Understanding External

&
Internal Environment
For reference:Managing human Resources by Susan E.Jackson

Ayesha Rasheed
THE EXTERNAL ENVIRONMENT
• External environment encompasses local,national and
multinational conditions that confront an orgnization.

• The economic landscape

• The demographic landscape
• The socio-cultural landscape
• The political and legal landscape
• The global landscape
 The economic landscape
The economic landscape referes to the economic conditions in
which a firm competes.
• The nature and direction of economy can be measured by
number of indicators including
 Interest rate
 Unemployment rate
 Inflation rate
 Consumer Confidence Index( monthly survey consumer attitudes, spending
plans, and expectations for inflation, stock prices, and interest rates,sentiments)
 Industry Sales
 Gross national product
The Economic Cycle

• The economic cycle used to describe the fluctuations in economic

activity that occur over long periods of time.
The Economic Cycle

During Economic Boom or expansion

• rising output- triggering job gains,
• rising incomes, and
• increasing sales that feed back into a further rise in
output.
• The recovery can persist and result in a sustained
During Economic Busts or Contraction

Cascading declines in output, employment, income,

and sales that feed back into a further drop in output,
spreading rapidly from industry to industry and region
to region.
This domino effect creates weakness across the
economy, driving the co movement among these
coincident economic indicators and the persistence of
the recession.
 Economic Cycles and HR
• During Economic Boom
• Unemployement rate will be low
• Companies must compete harder to get best employees
• Offer higher wages
• Provide better benefits
• Greater job security
 Economic Cycles and HR
During Economic Recession
• Economic activity will go down
• Unemployement level rises
• Employers look for ways to cut costs
• employees are target of cost cutting
• reduced benefits
• wages may be frozen
• layoffs
Implications for HR
• HR should design practices that are effective in good times and in
bad.
• When economic contractions make it necessary to cut labor costs,it is
useful to remember that economic expansion will eventually begin.
• When it does will your best employees quit and take other jobs
because they feel they were treated when times were tough? or
• Will they stay and actively help recruit new employees because they
know that company is always one of the best places to work?
• In summary,employers who use mass layoffs to cut costs
during economic contractions may find it difficut to
recover when the economy recovers because they lost
the goodwill of their employees.

• Best practices for HR leadership during a recession

include engaging in open and honest communication with
employees and crafting specific benefits packages

• Focus on retaining top employees and offer flexible

schedules, remote work, and PTO
The demographic landscape

• refers to characteristcs of people where the compnay does its

business.
these characteristics include
 Population’s age
 Gender
 Income level
 Religion
 Education
The demographic landscape
• Demographic characteristics describe the nature of
organization’s consumers,community and is most relevant to
HRM context.
• Just as firm compete for customers, they must compete for
employees.
• Some organizations seek in the domestic labor market
while other find employees in global labor market
• US population 320 million---by 2050 400 million
• The rate of growth in working population has slowed
• why?
• Reason --the retirement of Baby boomers
• 75 million Baby Boomers retiring by 2030
• Resulted in skills shortage
• U.S Internal revenue service(IRS) 40% are eligible for retirement.
• Companies are especially concerned about managerial ranks
• US Internal revenue service will need to hire a manager everyday for
a dedace to replace those who will be leaving.
• When people and skills are in short supply,competition among
employers heats up
• increasing the importance of effective staffing and training practices.
Ethnic and Age composition changing dramatically
• 1994 75% U.S workforce was white,today it is estimated to be 57%
• 9.1% U.S labor force was of Hispanic region and the numbers
expected to be 19.8% 2024
• In 1994 less than 12% workforce was 55 years or older,now the rate
is 25 %.
• Surveys in Pakistan
• The ethnic and age composition of the U.S. workforce in changing
dramatically. In 1994, about 75% of the U.S. labor force was white,
today it is close to 63%, and a decade from now it is estimated to be
57%.

• This continuing change in the ethnic and age composition of the

workforce has implications for how organizations manage their
human resources
HR Implications
• Every generation has grown in different environment that have
shaped their values and attitude towards work.Most companies are
multi-generational.
• It is important for HR professional to be aware of the values and
attitudes of each generation and determine their possible impact in
sharing HR policies.
• Rather than relying on stereotypes,employee interview,surveys and
focus groups can be used to study employee’s behavior
• Understanding the concern for each generation,HR professionals
should avoid adopting practices that are viewed as favoring members
of one generation while ignoring the concerns of the other.
The Overseas Investors Chamber of Commerce and Industry (OICCI)
organized the 4th Women Empowerment Awards on February 3, 2022

