HUMAN RESOURCE

MANAGEMENT
Chapter-2 (ENVIRONMENTS OF HRM)

By
Adeba hundera
(Ass. professor)

Wollega University,
Nekemte, Ethiopia

1
 CONTENTS
What is Environment
Types of Environment
External Environmental Factors
Internal Environmental Factors
Models of HRM
 Matching Model
Guest Model
Harvard Model

2
 What is ENVIRONMENT?
The term 'environment' here refers to the
"totality of all factors which influence both
the organization and personnel sub-system“

TWO types:
1)EXTERNAL Environment
2)INTERNAL Environment

3
External Environment : external environment is
an environment which is also called as un
controllable environment. The elements of
this environment are as follows
 Political Environment
 Economical aspects/forces
 Socio Cultural Elements
 Technological Factors
 Legal Factors

4
Internal Environment : Which is also called as
controllable Environment. The elements of this
environment are as follows
 Organizational Mission
 Organizational Strategy/Objectives
 Organizational Structure
 Past Practices of the Organization
 Top Management Priorities

5
 THE EXTERNAL ENVIRONMENT
1)Laws and regulations
The government regulates and influences some aspects of personnel
policies more directly than others. The major areas of legislation
and regulation include:
• Equal employment opportunity and human rights legislation,
which indirectly affects recruitment, selection, evaluation, and
promotion directly, and employment planning, orientation, career
planning, training and development.
• Sex and age discrimination.
• Compensation regulation, which affects pay, hours of work,
unemployment, and similar conditions.
• Benefits regulation, which affects pension and retirement.
• Workers’ compensation and safety laws, which affect health and
safety.
• Labour relations laws and regulations, which affect the conduct of
collective bargaining.

6
 THE EXTERNAL ENVIRONMENT (Contd)
2)Economic forces
• Economic environment refers to all those economic
forces, which have a bearing on the HR functions. The
components of the economic environment are:-
• Growth strategy, Industrial production (productivity),
Agriculture,
• Population, National and per capita income,
• Money and capital markets,
• Suppliers, Competitors, Customers and Industrial
labour.
• Besides those above, the following components of the
economic environment (i.e. productivity, suppliers,
competitors, customers and industrial labour) are
highly relevant to HR activities.
7
 THE EXTERNAL ENVIRONMENT (Contd)
3)Customers
• Customers have their own influence on a company’s
personnel functions. Customers want high-quality
products at reasonable prices. So, everybody in the
organization must endeavour to offer products that give
satisfaction for the money customers pay.

4)Industrial labou/diversify
• The industrial labour is characterized by increasing
diversity. Workforce of any factory comprises people
from different countries. Within this diversity of national
origins, there is an even wider diversity of cultures,
religions, languages and dialects, educational
attainment, skills, values, ages, races, gender and other
differentiating variables.

8
 THE EXTERNAL ENVIRONMENT (Contd)
5)Geographic location
• The location of the organization influences the
kinds of people it hires and the HRM activities
it conducts.
For example,
• The work force in rural area might be more
willing to accept a bureaucratic organization
style. Recruiting and selection in rural areas
will be different in that there may be fewer
applicants or larger proportion of hireable
workers.
Geographic location, therefore, influences the
kinds of workers available to staff the
organization.
9
 THE EXTERNAL ENVIRONMENT (Contd)
6)Technological changes
• Technological change alters jobs, creates new
skills, makes occupations obsolete and revises
what employees need to learn and to be trained to
do.
• Sometimes new technologies require new job
designs. For example, work teams whose members
share responsibility for tasks may be more
appropriate than individual workers with separate
responsibilities.
So at the minimum, technological change creates
uncertainty. It may also create the need for new
ways to manage employees.
10
 THE EXTERNAL ENVIRONMENT (Contd)
7)Labour market conditions
• The labour market also directly affects HRM
programs.
• When there are more workers than jobs,
employers find recruiting costs minimal.
Employees apply readily, and selection is less
difficult; Work attitudes tend to be work-ethic
oriented.
• Disciplinary problems, absenteeism, and
turnover are likely to decrease, and equal
employment opportunity goals may be easier to
fill.
11
 THE EXTERNAL ENVIRONMENT (Contd)
8)Cultural Forces
Culture refers to the complex whole which includes
knowledge, belief, art, morals, laws, customs and
other capabilities and habits acquired by an
individual as a member of a society.
• In the first place, culture creates the type of people
who become members of an organization.
• the attitude of workers towards work is the result of
their cultural background. For instance, if the
culture of the society promotes work, then tasks will
be performed with interest.
12
 THE INTERNAL ENVIRONMENT
Likewise, the internal environment has too an impact on HR
activities.
1)Labour Unions
• A trade union may be understood as an association of
workers formed to protect their own individual interests
through collective bargaining.
• Unions differ just as people differ.
• There are cooperative unions and combative/aggressive
unions, just as there are sensitive organizations and
socially irresponsible organizations.
• The presence of a union directly affects most aspects of HR
activities - recruiting, selection, performance evaluation,
promotion, compensation, and benefits, among others.

13
 THE INTERNAL ENVIRONMENT (contd)
2)Goals
• The goals of organizations differ within and
between departments. All departments
probably have goals that include employee
satisfaction, survival, and adaptability to
change.
• People vs job performance concern
• The differences arise in the importance the
decision makers place on the different goals.
• In some organizations, profit is of such major
importance that other goals such as increased
employee satisfaction are not well developed.
14
 THE INTERNAL ENVIRONMENT (contd)
3)Organizational style
• Modern organization theory provides many
ways to organize. At one extreme is
bureaucratic approach. In this approach, the
organization usually centralizes decision-
making, designs specialized jobs,
departmentalizes by function, has standardized
policies, uses small spans of control, has clearly
defined objectives, and encourages
communication through the chain of command.
• On the other hand, the participative approach
uses decentralized decision-making.
• These two styles reflect fundamentally different
managerial philosophies about the nature of
people, 15
 THE INTERNAL ENVIRONMENT (contd
4)Nature of the task
• Many experts believe that the task to be
performed is one of the two most vital
factors affecting HRM.
• There are perhaps unlimited similarities and
differences among jobs that attract or repel
workers and influence the meaning of work
for them.
• The nature of the task affects recruitment
and selection, since employees will be more
satisfied and productive if their preferences
are met.
16
 THE INTERNAL ENVIRONMENT (contd
5)Work Group

• Groups play a major role in the life of an individual. Once a person joins
an organization, his or her experiences are largely influenced by a work
group.
• A work group consists of two or more people who consider themselves a
group who are interdependent with one another for achievement of a
purpose,
• If the work group is effective and works with management, the manager’s
job is easier, and objectives are more likely to be achieved.
• Therefore, work groups are directly related to the success of HRM
activities.

17