Everything you need to know about the factors affecting Human Resource Management. The nature and scope of human resource management has undergone a serious transformation in the past couple of decades.
What used to be once a purely ‘hire and fire’ function mostly executed by administrative people has changed into treating employees as assets or resources and managing them in a way so as to create competitive advantage for the firm and win- win proposition for both.
The purely back-office personnel function has changed into a strategic board room game. HRM from being a game-bench has changed into the new game-changer, known as New Age HRM.
In this article we will discuss about the six main factors affecting or influencing the new age human resource management.
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Also learn about:- 1. Political Factors 2. Economic Factors 3. Social Factors 4. Cultural Factors 5. Legal/Regulatory Factors 6. Technological Factors.
Top 6 Factors Affecting Human Resource Management: Political, Economic, Social, Cultural, Regulatory and Technological Factors
Factors Affecting Human Resource Management: Political Factors Influencing HRM
Political factors determine how and to what degree a government intervenes in the economy.
Political factors include areas such as:
i. Tax policy
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ii. Labour law
iii. Environmental law
iv. Regional blocks
v. Trade restrictions & Tariffs
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vi. Political stability
The following changes have been observed in the political context over the years:
I. Less Government Interference in the Business – The government interference in terms of number of days to set up business, number of forms to be filled and the regulations therefore has gone down substantially.
II. Lowering of Trade Restrictions – Introduction of globalization and liberalization in many countries has removed restrictions on trade to a large extent.
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III. Tax Regimes Becoming more Liberal – Sectors that have significant contribution to the GDP enjoy a considerable tax relaxation.
IV. Increase in Political Instability – There have been fluctuations in the political leadership across the world. Say it be the case of countries like Afghanistan, Egypt, Syria or part of Europe or be it the case of Andhra-Pradesh, where the Chief Minister changed thrice in a span of 10-12 months, there has been fluctuations everywhere.
V. Power-shift, Emergence of Regional Blocks – If we take a close look at the global scenario it’s no more the case where a single economy drives all others. Many regional blocks have started emerging with great potential to influence each other.
VI. Emerging Markets (India, China) Altering Political Equations – The political factor along with some other factors has its effect on the demography of the country and thus different countries specialize in different products or services.
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VII. People-power (Democratization) – Politics has become more people driven after the introduction of democratic way of leading in many countries.
VIII. Rise of Environmental Driven Policies – Considering the limited availability of resources and increased amount of pollution, political parties have come up with policies to have a check on the same. The concepts like carbon credits have come came into the picture.
Business Imperatives Driven by Changed Political Climate:
Based on the above changes in the political context the following imperatives have become a part of the business:
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1. A business should understand the political undercurrents and not just read policy changes.
The example of Tata Nano – Singur case excellently describes the impact of the undercurrents on business.
2. It is necessary for a business to ensure that the political neutrality and policy (concrete steps) are aligned, so that the business runs smoothly.
3. Businesses are shifting towards free trade and there’s an uprising of disguised competition.
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4. Have a ‘stakeholder’s approach’ rather than only ‘shareholder’s approach’.
Having a stakeholder’s approach would ensure everyone’s engagement in the business and help the organization identify various dimensions of the business and thus the path towards achieving its goals.
5. Retaining the flexibility of a small organization (mobility and entrepreneurial mindset).
6. Understanding popular political moods and mood swings.
It is important for a company to be proactive in analysing the political situations surrounding the business environment. Thus several organizations have a Business Intelligence department that helps them keep a track on such situations.
7. A business should focus on both fundamental & incremental innovation to retain flexibility.
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8. Business and stakeholders (key) loyalty overrides all other loyalties.
The uprising of the people power overrides all other loyalties of a business. A business is now governed more by the people rather than the political bodies having an upper hand.
9. Business sectors enjoying liberal governmental regulation are growing at a fast pace.
10. Businesses now have a customer centric approach. They design or develop product based on the needs of the customers.
HR Imperatives Driven by Political Context:
The HR imperatives as a result of the changed political climate and the business imperatives necessitated by the same are as follows:
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Since now organizations have a diverse workforce it’s necessary for businesses to manage the cultural change happening.
Recruitment – Also now that businesses are spread across the globe it is necessary that care be taken while recruiting a diverse workforce and accepts the culture with an open mind.
Due to the dynamic nature of workforce it is necessary that organizations have an appropriate talent management strategy to acquire, develop, retain and replenish the workforce.
Personal Development – Now that there is a shift from collectivism to individualism it is necessary organizations focus on an individual’s career development, develop future leaders etc.
