Everything you need to know about the various factors affecting human resource management. Human resource management is a subsystem of an organization as a system.
However, when a subsystem is taken for analysis, it is treated as a system because it has the features of a system. A system works in the context of its environment. Environment of a system consists of all those factors which lie outside the system but affects working of the system.
In the case of human resource management, there are two categories of environmental factors-external and internal. External factors are all those factors which lie outside an organization and affect its working, including human resource management. Internal factors are all those factors which lie within the organization and affect human resource management.
Learn about the various external factors affecting human resource management. They are:- 1. Economic Factors 2. Socio-Cultural Factors 3. Technological Factors 4. Political-Legal Factors 5. Growing Strength of Trade Unions 6. and Growth of Management Theories and Approaches.
Also, learn about the various internal factors affecting human resource management. They are:- 1. Organization’s Strategy 2. Organizational Culture 3. Trade Unions and 4. Organization’s Financial Position.
Summing up, some other factors influencing human resource management are:- 1. Socio-Psychological 2. Cultural Factor 3. Demographic Factors 4. Economic Factors 5. Technological Factors 6. Ecological and Environmental Factors 7. Political Factors and 8. Legal and Administrative Factors.
Internal and External Factors Affecting Human Resource Management
Factors Affecting Human Resource Management – Environmental Factors: External and Internal Factors
Human resource management is a subsystem of an organization as a system. However, when a subsystem is taken for analysis, it is treated as a system because it has the features of a system. A system works in the context of its environment. Environment of a system consists of all those factors which lie outside the system but affects working of the system.
In the case of human resource management, there are two categories of environmental factors-external and internal. External factors are all those factors which lie outside an organization and affect its working, including human resource management. Internal factors are all those factors which lie within the organization and affect human resource management.
Classification of various environmental factors affecting human resource management into two categories is important because an organization cannot control external factors but it can control internal factors.
Both types of factors are:
External factors affecting human resource management are economic, socio-cultural, technological, political-legal, and professional association. These factors have different types of influences on human resource management.
Economic factors are those factors which give shape and form to the development of economic activities and include factors like nature of economic system, general economic conditions, various economic policies, and various factors of production including human resources.
Out of these, factors that influence human resource management practices are population and workforce, workforce market conditions, national income, and inflationary pressures.
Influence of these factors on human resource management practices are as follows:
i. Population and Workforce:
Population and workforce influence human resource management because these form the basis for an organizations’ external supply of human resources. While considering population and workforce as a means for supply of external human resources, organizations should differentiate between workforce and population because only a part of the population is eligible to work.
Further, eligible workforce can be divided into two groups- the workforce reserve (those not working for economic gain, for example, homemakers, students, etc., and those who constitute workforce. Out of this workforce, organizations can choose their employees.
ii. Workforce Market Condition:
Workforce market condition shows demand and supply of workforce. It influences human resource management practices relating to recruitment and selection. Exchanges between employers and potential employees occur in the workforce market. Since workforce market includes all types of workforce, only relevant workforce market is taken into account for searching potential employees.
Three factors usually define the relevant workforce market- (a) occupation — qualifications and skills required, (b) geography — potential employees are willing to relocate or commute, and (c) other employers that compete with similar products and services.
These three factors define the part of the workforce that is of interest to a particular employer. In fact, human resource professionals consider workforce market in terms of all three factors.
iii. National Income:
National income, particularly measured in terms of per capita income, affects wage/salary structure at the macro level. Each employer has to align wage/salary structure with that operating at the macro level. This is the reason for difference between wage/salary structure of economically advanced countries and developing countries.
iv. Inflationary Pressures:
Besides the national income, inflationary pressures in a country also affect the payment to be made to employees. In most of the countries, payment to employees is linked to cost of living either directly or indirectly. As a result, when a country faces inflationary pressures, its cost of living index goes up forcing employers to pay more to employees.
For example, in India, dearness allowance, a part of the payment made to employees, is linked with cost of living index. When this index goes up, there is proportionate increase in the amount of dearness allowance.
Socio-cultural factors are quite comprehensive and affect various aspects of organizational operations, including human resource management. From human resource management point of view, attitudes, beliefs, desires, expectations, and customs of the society at a given point of time are important.
These factors determine- (i) expectations of the society from organizations, (ii) views towards social status of jobs, (iii) views towards achievement of work, (iv) views towards authority structure, responsibility, and organizational positions, (v) workforce mobility, and (vi) role of unions in managing human resources. In the light of various socio- cultural factors, organizations can do better if they follow human resource management practices in accordance with the needs of these factors.
The socio-cultural factors affect human resource management practices in the following ways:
a. Socio-cultural factors have direct impact on organizational culture. If the organizational culture is not in accordance with socio-cultural characteristics, it will not be effective even if organizations offer higher monetary benefits. Since human resource management practices are one of the prime constituents of organizational culture, these practices have to be aligned to social expectations. In this context, the role of human resource professionals is very important.
b. Socio-cultural factors determine what kind of role is to be, played by unions in managing human resources. If the society views that unions are the champions of employee cause, their bargaining position increases and their role in managing human resources becomes more important. In alternative situation, the role of unions in managing human resources decreases.
