Impact of External Factors on HRM

1. Impact of External Factors on HR Strategies

At a broad level, the job of human resources (HR) is to make sure a company has the right people with the right skills, knowledge, and attitudes to reach the overall strategic goals of the company. HR also creates and manages rules, policies, and procedures related to employees. This includes making sure employees are aligned with not only the company’s own rules but also follow important laws like the Equal Employment Opportunity Act, the Occupational Safety and Health Act, and minimum wage laws. Because of this, some people might see HR staff as “enforcers.” However, it’s better to think of them as both protectors and supporters, encouraging behaviors that help create a positive and productive workplace.

In addition to managing internal policies and procedures, HR must stay aware of external factors that can impact the organization. These factors can influence various aspects of the workplace, from employee satisfaction to overall company performance. By understanding and anticipating these external factors, HR can better prepare the organization to adapt and thrive in a changing environment. This proactive approach helps ensure that the company remains competitive and resilient, even in the face of external challenges.

key concept

Human Resources ensures a company has the right people and manages policies, aligning employees with company goals and laws, while also adapting to external factors to maintain a positive, productive, and competitive workplace.

terms to know

Equal Employment Opportunity Act

Law prohibiting job discrimination based on race, color, religion, sex, or national origin.

Occupational Safety and Health Act

Law ensuring safe and healthy working conditions for employees.

Minimum Wage

The lowest hourly pay that employers can legally give workers.

External Factors

Outside influences affecting a business, like economic conditions or social trends.

1a. What are External Factors

External factors are influences that come from outside the organization and can affect its operations, strategies, and overall success. These factors are beyond the direct control of the organization but must be monitored and managed to ensure the company can adapt effectively. External factors can include changes in the economic environment, shifts in societal trends, technological advancements, and regulatory changes. They often require the organization to be flexible and responsive to maintain its competitive edge.

1b. External vs Internal Factors

In contrast, internal factors are elements within the organization that can be controlled and managed directly. These include the company’s culture, internal policies, employee performance, and operational processes. Internal factors are shaped by the organization’s leadership and management practices and can be adjusted to align with the company’s strategic goals.

The key difference between external and internal factors lies in the organization's level of control over them. While the organization can directly influence and modify internal factors, external factors require a more reactive and adaptive approach. HR plays a crucial role in balancing these influences, ensuring that internal policies and practices are robust enough to withstand external pressures while remaining flexible enough to adapt to changes in the external environment. This balance helps the organization navigate challenges and seize opportunities as they arise.

term to know

Internal Factors

Elements within a business, like company culture or management, that affect its performance.

1c. Importance for HR

Understanding external factors is crucial for HR because these influences can significantly impact the organization’s ability to achieve its goals. By staying informed about external changes, HR can anticipate potential challenges and opportunities, allowing the organization to respond proactively rather than reactively. This foresight helps in strategic planning and ensures that the company is prepared for shifts in the external environment.

Being aware of external factors enables HR to align the organization’s internal policies and practices with the broader context in which it operates. This alignment is essential for maintaining compliance with new regulations, adapting to technological advancements, and meeting evolving societal expectations. It also helps attract and retain talent, as employees are more likely to stay with a company that is responsive to external trends and changes.

Knowledge of external factors allows HR to support the organization’s leadership in making informed decisions. By providing insights into how external influences might affect the workforce and operations, HR can help leaders develop strategies that are both resilient and adaptable. This support is vital for navigating uncertainties and ensuring the long-term success of the organization.

HR’s awareness of external factors is key to fostering a dynamic and responsive organizational culture. It helps the company stay competitive, compliant, and capable of thriving in a constantly changing environment. This proactive approach not only benefits the organization but also enhances the overall employee experience, contributing to a positive and productive workplace.

key concept

HR ensures a company has the right people and policies to achieve goals, while adapting to external factors and maintaining a positive, compliant workplace.

1d. Monitoring External Factors

To stay aware of external factors, HR can employ several methods that provide valuable insights and keep the organization informed about changes and trends. One effective approach is conducting market research. This involves gathering and analyzing data about the industry, competitors, and broader economic conditions. By understanding market dynamics, HR can anticipate shifts that may impact the organization and develop strategies to address them.

HR departments use market research to make informed decisions by analyzing industry trends, salary benchmarks, and competitor practices. This helps them attract and retain talent, set competitive compensation packages, and develop effective training programs. By understanding the market landscape, HR can align their strategies with organizational goals and ensure they remain competitive in the job market.

Another important method of monitoring external factors is reviewing industry reports. These reports often contain comprehensive analyses of current trends, regulatory changes, and technological advancements. By regularly consulting these reports, HR can stay updated on developments that could affect the organization. This information helps HR to align internal policies and practices with external realities, ensuring the company remains competitive and compliant.

