External Factors

External Factors

• supply of labour (international, national, regional, local, long-term

trends, short-term trends);
• labour costs;
• workforce skills;
• government policy;
• labour market competition;
• changing nature of work; employee expectations eg full-time, part-
time, permanent, temporary, casual work;
• impact of automation; demand for products and services
 Supply of Labour
• Both demand and supply for labor is heterogeneous
• In other words where different firms require different competencies
from each other and for different roles in the organisation, and where
the supply of potential labour comprises individuals with different
competencies
• The demand for manpower is influenced by corporate strategies and
objectives, the environment and the way that staff are utilised within
the business.
• The supply of manpower is projected from current employees (via
calculations about expected leavers, retirements, promotions, etc.) and
from the availability of the required skills in the labour market.
• Anticipated demand and supply are then reconciled by considering a
range of options, and plans to achieve a feasible balance are designed.
• There is a need for organisations to integrate the process of planning for
numbers and skills of employees; employee behaviour and
organisational culture; organisation design and the make-up of
individual jobs; and formal and informal systems.
 Current and projected employee numbers and skills
(employee supply)
• To gain current supply the following factors may be analysed either
singly or in combination:
• number of employees classified by function, department, occupation
job title, skills, qualifications, training, age, length of service,
performance appraisal results.
• Forecasting employee supply is concerned with predicting how the
current supply of employees will change, primarily how many will
leave, be internally promoted or transferred.
• These changes are forecast by analysing what has happened in the
past, in terms of staff retention and/or movement, and projecting this
into the future to see what would happen if the same trends
continued.
• Analyses fall broadly into two categories: analyses of staff leaving,
and analyses of internal movements.
 Responding to Labour Market Trends

• In the field of employee resourcing, the environment is concerned

with the labour market, the pool of available talent in which
employers compete to recruit and subsequently retain staff.

• Demographic developments
• The overall population is increasing, despite falling birth rates,
because of lengthening life expectancy and substantial net
immigration (Blanchflower et al. 2007).
• The number of people who are economically active is increasing
largely because of women spending a greater proportion of their
lives in paid work than has been the case historically. Over the
longer term, however, the proportion of the population that is of
working age is likely to shrink in comparison with the total
population as more and more people live longer after reaching
retirement age.
 Responding to Labour Market Trends
• Diversity
• Increased female participation in the workforce has been one of the most
significant social trends over recent decades.
• In 1980 the employment rate for women of working age was 59 per cent, while
that for men has declined somewhat.
• More women with young children have opted to work while more men have
taken early retirement.
• As a result, in the workplaces, where women are heavily outnumbered by men
and an increase in the number where men are outnumbered by women.
• In order to attract and retain the best employees it is necessary to take account
of the needs of dual-career families. (parental leave, the right to time off for
family emergencies, and the right to request flexible working, etc.)
• There is a heightened need for awareness of the possibility of discrimination,
the perception of inequity (staff turnover rates to increase, gain a poor
reputation in its labour markets), required to pay more serious attention to the
issues of sexual and racial harassment in a workplace.
 Responding to Labour Market Trends

• Skills and qualifications

• Major development in the labour market is the changing

occupational structure, leading to a greater demand for skilled staff.

• While technical skills are not required for all the new jobs, social
skills are necessary, as is the ability to work effectively without
close supervision.

• The annual Labour Turnover Survey for 2006 reported that 82 per
cent of employers had had problems filling vacancies, mainly due to
a lack of required specialist skills and/or experience.
 Analyzing Labour Market

• There are several different ways in which labour markets vary.

• Geographical differences

• Tight versus loose

• Occupational structure

• Generational differences
 Geographical Differences
• For most jobs in most organisations the relevant labour market is local.
• Pay rates and career opportunities are not so great as to attract people from
outside the district in which the job is based.
• The market consists of people living in the ‘travel to work area’, meaning
those who are able to commute within a reasonable period of time.
• In determining rates of pay and designing recruitment campaigns there is a
need to compare activities with those of competitors in the local labour
market and to respond accordingly.
• Skills shortages may be relieved by increases in the local population or as a
result of rival firms contracting.
• New roads and improved public transport can increase the population in the
travel to work area, with implications for recruitment budgets and the
extent to which retention initiatives are necessary.
• The relevant labour market is national or even international.
• Different approaches to recruitment are necessary and there is a need to
keep a close eye on what a far larger number of rival employers are doing
to compete for staff.
 Tight Versus Loose

• A tight labour market is hard to recruit and retain staff.

