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Factors Influencing Hrm

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Autor:  anton  22 April 2011
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Abstract

The following essay is an effort to understand the notion that human resource functions cannot be performed in isolation. There is an intense need to identify the external and internal factors that influence the HRM functions and practices. The essay also identifies how successful companies like Nokia, Sony, Panasonic, Ikea, Commonwealth bank, have managed the impact of various internal and external factors to become leaders in their industry. Human resource management has achieved significant importance in recent years both in terms of theory and practice and corporations today cannot ignore the importance of managing human capital in order to achieve their goals and objectives.

Factors Influencing Human Resource Management Functions

In simple sense, Human Resource Management (now onwards referred as HRM) means managing people effectively in order to achieve the goals and objectives of any organizations, small or big. More sophistically, HRM involves all management decisions and practices that directly affect or influence the people, or human resources, who work for the organization. Corporations today have increased their attention towards managing human capital effectively. The reason behind this notion is that employees enable an organization to achieve its goals and that managing human capital is critical to an organization’s success.

Managing human resources is the vital role of managers in all organizations, both private and public. The changing world order has forced organizations to take a hard look at the ways they manage their people to make them more effective and efficient. Research has shown time and again that Human Resource Management practices can make an important, practical difference in terms of three key organizational outcomes: productivity, quality of work life, and profit. The issues of managing human resources are the key roles that managers in every organization in the business world have to pay attention in order to make their companies more productive, effective and efficient and also gain competitive advantages over their competitors.

HRM is one of the key fundamentals in coordinating and managing organizations. It is no more than a renaming of personnel functions which does little that is different from traditional practice of personnel management.

HRM involves the functions of planning and forecasting the personnel needs of the business, as well as putting in place systems for appraising, rewarding and developing staff. Hiring and training good staff are major tasks during the Start-Up Stage that ensures selection of high performance staff that can deal with performance issues and making sure that the firms’ personnel and management practices conform to various regulations. Business today is becoming more and more about working successfully in a team. Human resource management is integral to developing staff that have the skills to work independently but also as part of a team.

An important note to be considered here is that any organization does not exist in vacuum. For this reason, HRM functions and activities cannot be undertaken in vacuum. The external and internal environment within which the firms operate needs to be identified and accordingly HRM functions are to be carried out (Susan J, Randall S, 1995). There are various internal and external factors that influence a firm’s hiring and training activities. There is an intense need to analyze these factors to effectively carry out the HRM functions. External factors are those factors over which organizations have no or little control, but the better they understand those factors, the better they can adapt to it and develop appropriate HRM strategies. The external environment refers to conditions that are outside of the organization which includes legal, social and political conditions, customers’ preferences, competitors, unionization; labor market conditions; industry characteristics; and national cultures (Susan et al, 1995).The internal environment consists of those elements over which an organization has control or which it can use in order to gain information that will better help it in its HRM functions (Da-group, 2004). Now let’s understand how few of those external and internal factors affect the HRM functions.

Legal and political environments affect almost all aspects of the HRM functions. Different organizations have to follow different set of rules in context of their HRM functions. According to McKinnon & Murphy (2006), certain legislations are to be considered before conducting a recruitment and selection process such as; privacy that includes ethical and other legislative issues. For example, Nokia believes that complying with relevant national laws and collective agreements as well as internationally recognized standards and practices, such as those of United Nation’s Universal Declaration of Human Rights, the International Labor Organization and Global Compact, is fundamental to their employment practices and the way they carry out their business globally (Nokia, 2007).

According to Brewster and Hegewisch (1994), as US corporations expand their operations abroad, they face additional legal concerns in terms of HRM policies and practices. For example, in European countries, organizations are obliged to set aside specific sums of money for formal training and development. And for corporations that employ expatriates abroad, immigration and taxation treaties can influence staffing decisions (Dowling PJ, Schuler RS, Welch DE. 1994). In an example of Hewlett-Packard, Julian & Katie (1996) indicates that Australian human resource practices have led the organizations to move their selection criteria away from relying highly on the technical abilities. Major stress is laid on analytical, communication and management skill or behavioral attributes. This has influenced the HRM practices of other organizations within Australia.

Firms not only have to consider the legal and political environment, they also have to into consideration the labor market conditions while conducting HRM functions. Labor market conditions can be characterized along several dimensions including unemployment levels, labor diversity, and labor market structure. Unemployment levels and labor market structures have long been recognized as important macroeconomic variables, whereas the importance of labor diversity has been recognized more recently to effectively frame out the HRM policies and practices (Susan et al 1995). According to Rynes & Barber (1990), the recruitment activities regulate organizational inputs and therefore recruitment researchers have been more sensitive than others to the potential importance of unemployment levels.

