FACTORS AFFECTING HUMAN RESOURCE MANAGEMENT

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 There are two categories of macro environmental factors and micro environmental factors. Macro factors are all those which lie outside an organisation. Micro factors are all those factors which lie within the organization. In this blog we are going to look at the macro environmental factors that affect the human resource management

 

APPLICATION OF PESTEL ANALYSIS



Matovic (2020) defines PESTEL as a framework which comprehensive analysis of the environment in which organization operates. PESTEL is used to analyses the macro environment of an organisation.This can be assessed by breaking it down into what is happening at Political, Economic, Social , Technological, Ecological & Legal levels. Organisations use PESTEL to identify trends & to gain competitive advantage.


Figure 01 : PEST Analyst

Markwell, 2009

Political Factors

Stability of the government & political environment, levels of bureaucracy and corruption, Social and employment legislation, tax policies & tariffs are some political factors (Markwell, 2009). Chitescu & Lixandru (2016), in their article states that political activity forcing a certain pace and particular direction of development. In Sri Lanken context, political influence is very high in recruitments in public organisations. Many are recruited with & without the required skills & qualifications to public organisations mainly due to the influence of political leaders. Resulting in an increase in operational cost when compared to the productivity of that organization resulting in massive losses.

Sri Lanka Railway department is a good example, where there are many recruited & for a task that can be done by two workers, ten will be allocated & all of them will be paid for it including over time.


Economic Factors

The current economic crisis in Sri Lanka has created a massive impact on the human resource management. Due to the increasing inflation rates & the continuous rise in the cost of living, has led to a significant increase in brain drain. This has resulted in local companies having to spend lot on recruitment.

 

Social Factors

Matovic (2020), Refers to demographic structure, religious influence, national culture, level of education, structure of education as social factors. According to Islam religion, working for a finance companies or jobs related with interest is haram. A finance company after head hunting finds a perfect candidates but unfortunately if he/she is a Muslim, there is a high probability that he’she will not be willing to join a finance company even if the company provides an attractive remuneration package.

 

Technological Factors

Technological factors consider the rate of technological innovation and development that could affect human resource management e recruitment.

 

Ecological Factors

Ecological Factors are the environmental factors that affect human resource management. The COVID 19 pandemic is a good example for ecological factor. During the pandemic, companies had to follow different approaches in the recruitment process, Such as, E recruitment & online screening. Even the interviews were held online.

 

Legal Factors

Legal factors are: laws, regulatory agencies, requirements, regulations, standards, labor regulation, which governs the Human resource management.

 

APPLICATION OF PORTER'S FIVE FORCES

 

In 1979 Michael E Porter of Harvard Business School came up with a simple frame work in order to analyse the competitive position of an organisation. Through porters five forces theory you are able to asses & evaluate the competitive strengths & the position of the oraganisation in attracting new employees.

 


 

Figure 2 : Porter's Five Forces Model

Karmaker (2019)

 

 

The theory has five competitive forces that shape every industry and helps determine an industry's weaknesses and strengths. The five forces are as follows;

01. Industry Rivalry

02. Bargaining power of the customers

03. Bargaining power of the customers

04. Threat of new entrants - If a new player can enter the market

05. Threat of substitutes – If close substitute products exist in a market.

 

Industry rivalry

This can be referred to the competitiveness of the employees. When the employees are with the same specialization, with core competencies, the rivalry level will be high.

Bargaining Power of Suppliers

Bruijl (2018) states that power of suppliers can affect the profitability by increasing the prices of products & services. When applying the theory to Human resource management, the suppliers will be the recruitment agencies, head hunters, universities as well as competitors. The negotiation power of the suppliers will be high when the jobs are specialized in a specific area, and when the number of candidates is low. This will result in companies incurring huge costs in recruiting.


Bargaining Power of Customers



Anastasiu & Dorin (2020) refers to the organisations that search for the skilled employees as customers. Unless there are only few players in the industry, organisations’ power against the employees will be very low. However, the Brand image of the company/reputation will play their part in attracting skilled workers at a cheaper rate.

Compared to other professions, there is a very small number of investment advisors registered under the Colombo Stock Exchange. Hence, the Bargaining power of a qualified & experienced investment advisor will be higher compared to an investment advisor who completed his Certificate in Capital Markets Programme in Sri Lanka

 

Threat of New Entrants:

Porter (1985) states that new entrants to an industry will enter the market with a new capacity which the existing competitors lack. It will acquire market share which will enable them to put pressure on the prices. The graduates, Migrants & employees can be considered as new entrants in HRM.  Anastasiu & Dorin (2020) says that ‘the impact will be significant in niche sectors, where their competencies are essential’.

 

Migrants with skill willing to work for lower remuneration packages will be a threat for the existing candidates in a country, as the bargaining power of them will decries drastically

 

Threat of Substitute Products and Services

Substitute is a product or service that can replace the existing one & fulfills the same purpose says (Bruijl, 2018), New technology, systems & artificial intelligence can be considered as substitutes. However, the competitiveness of the substitutes will be depend on the below three factors;

01. Switching cost

02. Price of the substitute

03. If the substitutes have a sati factionary level of quality & performance

Robots & artificial intelligence is a good example for substitute products. Many organisatons especially in foreign destinations now tent to use robots & AI in replacing certain work which was carried out by humans. Which will result in companies searching  for more skilled & specialized workers,  “Café Robot” a restaurant in Sri Lanka using robots to get the customer’s food requirement & to deliver the food from kitchen to the customers.

 

Looking at all five aspects. Rivalry between the candidates, the power of the recruitement companies & the candidates due to their skill level, the competition & rivalry between the recruiters, the new candidates joining the work force as well as the substitute produces has a significant impact on the recruitment & selection in an organisation.

