Identify and evaluate the key business issues and external environmental factors that impact upon HR strategy and activities within organizations.
The current business environment is not static. It keeps on changing every day. The business environment consists of both internal and external factors. The changing business environment also affects the activities of HRM. However, it is the responsibility of the human resource managers to match the strategic human resource activities to the mission statement of the organization (Armstrong & Taylor, 2014). Some of the internal issues that affect the operations of the business include the size of the organization, organizational strategy, organizational structure, and the cultural practices of the employees. On the other hand, external factors that affect business operations include a change in technology, competition, changing the domestic and global market, and government legislations and regulations.
Key Business Issues that Affect the HR Strategy
The Mission Statement of the Organization
The mission statement should direct the functions or operations of the organization. It outlines the framework within which a company is required to operate. As such, it impacts on human resource strategy and other functions of the business. The mission statement outlines the primary reason behind the formation of the company (Armstrong & Taylor, 2014). Therefore, the strategic human resource activities must match the mission statement of the organization. The human resource activities should have clear guidelines concerning decision-making policies, strategies on employee performance and motivation, and recruitment policies. Besides, the mission statement should relate to various stakeholders including corporate social responsibility.
The business strategy outlines the methods that a company can use to achieve its set objectives. The plans may include restructuring of corporate principles, departments, and employee behavior. The human resource practices such as recruitment and selection, training and development, and performance appraisal should complement the organizational strategy (Holbeche, 2009). Successful implementation of human resource functions will enable the organization to achieve its objectives. The corporate strategy also affects other organizational departments. They must match their targets, policies, and objectives to the strategic goals of the organization.
The Size of the Organization
The size of the company impacts directly on the human resource strategy. The size of the organization is usually measured depending on the number of employees, level of production and the return on investment (Holbeche, 2009). Large organizations will require the HR department to hire more staff so as to meet the human resource requirements of the organization (Armstrong & Taylor, 2014). For large organizations to achieve their performance objectives, the HRM will be required to hire a diverse workforce that fits the organizational strategic goals. Large firms also have many departments that need skilled and experienced line managers.
Organizational structure can either be horizontal or vertical (Holbeche, 2009). Employees who work in vertically structured companies work under close supervision because the activities of the organization are centralized. On the other hand, horizontally structured firms provide a flexible working environment. In this case, the HR strategic functions will reflect the organizational structure. Various HR strategies such as rewards and bonuses can be used to ensure that employees are always motivated.
External Environmental Factors Affecting HR Strategy
Competition requires human resource managers to be proactive to ensure that the business remains competitive in the long-run (Armstrong & Taylor, 2014). The competition requires human resource managers to make various strategic decisions that impact directly on the operations of the organization. Such decisions include raising salaries and wages so as to attract a competent and skilled workforce. Moreover, the HR department can also work towards meeting the expectations of the employees. This can be achieved through adequate training and development, recruitment and selection and performance appraisal. In this case, the HR will be creating a competitive advantage for the firm (Wright, 2008). On the hand, the company will be obliged to incur more expenses on training and development so as to retain their skilled and competent staff.
Legislation and Regulations
Business organizations are required to comply with the existing rules and regulations. The human resource department is significantly affected by the government legislations. For instance, they have an obligation to comply with the labor laws concerning employee discipline and dismissal. The HRM strategy is always obliged to respect the regulations of the country. Legislation influences HRM functions such as health and safety, industrial relations and equal employment (Holbeche, 2009). The HR managers are required to observe labor laws of given country before conducting HRM functions. The legislation also affects other organizational roles and activities. The legislations require companies to remit their tax returns. Besides, the Companies Act regulates the formation and dissolution of enterprises.
Changes in the International and Domestic Economy
Economic changes in the global and national market influences the HR roles regarding redundancy, recruitment, compensation, and rewards and salaries (Bratton & Gold, 2012). For instance, during the Great Depression firms were forced to cut on the number of staff so as to remain competitive and earn returns from the investments. On the other hand, if the economy experiences growth and development, the demand for labor will increase. Besides, firms will also be compelled to increase wages and salaries so as to attract talented and competent staff.
Consider the contribution of the HR function in identifying and responding to change in the business and external context and promoting good management practice.
