Impact of external factors on human resource management (HRM)
For business operations, human resources are just as important as any other resource as the procurement and development is directly related to the performance of a business organization. Moreover, due to the fact that human resources of the organization have independent decision making capabilities, management of the same becomes all the more challenging for an organization. Internally, business factors which affect the human resources can yet still be controlled. However, when it comes to external environmental factors which affect human resource management the organization cannot exert control but can only adopt strategies aimed at effectively addressing them. The purpose of this presentation is to shed light on four such external factors – government regulations, economic conditions, technological advancements and workforce demographics in order to understand their impact on human resource management more effectively.
Just as all business activities are subjected to legal stipulations and guidelines, management of human resources in an organization is also dependent on government policies. In most of the countries, the ministry or department of human resources development is the body responsible for making of the policies as far as labor is concerned. These policies not only act as guidelines, but are in fact, statement of compliances for business organizations to adhere to in employment and management of human resources.
Even if the most basic factors are concerned - working hours and compensation - almost all countries have come up with policies which stipulate minimum wages and maximum limit for duration of work under normal circumstances. Minimum wage rate implies that irrespective of qualifications and the nature of work to be performed, an employee must be guaranteed the minimum hourly wage rate applicable. This is an important determinant for human resources planning by business organizations and the changes in the same by governments often affect the internal business strategies of a firm as it is required to re-structure its operations in accordance to the same. Examples of compliance that can be given especially in case of manufacturing organizations is that of safety standards such as adherence to HACCP, which lays down safety protocols for employees and all personnel. The Health and Safety at Work Act 1974 is yet another example of the same . It needs to be highlighted the fact that in instances of non-compliance to such statutory regulations, business organizations can be heavily penalized.
Impact of Economic conditions on HRM
Another important external factor that has an impact on the HRM is the prevalent economic condition in a place or country where the business organization is located. The most common impact of poor economic conditions prevalent in a state or country is observed to be on the population of the nation, the customers in particular. Due to poor economic conditions, customers of industries become less likely to make purchases and it directly affects commercial activity resulting in lesser employment opportunities. The opposite happens when the economic conditions in a nation improve significantly. The end impact is on the hiring activities of business organizations and the same can be observed if the unemployment rates are analyzed in the US. According to the Bureau of Labor Statistics, US, the average unemployment rate for the month of May in the last 10 years (2005-2015) has been 6.81% . While this year for the last five months the unemployment rate has been average at about 5.57%. the indication of this is that not only business organizations are looking at better returns, but are also hiring more employees as compared to previous years which increases competition in the labor market. Likewise, the unemployment rates for the years 2009-2012 were much higher which indicated less likelihood of organizations to hire people due to poorer performances.
Broadly stated, the combination of different economic factors also has an impact on the HRM in an organization – whenever the costs of operations are increased because of these factors, employment opportunities will become lesser and vice-versa.
HRM and Technological Advancements
Technological advancements have a major impact on the operations and management of business organizations in the industry and the same hold true for human resource management as well. The different areas whereby technological advancements may be applicable are manufacturing, sales and marketing, communication, enterprise management and others. The implications of these technological advancements have two main impacts on human resources management. On one hand, it makes it important for the business organization to be able to train and develop the labor resources so that they are capable of performing their duties more effectively, and on the other hand it makes it necessary for business organizations to not only procure but also retain effective manpower which can contribute to the realization of organizational objectives more efficiently in an environment of constant technological advancements.
A simple example of the same can be given in case of change of hiring strategies by business organizations with the advent of computers and internet technology – there has been remarkable shift from advertising vacancies in newspapers to broadcasting the same on employment websites and professional networking websites. Even in case of labor resources, there has been a change due to technological advancements. More and more business organizations resort to technology to make operations automatic, replacing the dependence on human labor.
Workplace demographics and HRM
With rapid changes in the workplace demographics due to internationalization, the strategies and policies of HRM are also required to be implemented accordingly. Two specific aspects that need to be mentioned here are gender and race. More number of female employees has been observed to be part of organizations over the last few decades. At the same time, there has been an increase in the numbers of overseas employees in business organizations around the world which is attributed to enhanced international relations.
These have changed the workplace demographics and in today’s world, it is important for business organizations to be able to develop management strategies which are focused on prevention of discrimination and promotion of equality among employees. The perspective of business leaders has changed and more and more attention is given to the aspect of ensuring achievement of organizational objectives through harmonious and contemporary management strategies. Also, there exists a generation gap among the retiring workforce and the new generation of employees joining the business organizations.
Specifically looking at the four above mentioned factors, it can be concluded that human resource management itself has changed to a great extent. No longer can one regard HRM to be just the department responsible for hiring and releasing employees of an organization. The roles and responsibilities due to a number of factors – both external and internal has made HRM quite a challenging task. No longer is it enough to be contempt with the traditional tasks of procurement, allocation and compensation of the human resources, but it is highly important for HRM departments to perform a wide range of activities to perform the desired duty – achievement of organizational competitiveness through human capital.
HSE. Health and Safety at Work etc Act 1974. 9 December 2014. Online. 22 June 2015. <http://www.hse.gov.uk/legislation/hswa.htm>.
United States Department of Labour. Bureau of Labor Statistics. 25 June 2015. 27 June 2015. <http://data.bls.gov/timeseries/LNS14000000>.