Recruitment strategies vary with unemployment levels. When the labor supply is tight, organizations use more expensive and intensive recruiting methods, increase the geographic scope of their recruitment activities and appear to forego pre-employment drug screening. Other responses to a tight labor supply include improving wages, benefits, and working conditions in order to attract and retain employees and reducing hiring standards as a means to fill vacant positions. All such responses have a significant impact on the human resource practices, for e.g. lower selection standards may mean that more training is needed (Hanssens & Levien, 1983).

On the other hand, the growing pressures on organizations for becoming internationally competitive, has encouraged diversity management which is another dimension of the labor market conditions. It has led to changing labour force composition and developing awareness of human resource management. In 1970, Australian government passed on Federal and State legislation that prohibits discrimination in employment based on sex, race, colour and other grounds (Julian et al, 1996). This implies that firms cannot discriminate any employee during their hiring and training process. At Sony Inc., the management strives to promote diversity among its employees, encouraging the employment of people of various nationalities, minorities, women and individuals with disabilities (Sony, 2007). As stated in Panasonic’s website, the company is wholly committed to the principles and practice of diversity within their human resource practices (Panasonic, 2007).

As an international company, Accor sees long term growth and sustainable development as its goals. Accor puts a lot of effort on diversity. As stated on the company website “The professional fulfillment of each employee is the foundation of our human resources policy” (Accor, 2007). Commonwealth Bank of Australia also encourages work place diversity. Their aim is to create an inclusive environment where people are treated with respect and dignity, where all staff are able to contribute to their maximum potential, and where the diversity of ideas, work styles and perspectives is valued and utilized to help grow their business (Commbank, 2007).

Today, companies are going global in order to diversify themselves and attain a competitive advantage. But different countries have their own unique cultures i.e. values, norms and customs. According to a study conducted by Brewster & Hegewisch (1994), the globalization of national economies and the evolution of multinational enterprises have resulted in increased awareness and documentation of the differences in how human resources are managed among countries. Cultural issues and national characteristics have to be considered in HRM practices (Boella & Goss-Turner, 2005). This implies if a small firm based in Australia wants to enter the US, Europe or Chinese market, they need to consider the national culture within these countries and accordingly plan out their recruitment and selection process.

In 2004, Sony Europe established a number of female focus groups, interviewing 80 women to understand the issues key to promoting employment opportunities and creating a better working environment for European women (Sony, 2007). In other words, Sony is trying to identify the national culture persisting among the European women and accordingly plan out their HRM functions. As mentioned on their website, McDonalds have different procedures for recruitment and selection in different countries (McDonalds, 2007). In Australia, the minimum employment age is 14 years while in India its 18 years. Employment below 18 years in India is considered as child labour which legally not permitted. So McDonalds take this difference into consideration while recruiting and selecting staff in India. So it can inferred a firm’s HRM functions are affected by the national culture prevailing in their country or countries of operation.

Another important external factor that influences the HRM function is competition faced by an organization from its competitors. In today’s business environment, a firm tries to achieve competitive advantage over its competitors in order to overcome the competition problem and retain more customers than its competitors. A firm can achieve competitive advantage through cost-leadership or differentiation strategy. To adopt either of these strategies, the firm is required have a highly committed and competent workforce. Hence, in a growing number of organizations human resources are now viewed as a source of competitive advantage (Dessler, Griffiths, Lloyd, Williams, 1999).

Today the job market is becoming more and more competitive because organizations want people who can really make difference by joining them. This has influenced the recruitment and selection process among different corporations. For e.g. the major competitors of Three mobile in Australia are Vodafone and Optus. Hence the HR department at Three Mobile is continuously looking for people with imagination, talent, passion and initiative to help them shape Australia’s consumer and business mobile needs (Three, 2007). Another example can be given of Ikea which is a well-known multinational company that sells low- priced home furnishing products. As a company, their vision is to create a better everyday life for the many people and they believe that it is their co-workers who make their vision a reality. PriceWaterhouseCoopers believes that getting and keeping people with the right jobs, right skills and right knowledge is critical to the success of every organization. (PWC, 2007). This is how HRM functions are affected due to external competition.

Not only external factors but internal factors, as mentioned above, affect the HRM functions and practices within an organization. Some of the internal factors that affect the HRM functions are technology, structure, size, organization’s strategy, and culture. The technological environment is perhaps one of the most dramatic force that shape a firm’s HRM practices (Zammuto & O’ Connor, 1992).Technology places an important role in reducing costs, improving efficiency of customer access and providing relevant information to help firms increase their productivity (Kotler, et.al. 2004). Technology refers to system’s processes for transforming inputs into usable outputs. These processes can vary along many dimensions, including the degree of continuity in the production system, the types and levels of knowledge required by the system the degree to which tasks are routinized and predictable and the linkages and interdependencies among tasks and people (Hulin & Roznowski 1985).

According to Katzell (1994) the impact of technology on the social dynamics within organizations has long been recognized, but only recently have US researchers begun to address systematically the implications of technology for HRM practices. Technology does affect positively on the internal operations as discusses above but it also changes the way HRM functions are carried out. Today employees work within integrated communication centers. By linking computers, telephones, fax machines, copiers, printers, and the like, information can be passed on more quickly. With that information, human resource plans can be better facilitated, decisions can be made faster, jobs can be clearly defined and communications with both the external community and employees can be enhanced.