• Nestlé Pakistan won in the ‘Leadership & Strategy’ category;

• Mobilink Microfinance Bank in ‘Gender Balance Workforce’;
• Standard Chartered Bank in ‘Work Life Integration’;
• Bank Alfalah in ‘Women Leaders Development’;
• Pakistan Mobile Communications (Jazz) in “Driving Change Beyond
Workspace”;
• TRG (ibex. Pakistan) in “Notable Growth in Women Empowerment”; and
• L’Oreal Pakistan bagged the ‘Top Performer amongst companies of 300
employees’
The global landscape

• Currently there are 8 billion people in this planet

• The labor force in Europe and Japan and declining
• In Africa ,Latin America,North America labor forces are
growing .
• In Germany,Japan and Mexico, a large population of their
population is over 60 years old.
• while in India,Mexico and South Africa a large percentage of
the population is 25 years old.
The global landscape
• Other factors to consider include
• Labor Cost
• Skill Level
• Health Issues
• Labor Cost
• Companies move their operations offshore because the cost of labor is
low in developing countires.
• IBM stated that it cost $56 per hour to employ a progammer with 3 to 5
years of experience.
• In China it cost $12.60 an hour
• Skill Level
• Researches suggest that availability of skill level in other countries is
one of the main reasons in moving jobs overseas,9 millions of
skilled,entry level workers are available.
• Implications for HR
When planning for their staffing needs,HR managers must weigh
carefullly the costs and benefits of employing labor in variety of
countries to fill jobs.
Challenge:The most common and difficult challenege is to develop an
effective integrated HRM system that works at home as well as abroad.
$2.16 in
philippines
 The socio-cultural landscape
• Our Social/cultural landscape refers to attitudes and values of society.
• Attitudes and values vary substantially across nations
• Reflected in national cultures like Eid,Ramadan,Christmas,Chinese new
year.
• The attitudes and values of scoiety can influence the concerns of
stakeholders such as customers,the community and employees.
Society’s view towards low wages
• For example,In last few years Society’s view towards low wages has
started to change.
• Labor groups,politicians and employees are putting pressure to raise
wages on organizations that pay minimum wages.
• Some orgamizations have changes their HR Practices for example in
2016.
• HR at Walmart raised wages of 50,000 workes to 10$ which is beyond
the 7.25$ minimum wage secified by government-a change that was
highly well received.
 The political and legal landscape

Government policies and the extent to which these and any changes that
are implemented have an influence on an organisation or a business.
In HR terms, examples include
• changes to tax rules or
• employment laws
• trade policies
• introduction of new rules with which a business must comply. etc
Activist Groups
• Political landscape also includes many activists group focused on
changing corporate practices in order to improve worker’s lives
• For example labor rights on environmentalism protects workers by
requiring project sponsors to engage in an environmental review
process intended to identify any major environmental impacts and
significant dangers to workplace safety prior to the start of
construction.
https://efp.org.pk/mega-conferences/occupational-
safety-health-and-environment-award/
Some activist groups focus on changing practices of specific
companies-often referred to as watch dogs
BP was attacked by a watchdogs because of oil that spewed into gulf of
Mexico from the compnay’s damaged well
BRITISH PETROLEUM OIL SPILL
A total of five million barrels of oil spilled into the gulf. Polluting the
water, killing marine life, and causing America's largest environmental
disaster. A disaster that still lingers in the gulf more than 10 years later.
• Effective utilization of human resources is an essential part of a
project’s success.
• Especially for a complex technical project involving many functional
departments and contractors, a well structured team of people with
sufficient technical background and clear division of responsibilities is
crucial.
• Walmart also has been targeted by activist group and watchdogs.in
addition to its low wages,walmart has also been criticized for
providing employees woth inadequate and expensive health care
benefit ,for eliminating small competitors
• for increasing trafic
• harming the nevironment
• for violating wage and hour law
• for engaging in gender discrimination
UNDERSTANDING INTERNAL
ENVIRONMENT
 UNDERSTANDING INTERNAL ENVIRONMENT

• Internal environment refers to conditions within organization

itself.
• The internal environment sometimes referred to as the
organizational environment.
 UNDERSTANDING INTERNAL ENVIRONMENT

