Chapter Two
Human Resource Management Environment
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After completing this part, participants will be
able to understand:
1. HRM Environment
2. The External Environment
3. The Internal Environment
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The Context of HRM
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Utility of Analysing the
Environment
• To become proactive and
not remain reactive to the
environment.
• Reactive strategy are
useful in stable and
competition less
environment.
• Today’s environment is
characterized by intense
competition and change
where proactive steps are
vital to survive.

1. Human Resource Management Environment
Human Resource management as a system is affected by
several factors including external and internal environment.
• External Environment are those factors that are outside
the organization, they are largely uncontrollable and
provide opportunities and threats (OT) to the
organization. The analysis of external environment is
some times called PEST analysis
• Internal environment are factors within the organization,
they constitute the strengths and weaknesses (SW) of the
organization.
• The analysis of the internal and external environment
together is called SWOT analysis. 4

External Environment
1. Political/legal
2. Ethical
3. Economic
4. Social
5. Technological
Internal Environment
1. Vision, mission,
2. Organizational styles,
leadership
3. Organizational Structure
4. Nature of the task
5. Work groups
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2.The External Environment
1. Political/Legal
Governments make different laws that require human
resource management to respect. Laws include:
 Equal employment opportunities,
 Affirmative actions
 Compensation and benefits
 Safety and health,
 Hours of work, holidays,
 Industrial relations etc. 6

2.The External Environment
1. The Legal Environment of HRM
Equal Employment Opportunity
Discrimination
 Forbids discrimination in all areas of the employment
relationship.
 Employment based on age, sex, disabilities, national
origins (ethnicity), religion, compensation (payment on
similar jobs) etc.
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2.The External Environment
1. The Legal Environment of HRM
Equal Employment Opportunity
Affirmative Action
 Governments encourage Affirmative action: the
commitment of employers to proactively seek out, assist in
developing, and hire employees from groups that are
underrepresented in the organization.
 Various executive orders, require employers to develop
affirmative action plans and engage in affirmative action in
hiring women, the disabled and disadvantaged groups. 8

2.The External Environment
1. The Legal Environment of HRM
Compensation and Benefits
Fair Labor Standards Acts
 Sets a minimum wage and requires overtime pay for
work in excess of 40 hours per week. For non exempt
employees
 Salaried professional, executive, and administrative
employees are exempt employees who are not paid
overtime provisions
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2.The External Environment
1. The Legal Environment of HRM
Compensation and Benefits
Employee Retirement Income Security
 Sets standards for pension plan management and
provides federal insurance if pension plans go bankrupt.
Family and Medical Leave Act
 Requires employers to provide up to 12
weeks of unpaid leave for family and
medical emergencies. 10

2.The External Environment
1. The Legal Environment of HRM
Health and Safety
Occupational Safety and Health Act (OSHA) requires
that employers:
 Provide a place of employment that is free from hazards
that may cause death or serious physical harm.
 Obey the safety and health standards established by
Occupational Safety and Health Administration
(OSHA). 11

2.The External Environment
1. The Legal Environment of HRM
Labor Relations
Sets rules on how employers and employees
relationship is governed
 Joining union
 Establishing union
 Bargaining in good faith etc.
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2.The External Environment
2. Ethical HR practices:
 HRM practices must result in the greatest good for
the largest number of people
 Employment practices must respect basic human
rights of privacy, due process, consent, and free
speech
 Managers must treat employees and customers
equitably and fairly
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2.The External Environment
3. Economic Environment:
 Economic growth, industrial production, agriculture,
population, national and per capita income, business
cycle , inflation, competition, money & Capital
market etc...
4. Socio-Cultural Environment:
 such as demographic factors, culture, religion, belief
on work etc.
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2.The External Environment
5. The Technology Challenge:
Advances in technology have:
 Changed how and where we work
 Resulted in high-performance work systems
 Increased the use of teams to improve customer service and
product quality
 Changed skill requirements
 Increased working partnerships
 Led to changes in company structure and reporting relationships.
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2.The External Environment
5. The Technology Challenge (Con’t):
Advances in technology have:
 increased the use and availability of Human Resource
Information Systems (HRIS)
 increased the use and availability of e-HRM
 increased the competitiveness in high performance work systems
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2.The External Environment
The Global Challenge:
 To survive companies must compete in international
markets
 Be prepared to deal with the global economy.
 Offshoring – exporting of jobs from developed countries to
less developed countries
 On shoring – exporting jobs to rural parts of the United
States
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3.The Internal Environment
• Vision mission objectives and strategies - HRM require to
align its activities to these requirements.
• Styles of Management - the styles of management whether it
is autocratic, democratic or laissez fair.
• Nature of the task - whether the job is attractive or repulsive
• Organizational Structure - Number of positions and
relationships.
• The work group - Whether the work group is supportive.
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Thank You
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