Technological factors consist of sum total of knowledge providing ways to do things. These include inventions and techniques which affect the ways of doing things, that is, designing, producing, and distributing products and services. Technology affects an organization in two ways- (i) defining nature of jobs and (ii) affecting human resource management practices.
(i) Defining Nature of Jobs:
Technology is a major source of productivity increase. Various jobs in an organization being performed by individuals are determined by the technology being used for conversion process. Thus, technology determines the type of skills to be possessed by job performers.
As the level of technology improves in an organization, skill requirement also increases. For example, in knowledge-based companies like in information technology, skill requirement is quite different as compared to industrial companies. For knowledge-based companies, knowledge workers are required.
Even in industrial companies, those opting for highly automated technology require human resources with different skill set as compared to companies opting for non-automated technology. HR professionals have to select and train human resources accordingly.
Technology not only affects the internal operations of organizations but it also affects how human resource professionals work. By linking computers, fax machines, copiers, printers, and the likes, information related to human resources can be disseminated more quickly.
With that information, human resource planning can be better facilitated, decisions can be made faster, and communication with employees and external community can be enhanced.
(ii) Affecting Human Resource Management Practices:
Technology has changed human resource management practices in the following areas:
a. In recruitment and selection, the total process has been reduced to such an extent that the entire process can be completed within a very short time. By posting jobs on the Internet, required information is assimilated quickly; applications from prospective candidates can be received quickly; even interviews can be conducted through telephone; result of selection process can be communicated electronically.
It may be mentioned that most of the IT companies and many of the forward-looking companies in other sectors send appointment letters to the selected candidates through the Internet.
b. In training and development, technology is dramatically changing how HR professionals are training and developing employees. The Internet has provided opportunities to deliver specific information to employees on demand; visual display terminal (VDT) is being used to make training programmes more effective.
In fact, various training media are also making it possible to send employees for training without having them to physically transport from one location to another.
c. In communication, technology has paved the way for open door policy, a policy which is must in the present business environment. Open door policy implies that anyone can communicate with anyone in the organization without being limited because of hierarchical pressures.
Organization’s websites and the Internet have made open door system workable. Human resource professionals use these media to share information with employees.
d. In the surveillance of employee behaviour, technology is playing crucial role. Instead of monitoring employee behaviour physically, this can be done through technology whether the employees are located at a single place or dispersed across the globe. In fact, many multinational companies adopt this mode of monitoring the behaviour of their employees.
e. In today’s environment, a major concern before HR professionals is to maintain proper work-life balance for employees. Organizational jobs have become demanding. This feature takes lot of employee time. If time taken in commuting to and from office is added to this, employees have no time to their personal life.
Technology has paved the way for emergence of virtual office which is devoid of a central place, known as office; no commuting of employees is required; they are linked through information technology. Therefore, they can work from any place. This helps them to maintain proper work-life balance.
Political-legal factors include political system, role of government in business, various government policies related to business operations, laws formulated by governments, both central and state levels.
Political-legal factors affect human resource management practices in the following ways:
i. Governments prescribe policies from time to time related to management of human resources. These policies have to be adhered by all the organizations which are covered by these policies.
ii. There cannot be discrimination among employees on the basis of sex, caste, religion, or place of origin.
iii. In certain sectors, at least prescribed percentage of total employees must be selected from personnel belonging to backward classes, scheduled castes/tribes, and physically handicapped.
iv. Employee remuneration, safety, working conditions, and industrial relations systems must conform to various legal prescriptions. In India, there are various Acts passed by Parliament and State legislatures, relevant to management of human resources. Organizations have to adopt their human resource management practices according to prescriptions of these Acts as these Acts leave very little discretion for adopting different human resource management practices.
For every major profession, there is a professional association. A professional association consists of organizations and individuals whose membership is based on common professional, scientific, or technical aims. The representative body of professionals is needed to regulate and develop the professional activities.
For this purpose, the association prescribes code of ethics to ensure adoption of ethical practices of its members. For example, in India, there is National Institute of Personnel Management which has provided a code of ethics to its members that aims at governing their behaviour in performing their duties related to managing human resources.
Internal factors (also known as organizational factors) lie within the organization and affect human resource management practices. In an organization, human resource management works within the overall perspective provided by the organization.
Overall perspective for the functioning of human resource management is provided by numerous organizational factors, the more relevant being the following- organization’s strategy, organizational culture, trade unions, and organization’s financial position.
Besides the above organizational factors, organization’s technology also affects human resource management practices by defining nature of jobs. Now let us see how the above internal factors affect human resource management practices.
Human resource management issues are not independent issues but these are derived; these are derived from organization’s strategy. Every organization sets its strategy either explicitly or implicitly. Strategy is a way in which an organization, reacting to its environment, deploys its principal resources and marshals its main efforts in pursuit of its purpose.
