HR Environment
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Human Resource Environment

HRM Environment is a unified, comprehensive
and integrated set of factors, elements or
forces which have positive or negative effects
on human resource functioning.
Human Resource Environment
Component of internal Environment
a) HRM scope: the opportunity or possibility to do or deal with something in HRM. It deals with the
following:
• Organizational
policies: Organizational policies on recruitment and
selection, training and development, compensation management, reward
management policies, retention policies etc.
 Organizational structure: It is the formal set of relationship between
authority and responsibility.
 Organizational
strategy: It is the sum total of the organization’s
actions intended to attain organizations goal.
 Organizational resources: human resource, physical resource, financial
resource, informational resource are the basic resource of the organization.
 Organizational culture: norms and values, vision, language and belief of organization
Human Resource Environment
b). Organizational activities
 Financing
activities: Accumulating and
providing funds for business activities
 Marketing activities: It is intended to create
market, create product value and the
organizational value.
 Research and development (R & D)
activities: These activities are directed at
innovation and development of product and
the process to enhance the quality and simplify
the production process.
COMPONENTS OF EXTERNAL ENVIRONMENT OF HRM
Component of External Environment
1. Specific environment
Shareholders like employees, shareholders, union, supplier
 Employees
 Employees unions
 Pressure groups: Environmentalist, Human Right Activists
 Competitors
 Suppliers
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 Customers
 Strategic allies: Two companies work together for mutual
benefits
 Regulator: labor department
 Government and court

COMPONENTS OF EXTERNAL ENVIRONMENT OF HRM

2. General environment
Political-legal forces
Socio-cultural forces
Economic forces
Labor market forces
Technological forces
1. Political Factor


These factors determine the extent to which a
government may influence the economy or a
certain industry.
For example: a government may impose
a new tax or duty due to which entire
revenue
generating
structures
of
organizations might change.
Political factors include Government
stability, Taxation policy, foreign trade
policy, social welfare policy which
influences human resource management.
2. Economic Factor

These factors are determinants of an
economy’s performance that directly impacts
a company and have resonating long term
effects.
For example: a rise in the inflation
rate of any economy would affect the way
companies’ price their products and services.
Adding to that, it would affect the purchasing
power of a consumer and change
demand/supply models for that economy
2. Economic Factor
Economic Factors refer to all the factors, which give
shape and form to economic activities. These factor
consist of
1. Economic system: Open market economy, state
owned economy and mixed economy. In open
market economy, more emphasis is given to private
sectors in business activities. In state owned
economy government directly involves in all the
economic activities of the nation. In mixed
economy, both state and private sector involve either
solely or on joint venture.
2. Economic Policies: Economic policies are the
guidelines adopted by the government for economic
prosperity of the nation. These policies consist of
industrial policy, commercial policy, monetary
policy, and fiscal policy etc.

2. Economic Factor
3. Economic conditions: Economic conditions
focus on economic strengths and weakness of the
nation in which organizations performs their
business. These involve per capita income,
economic growth rate, business cycle, inflation
and stages of economic development.
4. Capital market: The development of capital
market shows the shape of economic environment
of the nation. Capital market involves banks
including central bank, finance companies,
insurance, stock market etc.
3. Socio-Cultural Environment
The socio-cultural environment is
comprehensive since it includes the total
social forces within which an organization
operates. It involves tradition, social
values, beliefs, norms, attitudes, customs
and demographic composition of the
nation.
 Socio-cultural environment determines the
products, services and standard of conduct
that the society is likely to value.



The following are the common elements of sociocultural environment:
Demographic: Demography focuses on the
composition of population of the country. It
consists of size and distribution of population, age
groups, sex ratio and female, migration of people
etc.
Lifestyle: Lifestyle is the pattern and living
standard of the people. The change in level of
income, fashion, education, social interrelationship are the changed lifestyle which
forces people to change their attitude and
behavior.


Social values: Social values are the beliefs
and norms of the society. Different society
has different social values. It affects the
attitude towards organization and work
itself.
Social institution: Social institution involve
basic component of society like family,
social class etc.. The division of social
institutions changes the attitude and beliefs
of the people which also affect business of
organization.


Religion: Religion is the belief and trust that
groups of people have accepted since long
ago. Such religious beliefs also affects the
need and demand of the society.
Language: Language is the medium of
expressing views, ideas, knowledge,
experience etc. Generally, language
represents the tradition and culture of the
society, and it also affects the needs and
wants of the people.
4. Technological Environment

Technology is ever changing and is
growing rapidly in society and it has a
crucial impact on the success and
prosperity of business organizations. The
innovations of automation, hardware and
software
development,
information
system,
robotics,
internet
and
computerization has brought tremendous
change with regard to human resource
management.
5. Legal Environment
Legal Environment: Current legal status, process
of law formulation and implementation and
institutions involved.
Legal environment refers to the terms/conditions of the
place where you are conducting business. From the
business side of the issue, the legal environment generally
has three distinct characteristics:
◦ The domestic laws of your home country
◦ The domestic laws of each of your foreign markets
◦ International law in general.
For e.g.: Tax, Minimum salary policy, grade, bonus,
allowance etc.