 

List of References

 

·         Anastasiu,L , Gavri,O & Maier,D 2020, Is Human Capital Ready for Change? A Strategic Approach Adapting Porter’s Five Forces to Human Resource,Research Gate, Viewed on 27 November 2022, https://www.researchgate.net/publication/339940254_Is_Human_Capital_Ready_for_Change_A_Strategic_Approach_Adapting_Porters_Five_Forces_to_Human_Resources

·         Abdulnour, M 2015, Spa Ceylon, Viewed 30 November 2022,  https://prezi.com/hgzgdxjkyfy4/spa-ceylon/

 

·         Balagobei, S  & Bandara, DRNKK 2022, ‘Impact of macroeconomic variables on stock market performance: evidence from Sri Lanka’, Wayamba Journal of Management, Vol. 13,  Issue I

 

 

·         Bruijl,GHT 2018, The relevance of Porter’s Five forces in today’s innovative and changing business environment, Biz Change Strategy Consulting Ltd

 

·         Chitescua, RI & Lixandrub, M 2016, The influence of the social, political and economic impact on human resources, as a determinant factor of sustainable development,  Elsevier B.V.

 

·         Karmaker, AK 2019, Optimization of hybrid renewable energy based electric vehicle charging station, Research gate, Viewed on 27 November 2022, Available at: https://www.researchgate.net/publication/337888557

 

·         Markwell,S 2019, The impact of political, economic, socio-cultural, environmental and other external influences,Faculty of Public Health, 03 December 2022, https://www.healthknowledge.org.uk/public-health-textbook/organisation-management/5b-understanding-ofs/assessing-impact-external-influences

 

·         Matovic,IM 2020, PESTEL Analysis of External Environment as a Success Factor of Startup Business, Consciens conference on science and society,PP.96-102

 

 

·         Shefa, SBZ 2017, Effectiveness of Recruitment and Selection Process of Aarong -A Study on Project Staff. Viewd on 27 November 2022, http://dspace.bracu.ac.bd/xmlui/bitstream/handle/10361/8442/12104083_BBA.pdf

 

 

 

 

 

 

 

 

 

 

Comments

  1. Nadula NishadiDecember 7, 2022 at 8:08 PM

    Great post Layanjalie. As such, human resource management includes administrative activities that are associated with planning, recruitment, selection, orientation, training, appraisal motivation and remuneration (Jerome, N., 2013). Researchers around the world concur on the importance of human resources to an organization's success. They acknowledge that the most precious resource in the company is its human resources (Ghani et al., 2022).

    ReplyDelete
    Replies
    1. Layanjalie FernandoDecember 9, 2022 at 10:53 AM

      Agree on your comment Nadula, Gamage (2014) states that productivity, product quality, Innovation, and Customer Satisfaction are key indicators of operational performance of an organization. For a company to be innovative, creativity of the employees makes a huge impact. Creativity is to look into a situation or problem from a new angle & come up with a new solution or plan.

      Delete
  2. Puthra GRDecember 8, 2022 at 11:00 AM

    An interesting post Layanjalie.Factors that affect human resource management
    (HRM) activities were divided into two, as internal and external elements Accordingly, it was achieved that,
    companies take these internal and external elements into consideration in a high or at least moderate level in
    general. Moreover, it was found that, “priorities of top management”, “legislations/regulations”, “changes in
    national economy”, and “qualities of employees” are the top factors affecting HRM activities Kurtulus Yılmaz Genç.(2014)

    ReplyDelete
    Replies
    1. Layanjalie FernandoDecember 9, 2022 at 10:55 AM

      Thank you for the comment Puthra. Klepić, Mabić & Madžar (2020) states that, creativity and knowledge are the main challenges of modern business. Hence, companies should be looking for people with more brain power & creativity rather than hiring workers at a cheap cost.

      Delete
  3. RahmanDecember 9, 2022 at 9:32 AM

    Engaging Post, As much as all those factors impact the HRM as a whole but the legal and labor law are one of major concern of HRM in the current era.

    ReplyDelete
    Replies
    1. Layanjalie FernandoDecember 9, 2022 at 11:02 AM

      Yes Rahman, Its the Legal factors of the PESTEL analysis

      Delete
    2. RahmanDecember 14, 2022 at 7:08 AM

      Engaging Post, As much as all those factors impact the HRM as a whole but the legal and labor law are one of major concern of HRM in the current era. (Massey, K.B, Campbell, N, 2013)

      Delete
  4. W.A.Nimesha MadushaniDecember 10, 2022 at 10:04 AM

    According to Orpen (1997) better the relationship between mentors and mentees in the formal mentoring program, the more mentees are motivated to work hard and committed to their organization. Likewise, Malina and Selto (2001) conducted a case study in one corporate setting by using balance score card (BSC) method and found out that organizational outcomes would be greater if employees are provided with positive motivation

    ReplyDelete
  5. Wasana PereraDecember 15, 2022 at 1:32 AM

    Good article Layanjalee, Employee recruitment and retention is one of the best indicators of success of an organization (Carver, 2020). There are major challenges that many employers and HR teams struggle with when it comes to retention and recruitment. In the big picture of business success, employee retention of skilled talent is more important.

    ReplyDelete
  6. SEOAugust 24, 2023 at 12:25 AM

    Nice explanation on recruitment factors! Staffingcraft Staffing & Recruitment ERP software automates recruitment process. streamlining processes, leveraging automation, and providing powerful analytics, these solutions enable recruiters to focus on strategic decision-making and building relationships with candidates. Embracing these software solutions can significantly enhance recruitment efficiency, reduce time-to-hire, and improve the overall quality of hires

    ReplyDelete

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