Human resource is one of the principal resources of any organization. Therefore, it must be deployed and utilized keeping in view the requirements of the strategy. Its implication is that HR strategy should be chalked out in the light of organization strategy.
How strategy affects human resource management practices can be seen by analyzing how strategy works in an organization. Strategy operates at three levels- corporate level, business level, and functional level. At the corporate level, strategic decision involves deciding ‘what business should we be in’.
Such a decision sets the long-term direction for the whole organization. Such a decision is made by top management of the organization. Business level strategy is relevant to different business areas, often called strategic business units (SBUs). Each SBU formulates its own strategy within the overall framework provided by corporate level strategy.
Business level strategy primarily deals with the question- ‘how do we compete in the given businesses’? Functional level strategy is relevant to each functional area like production, marketing, finance, and, of course, human resource. Functional level strategy primarily deals with the question- ‘how do we contribute to business unit and corporate objectives’?
Thus, HR strategy is formulated within the overall framework provided by corporate level and business level strategy. Depending on the nature of corporate strategy, human resource management practices are followed.
Organizational culture is another factor that shapes human resource management practices. Organizational culture is the set of assumptions, beliefs, values, and norms that are shared by an organization’s members. There are two types of elements which define the culture of an organization- abstract elements and material elements. Abstract elements are internally- oriented and include values, beliefs, attitudes, and feelings.
Material elements are externally- focussed and include buildings, personnel dresses, products, etc. Every organization, being a social entity, develops within it a cultural system with some unique modes of behaviour. These unique modes distinguish an organization from others.
Organizational culture is very important factor which affects organizational processes and practices including human resource management practices. To understand the differences in human resource management practices in different types of organizational culture, it can be divided into two groups- high-performing culture and low-performing culture.
Human resource management practices differ in these two cultures on the following dimensions:
i. In high-performing culture, HR practices are intricately linked to the strategic management of the organization. In low-performing culture, there is lack of such a linkage.
ii. In high-performing culture, human resource is treated as a strategic resource. In low- performing culture, human resource is treated just like any other organizational resource.
iii. In high-performing culture, human resource function establishes business partnership with line managers who have a direct interest and involvement in delivering human resource.
Human resource functionaries become integral part of strategic business units and customize human resource solutions to provide fast and efficient service. In low-performing culture, human resource functionaries and line managers have independent status and way of working.
iv. In high performing culture, the focus is on growing new managers internally by promotion from within. Therefore, training and development activities have very high importance in HRM. In low-performing culture, training and development is not accorded high importance.
v. In high-performing culture, performance management is based on the person rather than the job. Assessment is done frequently and relies on multi-rater feedback. In low-performing culture, performance management is based on job result. Assessment is done after a fixed interval of time and assesses immediate superior plays significant role in assessment.
Though a trade union in an organization is a separate entity, it has been treated as an internal factor because organization’s employees (particularly operatives) are members of the trade union. Trade union affects recruitment of employees, their development, compensation, maintenance, and industrial relations.
Generally, agreement between management and labour is reached through collective bargaining. Outcome of the collective bargaining depends on the relative bargaining position of the management and labour. If trade union is in relatively better bargaining position, outcome of the collective bargaining goes in its favour.
In such a situation, the organization has to adopt human resource management practices according to wishes of the trade union though such practices may have adverse impact on the organization. Bargaining position of a trade union depends on the strength of its members as well as support of trade unions of other organizations at the same location and apex body of trade unions at national level.
While the above factors are enduring in shaping human resource management practices, organization’s financial position affects human resource management practices, particularly those having substantial financial implications. The ability to pay the wages and salaries, funds for retraining human resources, etc., are affected by an organization’s financial position and its cash flow.
Generally, highly profitable periods bring higher bonus while unprofitable periods may not result in any bonus (except the statutory bonus). Though many organizations tend to profess that employees are their most important asset, they manage their human resources as if employees are the most important expense.
Therefore, when financial difficulty is experienced, the axe falls first on the employees. This is evident by substantial employee layoff during the economic slowdowns. On the other hand, employee stock option, profit sharing, performance incentives, etc. are the result of sound financial position.
Factors Affecting Human Resource Management – External Factors Influencing the Growth of Modern Human Resource Management
The growth of modern human resource management in industrial and other organisations has been extensively influenced by a set of external factors.
More notable among these have been:
(1) Growing strength of trade unions
(2) Growth of management thoughts and studies
Workers’ organisations began to be given legal recognition as trade unions since the closing decades of the nineteenth century. The earlier stigma of their being in restraint of trade, conspiring criminally and inducing breach of contract came to an end. Since then, trade unions have been bargaining with employers for improving terms and conditions of employment of their members.
They have also been exerting pressure on the government to enact pro-labour laws. Many areas concerning employer-employee relations such as wages, hours of work, physical working conditions, welfare amenities and many other terms and conditions of employment increasingly came under the ambit of collective bargaining and state intervention.
Union pressure has been an important factor inducing many employers to give due attention to the human aspects in their enterprises.
Ever since the dawn of the twentieth century, several areas of management including personnel or human resources management have increasingly become subjects of study and research by experts and scholars particularly in the USA.
