HRM and the Business Environment

Many practitioners and academics have neglected HRM's environmental context, preferring to concentrate on technical detail. This is consistent with criticisms of traditional personnel management for its narrow focus on functional or 'micro' matters such as recruitment. In fairness, however, it must be recognised that personnel managers have always required a detailed knowledge of employment legislation, together with an understanding of industrial tribunals and trade union organization. Nevertheless, this represents a restricted selection from the wide range of environmental factors impacting on people management.

This section addresss a wider perspective and introduce a number of fundamental issues which are developed further within later chapters in the books - Human Resource Management and the shorter version Fundamentals of Human Resource Management..

We observed in the section on Introduction to Human Resource Management that the essence of HRM lies in the competitive advantage to be gained from making the most of an organization's human resources. However, it is obvious that we are constrained by the availability of suitable people - a factor that is heavily dependent on environmental variables such as:

  • the implications of world and national economic conditions for business growth;
  • the effect of inflation on the perceived value of wages;
  • the traditions of local business culture;
  • the particular nature of national employment markets.

These variables have a 'macro' effect on the utilization of human resources. Additionally, in this section we consider other effects caused by the activities of external stakeholders, such as:

  • competitors' utilization and demand for human resources;
  • multinational organizations and strategic alliances leading to restructuring or integration on a global basis;
  • economic and legislative actions by governments;
  • resistance or co-operation from trade unions;
  • pressure on senior managers to cut costs and maximise shareholder value.

Human Resources and the Global Economy

HRM and the State

The Employment Market