Chapter II

The Environment of HRM

By wendmu H.
AGU, CoBE, MGMT
 The Environment of HRM
• As all open systems HRM also is influenced
by many environmental factors. These factors
can be classified broadly as external and
internal.
 External environmental influences

Economic conditions.
• The kind of economic activity seen in the country as a
whole has a very important influence on HRM.
• When the economy is a fast growing one, the labor
cost tends to increase and maintaining the employees
become a very complicated and expensive affair.
• As an example we can take the case of American and
British companies dismissing employees in their own
countries and shifting these jobs to developing
countries (outsourcing) to take the advantage of lower
labor costs.
Labor markets.
• The supply and demand situation of the labor
in the country, the availability of the required
skilled labor, the quality of the available labor
and the cost of hiring and maintaining the
labor forces will greatly influence the human
resource policies of a firm.
• Some of the situations can be as under, when
the required labor of a given standard are
unavailable in the country, the organization
has to go for foreign recruitment which is
rather expensive; when the supply of labor is
more than the demand, a company has a lot of
choice in getting cheap, suitable labor force.
Labor unions.
• Employees in different organizations organize
themselves into labor unions to take the
advantage of collective bargaining and to have
an upper hand in the many interactions with
the employers.
• In the policy formulation concerning HRM the
unions, if they are strong, have a lot of
influence.
Law’s and regulations.
• Every government has a given set of laws and
regulations directing and controlling the
various human resource related activities of
industries.
• A breach (violate) of these laws and
regulations are punishable and are enforced
strictly.
HIV/AIDS:
• This deadly disease has affected and may
affect the workforce of industries in almost all
developing countries.
• The concerned firms should devise policies
and programs to deal with educating their
workforce in how to avoid this disease and
also to treat the workers who are already
infected humanely (kindly and gently) and to
provide them with medical facilities.
Social and cultural factors
• One of the major objectives of HRM is to see
that the social and community needs are
integrated with that of the organizations.
• Hence, we can say that the society and its
culture will have an important influence on the
human resource policy formulation.
Change
• The only thing constant in industries in change.
• Change is an ever present phenomenon and a firm
should have the ability to adopt (accept and
implement) and also adapt (adjusted or become
accustomed).
• Changes can be seen because of technology up
gradation, globalization, changing nature of the
labor market, changing tastes of the customers,
competition, etc.
• These changes have a major impact on the human
resource policies.
Political Influence
• The kind of political philosophy followed by
the governing elite (leaders) of the country
also has a major impact on the human resource
policies of the organization.
• Through the enforcement of laws, government
has a direct and immediate impact on
managers & the HR function.
• Federal laws regulating the employee-
employer relationship challenge the methods
HRM use.
Technological Challenges
• If the firm uses very advanced and automated
technology the number of employees would be
less and the importance of HRM may decrease
when compared with other policies.
• But if a firm uses labor intensive technology
then the personnel policies become as important
as other main policies like those concerning
production, marketing, etc.
• The following are some of the technological
changes that affect the HR department.
1.Artificial Intelligence:
 Jobs & job skills are changed by technology
and the greatest potential impact on jobs
since the industrial revolution is artificial
intelligence.
 Artificial intelligence develops programs
that allow machines to perform normally.
 It will give a growing number of workers
access to expert systems- computerized
programs that capture the knowledge and
decision making approaches of experts.
 As the capabilities of artificial intelligence give
people and machines greater problem solving
powers, jobs and skills they require will change
dramatically, affecting the employment,
training, development, compensation, and
employee activities of the HRD.
 One of the biggest impacts of technology on
HRM comes from the way in which technology
alters industries and lifestyles. Example; tetchy
(fashionable or stylish) of cars and airplanes
modified the transportation industry.
2. Automation
• Automation is another way in which
technology affects the field of HRM.
• Example: introduction of computers into
banks changed the employment needs.
3. Robots
• As robots become more common and sophisticated,
they will affect the organization productivity and