The contributions of some of them having more relevance to human resource/personnel management are briefly described below:
i. Frederick W. Taylor:
Taylor (1856-1912), also known as “the father of scientific management”, laid emphasis on promoting productivity through scientific management and rewarding more efficient workers with increased remuneration. He also recognised the importance of promoting group harmony and cooperation, method of enhancing output and developing workers’ skills.
ii. Henry L. Gantt:
Gantt (1861-1919) laid emphasis on scientific selection of workers, harmonious cooperation between labour and management and need for training workers.
iii. Frank Gilbreth:
Frank Gilbreth (1901) is famous for his Time and Motion Studies.
iv. Lillion Gilbreth:
Lillion Gilbreth (1901) tried to explain the importance of human aspects of work and understanding of workers’ personality and needs.
v. Henry Fayol:
Henry Fayol also known as “the father of modern management theory”, Fayol (1916) considered management as an important area of industrial activities. He emphasised the need for teaching management and suggested several principles of management. He has been an exponent of modern operational theory.
vi. Behavioural Scientists:
Hugo Munsterberg (1912) and Walter Dill Scott (1911) are known for their application of psychology to industry, management and personnel. Vilfredo Pareto (1896-1917) is famous for his application of “social system approach” to organisation and management. Elton Mayo and F. J. Roethlisberger (1933) conducted studies at the Hawthorne Works of the Western Electric Company. They found significant influence of social attitudes and relationships of work-groups on performance.
vii. The Systems Approach:
Chester Bernard (1938) advocated “System’s Theory” of management, suggesting that it is the task of management to maintain a system of cooperative effort in a formal organisation and to adopt comprehensive social systems.
viii. Abraham Maslow:
Maslow (1954) developed a “Need-hierarchy Theory.” He holds that men have a hierarchy of five needs – (1) physiological, (2) security and safety, (3) affiliation or acceptance, (4) esteem or status and (5) self-actualisation in an ascending order. The physiological needs comprise – food, shelter, sleep and relief from physical ailments.
The safety and security needs include job-security, pension, protection against certain contingencies of life and so on. The affiliation or acceptance needs cover the needs associated with one’s relationship to others such as need to be loved, to belong to a group and to contribute to its goals.
Esteem needs comprise appreciation for achievement, to be respected and secure status and recognition. Self-actualisation needs include maximising the contribution of one’s talent, skills and abilities.
ix. Clayton P. Alderfer:
Alderfer (1969) has developed “Existence, Relatedness and Growth (ERG) Theory” of needs. This theory is a modification over Maslow’s Need Hierarchy theory. Alderfer identifies three groups of core needs. These are – (1) existence, (2) relatedness and (3) growth. Existence needs include needs such as food, shelter and protection of health. These are essential for existence.
Relatedness needs are concerned with the desire for maintaining interpersonal relations such as need for belonging to a group and establishing satisfactory relationships with persons at work and outside. The growth needs comprise the desire for personal development and achievement and to be creative in performance. These needs are, however, not in ascending order and generally operate simultaneously.
x. Frederick Herzberg:
Herzberg (1959) has propounded “Two-factor Theory” (hygiene approach) concerned primarily with motivation. His approach is in modification of that suggested by Maslow. According to Herzberg, one group of needs is related to company policy and administration, supervision, working conditions, salary, status and job security.
He kept these in broad categories of maintenance, hygiene or job-context factors, and considered these as dissatisfiers. The second group is related to achievement, recognition, challenging work, advancement and growth in the job. These are job-content matters and are considered satisfiers and the real motivators.
xi. Douglas McGregor:
McGregor (1960) laid emphasis on two sets of assumptions about the nature of people in the form of “Theory X” and “Theory Y”. “Theory X” represents the traditional assumptions about the nature of people.
These assumptions are:
(a) Average human beings have an inherent dislike of work and will avoid it, if they can.
(b) Based on this human characteristic of dislike of work, most people must be coerced, controlled, directed and threatened with punishment in order to induce them to make an adequate effort for achieving the organisational goals.
(c) Average people prefer to be directed, to avoid responsibility and have relatively little ambition.
(d) Security is their topmost want.
The assumptions under “Theory Y” are as follows:
(a) Exerting physical and mental efforts in work is natural as is involved in play.
(b) Threat of punishment and outside control are not the only way to produce effort for achieving the objectives of an organisation. People exercise self-direction and self-control for achieving the objectives to which they are committed.
(c) The degree of commitment to objectives is in proportion to the rewards related to their achievement.
(d) Under proper conditions, average humans learn both, to accept responsibility and to seek it.
(e) The capacity to exercise a high degree of imagination and creativity in solving organisational problems is extensively distributed in population.
(f) Under modern industrial life, the intellectual potentialities of average people are only partially realised.