• Technology
• Company culture
• Business Strategy
• Resources
 1.Technology
• has been evolving for thousand of years
• From steam engines to factories revolutionary
technologies have greatly affected organizations.
• Most recent technological revolution in computer
technology has transformed how people work and
they are managed through
1. Robotics and automation
2. Information Technology
3. Human resource Information systems
Robots and automation
• The replacement of Human labor with automated system
• However the robots and automation of today are much more
precise,flexible and cost efficient than in the past.
• For example
1. At the new balance athletic shoe factory in US , a comupter runs 20
sewing machine heads at once and a camera-guided automated
sticher sew 6 times faster than a person.
2. A shoe that took 3 hours to produce using traditional sewing
equipments now can be made in 24 minutes
Information technology
• IT makes it possible for accountants in India to process U.S tax returns
for Ernst and Young(consultancy,audit) services.
• Yellow frieght
• It also makes it possible for customers of Yellow frieght to place their
orders online,track shipments and review their accounts.
• Yellow frieght ‘s dockworkers and drivers can communicate instantly
with each other easily and easily access schedule and delivery
information using wireless and mobile data terminals.
• real time location -tracked
Information technology
• Virtual workforce:perform their jobs anywhere by
eliminating the need of office space
• IBM reduced its real estate expenses by about 50% per office
site.
• HP reported that it doubled revenue per sales person after
adopting virtual work arrangements.
SIGNIFICANT CHALLENGES
• Managing virtual workforce comes with many challenges
• Several researches indicated that
Employees working under such conditions feel isolated and detached
from their employer.
when their actions are closely monitered electronically,their morale
may suffer
If they are not fully trained in the use of IT,their insensitve electronic
interaction with others may create misunderstandings or resentment
among coworkers.
• IT is the reason behind Walmart’s success and revenue increase from
16 million to 26 million
• whereas KMART failed
• Investment in supplychain management system
and HRIS
 HRIS and e-HRM
• When computer technologies are used to gather ,analyze and
distribute information about job applicants and employees ,the
resulting system is referred to as a human resource nformation system
(HRIS)
• HRM post Job openings virtually
• Conduct employee surveys-Feedbacks
• Some require their employees to use a website to manage their
benefits packages
• Facilitates world wide coordination of employees
HRIS AND e-HRM
• refers to use of information technology for both conducting human
resources management and social networking The millennial generation
grew up with social networking technology
• E-HRM is the application of IT for HR practices that enable easy interactions
between employees and employers. It stores information regarding
• payroll,
• employee personal data,
• performance management,
• training,
• recruitment etc
• E-HRM is the relatively new term for this IT-supported
HRM, especially through web technology. E-HRM has
the potential to change the way traditional HRM
functions are performed.
• For example, in the analysis and design of work,
employees in geographically dispersed locations can
work together in virtual teams using videos, email,
etc.
• Operational E-HRM
• Operational E-HRM is concerned with administrative functions –
payroll and employee personal data, for example.
• Relational E-HRM
• Relational E-HRM is concerned with supporting business processes
using training, recruitment, performance management, and so forth.
 2. Company culture

• A compnay’s culture is the uniques pattern of shared values and

norms that shape the socialization activities,language,symbols and
ceremonies of people in the organization.

• Companies describe their culture in many ways (see in figure on next

slide)
Four types of Company’s Culture
Managng sub culture

A company subculture exists when values

and norms are shared by some but not all
organizational members.
Why a sub culture exists in a company?
There are variety of reasons for a subculture to exist.
1. Compnay subcultures are common in international firms
2. After a merger and accquisition,subcultures are likely to
exist as two established organizations come together to
form a new one.
3. Subcultures may also come from employees working in
different divisions or occupations and among employees
from different demographic groups.
 Benefits of a Sub culture
1. more diverse opinions
2. greater creativity
3. better representation of other
stakeholders
Problems faced by Subcultures
• Research shows that employees
often feel the existence of a
glass ceiling that limits their career
opportunities
Glass ceiling concept
• Even employees working for companies that have been recognized
as the World’s Best Companies for Minorities often feel dominated
and undervalued by members of the majority.
• Worries about possible culture clashes also play a role in the decision
employees make about to be open about their sexual orientation
 IMPLICATIONS FOR HR
Effective leadership ensures that people are working to achieve the
same results.
• Leaders shape company’s culture by how they treat employees

Example At The Container Store the founders support the culture by

sending by sending personalized notes to employees and offering their
praise for work that is well done.
IMPLICATIONS FOR HR

Formulate and display Vision, Mission and Values to give a direction to

employees
• By formulating comoany’s vision mission and values ,compnay leaders convey
answers to questions such as
• Where are we going?
• Why are we going there?
• Mission ,vision and values create a framework that points poeple in one direction.
 Built and Integrated HRM
• Human resource professionals can help organizations build strong cultures by
developing an integrated HRM system to ensure everyone behaves in a ways that
are consistent with corporate mission,vision,values and culture.
The Container Store (a retail chain)
 HR INITIATIVES EXAMPLES
The Container Store
• In their first year of the job,employees at the container store receive
200 hours of training to learn about compnay’s business,products and
culture.
• Adobe system in San Jose
• Six Adobe employees receive the Founder Award to honour them for
upholding the company’s core values of
Integrity,innovation,respect,leadership,community involvement.
 https://
blog.adobe.com/en/
Adobe -Founder Award publish/2022/02/09/
founders-award-share-
proudest-career-
moments
Alison Lutjemeier,12 years with Adobe