Human resource management plays a significant role in responding to organizational change. Employees are considered as the greatest asset of the organization. They are a source of a competitive advantage (Wright, 2008). Therefore, the HR must work in unison with other departments in the organization so as to respond to change appropriately. Today, HR plays a critical function as a business partner. As such, it participates in strategy execution. The HR defines the organizational architecture (Armstrong & Taylor, 2014). In this case, it identifies how the organization is supposed to carry out its roles and activities. As a business partner, the HR will be able to determine changes that take place in the external environment. For instance, it is the responsibility of HR to review the structure of the organization, establish a strategic framework, manage people and oversee organizational processes. In the course of discharging these duties, the HR will be able to determine the change in the external business environment and establish effective management strategies (Bratton & Gold, 2012). The management strategies may require the organization to increase the number of staff or lay off some employees. Moreover, the business can reduce or decrease wages and salaries depending on the current business environmental. Therefore, it is the responsibility of the HR provides effective measures that the organization can implement so as to respond to change appropriately.
HR is also acts as an administrative partner in the organization (Armstrong & Taylor, 2014). As an administrator, the HR identifies factors in the external environment that can be incorporated into the business operations so as to improve the efficiency of accomplishing business processes. In this way, the organization will implement faster and cheaper method that can be used to identify and fix changes which are likely to be experienced. The ability of HR to streamline the business systems and procedures allows it respond to external changes.
HR plays a significant role in directing the performance of the employees towards achieving the desired organizational goals (Bratton & Gold, 2012). They act as employee champions by ensuring that employees are engaged fully. The HR outlines the job design for every employee. In this case, it will respond to critical business issues and external environment by developing jobs that match the strategic organizational goals and objectives. Moreover, the organization will ensure that talented employees are recruited so as to enhance the performance of the firm. Improved performance will enable the organization to remain competitive in the long-run. In case, HR is not able to respond to changes in the external and internal environment; the business is likely to fail since it would not be competitive.
The HR also identifies and responds to change by acting as a change agent (Armstrong & Taylor, 2014). Business environment has become very competitive, and organizations must respond to the rapid changing technology, globalization, and information access. The HR acts as a change leader in most organizations. They encourage employees to respond appropriately and adapt to the dynamic business environment. The contribution of HR as change agent ensures that employees don’t resist change. In this case, it will help to make the vision of the organization to become a reality. The HR also reviews salaries and wages of the staff. This is done by analyzing the labor market. The HR can decide to raise or lower salaries depending on the current labor market or economic conditions. When the organization increases wages and salaries, it will be in a better position to attract more talented employees who will drive the organizations towards its strategic objectives.
Compare and scrutinize relevant and appropriate HR data sources for the purposes of carrying out business and environment planning.
Human resource data sources play a significant role in carrying out business and environmental planning. The most relevant HR data that is used for planning include gender, the level of education of employees, the rate of staff turnover, salary information and performance levels (Armstrong & Taylor, 2014). The HR data allows the organization to plan for change appropriately. The HR data sources enable the firm to take various internal and external factors into account before a change is implemented. Such factors include political, technological and organizational structure among others. Human resource data on salary information will allow the firm to determine those who are being underpaid or overpaid. As such, the organization will develop a pay structure that ensures that employees are paid according to the amount of work they do. The HR data on salary information enables the organization to plan for its future operations (Bratton & Gold, 2012). This can be achieved by determining salaries and wages that correspond to the returns realized from the business. Besides, the company will develop a business strategy that addresses the implications that may be experienced in the future. The salary information enables the organization to assess the changes in the labor market. In this case, the salaries review will be implemented in line with the changing economic situations.
The HR data on gender also plays a significant role in business and environmental planning. This information allows the organization to determine the number of each sex in the organization (Wright, 2008). After establishing the number of each gender in the company, the firm will be able to plan for future employment that focuses on gender equity. This will also prevent the company from facing legal charges concerning gender disparity. The data on profile also allows the organization to distribute managerial positions fairly and equitably depending on the level of qualification as opposed to sex.
The HR data on the rate of employee turnover also helps the organization in a great deal. It enables the organization to identify reasons for staff turnover and possible mitigations. Grounds for staff turnover include poor working conditions and pay structure (Bratton & Gold, 2012). This data allows the business to plan for its future staff by providing equitable and fair pay depending on the performance of the employee. The data on employee turnover also allows the organization to carry out restructuring so as to meet future HR requirements. In case, the work environment does not favor internal promotion, this data will enable HR to adopt policies and procedures that allow internal recruitment and promotion as opposed to external recruitment.
The HR data on employee performance is of great significant to the organization. It enables the firm to determine employees whose performance is below average (Bratton & Gold, 2012). Besides, the organization will be able to identify those employees who are above average. The data will enable the firm to develop training and development program that meets the needs of each employee. For instance, the organization may decide to use apprenticeship to train employees whose performance is below average. They will assign various coaches to assist them to improve their performance. Training enables employees to enhance their performance. Improved performance leads to increased organizational productivity. In this case, the firm will earn more returns on investment thus allowing it compete effectively in the market.
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