Human Resource

Management Environments

Chapter Two
 Introduction
Human resource management
cannot take place in isolation from
the external and internal
environment
The basic reason for this expanded
role is that organizational
environment has become more
diverse and complex
 External Environment
External environment is the
environment that exists outside the
organization
They influence the organizational
performance but largely beyond
management’s control
It provides opportunities and threats
to the organization and human
resource management
It usually includes the Political
/Legal, Economic, Socio-Cultural
and Technological (PEST)
1. Political /Legal Factors
 The Political system, such as,
democratic or not, nature of the
government and favouring the
employee over the employee, affects
the human resource functions of an
organization
 Government through the
enforcement of different laws also
has direct and immediate impact on
HRM function
 Equal Employment Opportunity:
Government laws require providing
applicants an equal opportunity for
employment with regard to race, religion,
sex, disability, age or national origin
 Affirmative Action: It is the practice of
recruiting, hiring or staffing
underrepresented groups or minorities, such
as women, disability, and the disadvantaged
groups of the society
 Government passes legislations that will
enforce the employee’s safety and health
 Government may set minimum level of
wages and salaries, equal pay for equal
work, hours of work, holiday, leaves, etc
[Link] Factors
 Economic parameter like GNP, per
capital income, an employment rate,
inflation rate, etc affects HRM
 If the economy is booming and
unemployment rate is low, it may be
harder to acquire and retain the staff
 In times of economic decline,
unemployment rate increases and a
greater choice of labor is available to
the employer
3. Socio-Cultural Factors
 These factors are created by the
society on human resource
management, such as demographic
factors and culture
 Demographic factors describe the
composition of the workforce, such as
age, sex, race, and language
 Culture is the belief and custom
(religion) of the society
 It affects the attitude and activities of
workers
4. Technological Factors
 Technological change will continue to
shift employment from some
occupations to others, i.e., labor-
intensive and clerical jobs will
decrease while technical, managerial,
and professional jobs will increase
 Jobs and the skills of employees are
changed by technology
 For example, the introduction of
computer in an organization changes
the skill requirement of the employee
 Internal Environment
 An internal environment is the environment
that exists inside the organization
 It contributes to the strength and weakness
of the organization
 Strategy of an organization:
Organizations have several strategies
(goals and objectives), such as growth
strategy, survival strategy or exit strategy
 Leadership style of the organization:
Leadership styles practiced by top
management and supervisors will affect
the relationship between supervisors and
subordinates
The style of leadership might be
autocratic, democratic or laissez-
faire
Leadership styles adopted in an
organization influences human
resource functions
Nature of the task: The type of the
task to be performed in an
organization highly affects human
resource management
This is because some jobs can
attract or retain workers, while
others might be the causes of high
 Degree of physical exertion
 Working environment
 Physical location
 Degree of human interaction
 The Steps in Dealing
Environmental Challenges
1. Monitor the environment
Human resource managers must be
always informed about new changes
in the environment
They can scan the environment
through professional associations,
attendance of seminars, furthering
their formal education, reading
newspaper and magazines, and
browsing the internet
2. Evaluate the impact
After human resource managers
acquire new information about
changes in the environment, they
should analyze and evaluate the
impact of the environment on the
organization’s human resource
management
3. Take proactive measures
Once the impacts of environmental
changes are evaluated, human
resource managers implement
approaches that help the
 There are two opposite approaches of
human resource management, reactive
and proactive
 Reactive human resource management
occurs when decision makers respond to
human resource problems, i.e., after the
actual problem happens
 Proactive approach of human resource
management anticipated human resource
problems and correction action begins
before the problem arises
 To give effective and efficient solutions to
human resource problems, human resource
managers should take proactive measures
4. Obtain andanalyze feedback
The results of proactive measures
taken by the HR manager are
evaluated to see if the desired
outcomes are achieved
 HRM MODEL

Current Context Organizational Organizational

Human Resource
Functions
Plan for Future Recruitment and
Human Selection
Resource Needs Policies

Training and Salary, Benefits,

Performance
Management

Review & Evaluation of