Chapter 3: Environmental Influences on HRM

Chapter 3: Environmental Influences on HRM

Environmental Scanning

  • Definition: Environmental scanning is the systematic monitoring of the major factors influencing the organization to identify trends that might affect the formulation and implementation of both organizational and HR strategies.

  • Importance: A lack of environmental scanning is often what gets organizations into major trouble.

The Environmental Analysis Process

  • Scanning and Monitoring the General Environment:

    • Includes factors like economics, globalization, politics and legislation, technology, demographics, and social and cultural factors.

  • HR Forecasting and Assessing:

    • Involves the following components:

    • Determining issue priority.

    • Conducting SWOT analysis.

    • Engaging in scenario planning.

  • Scanning and Monitoring the Business Environment:

    • Utilizes models such as Porter's Five Forces and focuses on constituent groups (management, employees, unions).

Stages of Analysis

  • The analysis of the external environment consists of these stages:

    • Scanning

    • Monitoring

    • Forecasting

    • Assessing

Sources and Methods of Information

  • HR professionals rely on many sources of information, including:

    • Business publications and media

    • Professional associations

    • Conferences/workshops

    • Professional consultants

    • Research journals

Methods of Forecasting

  • HR professionals utilize several methods to generate predictions about the future or extrapolate from current events to determine their impact on HR practices.

Scenario-Based HR Planning

  • Four-step approach:

    1. Assess business scenarios and how they may play out over a five-year term.

    2. Assess the firm’s HR readiness and possible challenges.

    3. Identify HR’s strengths and weaknesses, employee needs, and threats.

    4. Identify HR initiatives and programs that must be undertaken to deal with threats and opportunities.

Competitive Intelligence

  • Definition: Competitive intelligence is a formal approach to obtaining information about competitors.

  • Evaluation Questions:

    • Is the source reliable?

    • What is the likelihood of the information being correct?

Challenges in Environmental Scanning

  • Common challenges include:

    • Inability to accurately predict the future.

    • Difficulty in isolating what really is important to HR from less significant trends.

Environmental Factors

  • Major environmental factors influencing HRM:

    • Economic climate

    • Globalization

    • Political and legislative factors

    • Technology

    • Demographics

    • Social and cultural factors

Economic Climate

  • Key indicators:

    • Unemployment rate

    • Cost of fuel/commuting

    • Value of the Canadian dollar

    • Public debt

    • Interest rates

    • Presence of the gig economy

Globalization

  • Definition: The growth in the flow of trade and financial capital across borders.

  • Effects: Impacts prosperity, jobs, wages, etc.

  • Employment Statistics: One in five jobs in Canada is related to international trade.

Globalization-Related Issues

  • Challenges associated with globalization include:

    • Crisis management

    • Evacuation in cases of terrorism

    • Civil war

    • Outbreak of infectious diseases

Political and Legislative Factors

  • Government Influence: Provincial and federal governments affect organizations by:

    • Emphasizing tax cuts

    • Providing tax incentives for job creation

    • Increasing job-training opportunities

    • Creating balanced labor legislation

  • Ethical Considerations: Decisions not governed by law are usually governed by morals or ethical codes.

Technology

  • Definition: HR technology encompasses software and hardware that automates HR tasks.

  • Trends: Increased use of artificial intelligence to replace human work and workers.

Demographics

  • Definition: The study of population statistics that includes:

    • Labor market

    • Diversity

    • Generational differences

Social and Cultural Factors

  • Right to Privacy: There are laws and regulations in effect, but questions remain concerning the employer's moral right to monitor employee activities.

  • Work–Life Balance: Issues include the desire for quality family time while pursuing a career, including:

    • Elder care

    • Child care

    • Flextime

    • Telecommuting

    • Reduced hours

    • Part-time hours

    • Job sharing

Remote Work and Contingent Workers

  • Remote Work: Accelerated by the COVID-19 pandemic.

  • Contingent Workers: Includes part-time, seasonal, temporary, and contract employees.

Constituent Groups

  • Definition: Groups of people who have an interest in the projects, policies, or outcomes of an organization’s decisions.

  • Examples:

    • Board of directors

    • Senior management

    • Supervisors

    • Employees

    • Unions

Responding to External Factors

  • Organizations typically examine two factors to determine important trends:

    • The probability of these trends actually occurring.

    • The likely impact of each trend on the organization.

Proactive Approach

  • HR managers are not passive observers; they seek to participate and influence trends.

  • Organizations can utilize SWOT analysis to evaluate the impact of the business environment on their operations.

Summary - 1

  • L.O. 3.1: Environmental factors have varying degrees of influence on organizations.

  • L.O. 3.2: HR professionals can use a variety of methods to forecast the future or extrapolate from current events to determine their impact on HR practices.

  • L.O. 3.3: Challenges in environmental scanning include isolating critical issues from insignificant trends.

Summary - 2

  • L.O. 3.4: HR strategists monitor a range of environmental factors, including the economic climate, political and regulatory environment, and issues concerning technology, demographics, and social and cultural values and norms.

  • L.O. 3.5: Constituent groups such as shareholders, unions, customers, and executives significantly impact strategy formulation and implementation.

  • L.O. 3.6: HR professionals must assess the importance and severity of trends and respond proactively.