McGregor’s theories received serious attention of the theorists as well as practitioners in the field of management and human relations all over the world. Even today, his propositions are considered important in understanding the behaviour of work-people in organisations.
xii. David C. McClelland:
McClelland and his associates (1953-1969) have identified three main motivating needs of people. These are – (a) need for power, (b) need for affiliation and (c) need for achievement (PAA). People having a high need for power have a drive for exercising influence and control. Those having a high degree of need for affiliation generally desire to be loved and they tend to avoid the pain of being rejected by a social group.
People with a high need for achievement have a strong desire of success and an intense fear of failure. All these needs are relevant to management as all influence the behaviour and motivation of people at work. The scholars have, however, given more attention to the need for achievement in comparison to others.
xiii. Victor H. Vroom:
Vroom’s theory (1964) of motivation is popularly known as “Expectancy Theory”. Vroom holds that people are motivated towards such activities, which they understand and which can drive them to the goals which they prefer, and which will lead to expected rewards. He asserts that motivation is a product of the anticipated worth that an individual places on a goal and the possibility of achieving that goal.
He presents his theory in the following formula:
Force = valence x expectancy
Force represents the strength of a person’s motivation.
Valence is the strength of a person’s preference for an outcome or reward.
Expectancy refers to the strength of the probability that a particular action will lead to a desired outcome.
The significance of Vroom’s theory lies in the recognition of the importance of various needs and motivations of individuals.
xiv. J. Stacy Adams:
Adams (1965) has developed “Equity Theory of Motivation”. According to this theory, individuals take subjective judgements about fairness or equity of the reward for the inputs which include – effort, experience, education and training, skill and so on, and compare it with that of others. The theory holds that there should be a balance of outcome/input relationship of one person in relation to that of another person.
If an individual feels that his reward for the input is inadequate, he will remain dissatisfied, and he may reduce the quantity of production or quit the organisation. If he considers the reward as equitable, he will continue at the same or satisfactory level of output. If he perceives that the reward is more than what he considers equitable, he may apply extra effort. Thus, the theory lays stress on cost-benefit analysis.
The contributions of the above and some other scholars have come to influence not only further studies and research in the field of management, but also perceptions, policies, strategies and practices in many areas of personnel and human resource management in industrial and other organisations all over the world.
Some of the specific fields in which the influence of these theories and approaches can be easily discerned include – motivation, job-satisfaction, morale, skill-development and training, remuneration and incentives and employee and industrial relations.
Factors Affecting Human Resource Management – Top 8 Factors: Socio-Psychological, Cultural, Demographic, Economic, Technological, Ecological and Environmental
Factor # 1. Socio-Psychological:
Socio-psychological factors greatly influence people’s thoughts, feelings, perceptions, attitudes and behaviour. Customs, traditions, cultural norms and value-systems to which a society is wedded are some of the decisive factors in people’s attitude towards life and work. In India, for instance, the two most widely-read books are Ramayan and Bhagavad Gita, both highlighting the ‘Law of Karma’ as the supreme law.
One should, therefore, perform his duties without longing for fruits, which will be there according to one’s Karma – actions. The scriptures also emphasise on the purity of means. The dos and don’ts are prescribed even for the forces fighting on the battlefields. Achieving goals through undesirable means is considered a sin. It is in this context that one may realise why truth and non-violence have been the hallmarks of India’s culture.
In remote past, India had a flourishing economy and civilisation, but it never attacked other countries or forced others to accept its philosophy. There have been civilisations in the world which, on the contrary, expanded their frontiers by force, that is, militarily, as well as by forcing their religious and social beliefs on others. India has been a victim of such attacks in the past and has suffered heavily.
British rulers partitioned India in 1947. It had a long-term impact on the social fabric and the mindset of people. The Constitution of India guarantees equal rights to all citizens, nonetheless differences exist in perception on vital national and social issues between communities adhering to different religious practices and faiths.
Socio-psychology helps in understanding how and why individuals behave, think and feel as they do in a given situation. Social cognition, perceptions, attitudes, stereotyping, prejudices, group norms and influences all affect people’s interactions in society and at work. Cognitive framework may be acquired through past experiences. People with different cultural, religious and family backgrounds may have different approaches which help them to organise and process information which can have self- confirming effects and cause behaviour consistent to it.
As against automatic processing of information, there may be controlled processing where information from different sources is collected, verified and used for decision-making. It may be influenced by positive or negative biases, sometimes causing errors. Perceptions help in identifying the causes of others behaviour. Body language, gestures, postures and movements of people in different cultures and societies account for differing perceptions. The way in which people meet and greet each other, keep distance, address and get feedback, show group feelings and self-presentation are not the same everywhere.
Attitude reflects people’s evaluation of social world and may colour their experience and opinion. When attitudes are strong, behaviour is strongly affected. Attitudes are formed through learning which may be the result of conditioned or unconditioned stimulus. A favourable attitude among workmen, for instance, may be created by employee benefit programmes and participative approach to management.
There are prejudices and stereotypes in all societies influencing people’s behaviour in many ways. Age, marital status, occupation, gender, language, religion, caste and community, etc. may form the basis of prejudices. Behaviour based on prejudices is perceived as legitimate by the perpetrators. Women, for instance, are considered weak and emotional in many societies and discriminated against men. Even today, there are only a few women in large business houses who are able to make it to the top.