Networking is also a crucial tool for HR professionals to stay up to date on changes. Building relationships with peers, industry experts, and professional organizations provides access to a wealth of knowledge and experience. Through networking, HR can gain insights into best practices, emerging trends, and potential challenges. This exchange of information helps HR to stay ahead of the curve and implement proactive measures within the organization.

HR can also benefit from attending conferences, seminars, and workshops as these events offer opportunities to learn from thought leaders, participate in discussions, and gain exposure to new ideas and innovations. By engaging in continuous learning, HR can enhance its ability to navigate external factors and contribute to the organization’s strategic goals.

Staying aware of external factors requires a multifaceted approach that includes activities like market research, industry reports, networking, and continuous learning. By leveraging these methods, HR can ensure the organization is well-prepared to adapt to changes and thrive in a dynamic environment. This proactive stance not only supports the company’s success but also fosters a resilient and forward-thinking workplace culture.

brainstorm

How can you effectively use market research and industry reports to anticipate and respond to changes in your future HR role? What are some potential challenges you might face when trying to stay informed about external factors, and how can you overcome them? How can networking and continuous learning contribute to your professional development and effectiveness as an HR professional?

terms to know

Market Research

Collecting information about consumers’ needs and preferences to help businesses make better decisions.

Economic Conditions

The state of the economy at a given time, including factors like employment, inflation, and growth.

Industry Reports

Detailed analyses of specific industries, including trends, challenges, and opportunities.

Networking

Building relationships with people to share information and support each other’s professional goals.

2. Adapting to Change

Adapting to changes in external factors is crucial for HR to maintain organizational agility and resilience. One important step in adapting to changes is to keep policies updated. As the world evolves, outdated policies may become ineffective or even illegal. Regular reviews and revisions are necessary to align with new regulations, industry standards, and best practices. This process is not merely about compliance, but it also ensures that policies support strategic objectives and foster a positive workplace culture.

As technology evolves, HR must leverage new tools and platforms to streamline HR processes, enhance communication, and improve data management. This includes adopting HR software for recruitment, onboarding, performance management, and employee engagement. By staying current with technological advancements, HR can increase efficiency, reduce administrative burdens, and provide a better experience for employees.

HR should also be updating and changing training programs to reflect the ever-changing environment as learning can equip employees with the skills and knowledge to navigate changes.

EXAMPLE

HR can design programs that address new technologies, regulatory updates, and emerging trends. Investing in employee development not only maintains a competent and confident workforce but also drives organizational success.

Recruitment strategies must also adapt as the required knowledge, skills and abilities change over time. HR should adjust recruitment approaches to attract and retain talent that meets the organization’s evolving needs. This may involve redefining job descriptions, exploring new talent pools, and employing innovative recruitment methods. By staying aware of trends, HR can ensure the organization attracts individuals capable of driving growth and innovation.

Fostering a culture of adaptability is another critical step. Encouraging open communication, promoting flexibility, and emphasizing the importance of change can help employees embrace new challenges and opportunities. When adaptability is valued, the organization is better positioned to respond effectively to external factors.

key concept

HR must continuously adapt to external changes by updating policies, enhancing training programs, and refining recruitment strategies. This adaptability ensures that employees are trained and knowledgeable around trends so that they can continue to be effective members of the organization.

terms to know

Job Description

A detailed list of duties, responsibilities, and qualifications for a specific job.

Talent Pools

Groups of potential candidates for future job openings.

2a. Proactive vs Reactive Approaches

A proactive approach involves anticipating potential external changes and preparing for them in advance. This approach necessitates that HR remains proactive, continuously monitoring industry trends, regulatory updates, and other external factors in real-time, rather than reacting to them after they occur.

The primary benefit of a proactive approach is that it allows the organization to stay ahead of changes. By anticipating and preparing for external factors, HR can implement policies, training programs, and recruitment strategies that align with future needs and organizational goals. This foresight helps the organization avoid disruptions and maintain a competitive edge. Additionally, a proactive approach fosters a culture of innovation and continuous improvement, as employees are encouraged to think ahead and adapt to new challenges.

EXAMPLE

One proactive approach is when HR conducts a thorough analysis of industry trends and identifies emerging technologies that will impact the organization. They then develop a comprehensive training program to upskill current employees in these new technologies. Additionally, HR collaborates with educational institutions to create internship programs that attract fresh talent with the necessary skills.

By proactively addressing the skills gap, the organization ensures that its workforce is prepared for future challenges. This not only enhances employee satisfaction and retention but also positions the company as a leader in innovation.

In contrast, a reactive approach involves responding to external changes after they occur. This method requires HR to be flexible and quick to adapt when unexpected events or trends arise. The main benefit of a reactive approach is its ability to address immediate issues effectively. When external factors change suddenly, HR can quickly implement necessary adjustments to policies, training, and recruitment. This responsiveness ensures that the organization can navigate challenges without significant delays. Additionally, a reactive approach can help identify gaps in existing strategies, providing valuable lessons for future planning.