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Cross-cultural Training – It is necessary to provide training to individuals on the various cultures they are going to work when businesses are going global.
c. Structural Change in Organization:
With reduced political barriers it is an imperative that businesses have:
(a) A flat hierarchy
(b) The power distance be reduced
(c) Empowerment of employees
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(d) Communication barriers be reduced
Communication should be Instant (decisions be made quickly and also feedback be provided instantaneously) and transparent.
With changing business context it is necessary that employees be trained to sustain in the market with the changing technology. Also they are provided cross functional training, so that they can be employed with the changing business needs.
For the success of a business it is necessary that the workforce be highly engaged and therefore it is the need of every business to keep its employees engaged.
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Employee engagement is necessary to make the employees aware of various business activities, manages employee turnover and boost business growth.
f. Increase in Use of Temporary Employment Practices:
Businesses are moving towards a temporary workforce due to various reasons. They are easy to hire, flexible to any work timings, though they have high pay rates and they are low cost to the company in the long run.
This is a part of the talent management strategy where the businesses target the key players rather than the not so important players and their focus is on retaining them. This will help the organisation in succession planning.
h. Increasing Use of Technology and Business Intelligence:
Organisations are increasingly looking to technology to enhance performance and fill skills gaps. As a result HR is also using technology for organisation’s advantage. This can provide the organisation a competitive edge and lowers the cost of HR operations.
The development of HR technologies is helping to transform HR into a decision science with a measurable impact on business results. This creates new roles for HR professionals and the imperative to develop strong HR technology competencies.
The wide range of impact of technology on HR can be clearly viewed on the HR functions such as:
(i) Recruitment
(ii) Training & development
(iii) Performance management
(iv) Payroll & attendance records
Businesses are widely deploying Business Intelligence in HR for executing extensive manpower assessments, preparing account reports, employee performance reports, evaluating wages, staffing, available jobs and termination rules. This helps HR make strategic decisions and align them with the corporate goals.
2. Factors Affecting Human Resource Management – Economic Factors Influencing HRM
There have been several changes in the global economy as compared to earlier centuries.
Some of them are as follows:
1. Globalization:
Globalization refers to the increasing unification of the world’s economic order through reduction of barriers to international trade as tariffs, export fees, and import quotas. The goal is to increase material wealth, goods, and services through an international division of labour by efficiencies catalyzed through international relations, specialization and competition.
It describes the process by which regional economies, societies, and cultures have become integrated through communication, transportation, and trade. Globalization is caused by four fundamental forms of capital movement throughout the global economy.
The four important capital flows are:
i. Human Capital (i.e., Immigration, Migration, Emigration, Deportation, etc.)
ii. Financial Capital (i.e., Aid, Equity, Debt, Credit & Lending, etc.)
iii. Resource Capital (i.e., Energy, Metals, Minerals, Lumber, etc.)
iv. Power Capital (i.e., Security Forces, Alliances, Armed Forces, etc.)
After the world war many committees and associations have emerged with focus on free global trade.
2. Monetary Policies:
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment. Monetary policies of various countries change significantly according to the prevailing economic situation.
3. Explosion in Stock Markets:
With the advent of free trade and globalisation across the world, there has been a significant change in stock markets of various countries. Due to availability of capital for companies due to portfolio investments and Flls there is an explosion in stock markets.
4. Trade in Commodities:
Since the advent of internet and online trading in 1990s, commodities also entered in the virtual trading market. With the entry of commodities like gold, silver, platinum etc. the power of safe heaven asset is slightly lost from dollar. Safe heaven asset is the one which is expected to grow in rates with time. Dollar is considered as safe heaven but due to anticipation of a double dip recession, it is losing its appeal as safe heaven.
5. Growth of Unemployment in Developed Countries & Employment in Developing Countries:
The prices of factors of production are rising continuously in countries like U.S.A and European countries. Companies tend to outsource their manufacturing and service base to developing countries due to which there is a growth of unemployment in developed countries & employment in developing countries.
6. Growth of Inflation in Developing Countries:
Due to growth of employment in developing countries and shift in focus of major MNCs there is a growth of inflation. Apart from that various economic policies like free trade, globalization, etc. also have an impact on inflation.
7. Great Divide (GDP Growth Rate):
There is a great divide in the growth rate of various countries. Developed countries are growing at a very slow rate or can be said as stagnant economies whereas the developing countries are growing at a faster rate.
8. World Economy is more Powerful than Individual Nations:
It has been said, “US sneezes the world freezes”. But the saying is not entirely true in the current era. Today the world economy is more powerful than individual nations, and the same was seen in the 2008 recession when the impact of American recession was not much felt by India.
Business Imperatives Driven by Changed Economic Climate:
These thrusts of activities are critical to arriving at stated objectives in the business. These are the drivers of business and the principles by which the business acts and thinks, not the actions it takes.
