
unions are the champions of employee cause, their bargaining
position increases and their role in managing human resources
becomes more important. In alternative situation, the role of unions
in managing human resources decreases.
III. Technological Factors:
Technological factors consist of sum total of knowledge providing
ways to do things. These include inventions and techniques which
affect the ways of doing things, that is, designing, producing, and
distributing products and services. Technology affects an
organization in two ways- (i) defining nature of jobs and (ii)
affecting human resource management practices.
(i) Defining Nature of Jobs:
Technology is a major source of productivity increase. Various jobs
in an organization being performed by individuals are determined
by the technology being used for conversion process. Thus,
technology determines the type of skills to be possessed by job
performers.
As the level of technology improves in an organization, skill
requirement also increases. For example, in knowledge-based
companies like in information technology, skill requirement is quite
different as compared to industrial companies. For knowledge-
based companies, knowledge workers are required.
Even in industrial companies, those opting for highly automated
technology require human resources with different skill set as
compared to companies opting for non-automated technology. HR
professionals have to select and train human resources accordingly.
Technology not only affects the internal operations of organizations
but it also affects how human resource professionals work. By
linking computers, fax machines, copiers, printers, and the likes,
information related to human resources can be disseminated more
quickly.
With that information, human resource planning can be better
facilitated, decisions can be made faster, and communication with
employees and external community can be enhanced.
(ii) Affecting Human Resource Management Practices:
Technology has changed human resource management
practices in the following areas:
a. In recruitment and selection, the total process has been reduced
to such an extent that the entire process can be completed within a
very short time. By posting jobs on the Internet, required
information is assimilated quickly; applications from prospective
candidates can be received quickly; even interviews can be
conducted through telephone; result of selection process can be
communicated electronically.
It may be mentioned that most of the IT companies and many of the
forward-looking companies in other sectors send appointment
letters to the selected candidates through the Internet.
b. In training and development, technology is dramatically changing
how HR professionals are training and developing employees. The
Internet has provided opportunities to deliver specific information
to employees on demand; visual display terminal (VDT) is being
used to make training programmes more effective.
In fact, various training media are also making it possible to send
employees for training without having them to physically transport
from one location to another.
c. In communication, technology has paved the way for open door
policy, a policy which is must in the present business environment.
Open door policy implies that anyone can communicate with
anyone in the organization without being limited because of
hierarchical pressures.
Organization’s websites and the Internet have made open door
system workable. Human resource professionals use these media to
share information with employees.
d. In the surveillance of employee behaviour, technology is playing
crucial role. Instead of monitoring employee behaviour physically,
this can be done through technology whether the employees are
located at a single place or dispersed across the globe. In fact, many
multinational companies adopt this mode of monitoring the
behaviour of their employees.
e. In today’s environment, a major concern before HR professionals
is to maintain proper work-life balance for employees.
Organizational jobs have become demanding. This feature takes lot
of employee time. If time taken in commuting to and from office is
added to this, employees have no time to their personal life.
Technology has paved the way for emergence of virtual office which
is devoid of a central place, known as office; no commuting of
employees is required; they are linked through information
technology. Therefore, they can work from any place. This helps
them to maintain proper work-life balance.
IV. Political-Legal Factors:
Political-legal factors include political system, role of government in
business, various government policies related to business
operations, laws formulated by governments, both central and state
levels.
Political-legal factors affect human resource management
practices in the following ways:
i. Governments prescribe policies from time to time related to
management of human resources. These policies have to be adhered
by all the organizations which are covered by these policies.
ii. There cannot be discrimination among employees on the basis of
sex, caste, religion, or place of origin.
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iii. In certain sectors, at least prescribed percentage of total

employees must be selected from personnel belonging to backward
classes, scheduled castes/tribes, and physically handicapped.
iv. Employee remuneration, safety, working conditions, and
industrial relations systems must conform to various legal
prescriptions. In India, there are various Acts passed by Parliament
and State legislatures, relevant to management of human resources.
Organizations have to adopt their human resource management
practices according to prescriptions of these Acts as these Acts leave
very little discretion for adopting different human resource
management practices.
Professional Association:
For every major profession, there is a professional association. A
professional association consists of organizations and individuals
whose membership is based on common professional, scientific, or
technical aims. The representative body of professionals is needed
to regulate and develop the professional activities.
For this purpose, the association prescribes code of ethics to ensure
adoption of ethical practices of its members. For example, in India,
there is National Institute of Personnel Management which has
provided a code of ethics to its members that aims at governing
their behaviour in performing their duties related to managing
human resources.
2. Internal Factors:
Internal factors (also known as organizational factors) lie within the
organization and affect human resource management practices. In
an organization, human resource management works within the
overall perspective provided by the organization.
Overall perspective for the functioning of human resource
management is provided by numerous organizational factors, the
more relevant being the following- organization’s strategy,
organizational culture, trade unions, and organization’s financial
position.