• Where the labour market is loose, there are few problems finding
people of the required caliber.
• Labour market conditions of this type clearly vary over time.
• The higher the rate of unemployment in an area, the looser the labour
market will be.
• However, some labour markets always remain tight whatever the
economic conditions simply because there are insufficient numbers of
people willing or able to apply for the jobs concerned.
• The more intelligent organisations took the opportunity afforded by
favourable labour market conditions to seek out people with the
capacity to innovate and who would develop their roles proactively.
• All available recruitment channels were used, leading to the
development of a richly diverse and creative workforce.
 Occupational Structure
• Labour markets also differ according to established behavioural norms among
different occupational groups.
• A useful model developed by Mahoney (1989) identifies three distinct types of
occupational structure: craft, organisation career and unstructured.
• In craft-oriented labour markets, people are more committed over the long term to
their profession or occupation than they are to the organisation for which they work.
• In order to develop a career they perceive that it is necessary for them to move from
employer to employer, building up a portfolio of experience on which to draw.
• Remaining in one organisation for too long is believed to damage or at least to slow
down career prospects. Examples include teaching, where there is often a stronger
loyalty to the profession as a whole than towards the employing institution.
• By contrast, an organisation-career occupation is one in which progress is primarily
made by climbing a promotion ladder within an organisation.
• The unstructured market, consists of lower-skilled jobs for which little training is
necessary. Opportunities for professional advancement are few, leading to a
situation where people move in and out of jobs for reasons which are not primarily
career related.
 Generational Differences

• Within the constraints of age discrimination law, employee resourcing

practices should also be adapted to take account of variations in the age
profile of those whom the organisation is seeking to employ.
• While it is clearly wrong to assert that everyone of a certain age shares
the same attitudes and characteristics, significant if broad differences
between the generations can be identified.
• Sparrow and Cooper (2003), in their review of recent research in this
area, argue that there are good reasons for believing that the workforce
of the future (i.e. made up of young people currently in full-time
education) will have decidedly different ‘work values’ from those of the
current workforce.
• Because the shared experiences which shape the attitudes and
expectations of each generation are different.
• Evidence suggests that future employees will be less trusting of
organisations, more inclined to switch jobs, and more prepared to
relocate, and indeed emigrate, than is the case today.
 Flexible Resourcing Choices

• Understanding the dynamics of the organisational environment is

only one part of taking a strategic approach to employee resourcing.

• One set of key choices concerns the extent to which the organisation
can aspire to flexibility and in what ways this can be achieved.

• Three types of flexibility are identified

• numerical flexibility,
• temporal flexibility and
• Functional flexibility.
 Numerical Flexibility

• Numerical flexibility allows the organisation to respond quickly to

the environment in terms of the numbers of people employed.
• This is achieved by using alternatives to traditional full-time,
permanent employees.
• The use, for example, of short-term contract staff, staff with rolling
contracts, staff on short-term, government-supported training
schemes, outworkers, and so on, enables the organisation to reduce
or expand the workforce quickly and cheaply.

• Atkinson has described the way in which firms may develop

flexibility in their approach to employment
Atkinson’s model of the flexible firm
 Numerical Flexibility

• In this analysis, the flexible firm has a variety of ways of meeting the
need for human resources.
• First, core employees, who form the primary labour market.
• They are highly regarded by the employer, well paid and involved in
those activities that are unique to the firm or give it a distinctive
character.
• These employees have improved career prospects and offer the type of
flexibility to the employer that is so prized in the skilled craftworker
who does not adhere rigidly to customary protective working practices.
• Two peripheral groups: first, those who have skills that are needed but
not specific to the particular firm, like typing and word processing. The
strategy for these posts is to rely on the external labour market to a
much greater extent, to specify a narrow range of tasks without career
prospects, so that the employee has a job but not a career.
 Numerical Flexibility

• The second peripheral group is made up of those enjoying even less

security, as they have contracts of employment that are limited,
either to a short-term or to a part-time attachment.