I. Need to Operate Across National Boundaries:
With the advent of globalization, a business firm needs to expand its operations across the national boundaries in order to gain competitive advantage and sustain its business.
II. Shift Manufacturing and Service Bases:
Outsourcing of service base as a cost reduction procedure by the organization is getting increasingly prevalent.
III. Cost is a Major Issue and Optimizing Cost is Very Important:
Companies now-a-days retain the core department such as R & D and outsource the non-core ones. This again acts as a cost reduction benefit to the company.
IV. Ensuring Presence of Emerging Markets like China, India, Brazil etc.:
Developing markets such as China, India and Brazil are hot seats for FDIs’ and Flls’. Multinational companies are realizing the market potential of these countries and are expanding their market base to these nations.
V. Quality Assurance is Significant:
Due to increased global competition, companies are now focusing extensively on quality to sustain their business in the global scenario. Today customers are entitled to choose from a variety of options available in the market, therefore, to maintain market sustainability compromising on quality has to take a setback.
VI. Competitive Business Strategy Needs to be Reassessed Continuously:
Any business strategy gains obsolescence over a period of time. Therefore, there needs to be a drive for constant innovation and upgradation of the business strategy continuously.
VII. Need to Focus Both on Top Line and Bottom Line Growth:
Achieve bottom line growth through innovative business strategies which may be decreased in expenditures/ raw materials or various combinations including exceptional items (one time expenditures) which can reduce the cost of the business, rather than only focusing on the gross sales and revenue of the company which results in merely top line growth of the company.
VIII. Need to Balance Pricing Decisions and Quality Offerings:
Compromising on quality based on reduced pricing decisions can retard the business growth. Today the options available are endless in the market; therefore, the business imperatives should seek a balance between their pricing strategy and quality offered.
IX. Integrating Emerging and Unique Services and Applications in Business:
Aligning innovation in the current scenario with the business strategies to sustain a competitive edge in the market.
X. Need to Differentiate between Innovation and Manufacturing Headquarters:
There needs to be a distinction between the R&D department and the manufacturing unit of the organization. Generally, companies prefer keeping their R&D department in their home country whereas other services are outsourced. This helps in increased efficiency of their business as well as reduced cost.
HR Imperatives Driven by Economic Environment:
With the various changes in the macroeconomic variable there has been significant strategies developed by the corporate. Any strategy developed makes an impact on the HR policies and practices.
Some of the HR imperatives are:
i. Increase Focus on Manpower Management:
There has been a significant increase in focus on manpower management. Practicing good manpower management or Human Resource Management (HRM) enables managers of an enterprise to express their goals with specificity, increasing worker comprehension of goals, and provide the necessary resources to promote successfully accomplishment of said goals.
ii. Innovative Flexibility in Work Environment:
Flexibility in work environment brings a culture of creativity and innovation in the work culture. In today’s competitive environment, innovation plays a major role in bringing a core competency for the company in market.
iii. Increased Focus on Learning Culture:
There has been an increased focus on employees. Due to this reason organisations are focusing on development of skills. Training and development is now an integral part of HR department
iv. Increased Focus on Strategic Recruitment:
There has been a clear focus on recruitment strategy to be in line with business strategy. The hiring process should focus on our core competency and should strengthen it.
v. Change Management:
Today organisations take any change very seriously. With the growth in education among employees and workers, any change cannot be neglected as it plays a significant role in organisation’s working.
vi. Managing Budgets Efficiently & Meeting Biz Expectations:
There should be a proper budget allocation for Human Resources. Human resources should be given a particular importance in the budget allocation. The approach considering human resources as a cost centre is now shifting and the perception has been changing significantly.
vii. Growth & Expansion:
There has been an expansion in every businesses and industry. Global trade and functions seek proper attention on HR. The policies should be in line with such growth.
viii. Expectation Management:
There should be proper management of employee expectation because employees are premium assets of the business.
3. Factors Affecting Human Resource Management – Social Factors Influencing HRM
Social change refers to an alteration in the social order of a society. This change is facilitated by the interaction between various other macro environment factors.
This change can be measured on the basis of the following criteria:
I. Social Relations – Social relations focus on the behaviours and needs, those that primarily concern themselves with how people organise and make meaning of their world and their relationships within it.
II. Social Institutions – A social institution is a complex, integrated set of social norms organized around the preservation of a basic societal value. In short-hand, the five basic institutions are called the family, government, economy, education and religion.
III. Social Behaviour – It is behaviour directed towards society, or taking place between, members of the same species.
IV. Social Networking – It is the practice of expanding the number of one’s business and/or social contacts by making connections through individuals.