Besides the above organizational factors, organization’s technology
also affects human resource management practices by defining
nature of jobs. Now let us see how the above internal factors affect
human resource management practices.
I. Organization’s Strategy:
Human resource management issues are not independent issues but
these are derived; these are derived from organization’s strategy.
Every organization sets its strategy either explicitly or implicitly.
Strategy is a way in which an organization, reacting to its
environment, deploys its principal resources and marshals its main
efforts in pursuit of its purpose.
Human resource is one of the principal resources of any
organization. Therefore, it must be deployed and utilized keeping in
view the requirements of the strategy. Its implication is that HR
strategy should be chalked out in the light of organization strategy.
How strategy affects human resource management practices can be
seen by analyzing how strategy works in an organization. Strategy
operates at three levels- corporate level, business level, and
functional level. At the corporate level, strategic decision involves
deciding ‘what business should we be in’.
Such a decision sets the long-term direction for the whole
organization. Such a decision is made by top management of the
organization. Business level strategy is relevant to different business
areas, often called strategic business units (SBUs). Each SBU
formulates its own strategy within the overall framework provided
by corporate level strategy.
Business level strategy primarily deals with the question- ‘how do
we compete in the given businesses’? Functional level strategy is
relevant to each functional area like production, marketing, finance,
and, of course, human resource. Functional level strategy primarily
deals with the question- ‘how do we contribute to business unit and
corporate objectives’?
Thus, HR strategy is formulated within the overall framework
provided by corporate level and business level strategy. Depending
on the nature of corporate strategy, human resource management
practices are followed.
II. Organizational Culture:
Organizational culture is another factor that shapes human resource
management practices. Organizational culture is the set of
assumptions, beliefs, values, and norms that are shared by an
organization’s members. There are two types of elements which
define the culture of an organization- abstract elements and
material elements. Abstract elements are internally- oriented and
include values, beliefs, attitudes, and feelings.
Material elements are externally- focussed and include buildings,
personnel dresses, products, etc. Every organization, being a social
entity, develops within it a cultural system with some unique modes
of behaviour. These unique modes distinguish an organization from
others.
Organizational culture is very important factor which affects
organizational processes and practices including human resource
management practices. To understand the differences in human
resource management practices in different types of organizational
culture, it can be divided into two groups- high-performing culture
and low-performing culture.
Human resource management practices differ in these
two cultures on the following dimensions:
i. In high-performing culture, HR practices are intricately linked to
the strategic management of the organization. In low-performing
culture, there is lack of such a linkage.
ii. In high-performing culture, human resource is treated as a
strategic resource. In low- performing culture, human resource is
treated just like any other organizational resource.
iii. In high-performing culture, human resource function establishes
business partnership with line managers who have a direct interest
and involvement in delivering human resource.
Human resource functionaries become integral part of strategic
business units and customize human resource solutions to provide
fast and efficient service. In low-performing culture, human
resource functionaries and line managers have independent status
and way of working.
iv. In high performing culture, the focus is on growing new
managers internally by promotion from within. Therefore, training
and development activities have very high importance in HRM. In
low-performing culture, training and development is not accorded
high importance.
v. In high-performing culture, performance management is based
on the person rather than the job. Assessment is done frequently
and relies on multi-rater feedback. In low-performing culture,
performance management is based on job result. Assessment is
done after a fixed interval of time and assesses immediate superior
plays significant role in assessment.
III. Trade Unions:
Though a trade union in an organization is a separate entity, it has
been treated as an internal factor because organization’s employees
(particularly operatives) are members of the trade union. Trade
union affects recruitment of employees, their development,
compensation, maintenance, and industrial relations.
Generally, agreement between management and labour is reached
through collective bargaining. Outcome of the collective bargaining
depends on the relative bargaining position of the management and
labour. If trade union is in relatively better bargaining position,
outcome of the collective bargaining goes in its favour.
In such a situation, the organization has to adopt human resource
management practices according to wishes of the trade union
though such practices may have adverse impact on the organization.
Bargaining position of a trade union depends on the strength of its
members as well as support of trade unions of other organizations
at the same location and apex body of trade unions at national level.
IV. Organization’s Financial Position:
While the above factors are enduring in shaping human resource
management practices, organization’s financial position affects
human resource management practices, particularly those having
substantial financial implications. The ability to pay the wages and
salaries, funds for retraining human resources, etc., are affected by
an organization’s financial position and its cash flow.
Generally, highly profitable periods bring higher bonus while
unprofitable periods may not result in any bonus (except the
statutory bonus). Though many organizations tend to profess that
employees are their most important asset, they manage their
human resources as if employees are the most important expense.
Therefore, when financial difficulty is experienced, the axe falls first
on the employees. This is evident by substantial employee layoff
during the economic slowdowns. On the other hand, employee stock
option, profit sharing, performance incentives, etc. are the result of
sound financial position.