Family ties and relationships exert great influence on social and work life. In India, for instance, joint-family system has been popular since ages providing social security to old and weak, promoting brotherly feelings and joy of living together with parents, brothers, sisters and close relations. Members of the family do not feel the kind of loneliness as is widespread in the West.
Social groups influence people through norms to guide behaviour in certain situations which makes it easy to predict the behaviour of members. Behaviour of men and women, parents and children, husband and wife, managers and workers, all may be examined in this light.
Organisations world over consist of both types with differing emphasis in different cultures. Japanese management style gives premium to group performance while American system promotes competitive behaviour based on individual capability and self-esteem. Indian management style is influenced by joint- family system and old ethos as given in the Rigveda – Vasudhev Kutumbakam (world is a family) – emphasising living and working together.
Factor # 2. Cultural Factor:
Culture is the learnt behaviour transmitted by one member of the society to another. In the words of G.C. Schneider, “It is the glue that holds an organisation together”. Hofstede analyses culture in five dimensions from one extreme to the other- individualism – collectivism, power respect – power tolerance, uncertainty acceptance – uncertainty avoidance, aggressive goal behaviour – passive goal behaviour and long-term outlook – short-term outlook. Not all people in society have similar orientations, but a broad categorisation on this basis is possible and helpful in understanding major orientations of a given society.
Organisations develop their own culture which is reflected in promoters’ vision, values and beliefs, management philosophy, organisation design and hierarchical structure, leadership style, communication process, work environment and HR systems, and policies with regard to recruitment, promotion, compensation, training and employee empowerment, etc.
Some organisations have open culture emphasising informal relations, cordial work environment, decentralised decision-making, opportunities for personal growth within organisation, while some are more bureaucratic with formal relations, rules, regulations, procedures, centralised decision-making and few opportunities for the personal growth of employees. Organisational culture in Western countries is different in some respects compared to countries in the East such as Japan, India, China and others.
Factor # 3. Demographic Factors:
Human resource is growing while other natural resources are depleting. The world population is nearing 7 billion, adding 83 million people every year. It has doubled during the last fifty years. Population had never grown at this rate in the past 200,000 years. The extreme growth of population is heavily taxing the earth and its resources.
WWF has already warned that if the ecosystem continued degrading at the present rate, humans will need at least two planets worth of natural resources by 2050. Biodiversity has already been damaged with terrestrial species declining by 31%, fresh water species by 28% and marine species by 27% during the last few decades only.
Ninety percent of human population growth is occurring in countries already struggling with poverty, illiteracy and civil unrest. Asia accounts for 61% population of the world, Europe for 12%, Africa for 13% and the western hemisphere for the remaining 14%.
India with 1.21 billion people, as per the census report of 2011, is the second most-populous country in the world. China is at number one. India’s population has more than tripled since 1947. The fertility rate is 2.8%, one of the highest in the world. Population projection for India is around 1.5 to 1.8 billion by 2050 and is expected to cross 2 billion mark by the end of the century.
High population growth has resulted into increasingly impoverished and substandard living conditions for a large section of the population. People below poverty line constitute almost one third of the total population. Situation in most developing countries is no better. The world is sharply divided between haves and have-nots.
India’s population is labelled by some as the ‘demographic dividend’ as half of its population is below 25 years of age. The country faces an immense task of feeding, educating, housing, and employing its youthful population. To avoid a ‘demographic liability’, India must grow in double digits per year to provide jobs for the expanding working population. Almost 70% of Indians live in rural areas, although in recent decades migration to larger cities has led to a dramatic increase in the country’s urban population which has led to mega slums and challenges to quality of life, social harmony and environmental impacts.
Despite its youthful population, India’s size has made it home to the second largest number of older people in the world in absolute terms (after China). With around 18% of world population, India has only 2.4% of world land area. Population control measures have been largely unsuccessful due to political and social reasons. The country thus faces a great challenge on the demographic front.
The literacy rate has risen in India in the last decade from 64% to 74% with a notable surge in female literacy for the first time in the post-independence era. But the male-female divide in education is still there. While male literacy is around 82%, female literacy is at 65%. Higher education in India is growing.
The country has third largest education system in the world after the US and China. IIMs, UTs and some other universities in India are centres of world-class learning, education and research. But the number and size of educational institutions and facilities are grossly inadequate for a rising population. There is mismatch between demand and supply.
Factor # 4. Economic Factors:
Globalisation has created opportunities for global movement of talents despite immigration restriction and controls. It is no surprise that one third of Silicon Valley’s software experts come from India and other countries in Asia which also provide call centre facilities and promote BPOs. MNCs today are not only employing local labour from host countries but also technical and managerial personnel.
The movement of talent is no longer restricted from developed to underdeveloped countries. Universities and centres of higher education in the West have a large number of qualified faculty in different disciplines who have been trained in India, China and some other countries. Most universities in the US, UK, Australia and other developed countries are opening their doors for students from Asia, Africa and Latin America.