Today, the recruitment process can be conducted by posting job ads on the internet rather than word of mouth, newspaper advertisements and other traditional way. For e.g. in Australia, Seek.com.au is being widely used by major employers to post their job ads. This way they can also determine if an applicant possesses some of the basic technology skills. At the Ford Motor Company, all employees were given a home computer and Internet access for $5 a month. This allows Ford management to keep in close touch with its employees, and allow employees to easily communicate with each other and readily access company information and services (Ford, 2007). Thus it can be understood that technology does affect employees which in turn affects human resource policies and practices.

Another internal factor that influences the HRM functions and practices is the Organizational culture. Although human capital is important, the driver for sustained superior performance is a combination of human capital management capabilities and an appropriate culture. Culture can be defined as common patterns of beliefs, assumptions, values, and norms of behaviour of human groups (represented by societies, institutions, and organizations).

More than two decades ago, Barett and Bass (1976) observed that culture was not considered a critical contingency variable to explain organizational behaviour and HRM practices. Most researchers were primarily concerned with testing the generalisability of North American behavioural theories and technologies in other countries. The situation has changed now on two fronts. First, because of increasing demands of the globalised and liberalized business environment, both researchers and practitioners have started paying more attention to the study of culture as an explanatory variable. Second, they have come to realize that the uncritical adaptation of HRM practices and techniques evolved in the context of Western cultural values may not be effective in other socio-cultural environment.

This justifies that national culture influences organizational culture and in turn influences the HRM practices. Research indicates that organizations operating in different countries tend to be structured and behave differently, especially those subsidiaries in the same multinational organization (Dowling et al. 1999; Dowling & Welch 2004). Organizational culture, like national culture, is implicit, and emergent. This means it develops internally within the organization over a period of time.

In today’s diverse business environment, managing culture has become inevitable (Baker, 1980; Green, 1988; Kilmann, 1982; Whipp, 1989). Legge (1989) observes that HRM emphasizes the management of culture as a central management activity, while Armstrong (1987) notes that management of culture is an essential element of HRM. Indeed, the ‘soft’ version of HRM (found more readily in some UK organizations) emphasizes the development and maintenance of a strong organizational culture. This serves multiple purposes for managers. First, an organizational culture provides a means of enacting the all-encompassing vision of what the organization wishes to be and offers a possible sense of direction for its members. Secondly, and perhaps more importantly, it promises some way of redressing the potential conflict between ‘individualism’ and ‘collectivism’ which is inherent in HRM (e.g. ensuring that ‘individuals’ are systematically recruited and socialized to share key organizational values).

According to Bond (1996) & Hofstede (2001), managers and workers in one country differ from their counterparts in another country. For e.g. Hong Kong based manager and workers will differ from their counterparts in the US due to various cultural differences. These cultural differences may combine to establish differences in decision-making and models of employee-organization relationships that influence choices of HRM strategies to counteract uncertainties in the supply of labor.

Different cultures will require different HR practices and organizations wishing to develop and sustain ‘strong’ cultures would need to pay particular attention to their HRM policies and practices to ensure that they are supportive of the culture they wish to develop and that they feed through to strategic planning. It is interesting to know how top MNC’s like Microsoft, Sony, Nokia, Wal-mart etc manage their HRM functions in context of different national cultures where they operate.

Business strategy, an internal factor, also affects the HRM functions. An approach to assess the links between strategy and HRM practices are found in the work of Miles and Snow (1984).They identified three strategic types, and demonstrated how each type will have different HR requirement. For example, ‘defender’ strategies which are aimed at securing a slow but steady growth in market share require HR to be developed internally, frequently involving selective recruitment, training and strong internal promotion policies. In contrast, ‘prospector’ strategies are characteristic of firms that experience rapid growth. Such firms emphasize the redeployment of management and technical resources in order to develop people who can be moved easily to undertake different assignments.

Finally, the ‘analyser’ strategic type describes organizations that compete not only when their product is new and unique but also at the later stages of a product life cycle when the organizations can benefit from mass production technology. The HR system needed by the ‘analyzer’ firm is similar to that of the ‘defender’ whereby the emphasis is on selecting and training the right people and placing them where they can maximize their contribution to their business. Thus a link between strategy and HRM is regarded as essential both in theory and practice.

Conclusion

At the end it can be concluded that HRM is considered as effective tool for competitive advantage and that HRM functions and practices cannot be performed in isolation. Today successful companies like Sony, Nokia, Panasonic, and Commonwealth, all of them have been successful in managing their human capital effectively and they managed to become leaders within their Industry. There is no doubt that people are the strength of any organization. It is quite clear from the analysis that in order to understand HRM in context it is necessary to consider how the functions of HRM are affected by the internal and external environments of organizations.

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