Chapter Two- Human Resource Management
Dire Dawa University, Department Of Management Page 1
Chapter Two
Human Resource Management Environments
2.1. The External Environment
When it comes to human resource management there are several factors that affect day-to-day
operations. Adapting in this field is important because at a moment’s notice new legislation can
be passed with an immediate effective date or corporate policies are changed where human
resources feel the brunt. A well-developed strategy for your human resources department takes
into considers external factors that might affect your department.
The four external factors that affect human resource management are:
1. Government Regulations – With the introduction of new workplace compliance standards
your human resources department is constantly under pressure to stay within the law. These
types of regulations influence every process of the HR department, including hiring, training,
compensation, termination, and much more. Without adhering to such regulations a company
can be fined extensively which if it was bad enough could cause the company to shut down.
2. Economic Conditions – One of the biggest external influences is the shape of the current
economy. Not only does it affect the talent pool, but it might affect your ability to hire
anyone at all. One of the biggest ways to prepare against economic conditions is to not only
know what’s happening in the world around you, but also create a plan for when there is an
economic downturn. All companies can make due in a bad economy if they have a rainy day
fund or plan to combat the harsh environment.
3. Technological Advancements – This is considered an external influence because when new
technologies are introduced the HR department can start looking at how to downsize and
look for ways to save money. A job that used to take 2-4 people could be cut to one done by
a single person. Technology is revolutionizing the way we do business and not just from a
consumer standpoint, but from an internal cost-savings way.
4. Workforce Demographics – As an older generation retires and a new generation enters the
workforce the human resources department must look for ways to attract this new set of
candidates. They must hire in a different way and offer different types of compensation
packages that work for this younger generation. At the same time, they must offer a work
environment contusive to how this generation works.
Chapter Two- Human Resource Management
Dire Dawa University, Department Of Management Page 2
Those involved in human resource management does more than hiring and firing, they make sure
that every type of external influence is listened to and proper procedures are followed to avoid
lawsuits and sanctions. If you’re in HR make sure that you’re paying close attention to external
influences because there is a good chance they’re affecting your job and the company you work
for. So next time you talk to someone invovled in the human resource management process think
twice about the amount of factors that affect their job and how important it is for them to be on
top of their game.
2.2. The Internal Environment
These are the forces internal to an organization. Internal forces have profound influence on HR
functions. The internal environment of HRM consists of unions, organizational culture and
conflict, professional bodies, organizational objectives, polices, etc. A brief mention of these
follows.
1. Unions: Trade unions are formed to safeguard the interest of its members/workers. HR
activities like recruitment, selection, training, compensation, industrial relations and
separations are carried out in consultation with trade union leaders.
2. Organizational Culture and Conflict: As individuals have personality, organizations have
cultures. Each organization has its own culture that distinguishes one organization from
another. Culture may be understood as sharing of some core values or beliefs by the members
of the organization “Value for time” are the culture of Reliance Industries Limited. The
culture of Tata conglomerate is “get the best people and set them free”.
HR practices need to be implemented that best fit the organization’s culture. There is often
conflict between organizational culture and employee’s attitude. Conflict usually surfaces
because of dualities such as personal goal vs. organizational goal, discipline vs. autonomy,
rights vs. duties, etc. Such conflicts have their bearings on HR activities in an organization.
3. Professional Bodies: Like other professional bodies, the HR professional body regulates the
functions of HR practitioners. For this the HR practitioners are expected to declare their
allegiance to the code. Thus, professional bodies also influence HR functions of an
organization.
Chapter Two- Human Resource Management
Strategic HRM (SHRM)
The HR Strategy is usually high-level. The HR Strategy defines the strategic role of HR in the
organization and initiatives to be done within the frame of several years.
The field of strategic HRM is still evolving and there is little agreement among scholars regarding an
acceptable definition.
➢ SHRM is systematically linking people with the organization; more specifically, it is about the
integration of HRM strategies into corporate strategies.
HR strategies focus is on alignment of the organization’s HR practices, policies and programmes with
corporate and strategic business unit plans (Greer, 1995). Strategic HRM thus links corporate strategy and
HRM, and emphasizes the integration of HR with the business and its environment.
It is believed that integration between HRM and business strategy contributes to effective management of
human resources, improvement in organizational performance and finally the success of a particular
business (see Holbeche, 1999; Schuler and Jackson, 1999). It can also help organizations achieve
competitive advantage by creating unique HRM systems that cannot be imitated by others (Barney, 1991;
Huselid et al., 1997). In order for this to happen, HR departments should be forward-thinking (future-