Liberalisation of economies since early 1990s have enabled MNCs to expand their manufacturing and trading operations at a large-scale in the less developed world. Flow of capital and transfer of technology have substantially increased resulting into the high growth rate of the GDP of many developing countries. China, India, Russia and Brazil are among the fastest growing economies in the world.
While China has enjoyed double digit growth rate in the recent years, India had it between 7% to 9%. Business operations of Indian companies had impressive growth. In 2011, Forbes listed 57 Indian companies amongst the 2000 most powerful companies of the world.
The biggest economic depression in recent history which originated in the US has shaken faith on market economy. The silver lining was provided by the developing countries which gave MNCs the much-needed access to markets, in the absence of which economic recession would have been a disaster for many developed countries of the West with shrinking population, high rate of unemployment and poor growth rate.
While developing countries provided a cushion to developed countries in the times of crisis, all sorts of restrictions are still continuing against them when it comes to the export of skilled manpower. Asian, African and Latin American countries continue to be the targets of economic imperialism. Restrictive trade practices of economic powers in the West, in some measures, defeat the very objectives of WTO and other such organisations to promote free trade, flow of capital and skilled manpower.
The rate of growth has been impressive in developing countries as a consequence of economic liberalisation but the benefits have not percolated to a large section of people who are poor. Income inequality has grown dramatically as reported by ILO in recent studies. Share of wages in national income has declined in majority of these countries. The largest decline in the share of wages in GDP took place in Latin America and the Caribbean followed by Asia.
The cost of financial indiscipline and over-consumption by people in the West is in effect transferred to the developing East through market economy mechanism. The cost of primary products and labour has been deliberately controlled to be low and manufactured value added products much higher, resulting into economic exploitation and perpetuation of imperialism.
Factor # 5. Technological Factors:
Since Industrial Revolution in the early 20th century, machines have been replacing man with increased automation at work. Last few decades have witnessed computers as a powerful tool in the hands of managers. E-HR, as Ulrich puts it, is “a matrix with two columns- transactions – doing administrative things faster and better, enabling employees to be self-sufficient and self-reliant, building employee portals, etc., and transformation – becoming more strategic and building sustainable competitive advantage.”
Payroll system was the first to be computerised followed by employee recruitment, training, performance evaluation, promotions, incentives and rewards, and feedback systems. Job portals, online screening, testing, interviewing, skill matching on computers have not only facilitated transactions, but reduced cost and time.
E-HR is most helpful in manpower planning, storing and disseminating information, sharing knowledge, empowering people and formulating future strategies. It has resulted in improving performance and employee morale. Higher-level management in most companies have fully integrated organisation-wide network of HR-related data and information services available at any time, enabling timely and effective decision-making.
Technological changes have further changed the skill requirements. The demand for knowledge and skill-intensive occupations has increased. There is a marked reduction in conventional office jobs and increase in services like BPO, call centres, security, catering, etc.
E-HR is interactive in nature enabling instant feedback, helping decision-making in ever-changing environment with vast amount of data and information available, communicating quickly, expanding geographical and time horizons.
IT-HRD companies have emerged as a big support to business operations all over the world. Indian IT companies have made their mark in providing financial and other services by their innovative skills in developing softwares. They are in the forefront of exporting software products and skills both. Infosys, TCS, Wipro, HCL, etc. are among the world-class IT service providers to most of MNCs and TNCs.
IT education in India has developed with the joint efforts of private sector corporations and the government. Most companies have their own training institutes with highly qualified expert staff. Government on its part has allowed banks and financial institutions in public sector to float special bonds to raise capital for IT education for providing loan to IT-HRD companies and institutions at a low-rate of interest. Entrepreneurs, including NRIs, are offered special financial packages including venture capital to set up IT education. IT companies are encouraged to set aside a certain percentage of value-added revenue to support IT-HRD sector.
Professionally qualified women in IT are provided telecommunicating facilities to operate from home when they are not in a position to attend to the job in office on a regular basis due to family constraints. They are also offered special loan/ financial grants to set-up infrastructure at home to be able to telecommunicate. Job prospects for women have increased with the growth of IT sector.
Factor # 6. Ecological and Environmental Factors:
Ecosystems provide goods and services that sustain human societies and general well-being. Biodiversity sustains ecosystems. Environment includes the physical world; the social world of human relations and the built world of human creations. WWF’s 2010 report points out the alarming rate of loss of biodiversity particularly in low-income countries. Rich nations are far ahead of poor countries in consuming resources of the earth.
Rapid economic growth has fuelled an ever-growing demand for resources for food and drink, energy, transport, electronic products, living space and space to dispose waste. The ecological footprint shows a doubling of our demands on the natural world since 1960s, while the living planet index tracks a fall of 30% in the health of species that are the foundation of our ecosystem services on which we all depend. Even with modest projections for population growth, consumption and climate change by 2030, humanity will need the capacity of two earths to absorb waste and keep up with the natural resource consumption.