Both proactive and reactive approaches have their advantages, and the most effective HR strategy often involves a combination of both. A proactive approach provides a strong foundation by preparing the organization for anticipated changes, while a reactive approach ensures that the organization can handle unexpected events with agility.

EXAMPLE

One reactive scenario might be when HR quickly reviews the new regulations and assesses their impact on current policies. They then organize a series of informational sessions to educate employees about the changes and how they will be affected. HR also updates the company’s benefits packages to comply with the new laws and communicates these changes to all staff. The organization swiftly adapts to the new regulations, ensuring compliance and minimizing disruption. Employees are well-informed and reassured, which helps maintain trust and morale during the transition.

By balancing proactive and reactive strategies, HR can create a resilient and adaptable organization. Proactive measures help mitigate risks and capitalize on opportunities, while reactive measures ensure that the organization remains flexible and responsive. This balanced approach enables HR to support the organization’s long-term success and maintain a positive and productive workplace culture.

try it

Directions: Reflect on the proactive and reactive examples above to answer the following questions.

How can HR balance the need for proactive planning with the necessity of being reactive to sudden changes?

HR can balance these needs by making plans that include both long-term goals and backup plans. They should keep an eye on industry trends and talk regularly with employees to stay informed and ready to adjust plans as needed. This way, the organization is prepared for future changes but can also quickly respond to unexpected events.

What are some potential risks of relying solely on a proactive or reactive approach in HR?

If HR only focuses on being proactive, the organization might become too rigid and unable to adapt quickly to surprises. On the other hand, if HR is only reactive, the organization might lack direction and always be putting out fires, which can be stressful and inefficient. A balanced approach helps by combining planning with flexibility, ensuring the organization is both prepared and adaptable.

How can HR professionals foster a culture of continuous improvement and innovation while also maintaining the flexibility to respond to unexpected events?

HR can encourage a culture of improvement and innovation by promoting ongoing learning, open communication, and rewarding new ideas. Using agile methods and creating teams that work well together can also help. By making these practices part of the company culture, HR ensures that employees are both forward-thinking and adaptable, ready to handle new challenges.

make the connection

In the Touchstone, you will be asked to assess the human resources practices for an organization. Looking at internal and external factors along with HR’s approach to adapting to change can be important in an HR assessment.

terms to know

Proactive Approach

Taking action in advance to prevent problems or seize opportunities.

Reactive Approach

Responding to problems or situations after they occur.

2b. Collaboration with Other Departments

Navigating the ever-changing landscape of external factors requires more than just an action and changes from HR; it should also involve collaborating with other departments and functions within the organization. When HR teams join forces with other departments, they don’t just align strategies—they build a cohesive front that can tackle challenges head-on.

Imagine HR working closely with finance, marketing, and operations. This isn’t just about ticking boxes; it’s about ensuring that each department’s goals are aligned. Such collaboration ensures that changes are not only timely but also strategically sound, making transitions smoother and minimizing disruptions. Collaboration also enhances the organization’s ability to innovate and adapt.

EXAMPLE

By partnering with IT, HR can leverage new technologies to improve processes and enhance employee experiences.

EXAMPLE

Working with the legal team ensures that all updates comply with current regulations, reducing risks and ensuring compliance.

Communication is the key to successful collaboration. Regular meetings and shared platforms are crucial because they create a space where ideas can be exchanged easily, and departments can stay connected. This continuous conversation helps the organization move from just reacting to problems to being proactive, and ready to anticipate and adapt to changes.

While HR’s ability to adapt to external factors is crucial, it’s the collaboration with other departments that truly amplifies this adaptability. Together, they create a resilient and agile organization, poised to navigate the complexities of the external environment. This collective effort not only strengthens the organization’s response to external factors but also cultivates a culture of unity and forward-thinking.

think about it

How might the lack of collaboration between HR and other departments affect employee morale and productivity? What challenges could arise in implementing company-wide policies and initiatives without HR’s collaboration with other departments? In what ways could the absence of HR’s input in other departments’ decisions impact the workforce?

REFERENCES

Lobosco, Mark. (2019, Jan. 28). "LinkedIn Report: These 4 Ideas are Shaping the Future of HR and Hiring." LinkedIn Talent Blog. https://business.linkedin.com/talent-solutions/blog/trends-and-research/2019/global-recruiting-trends-2019

Deloitte Insights. (2018). "2018 Global Human Capital Trends." Deloitte Insights. https://www2.deloitte.com/us/en/insights/focus/human-capital-trends/2018.html

PwC. (2019). "Talent Trends 2019: Upskilling for a Digital World." PwC. https://www.pwc.com/gx/en/ceo-survey/2019/Theme-assets/reports/talent-trends-report.pdf