PRESIDENCY UNIVERSITY

COURSE CODE – HRM 406

COURSE INSTRUCTOR- DR. TARUN TAPAN DHAR
SPRING - 2010

Environmental Factors
Influence on HR
Management

Submitted By
Md. Abul Hasnat
ID # 081091025
Date : February 23, 2010
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Environmental factors: influence on HR management

Introduction
Human Resource Management (HRM) seems to be a lasting phenomenon.
Twenty years ago there was little understanding for and knowledge about
the functional conditions for the human resources of working life, but today
HRM is in focus. Companies find themselves increasingly up against the wall
if they are not managing human resources in a professional way. The
majority of operations costs are staff costs, which itself is an argument for
taking interest in using human resources more effectively. The company
must recognize that it is no longer in a position to dictate the rules of
interaction with employees. It is often the employees that set the agenda
because they are the ones who represent the competitive strength of the
company. The result is a type of impotence that employers have never
experienced before.

Not only are human resources gaining increasing importance for the
company, but simultaneously several dilemmas or paradoxes seem to be
emerging. Therefore, both top managers and HR professionals must be able
to identify ways of balancing, live with paradoxes, and join contrasts of
strategic, ethical, and practical nature. The value of universal solutions is
decreasing, and the need for situational methods and interventions is
growing.

The coming of the 21st century globalization poses distinctive HRM

challenges to businesses especially those operating across national
boundaries as multinational or global enterprises. Global business is
characterized by the free flow of human and financial resources especially in
the developed economies of European Union (EU), the North American Free
Trade Agreement (NAFTA), other regional groupings such as the Association
of South East Asian Nations (ASEAN), the Economic Community of West
African States (ECOWAS), the Southern African Development Community,
etc. These developments are opening up new markets in a way that has
never been seen before. This accentuates the need to manage human
resources effectively to gain competitive advantage in the global market
place. To achieve this, organizations require an understanding of the factors
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that can determine the effectiveness of various HR practices and

approaches. This is because countries differ along a number of dimensions
that influence the attractiveness of Direct Foreign Investments in each
country. These differences determine the economic viability of building an
operation in a foreign country and they have a particularly strong impact on
HRM in that operation. A number of factors that affect HRM in global markets
are identified: (1) Culture (2) Economic System (3) Political System – the
legal framework and (4) Stake holders (internal factors). These factors are
influencing the overall organization as well as the Human Resource
Management (HRM) process of an organization.

The Environmental factors which are Influencing the HRM are needed to be
controlled by the organization through its strategies for gaining more
competitiveness in terms of maximum output.

Environmental Factors of HRM

There are other factors that have great influences on the HRM can be
classified as :

• Labor Market
• Demographic Factors
• Social Factors
• Stakeholders

Economic Factors
Economic environment refers to all those economic forces which have
bearing on the HR factor.

Suppliers – For HR dept, suppliers are those who provide human Resources
to an organization. Ex: Consulting firms, training institutes
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Competitors – Competition plays significant role in HR function and

Activities. Organization need to groom its employees through well managed
HR planning programmes to withstand competition.

Customers – Customers have their own influence on companies personal

Functions. So everybody in the organization must endeavor to offer products
which gives satisfaction for the money customers pay.

Globalization – Another trend is emerging is the globalization of the

world of human civilization. Globalization affects sovereignty,
prosperity, jobs, wages, and social legislations. Companies conducting
their business all over the world facing HR challenges in managing
their employees of different backgrounds. So globalization influencing
the whole HRM strategies in a certain level.

Political and Legislative Factors

There are three institutions which together constitute the total political
environment. They are i) the legislature, ii) the executive, and iii) the
judiciary.

i) The legislature - The legislature also called Parliament at central

level and Assembly at the state level is the law making body. The
govt. does the job of implementing the laws and policies in macro
level throughout a country.
ii) The employers – The executive popularly known as the govt. is
the law-implementing body. The legislature decides and the
executive acts.
iii) The judiciary – Above this two is the judiciary which has the role
of watchdog. The main function of the judiciary to ensure that both
the legislature and the executive work within the confines of the
constitution and in the public interest.

To be specific, HR planning, recruitment and selection, placement , Training

and development, remuneration, employee relations and Separation are
conditioned by constitutional provisions.

Labour Market Factors

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A labour market is an area from which an organization recruits its labor force
or employees. Just as customers are a key element of business success so
are the employees that
An organization hires to represent their interests. Having quality human
resources is very important. The lack of talented people can cripple a
company and foster a negative customer experience, which could potentially
lead to customer dissatisfaction. To grasp
The impact of company’s employee turnover level, you must first have a
sense for the
Performance levels of the leavers and whether you could have had any
influence over an employee’s decision to depart. However, in these times of
high employee mobility and two-career couples, some employees may leave
a firm for reasons unrelated to their jobs (Becker, Huselid & Ulrich, 2001, p
98). Turnover is one reason organizations must tap into the labor market to
fill open positions. A strategic Human Resources partner can be key asset in
developing a plan to address future employee needs.

