4 Most Potent External Factors Affecting HRM

Shefali Vasave | January 25, 2022 | 3150 views

The Human Resources department is always at the forefront of change. It needs to maintain a balance between old and new, be agile enough to adapt quickly, and still deliver on its core functions of managing people. A process where a broad demographic of people come together can get chaotic at times.

In addition, businesses are faced with external factors that affect HR management every day. These factors pose unseen challenges that can create a hurdle in the smooth sailing of day-to-day HR operations.

These external factors can be categorized into two parts: macro factors and micro factors. Macro elements are related to the organization's environment, while micro factors affecting HRM are related to individual employees.

The macro factors affecting human resources planning can be classified into economic, technological, and social/political. They each impact human resource management by changing the skill sets needed for different positions or by changing how people perceive their jobs or careers. In addition, technologies like AI, robotics, and even wearable devices will change the way humans work in all industries.


How Do the Economic Climates Influence HR Policies?

Economic climates have a significant impact on the human resource management process. For example, when the economy is booming, employees are likely to be more motivated to go above and beyond to maintain or increase their salaries. As a result, employers are more likely to offer incentives for good performance. However, when the economy is in a recession, many employers may not afford these incentives due to a lack of funds.

One example is the labor market. The labor market is for the supply and demand for labor. Employers and the have human resources department to offer competitive wages and benefits to attract employees in a highly competitive labor market. In a less competitive labor market, employers have the opportunity to provide lower wages and benefits because their employees are less likely to leave for a better chance.


What is the Impact of Legal Policies on Human Resources Management?

The impact of legal policies on HR management is significant. They are necessary to protect the company and its employees. They are also the framework around which workplace conduct is built. Legal policies help ensure that employees are protected in the workplace and that the company is protected against potential lawsuits.

In light of this, HR professionals must have access to legal policies and be aware of the implications these policies may have on their organization's ability to conduct business. It is also vital that employees understand these policies and know what they can and cannot do.


How Do Workforce Demographics Affect HR?

Workforce demographics are changing. The future labor force will be composed of a diverse group with different backgrounds, ethnicity, cultures, and languages. It is not just about age groups but also about generational gaps. For example, the millennials are now the largest generation of workers in America.

The population is aging and getting older, which means more individuals are retiring from employment. Hence, fewer employed people will be working to support the retirees as time goes by. As a result, there have been various economic impacts globally on pensions and welfare systems for older generations and increased pressure on current working populations to support themselves without children or other dependents to care for them in their old age.


How Do New Technologies Affect Human Resources Management?

New technologies affect HR management in many ways. For instance, the Internet has made it possible for companies to hire more people remotely. This is especially crucial during the current times when offices are off-limits due to restrictions. New technologies also impact HR management by making it possible for anyone to access job listings anywhere in the world.

For instance, Experian, a well-known consumer credit reporting company, reduced their employee attrition by 2-3% over a year and saved them over $8,000,000. This was achieved by simply deploying an AI algorithm that made use of employee data.

In addition, technology has helped HR managers do their job more efficiently. For example, the software can automate tasks like recruitment, screening candidates, and even pre-employment testing. HR managers could use digital tools for making decisions or gathering information from different sources. However, this also means that HR’s responsibilities and the human resources management process are reduced due to automation, causing downsizing.

“Bringing data-driven personalization to recognition at mass helps employees to be better connected to the value they provide.”

- ZsuzsannaFerenczi, Chief Marketing Officer at Tradler.


Conclusion: Can Internal HR Systems Control the Effects of External Factors on HR?

As the HR industry's importance grows, it is experiencing increased competition. HR professionals must deal with external factors such as mergers and acquisitions, changing work cultures and technologies, and constant pressure to deliver results. However, one cannot always control these external factors. The key to success lies in how HR teams manage and navigate them.

To conclude, internal HR systems can only control the effects of external factors on the human resources management process if they are adequately equipped to address those problems. Various strategies for HR departments have emerged over the years in response to these external factors. For example, HR departments can either go "agile" by focusing on flexibility and employee engagement or "lean" by reducing time and effort on HR functions such as recruitment and training.

Frequently Asked Questions


What are the factors affecting HRM?

The factors that influence human resource management are many and varied. Some of these include the structure of the organization, the organization's culture, and the industry in which the organization operates. In addition, several legal regulations impact HRM.


How can HRM professionals deal with external factors?

One of the most challenging tasks in the human resources management process in dealing with the organization's external stakeholders. However, you can manage these external factors by building a solid relationship with them that will also help in boosting the company's brand value.

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