To summarize, when taken social changes as a whole in consideration, we thus note following outcomes:
I. Demographic Alteration:
The demographic alterations have been the significant changes that have happened in the society. The countries, like India, which have seen a swing towards younger population, have seen a growing need to address the conversion of a potential workforce to a dynamite talent pool.
For filling the skill gap as the IBM started IBM Drona and IBM Great Minds Challenge training programs where the brightest brains are trained in the graduation for the required KSA’s at workplace. Whereas, countries like japan and Canada, that have seen a sharp drop in the birth rates, are struggling with low workforce participation and are increasingly becoming more and more dependent on the immigrant population.
As the ageing population is increasing there should be a policy of hiring older people with required experience and KSA’s. The firm ASDA in UK started applying this policy where it attracts and tries to retain the older population.
II. Work Force:
The diversity in workforce observed is comparatively more diverse than the previous years. The workforce diversity in terms of nationality, gender, ethnicity, differently-abled people, etc. is more pronounced in the some workplaces.
III. Growth of Income & Income Disparities:
As India is ranked as 4th country for having highest purchasing power we can easily observe that the disposable income with individuals is comparatively higher than the previous years. At the same time the divide in the income group is also increasing.
IV. Rise in Educational Levels:
The average level of education has risen. Along with the education the levels of awareness has also increased tremendously.
V. Greater Global Citizenship (Social Relationships have Altered):
Today the youth especially feels more a global citizen then being limited to a region or a nation. The social media has played a huge role in the same. This also has meant greater mobility and transparency.
VI. Change in Family Structure:
Alternation of family structure from traditional joint family systems to nuclear families and introduction of DINK Croup- ‘Double Income No Kids’.
VII. Pressure Group:
Social pressure groups are being created for human rights, consumer behaviour, social groups etc.
VIII. Equality Concept:
Equality concept strongly growing not only in the organizations but also in the society.
Business Imperatives Driven by Changed Social Context:
The business imperatives as a result of the social changes can be captured as:
1. Need to alter offerings (products, services, jobs) keeping demographic realities in mind.
2. Need to innovate new product designs and service offerings.
3. Need to cater to aspirations of middle-class.
4. Need to integrate social media in marketing.
5. Need to have flatter and flexible organizations.
6. Need to integrate diversity management.
7. Need to let employees engage with clients/customers and other stakeholders using communication mediums, socializing and networking.
8. Need to understand and manage impact of social groups and peer groups on business.
9. Need to have greater transparency in business disclosures and offerings.
10. With social context becoming more dynamic, there is a need to anticipate the future trends.
HR Imperatives Driven by Social Context:
Companies like IBM having equality policies in their manual under which homosexuals, third gender and under-privileged people are treated and recruited with equal rules and procedures. IBM has even received awards for respecting the diversity. The Hispanic, blacks, homosexuals and third gender are treated with same respect and motivated to participate more in the organization.
Overall the HR imperatives driven by the social changes and consequent business imperatives are as follows:
a. Social Recruiting:
The Society for Human Resource Management (SHRM) reports that the number of companies using social networking sites, including Linked in, Facebook and Twitter, to recruit increased from 34% in 2008 to 56% in 2011. In addition, the number of companies who don’t plan to use social recruiting dropped from 45% to 21 % during the same time period.
b. Creative Jobs:
The organizations in order to extract maximum from the dynamic ideas of the GEN Y and are coming up with very creative jobs and job profiles. The jobs that are pretty unconventional in nature are slowly but steadily catching the attention.
c. Creative Work Culture:
Attitude towards work is now changing as the Gen Y is looking for more challenging options and have alternatives because of the vast market for skilled and knowledge workers.
d. Train the Graduate Student:
To make sure that the talent is not drained, the companies now believe in imbibing the skills in the prospective employees even before they join the company.
e. Outsource Talent and Technology:
To make sure the companies use the resource effectively and efficiently, the companies believe in specialization using core competencies. Thus the companies work on their respective core competencies and outsource the rest from the companies having the respective core competency.
f. Diversity Management:
Diversity is determined by the following factors:
i. Where do the employees come from?
ii. How much do they earn?
iii. How do they look physically?
iv. Age group
v. Beliefs and traditions
vi. Level of education
vii. Tastes, preferences
viii.Gender
ix. Attitude and values concerning work.
All these factors either divide employees or unite employees.
Managing diversity can be defined in the present context as follows:
1. Recognizing in a very positive way, those groups of people who share common characteristics and those who have different characteristics.
2. And hence work on involving them as part of the organization, as a member of the organization culture thus respecting the differences and work towards a common goal which requires the expertise of the people across the globe at different levels.