• There may also be a few job sharers and many participants on

government training schemes find themselves in this category.

• An alternative or additional means towards this flexibility is to

contract out the work that has to be done, either by employing
temporary personnel from agencies or by subcontracting the entire
operation.
 Temporal Flexibility

• Temporal flexibility concerns varying the pattern of hours worked in

order to respond to business demands and employee needs.
• Moves away from the 9–5, 38-hour week include the use of annual
hours contracts, increased use of part-time work, job sharing and
flexible working hours.
• For example, an organisation subject to peaks and troughs of
demand (such as an ice cream manufacturer) could use annual hours
contracts so that more employee hours are available at peak periods
and less are used when business is slow.
• Longer opening hours in retailing and the growth of the leisure
sector mean that many more people now work in the evening (17 per
cent) and at night (6 per cent) than used to be the case.
• The proportion of jobs that are part time also continues to rise, while
the length of the working week for higher-paid full-time workers has
increased by three hours on average during the past decade.
 Functional Flexibility

• ‘Functional flexibility’ refers to a process in which employees gain

the capacity to undertake a variety of tasks rather than specialising
in just one area.

• The primary purpose of functional flexibility initiatives is to deploy

human resources more efficiently.

• It should mean that employees are kept busy throughout their

working day and that absence is more easily covered than in a
workplace with rigidly defined demarcation between jobs.
 Pressure for Change
• There are enormous pressures for change upon organizations, which
can be found in the business environment: globalization, customer
demands for improved quality, technology innovations, demographic
and social change.
• Among the pressures for change which impact as external factors on
the fit, general economic and demographic changes will be most
important, but also that there are political pressures
• One way for classify these factors is through a PESTEL analysis
(Political, Economic, Social, Technological, Environment and Legal
pressures for change).
 Labour Turnover
• A well-known problem in organizations is the tendency for
administrative and supporting staffs to grow disproportionately to the
relatively small number of operational staff.
• One of the commonest factors is unforeseen wastage.
• Management upon labour turnover cannot always control or forecast.
• The most significant source of loss is through voluntary wastage, i.e.
when employees leave of their own accord.
• In very large organizations it may also be necessary to include transfers
or promotion of staff across divisions, departments or branches in these
calculations.
• Traditional formula calculation of Labour turnover (wastage)
 External Factors
• There are external factors that also need to be taken into account when the
availability of human resources is being considered
• Categorized as macro- (national) or micro- (local) influences
• At the macro level the commonly significant factors are:
1 The intervention by the State in the field of employment as a user and
protector of the labour force in the form of employment legislation,
regional development schemes, and governmental and related agencies.
2 National trends affecting the working population such as, for example:
(a) the higher percentage of older people
(b) the percentage of people pursuing courses of higher education, and the
types of degree or diploma courses
(c) the variety of contractual arrangements available (part time, job sharing,
etc.) is a reflection of the need for part time and flexible working
arrangements.
3 International recruitment possibilities (e.g. the recruitmentof nurses for
hospitals in the UK from the Philippines and from mainland European
countries).
 External Factors

• The important factors at micro level are:

1 The nature of the local population: numbers, growth or decrease,
reserves of skills, availability of part-time labour, etc.
2 The level of unemployment and its location.
3 The competition from other employers.
4 Costs of labour, local premiums, and the ease of travel to the locations.
5 The degree of development of the area, accessibility and transport
facilities.
6 Plans of central and local government and other organizations that may
significantly affect the area.
7 The reputation of the organization, and how this is sustained.
• The possible influences of these factors can never be easily assessed.
• Those responsible for planning should be aware of possible effects and
should take them into account when making human resource plans.
 The Planning Stage

• The planning stage involves:

• matching the forecasts for supply and demand
• identifying key areas essential to the achievement of objectives
• making plans to minimize the effects of possible shortages or
excesses of staffing
• considering whether the best use is currently being made of the
organization’s human resources.