• “Apart from this award, it would have to be putting together an

awesome team of individuals who not only care passionately about
our customer experience, but about Adobe’s success and the wellbeing
of one another. They motivate me to be a better leader and I learn
from them each day. I once had a mentor advise me to hire people
smarter than me and I can say that I have! They all complement one
another in so many ways, which makes us stronger as a team overall.”
 3. Business Strategy

• A business strategy is a set of integrated and coordinated

commitment and action intended to achieve stated goals of a
business.
• While corporate strategy cover an entire large corporation,a business
strategy describes how a particular business unit competes against
rivals who offer same products.
 Implications for HR
• Business strategies influence the type of employees who must be
recruited to work at the company,the behaviour needed from those
employees. the conditions in which employees are expected to work
• Business strategies describe how the company plans to deliver goods
and services that customers see as different and in someways better
than those offered by competitors.
• Compnay can differentiate themselves by providing goods and
services of higher quality(TQM training),lower cost ,excellent
customer service training.
“The offer” program by Zappos
• Tony Hsieh was the CEO of the online retailer Zappos for 20
years and pioneered a number of out-of-the-box work
policies to foster innovation and productivity.
• One of them was "The Offer," a program that offered new
employees who decided they were unhappy a $2,000 bonus
to quit following a four-week training period.

• "We want to make sure that employees aren't here just for
paychecks and truly believe this is the right place for them,"
https://www.cybercoders.com/insights/why-are-some-
companies-paying-their-team-to-quit/
 Resources

1. Financial Resources
includes firm current available capital and its ability to borrow
capital.Some business tasks require more financial resources than
others.For example if financial resources are at a shortage,HR need to
revise recruitment,training expenses,compensation and appraisal
policies may be revised.
2. Reputation Resources:
includes a company’s reputation with customer,suppliers,potential
customers and employees.It also includes reputation of its
brand,perception of quality,reliability.
HR must design strategies that will enhance company’s reputation by
conducting TQM and sustainablility trainings.
Resources
3. Human resources
Human Resources (HR) is such a vital part of a company.
The capabilities of firm’s human resource to attract and retain
talent,train them and compensate them will dramatically affect
compnay’s performance.
By developing a healthy culture HR team can boost employee morale
and confidence.
Without a good HR system, many companies will struggle when
onboarding employees, handling worker disputes, and maintaining a
safe environment for the business and employees.
HRM STRATEGY
FORMULATION
1. Coordination and Collaboration of HRM and Business Strategy(First
step)

In the times of heightened environment stability

• HRM should focus on matching human resource
supply with human resource demand.
• Primary purpose should be to ensure
• the right number and type of people were available
at the right time and place to serve predictable
business needs
• For example:If the business was growing at the rate of
10%,top management would continue to add to the
workforce by 10%
• During Business strategy formulation,close collaboration and
coordination among lne manager and HR professionals is desirable
• At Weyerhaeuser,when there was a slump in U.S housing market,all
managers were informed about the changes made.Close coordination
helped the company achieve its strategic business objectives.
• Managers and HR professional planned changes in HRM strategy in
context of issues related to finances,technology,supply chain.
2. Specifying Strategic Objectives
• A business strategy describes in general terms how a company will
compete in the market place.
• After business strategy is finalized,stragetic objectives are made.
• Strategic objectives translates the business strategy in to specific
metrics that are relevant to specific functional
areas,including,marketing,finance,supplychain
• Specific Metric:Qualitative and Quantitative
• Stragetic objectives hsould be specific, measurable,flexible because of
dynamic environment
Specifying Strategic Objectives-Examples
If a strategic busines objective is improve organizational learning
capacity
• A strategic HR objective will be to increase the movement of
employees (job rotation,job enlargement and job enrichment) in order
to improve the the echange of information