Thus managing diversity is critical to ensure smooth functioning in every organization. This can be imbibed in the workplace culture only by implementing well thought measures to bring the people to work together. This, no doubt requires HR policies facilitating the needs of the business.
g. Participative Management:
The power distance is slowly reducing thus the employees are being involved in the process of decision making. It’s about taking inclusive and collective decisions.
4. Factors Affecting Human Resource Management – Cultural Factors Influencing New Age HRM
The cultural changes on a broad level may be described as following:
1. Mindset Change – People have become more broad minded and more acceptable in nature and also more tolerant towards different cultures.
2. Woman Participation – The participation of women is being encouraged in organizations. They are taking up important roles and their contribution is being recognized.
3. Diversity in Terms of Work Force – The organizations are employing people from all over the globe to ensure, they have the best talent onboard, rather than restricting themselves to a particular location.
4. Orientation (Collective to Individualistic) – The workforce is now self-oriented more than collective.
5. Multilingual Acceptance – Acceptance towards other languages has increased.
6. Emergence of Online Communities – Various online communities have emerged primarily due to the social media revolution. Such communities are transnational and virtual.
7. Emergence of Aspirational Culture – The Gen Y especially is an aspirational generation. It aspires for better quality of life, better amenities, better technology & gadgets, better standard of living, better jobs & career, financial freedom, better access and no- nonsense culture.
8. Decrease of Shelf-life of Relationship – The lifelong relationship culture is fast losing its sheen and it is replaced by a culture where every relationship comes with a shelf-life. This can be seen in the society as well as in the organizations.
9. Increase of ‘Other’ Cultural Influence – With people becoming more and more connected and the communities becoming more and more virtual and global, the influence of the ‘other’ culture can be felt more and more. The emergence of the metro-sexual breed is a result of such influence.
Business Imperatives Driven by Changed Cultural Environment:
i. Cross-Cultural Management:
With multi-cultural interactions becoming more and more imminent, the need to understand, appreciate, educate and create awareness about cross-cultural issues is a business imperative.
ii. Presence on Social Networking Websites:
Social networking websites are the new communities of change. Companies are increasingly realizing the need to connect with people through such sites in order to appreciate better the cultural nuances.
iii. Connecting with Stakeholders through Social Networking Platform:
The social networking sites also provide a platform to connect with the other stakeholders.
iv. Implementing Tools that Help to Sustain Diverse Communities:
Businesses need to implement tools that appeal to multi-cultural sensibilities and help in sustaining the diverse communities. Many companies have come-out with commercials that have a global appeal and they have appealed to the youth rather than to a single culture. This is also true in the case of products and brands.
v. Need to Innovate and Design an Offering on a Continuous Basis (Aspiration):
Change is the order of the day. People are looking for newer designs, newer products etc. Sustaining this mindset requires the companies to innovate at a rapid pace and on a continuous basis. Dell for example has introduced laptops with changeable cover-designs.
So no more the boring laptop anymore. Every day you could have a new laptop, without really changing anything but the top lid cover. So you can match the laptop design to your mood, your dress or simple with your friend’s laptop.
vi. Customisation and Personalisation:
Driven by the increasing individualistic orientation, the companies have realized the need to offer customisation and personalization services, even to non- premium customers.
So there are companies which let you design your own teas, coffee mugs, etc., then there are companies which let you come-out with your own flavour of chips (Lays) or noodles (Maggie, Nestle) etc. E-bay and Amazon provide an option of customized product and services to their customers.
vii. Balancing Standardization and Customisation:
If customisation caters to the growing individual sensibilities, then standardization augurs good for efficiency. Companies are learning how to balance between the same. One of the companies which has done that wonderfully is Mc Donald’s that very much pioneered the entire concept of chaining fast-food outlets based on its ability to achieve custom-standardization, which very much refer to their ability to standardize the back-end (process) and customize the front-end (offerings). Hence in India you have Mc Aloo Tikki, Mc Paneer, etc.
viii. Recognizing Women as an Important Decision Maker and as New Aspirational Customer:
The kind of freedom, empowerment and expression that women have found and are continuously seeking makes them powerful new set of aspirational customers. Catering to such customers becomes a business imperative. Most companies are trying to innovate their products and services to suit their women customers.
ix. Uniform Quality Offering Across Globe:
Connected world has meant that quality awareness is uniform around the world. Companies are almost forced to offer similar quality products around the world.
