HRM and the Business Environment

Many practitioners and academics have neglected HRM's environmental context, preferring to concentrate on technical detail. This is consistent with criticisms of traditional personnel management for its narrow focus on functional or 'micro' matters such as recruitment. In fairness, however, it must be recognised that personnel managers have always required a detailed knowledge of employment legislation, together with an understanding of industrial tribunals and trade union organization. Nevertheless, this represents a restricted selection from the wide range of environmental factors impacting on people management.

Often exponents of HRM have been no better than traditional personnel managers in this respect. Kochan and Dyer (1995: 343) argue that despite the obsession with strategy, HRM theories have a fundamental weakness: 'a myopic viewpoint which fails to look beyond the boundary of the firm'. Without the ability or the interest to locate their activities in a wider environmental setting, human resource practitioners can lose contact with the 'bleeding edge' of organizational survival. To counter short-sightedness and parochialism, HR managers must widen their perspectives beyond their own organizations (Beardwell and Holden, 1994: 613). In contrast to colleagues in marketing, production and finance, people managers seem less prepared to function in a competitive world.

This chapter addresses this wider perspective and introduces a number of fundamental issues which are developed further in later chapters, for example:

*   What is the connection between education and skill levels and national success?

*   To what extent is the nature of people management determined by prevailing
political ideology and national culture?

*   Is HRM simply a managerial reaction to the spread of market economies
throughout the world?

*   Is there a contradiction between HRM's long-term emphasis and the short-term priorities of the stock market?

We observed in the previous chapter that the essence of HRM lies in the competitive advantage to be gained from making the most of an organization's human resources. However, it is obvious that we are constrained by the availability of suitable people - a factor which is heavily dependent on environmental variables. As we shall see, they include:

-   the implications of world and national economic conditions for business growth; 
-   the effect of inflation on the perceived value of wages;
-   the traditions of local business culture;
-   the particular nature of national employment markets.

In effect, therefore, these variables have a 'macro' effect on the utilization of human resources. Additionally, in this chapter we consider other effects caused by the activities of external stakeholders, such as:

-   competitors' utilization and demand for human resources; 
-   multinational organizations and strategic alliances leading to restructuring or integration on a global basis;
-   economic and legislative actions by governments;
-   resistance or cooperation from trade unions;
-   pressure on senior managers to cut costs and maximise shareholder value.

We begin the chapter with an examination of situational factors at the international and national levels.

Excerpt from chapter 2  - Human Resource Management in a Business Context, International Thomson Business Press. Copyright A. J. Price - this excerpt may be copied for personal use only and must be credited to the author if quoted in any text.