quality of life of employees.
• The hazardous and boring jobs will be taken over by
robots.
• Dangerous jobs-such as working with toxic chemicals
and paints & highly repetitive assembly tasks will be
changed by substituting robots for people.
• These charging technologies also will shape the
educational preparation of future workers and their
productivity.
 Internal environmental influences
Management philosophy
• The kind of philosophy the top managers have regarding
human resources dictate to a large extent the way personnel
policies and procedures are evolved in that organization.
• Management philosophy can be defined as the set of
common values advocated by members of certain
organization and also is a set of assumptions and
expectations one has about the work and workforce.
• The main values common to any organization are respect,
team spirit, transparency and creativity.
• They guide managers to make different types of decision.
Employee ability and productivity
• If the employees are highly qualified and self
motivated to work the personnel policies
would be much more employee friendly and if
the employees are indifferent , not skilled,
uncooperative, etc., the personnel policies tend
to be much more stricter and control becomes
negative.
Organizational climate
• The kind of inter personnel climate inside the
organization plays an important part in its
HRM related policies.
• If the climate is friendly (cordial), cooperative
and is based on mutual respect then the human
resource policies would be entirely different
than that of an organization whose inter
personnel climate is vicious, competitive and
conflict based.
Organizational Culture:
• Organizational culture is a pattern of shared
values and beliefs giving members of an
organization meaning and providing them with
rules for behavior.
• Every employees is unique and has unique
culture. The organizational culture is the
product of all the organizations feature: its
people, its successes, and its failure.
• The HRM challenge is to adjust proactively to
the organization culture.
• There are multiple paths to achieve the
objectives, but the key to success is pricking
the paths that best fits the organization culture
Information Systems:
• HRM require large amount of detailed
information. The quality of HR decisions
depends on the quality of information.
• The information needs are:
– What are the duties and responsibilities of
every job in the organization?,
– What are the skills possessed by every
employee?,
– What are the organization future HR needs?,
– How do the external constraints affect the
organization?, and
– What are the current trends in
compensations of employees?
Workforce Diversity:
• The sources of diversity are cultures, religions,
languages, & dialects, educational attainment,
skills, values, ages, races. genders and other
differentiating variables.
• Knowledge of these variations challenges HR
managers is develop proactive policies and
practices.
• Key developments in the evolution of HRM,
e.g., occupational, safety & health act,
retirement equity, labor management
cooperation, principles of scientific
management, equal pay, clean air act, family &
medical leave, etc
• workforce diversity could be due to one of the
following reasons:
1. Cultural and Attitudinal Diversity:
• Diversity in the workforce is also influenced by
cultural values & social norms. In many
progressive companies pay for sick days, personal
leave day, etc. are given.
• Changes in attitude about work have forced the
company to find new ways to motivate employees.
e.g. longer vacations, more holidays,
nontraditional work schedules.
• As society becomes more varied in its attitudes,
culture, and other dimensions, managers and HR
department must try to anticipate the impact of
changes and act accordingly.
2. Diversity though Immigration and
Migrations
• The diversity in workforce may come from
immigration across national borders or from
migration within the country
• Example: guest workers in Saudi Arabia are
granted work visas but not citizenship.
3. Diversity and Professionals:
• Diversity creates new challenges for managers.
• Example: aging workforce, working mothers,
and workforce participation.
• The HR departments must embrace or hold
diversity and make it a source of competitive
advantage.
Steps in Dealing with Environmental Changes

1) Monitor the environment:

• Personnel specialists must stay informed about
likely changes in the environment by belonging to
professional associations, attending seminars,
furthering their formal education, and reading
widely.
2) Obtain & analyze feedback:
• The results of proactive personnel activities are
then evaluated to see if the desired outcomes are
reached.
3) Evaluate the impact:
• As new information is acquired, personal
experts ask the impact of this information on
the organization today & tomorrow.
4) Take proactive measures:
• Once changes and their impact are evaluated,
personnel specialists implement approaches
that help the organization reach its goals.

“End of Chapter Two”