HR Imperatives Driven by Cultural Context:
a. Decentralised Policies:
Empowered, multi-cultural workforce has necessitated the decentralisation of the policies. Companies are adapting to policies according to the different cultures, legality, working hours, e.g., US hourly, India Monthly, holiday policy.
b. Social Networking Platforms:
Engaging employees e.g., HLL intranet blog “Your Say” where employees can post comments, views on recent policies, company procedures, organization practices etc. Moreover they get the response within two consecutive working days for their respective posts.
c. Innovative Policies and Practices e.g., IBM, LG, Infosys and JW Marriot:
Innovative policies and practices for example IBM flexi time policies, LG bonus five times a year, Infosys-ESOP (Employees Stock Option Programme) JW Marriott- six days off per month.
d. Customized Policies e.g., Accenture:
Customized policies for e.g., Accenture’s compensation restructuring policies. Companies come up with policies that the employees can customize to suit their needs. Modification of variable pay.
e. Recognizing Women Workforce:
IBM’s Diversity workforce with a fixed percentage of women employee ratio. Mind Tree provides crèche facility for women with kids. HLL has job sharing facilities wherein women who have returned after the maternity leave can share their job with other co-workers as they are not allowed too much stress during that period. LG has global mandate to hire more women.
f. Uniform Value Sharing across Globe:
‘Uniform value sharing across globe’ Spirit of WIPRO lays down certain values which are to be followed uniformly throughout the globe and is not subject to change according to the countries and cultures.
g. Quick Changes in Roles:
Quick change in roles- due to emergence of aspirational workforce, Scope Intl (Backend Process of Standard Chartered) has adopted a policy of quick change in roles in every two to three years either vertically or horizontally.
h. Idea Sharing:
Aircel’s CEO and Head HR flies frequently to different locations to meet employees across the country. He holds town hall meetings to check the pulse of employees.
5. Factors Affecting Human Resource Management – Legal/Regulatory Factors Influencing New Age HRM
Business Imperatives Driven by Changed Legal/Regulatory Climate:
In light of the changes in the legal/regulatory environment businesses face the following imperatives:
a. Flexible in Corporate Governance and Expansion – As a result of globalization, businesses now have the opportunity to expand beyond their national boundaries and adapt to the type of regulations followed in that particular country.
b. Foresight of Legal Changes – For setting up any kind of business in other nations, the business shall be much aware about the legal/ regulatory aspects.
c. Employment Terms (Talent Philosophy) – Employee rights vary from country to country and it depends on the talent philosophy of the organization how they treat their employees.
d. Implementation of Laws – Only understanding the laws is not important, the degree to which they are implemented needs to be known.
e. Know Your Customer Rights – The businesses have to understand the rights that customers enjoy in a particular nation. However globally there is a surge in consumer rights and businesses must become cognizant of the same.
f. Leverage of Legal Rights – The degree to which the people of the country can leverage the use of their legal rights should be known and understood.
g. Transparency of Information – The kind of information that is required to be exhibited in one country as a legal right may not be the same for any other country.
Overall these business imperatives could be articulated as:
The change in legal frameworks regarding International Trade has led to increased freedom for countries to look beyond their own boundaries and form trade relations with each other. Liberalization and Privatization policies led to increased flexibility in the trade and labour laws, which in turn encouraged cross-boundary business.
For example- in India, pre-liberalization era mandated about 129 approvals for the initiation of an Import or Export business, whereas now the count of approvals required has come down to a reasonable and convenient number of just 25, for the same.
The structure of all legal frameworks, global as well as domestic, have undergone a transformation with the aim of making them more direct, organized and specific. This helps in not only covering loopholes, but also to make them easier to be followed.
The business processes too have gone through a transition making them more organised, better managed, cost-effective and more adaptable to the changing legal scenarios universally. For example- prior to 1995, India had about 18 different acts for regulating food standards and safety, which were disorganized and mostly ineffective, as they provided many loopholes amongst them.
But in 1995, the Food Safety Act came into being, which consolidated all these 18 acts under it, hence, providing a single window for all approvals as regulated by the Ministry of Food Processing. Again in 2006, Food Safety and Standards Act, 2006, (No. 34 of 2006) was enacted from 23 August 2006.
This act meant to consolidate the laws relating to food and to establish the Food Safety and Standards Authority of India for laying down science based standards for articles of foods. In 2011, Food Safety and Standards Rules were enacted (w.e.f. 5th August 2011) and later Food Safety and Standards Regulations, 2011 were enacted (w.e.f. 5th August 2011).
In a world which is getting smaller, preserving personal space and privacy of individuals is becoming a major concern. Countries around the world are trying to come up with laws to contend with this problem.
Universally applicable laws have ensured their uniformity and acceptance around the globe, hence making agreements and contracts safer.
i. For Nations:
The WTO has brought all the nations to an equal platform, irrespective of them being a Developed, Transition or Developing Economies. It has provided the Third World countries with the opportunity to indulge in trade practices with the more economically powerful nations of the world.
ii. For Organisations:
The legislation of any nation decrees all its laws to be equally applicable to all businesses within it. The various Trade and Labour laws are mandatory for organisations to be part of global trade.
iii. For Workers:
In India, the Labour laws provide for equal opportunity for all citizens, men as well as women, and the constitution endeavours to provide “equal pay for equal work” for both.
