Each of these external factors separately or in combination can influence the HRM function of any organisation.
The changes in the external environment of an enterprise have a profound impact on its personnel. These changes include technological obsolescence, cultural and social changes, policies of the government etc.
The external environment consists of those factors that affect an organisation’s human resources from outside the organisation.
1. Technological Innovation:
Rapid technological changes and innovations are taking place all over the world. As a result of these technological changes, technical personnel are increasingly required. Hence, procurement of technically skilled employees is necessary to match the changing job requirements.
2. Economic Factors:
Economic conditions influence financial “health” of the organisation. Under favourable economic conditions, expansion of existing programmes and creation of new programmes are very likely.
With less favourable or deteriorating conditions, contraction or cancellation of some programmes may be necessary.
Thus, a number of economic factors affect human resources management of an organisation by influencing its operations.
3. Employee’s Organisations:
Employee’s organisations have mustered strength that is parallel to the growth of industrialism.
Labour unions seek to bargain with management over the terms and conditions of employment for their members.
As a consequence, most HR activities are subject to joint decision making when employees are represented by a union.
4. Labour Markets:
In labour markets, organisations seek employees (demand for labour) and individuals offer their availability to organisations (supply of labour).
Labour supply and demand have implications for all activities, but particularly for compensation and external staffing.
Moreover, they are generally not subject to organisation control, thereby creating potential turbulence and uncertainty for HR management.
5. Changing Demand of Employers:
Organisations also undergo changes and consequently their demands for employees will also change.
The technological revolution and neck-to-neck marketing competition amongst most of the organisations demand that the existing employees adapt to the every changing work situations and learn new skills, knowledge etc., to cope with the new changes.
6. Legal Factors:
One of the most important external factors that affect HRM is the legal environment. The management cannot manage the human resources unilaterally.
It is now compelled to manage its employees according to the legislation enacted by the government at the centre and the states.
The important legislation enacted in India affecting HRM is-Factories Act, Trade Unions Act, Workmen’s Compensation Act and The Payment of Wages Act, The Minimum Wages Act, Payment of Gratuity Act and The Maternity Benefit Act.
The government believes that it is the custodian of industrial and economic activities and hence legislation.
7. Human Resource in the Country:
The structure, values and the level of education of human resources in the country influence the HRM function of any organisation. The influence of manpower in the country can be studied through:
(a) Change in the structure of employment with the entry of workforce with different backgrounds.
(b) The changes that have taken place in the structure of the workforce over the years and that have led to the emergence of new values in the organisations.
(c) Increased level of formal education has led to the changes in attitude of employees. The well-educated employees always challenge and question the management’s decisions and want a voice in the company’s affairs that affect their interest.
Thus, many environmental factors affect the performance of specific tasks of HRM. Changes in the internal and external environmental factors complicate the job both of line and personnel managers in overseeing the contributions of human resources.
Considering the complexities and the challenges in the HRM now and in near future, management has to develop sophisticated techniques and competent people to manage personnel on sound lines.