Ecosystems with plants, animals and microorganisms provide myriad of services upon which all life depends.
These services are:
(i) Provisioning – Food, medicines, timber, biofuel, etc.
(ii) Regulating – Water filtration, waste decomposition, climate regulation, crop pollution, etc.
(iii) Supporting – Nutrient cycling, photosynthesis, soil formation, etc.
(iv) Cultural – Enriching recreational, aesthetic and spiritual experiences.
Human activities which cause damage to ecosystems are:
(i) Conversion of land for agriculture, aquaculture, industrial and urban use; river water for irrigation, hydropower generation.
(ii) Harvesting plants and animals for food, materials and medicines at a higher rate than the reproductive capacity of the population.
(iii) Climate change due to the rising levels of greenhouse gases in atmosphere, caused mainly by the burning of fossil fuels, deforestation and industrial processes.
(iv) Invasive species introduced deliberately or inadvertently to one part of the world from another becoming competitors, predators or parasites of native species.
The impact of loss of biodiversity and environmental degradation is felt most profoundly by the world’s poorest and most vulnerable people living in the underdeveloped and developing regions of Asia, Africa and South America. Natural resources of poor countries are bought by rich nations at a price much lower than the price of manufactured products which they provide.
The gulf between rich and poor nations is widening. Without access to clean water, land and adequate food, fuel and materials, vulnerable people cannot break out of the poverty trap and prosper. Ending ecological overshoot by rich nations is essential to ensure the continued supply of ecosystem services.
Factor # 7. Political Factors:
A functional democracy with a government genuinely concerned with the welfare of people by promoting literacy, healthcare, social security and welfare, guarding fundamental rights of freedom of speech, expression and information, equality of opportunity, no discrimination on the basis of religion, caste, creed and faith, providing employment opportunities and food security and a people-friendly administrative machinery and effective legal system may be ideal for the development of human resource of the country. Experience world over has shown that development of human resource leads to all other developments.
Democracies, even with inadequacies, are preferable over dictatorship in the long rim. The collapse of totalitarian regimes in many countries in recent years including Soviet Russia confirms the belief that people should be the master of their own fate. This needs empowerment of the people. In many developing countries, governments, though elected, have not been able to eradicate poverty, illiteracy, unemployment, inequality of income and opportunities for their people.
Government policy of liberalisation has resulted into impressive economic growth, but human resource growth has been slow as reported by UNDP in its reports from time to time. Lack of infrastructure, inadequate allocation of funds for education, health and social security, administrative inefficiency and corruption in high offices are the main reasons of failure in most developing nations. Most countries ruled by dictators, except the oil-rich, have poor records on HRD front.
Factor # 8. Legal and Administrative Factors:
Legal framework of a country directly influences HR management in several ways. The Factories Act in India, for instance, regulates working hours, health, welfare and safety measures at work place, leave with wages, overtime allowance, etc. The Minimum Wages Act authorises appropriate government to fix minimum rates of wages of employees in scheduled employment.
The Payment of Wages Act aims at ensuring wage payment in prescribed time. The Workmen’s Compensation Act helps in providing compensation for injuries/death of employees during the course of employment. Social security legislation like the Employee State Insurance Act provides for maternity benefit, disablement benefit, and medical benefits to the workers. Industrial Disputes Act provides machinery to settle disputes through conciliation and adjudication when parties fail to resolve a matter mutually.
General laws of the country have a huge impact on HR management and development. Constitutional guarantees of freedom of speech and expression, for instance, go a long way in raising voice against any type of exploitation of the weaker section of society to which workers in many countries belong to. Laws to promote economy increase employment opportunities, wages, working and service conditions of workers, control prices specially of necessities of life and improve public distribution system.
Legislative and administrative measures on education, health, drinking water, sanitation, food security, and employment guarantee promote welfare of people.
Legal system must cope with changing times. In India, there are many acts which are more than 100 years old. Economic, social and political systems and environment have since changed drastically, but laws remain the same. In recent years, however, higher judiciary has shown sensitivity to people’s aspirations and needs of reform on such issues as environment protection, farmers’ rights, civil rights, corruption and black money. Laws passed by the Parliament, like the Right to Information Act, have been welcomed by the people.
Good governance is a major challenge in developed as well as developing countries. The 2010 corruption perception index shows that nearly three quarters of 178 countries have the index score below 5 on a scale from 10 (highly clean) to 0 (highly corrupt). The problem is more acute in fast developing and underdeveloped economies and also in some developed economies, seriously hit by recession and unable to manage their financial system effectively.
The case of bribery of public officials, embezzlement of public funds, frauds committed by big corporations, involvement of politicians and ministers in big scams and transfer of black money to some banks in the developed countries known to be haven for it, have been widely reported in recent years. Scams by giant MNCs have been eroding public confidence in the functioning of market economy.
The Pongi, Maddott, Enron and Satyam scams in recent years show lack of accountability and disregard for laws by such corporations. Many stock market scams have hit small investors below the belt. Ethic-deficit at the highest levels of government and corporate sector seriously affects morale of the people.