HR Imperatives Driven by Legal Environment:
The HR response in the face of changed legal/regulatory environment and the altered business scenario should be-
I. How to align the organizational strategy with the regulatory framework?
a. Aligning individual goals to organizational goals.
b. Take necessary steps required in order to sustain at that point of time.
II. How to be proactive measures to adapt to the dynamic legal/ regulatory environment?
In 1991 when economy was going through a critical phase, there was stagnation in the economy and government controls and protections were lifted.
III. How the top management should support the implementation of changes?
At the time when Tata Steel had to downsize, Dr. Irani, called up a meeting for the top officials and communicated to them the plan. He put forward an idea of “Internal Communications Campaign” through which they would get their employees into confidence by telling them the goals of the company and to have the line managers support them. They also stressed on the fact that don’t give fabricated figures to the employees, rather, have an open and transparent communication with them.
IV. How to get awareness about employee empowerment according to demographics?
As per the changing demographics there has been a vast change in the legal obligations which differ from one country to another country even though the organization is same.
V. How to ensure that the HR regulations in the organization are in complete accordance with the country specific legal laws?
As per the laws of Indian Industry, the textile division of the well-known Group has the following rule in place, The Company must give workers a day off for rest on Sunday. If in case of emergencies or urgent need workers are called to work on a Sunday, the company must give the workers a day off within the next three days [i.e., Wednesday at the latest]. Failure to abide by this will be viewed as a serious violation.
VI. How to simultaneously organize HR regulations of all the branches of the organization located in various countries?
This is a challenge for companies like HSBC bank, which has branches all over the world. The structure and regulations of each branch is based on a lead bank in respective regions. HSBC markets itself as “The World’s Local Bank”.
VII. How to manage HR strategies to address legal and security concerns in a country or region?
Facebook recently got into a controversy regarding the “auto-tagging” of photos through face-recognition technology. Many people especially in the U.S. voiced concerns of their privacy being intruded upon. The U.S. Congress passed an order directing the company to inform the users via e- mail about the new system and the option of opting or not opting for the feature being enabled on their accounts. EU is also looking into this issue.
6. Factors Affecting Human Resource Management – Technological Factors Influencing New Age HRM
The technological environment has perhaps undergone the greatest and fastest transformation world-wide. Technology is into everything and firms that have not been able to keep pace with the same have been forced to exit the business. Consider this for an example – EMI pioneered the innovation of the CT scanner in 1972.
Despite a strong market position in early years, by 1977, EMI was forced to exit the scanner business. Primarily, it was because of the company’s failure to establish source of competitive advantage and also its failure to build integrated market sensing, design, manufacturing, and delivery and service capability.
More than three decades later the scenario is even more competitive with respect to technology. The one who are thriving are those who have combined technology and hence innovation in their business processes and the ones who have failed to do so are either struggling or have closed-down.
Contextually, the changes in the technological environment can be captured as under:
Competing on Technological climate has changed drastically into a highly techno- technology has led competitive climate. Competing on technology has led to the creation of to the creation of knowledge-based organizations and has seen huge resources being allocated knowledge-based to creation, management and strategic use of the knowledge.
Today organizations competing on technology is not enough. There is a need to compete on technological applications which are directed towards client’s or customer’s specific needs. And there is a need to do that continuously. In short, it calls for the organizations to be innovative in whatever they do.
The need to be innovative has also led the organizations to think what it takes to become innovative in the first place.
The innovation pizza has four slices, which primarily tells us what an organization needs to be innovative:
Slice 1 – Freedom:
Organizations have to provide freedom to its employees to:
i. Think radically;
ii. Express and differ without fear;
iii. Experiment and to act.
Slice 2 – Develop:
Dedicated resource and time is required to develop:
i. Skill inventory,
ii. Expertise,
iii. Talent.
Slice 3 – Network:
Organization should allow its employees to network:
i. For mentoring & facilitation amongst themselves.
ii. With client/customers for idea.
Slice 4 – Commitment:
And finally strong unwavering commitment shall be required:
i. From the top;
ii. For planned resources; and
iii. To take risks (tolerate failures).
HR Imperatives Driven by Technological Context:
I. How to connect with business and organizational strategy?
Consider these two statements:
A. Based on Aon Hewitt’s research, more the 60% of HR’s time is transactional, administrative in nature. In addition, HR is often not included.
B. Up to 70 percent of a company’s market value can come from intangibles such as its human capital, its brand, and its culture.
