CHAPTER TWO
Human Resource Management Environments
2. Introduction
What is environment? In simple words it is the "totality of all factors which influence both the
organization and human resources sub-system". Environment comprises all those forces which
have their bearing on the functioning of various activities including human resource activities.
Environment is an important variable in the HRM model. It may be understood as all those forces,
which have their bearing on the functioning of the HR department. It is desirable to know what
the environment is and how it influences HR functions in an organization.
Environmental scanning is important to HR managers to become proactive and not reactive to
the environment which is characterized by change and intense competition.
HRM processes in an organization do not operate in a vacuum. They are influenced by and
influence the external environment (outside the organization) and internal environment (inside
the organization).
2.1. The External Environment
The external (macro-environmental) factors separately or in combination can influence the HR
function of any organization. The job of a HR manager is to balance the demands and
expectations of the external groups with the internal requirements and achieve the assigned
goals in an efficient and effective manner. They must identify, evaluate, and react to the forces
outside the enterprise that may affect its operations.
External environmental influences such as government laws and regulations, demographic,
economic conditions, technological, social condition, and the labor market condition have a
significant impact on HRM processes.
1
, 2.1.1. Government Law and Regulations
A powerful external environmental influence is government law and regulations, which affect
organizations directly. Federal regulations influence HRM activities, policies, and programs.
When an organization makes decisions about minimum wage, working time, managing diversity,
employee safety and health, downsizing, and discipline, it must weigh the impact of government
regulations.
The government regulates and influences some aspects of HRM more directly than others. Major
areas of legislation and regulation include:
Equal employment opportunity and human rights legislation, which directly affect
recruiting, selection, evaluation, and promotion, and indirectly affect employment
planning, orientation, career planning, training, and development.
Discrimination based on sex, age, and disability.
Compensation regulation, which affects pay, hours of work, unemployment, and similar
conditions.
Benefits regulation, which affects pensions and retirement.
Labor relations laws and regulations, which affect the conduct of collective bargaining.
Privacy laws.
Therefore, laws and regulations have a direct effect in the management of HR. Legal issues affect
almost all aspects of HRM, from the initial recruitment and selection of applicants to their
discharge, retirement or lay off. In other words, there are almost no HR decisions that remain
unaffected by government rules and regulations.
2.1.2. Economic Condition
Economic environment is of great concern to company everywhere. Economic environment
refers to all those economic forces, which have a bearing on the HR function. The components
of the economic environment are:-
Growth strategy, Industrial production (productivity)
2
Human Resource Management Environments
2. Introduction
What is environment? In simple words it is the "totality of all factors which influence both the
organization and human resources sub-system". Environment comprises all those forces which
have their bearing on the functioning of various activities including human resource activities.
Environment is an important variable in the HRM model. It may be understood as all those forces,
which have their bearing on the functioning of the HR department. It is desirable to know what
the environment is and how it influences HR functions in an organization.
Environmental scanning is important to HR managers to become proactive and not reactive to
the environment which is characterized by change and intense competition.
HRM processes in an organization do not operate in a vacuum. They are influenced by and
influence the external environment (outside the organization) and internal environment (inside
the organization).
2.1. The External Environment
The external (macro-environmental) factors separately or in combination can influence the HR
function of any organization. The job of a HR manager is to balance the demands and
expectations of the external groups with the internal requirements and achieve the assigned
goals in an efficient and effective manner. They must identify, evaluate, and react to the forces
outside the enterprise that may affect its operations.
External environmental influences such as government laws and regulations, demographic,
economic conditions, technological, social condition, and the labor market condition have a
significant impact on HRM processes.
1
, 2.1.1. Government Law and Regulations
A powerful external environmental influence is government law and regulations, which affect
organizations directly. Federal regulations influence HRM activities, policies, and programs.
When an organization makes decisions about minimum wage, working time, managing diversity,
employee safety and health, downsizing, and discipline, it must weigh the impact of government
regulations.
The government regulates and influences some aspects of HRM more directly than others. Major
areas of legislation and regulation include:
Equal employment opportunity and human rights legislation, which directly affect
recruiting, selection, evaluation, and promotion, and indirectly affect employment
planning, orientation, career planning, training, and development.
Discrimination based on sex, age, and disability.
Compensation regulation, which affects pay, hours of work, unemployment, and similar
conditions.
Benefits regulation, which affects pensions and retirement.
Labor relations laws and regulations, which affect the conduct of collective bargaining.
Privacy laws.
Therefore, laws and regulations have a direct effect in the management of HR. Legal issues affect
almost all aspects of HRM, from the initial recruitment and selection of applicants to their
discharge, retirement or lay off. In other words, there are almost no HR decisions that remain
unaffected by government rules and regulations.
2.1.2. Economic Condition
Economic environment is of great concern to company everywhere. Economic environment
refers to all those economic forces, which have a bearing on the HR function. The components
of the economic environment are:-
Growth strategy, Industrial production (productivity)
2