Technological Factors
Technology is the process by which inputs from an organization’s
environment are transformed into outputs. Every HR function has the
potential to be managed electronically. Technology factors are the scientific
advances, which influence the competitive position of the enterprise.
Maintaining awareness of new technologies decreases the probability of
becoming obsolete and promotes innovation. Advancements in technology
can impact the transformation plan in many ways. New technology as cited
in Develop Vision and Strategy (nod.) can change the demand for a product,
render current manufacturing processes obsolete, and reduce costs to
undercut competitors, produce new products and a host of other possibilities.
So For a fully automated and technologically sound organization; and
organization must hire efficient employees which is the core job of HR
department. This recruitment is not possible without HR because electronics
cannot find out the potentiality of human beings better than human beings.

Social and Cultural Factors

So far it has been universally accepted that employees should be treated equally.
However, the growing diversity implies that individual sub-groups will have different
and often conflicting demands, which will make it necessary to design more focused
and diverse personnel policies. An additional, and relatively neglected, problem is
that even within a given national context culture and life forms vary across the
country. Headquarters located in the metropolis most often designs the personnel
policy of large national or international companies. The HR departments design
personnel policies and the work is done by people whose life form is usually career
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oriented. However, the policies must function for employees in other parts of the
country that are perhaps first generation wage earners and whose values and needs
are quite different. Therefore, it should not come as a surprise if the company has
difficulties in getting its message across to and accepted by front line employees.

Culture refers to the complex whole which includes knowledge, belief, art
Morales, laws, customs and other capabilities and habits acquired by an
Individual as a member of society.
E.g.: Tata and L& T

Tata’s culture – “Hire the right people and let them free”

L & T’s culture – “They are known for their professional approach”

So different kind of racial, relational, regional, educational backgrounds mix

up in a organization. Another issue is the employee’s attempt to balance a
personal life with an even more encompassing work life. That is the cause of
most of the employees’ cultural shock. They cannot keep pace with the
culture them working with. So it is difficult for HR personnel to make a
balance considering all the social and cultural factors that is influencing its
employees by different point of views and thoughts. SO HR is becoming more
updated an important in an organization.

Social responsibility as a managerial obligation to take actions that protects

and improves both the welfare of society as whole and the interests of the
organization. In recent years there have been multiple corporate ethical
issues that have influenced social views on corporate America. The number
of high profile scandals, from Enron to MCI WorldCom, has adversely affected
public’s perception of corporate strategy as it relates to decisions that affect
shareholder and employee interests.

Demographic Factors
Demographics, it is the study of population statistics, affects HR profoundly.
The influence of women in work force, the Gen X, Gen Y all influences the HR
policies in a certain level of analysis. Demographical factors are Influencing
from the beginning of human race in the world in management. The supply
workers were the baby boomers. Then Gen X workers are highly effective in
terms of productivity and organizational bonding. So day by day HR is
changing and also the trend of HR activities and its different aspect. With the
demographic variations HR activities in different places of the world. Such as
China HR policies are different then Americans. South Asian people are also
different so the whole managerial process is different. Demography is a
factor that is changing the trends of HR activities, policies and over all
strategies of an organization.
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Internal Factors: The Stakeholders

Stake holders are the group of people who have interest in the project,
policies, or outcomes of an organization’s decision. Sometimes called
constituent groups, they follow the actions of the organization and lobby to
have their interests satisfied. These stakeholders affect strategy formulation
which is the main mission of HR department to achieve. So these people also
have major effects on the HR management of an organization.

Stakes holders are divided into categories based on their nature of interest
with the company. They prefer different outcomes from different strategies.
To deal with these stakeholders it is a great challenge for HR personnel to
satisfy them and continuing the smoothness of the organizations activity.
Stakeholders can be classified into below categories:

• Shareholders –those who owns shares of the

company
• Customers – who are the main motive of a company
to run the profit bringing party, are them.
• Suppliers- can influence the skill level of their clients’
employees by interchanging this skills and experiences.
• Government - The govt. gives extensive assistance
with implementing employment equity programs in
federally regulated corporations, thus encouraging
sensitivity, training, and skill development not only in
equity matters but also generally in management
change program. BIU, BYDO these are the organizations
of Bangladesh govt. to develop skills of its people.
• Public – An increasingly important stakeholder is the
community itself. Everything of an n organization
including HR policies must be supported by the
community where it runs its operation.
• Un ions - A firm’s personal activities will be influenced by
its own union’s as well as the union’s of other plants. A
trade union may be understood as association of
workers or management formed to protect their own
individual interest. All HR activities like recruitment,
selection, training, compensation are carried out in
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consultation with union leaders. E.g.: The Bokaro steel

plant has 68 trade unions. Calcutta Corporation has
about 100 trade unions.
• The Employees – Sometimes organization’s strategy is
influenced by the kinds of competencies of it employees. If
employees are motivated, committed and flexible, the
organization might be more willing to grow rapidly to become
the market leader easily.
• Top Management – Much of the HR planning
recognizes the powerful decisions of CEO leads a
organization to the attainment of its goal. So for
influencing the HR policies effectively top management
must concern about the overall strategies and avoid
favoritism and other unethical activities to keep the
climate more motivating for the employees.

Conclusion
HRM strategy is determined primarily by organizational strategy. However
the environmental factors that shape the HRM planning must be considered
by the managers and the planners. They must continue to monitor the
environment to get the outmost benefits from its operations. All the factors
that are influencing externally or internally on an organization it must be
considered by the managers very seriously. Coz the HR management is the
system that can influence, motivate and get to work the whole workforce of
it to achieve all the goals of it. Thus it can be said that Human resource
management should always be concerned about the environmental factors
that influence the HRM and be ready to keep pace with it for the long term
growth of an Organization.
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