These statements make it amply clear that although HR can contribute immensely in adding value to a company, its place is often obscure and non-strategic.
There is a need to connect with business and organizational strategy to:
i. Understanding true state of technology readiness.
ii. Align HR efforts with business goals.
iii. Build high performance workforce.
iv. Achieve high ROI (Return on Investment).
v. Transform HR from a cost-centre to an investment-centre.
‘Garage’ has tinker forums, science fairs, garage weeks etc. to encourage show-casing of various prototypes under development and hence infuse a sense of competition amongst various employee groups. The Garage pay offs have already started to come in the form of special apps for women, instant messaging conversation translator, Microsoft shuttered pioneer studios etc.
II. How to create non-threatening but accountable systems?
Technology is always leveraged by an innovation culture in the organization, which in turn is only possible when people have freedom to think radically and express the same; freedom to differ; freedom to experiment; freedom to act. Non-threatening but account-able systems always ‘pull’ people to –
A. Create,
B. Contribute, and
C. Captain.
Google is one such company that has been able to pull people to create by creating non-threatening yet accountable systems. Google has identified them as the rules of innovation at the company.
Some of them are:
Ideas Come from Everywhere:
Google has this great internal list where people post new ideas and everyone can go on and see them. It’s like a voting pool where one can say how good or bad you think an idea is. Those comments lead to new ideas.
A License to Pursue Your Dreams:
Google lets engineers spend 20% of their time working on whatever they want, and the company trusts that they’ll build interesting things. After September 11, one of Google’s researchers, Krishna Bharat, would go to 10 or 15 news sites each day looking for information about the case. And he thought, why don’t I write a program to do this?
So Krishna, who’s an expert in artificial intelligence, used a Web crawler to cluster articles. He later emailed it around the company. Some senior executives like Marissa Mayer, Google’s vice president of search products got the mail and they were like, ‘This isn’t just a cool little tool for Krishna.
We could add more sources and build this into a great product.’ That’s how Google News came about. Krishna did not intend to build a product, but he accidentally gave Google the idea for one.
Share as Much Information as You Can:
MOMA, the intranet of Google has so much information shared across the company that employees have insight into what’s happening with the business and what’s important. It also has people do things like Snippets.
Every Monday, all the employees write an email that has five to seven bullet points on what you did the previous week. Being a search company, Google takes all the emails and make a giant Web page and index them. It allows Google to share what it knows across the whole company, and it reduces duplication.
III. How to develop and replenish contemporary skill inventory?
There is a need to develop and replenish contemporary skill inventory in employees to:
A. Remain in a state of technology readiness always.
B. Create high-performance work systems.
C. Develop expertise that pervades organizational needs.
D. To out-wit the competition, by accelerating speed of development and execution.
Take for instance CISCO. Cisco Systems is one of the largest network companies in the world with annual revenues of over US$20 billion. Headquartered in the U.S.A., the company has 225 sales and support offices in 75 countries.
For years, its training programs were managed independently at each different unit, resulting in redundant and unequal programming. To streamline, expedite and improve the quality of the training programs, the Company developed the Cisco Learning Network (CLN).
CLN training contents are developed using multimedia technologies and stored in a centralized database. The employee selects either a full curriculum or individual modules and takes an assessment test.
E-learning programs can be provided in two ways:
(1) In scheduled delivery, at fixed time and place using three platforms: multicasts (videos that are sent over the network to desktops), virtual classrooms, and remote laboratories, or
(2) On-demand, for individuals who have particular needs using web-based on demand content, CD-ROM, and remote labs.
The CLN system promotes significant savings of time away from work – it was observed that CLN courses reduced the time that the sales-employees spent away from their customers by up to 40 percent.
IV. How to build entrepreneurial environment?
Amazon(dot)com CEO Jeff Bezos said that at Amazon the entrepreneurial mindset pervades the organization and he wants each and every employee to fulfill his/her responsibilities with an entrepreneurial perspective. “We have entrepreneurs at every level. Everyone must look for and find ways to do their work better than it’s ever been done before and to do that as often as possible.”
The entrepreneurial mindset means that every employee thinks himself or herself as an entrepreneur and does things the better next time, whenever he does that again. If a firm needs to have a technological edge, it has to transform itself into an innovation incubator and for that it is paramount to have an entrepreneurial mindset.
Take 3M for instance which has over 60000 products selling worldwide has survived on the mantra of ‘Grow and Divide’. They have encouraged and celebrated the spirit of entrepreneurship in the organization.
Then there is BMW which celebrates ‘most creative error of the month’ or there is a TATA that has something like ‘dare to try’. In both these initiatives those efforts of employees are celebrated that may have failed but in the process provided a great learning for the future.