If a strategic business is to increase the amount of repeat business

form an existing customer
• strategic HR objective might include increasing employee awareness
about understanding customer needs and training them to build
strong connections with customers.
 Designing an integrated HRM System to
achieve those strategic objectives
• After setting objectives,specific means must be determined to achieve
thoses objectives.
• Human resource plans can be thought of as blue prints for
action:they specify who needs to do what,where and how.
• Timetables specify when each planned activity will be completed
• HR Metrics are the measures HR use to access the progress of
employees.
• Each organization has its unique HR Metrics
HR METRICS-some examples
• There are many possible HR Metrics some of them are:
• Human Capital Spending Metric: include total head
count,number of employees,cost of third party
employees,cost per hire, training and development
spending.
• Talent Retention Metric:including voluntary and total
turnover,turnover cost and absenteeism.
• Leadership engagement Metric:includes employee rating of
leadership quality,employee response to annual engagement
surveys,employee involvement in voluntary activities.
HR Metrics at Sears
Sears the departmental store chain
Problem:poor financial performance
Strategic objective :improve customer satisfaction and store revenue
Sears conducted a study to find out the factors that could lead to
customer satisfaction.Using data from all of its stores sears found that
Stores with low employee turnover have high customer satisfaction
and vice versa.
Sears application installation- HR Metrics
• Schedulling service level-Did the technician arrive within the
appropriate time window?
• Courtesy call adherence-Did the technician call 24 hours in advance
• Customer service call transfer burden- How many times was the
customer transferred?
• Resolution-Was the customer’s concern resolved?
 HRM STRATEGY
IMPLEMENTATION
HRM STRATEGY IMPLEMENTATION
• Once strategies are formulated,they must be put into action.
• In a survey of HR professional ,90% said the HR department
works closely with senior managers to implement a business
strategy.
 CHANGE BRINGS RESISTANCE
• Strategy implementation almost always involve change.
• Change alsways brings uncertainity and requires learning what works best.
• Most employees run into some kind of resistance
• The most challenging responsibility of HR is to minimize employee resistance to
change.
• Various forms of resistance include:
Imediate criticism
Malicious compliance
insincere agreement
deflection
in-your-face defiance
Why employees are resistant to change?
• Reasons for Resistance
The reasons for resistance to change include
1. Fear
2. Miunderstanding
 Reasons for Resistance
Fear
Some people resist because they fear that positive aspects of their jobs
will be threartened.
This include the desirable aspects of their job ,pay and
benefits,coworker relationships and job security.
Mecedes-Benz set out to restructure its operations in United
States ,employees seemed to have good reason to be fearful of the
future layoffs.The company realized that fear could be a problem.They
asked employees to express their ideas about where to cut cost etc.
In his interview,The CEO said that “it was abolutely essential to
establish a “no -fear” element in this whole change process
 Reasons for Resistance
Misunderstanding
• People also resist change when they dont understand its
implications.
• Misunderstanding and lack of trust build resistance.
• Implications for HR should be
• to be as transparent as possible
• spell out clearly the new direction for the organization.
• what it will mean for everyone involved.
• Getting employees to discuss their concerns openly is also crucial
 OVERCOMING RESISTANCE
• Organizations can overcome resistance to change by
1. Involving empoyees
2. establishing accountability
3. Showing respect in difficult times

• For a change effort to be effective,those who are affected by it must

buy into it.
• The best way to ensure that they do is through early involvement.
OVERCOMING RESISTANCE
1. Involving empoyees
Task force,focus
groups,surveys,hotlines,informal
conversations are some methods to
involve stakeholders
Strategy implementation in Siemens
To involve empoyees in developing
plans.Siemens Siemens (a German
multinational conglomerate)uses its
university.Its in-house corporate
trained analyst and engineers work
together in student teams.
2. Establishing Accountability
Specify not only what is to be
achieved but also
Who is responsibile for making
these changes.
If the change is success,will only
managers reap the reward?
If things dont go well,will lower
level employees be the one who
suffer?
 Establishing Accountability
At Unilever
• At Unilever the new compensation system was implemented as a part
of HR plan to improve the representation of Women in leadership
positions.
• The task of training,development and retaining of high performing
women was given to some senior managers and their incentives were
linked to their success in achieving that goal.
OVERCOMING RESISTANCE
3. Showing respect in difficult times
Employee’s fear is jusified.Change often means that some employees
will lose their jobs.
The process used to eliminate employees can make a difference.

Patty McCord,CTO at Netflix stateed that Employees can handle

everything as long as they are told the truth.
Showing respect in difficult times
• When Netflix buisness became more technologically focused because
of streaming,it found that some employeesskills no longer matched
the requirements of some jobs.
• One such case was the person whose job was to detect bugs in the
software.As the automation software beame more
complicated,softwares were used to detect bugs.Netflix managers
decided to be honest and transparent with her .
• They discussed with her,how the company has changed and how her
skills are nor longer applied.They offered her a great severence
package.