External Macro Environment - Essay Example

External macro environment This refers to the major external factors, which influences an organization on how it makes its decisions. The external macroeconomic environment of a business is not within the range of business control, thus making these factors uncontrollable by the business (Adams, 1990 p21). The external macro environment affects the strategies that a business seeks to formulate and implement, in that it determines the performance of the business in its market or industry. There are several macroeconomic factors that affect a business. They include the economic, the legal, political, demographic, social, and technological factors. These factors influences a business through causing some major influences on it like competition, changing the interest rates payable by a business on loans and other debts that it, owes, changes in the cultural tastes and preferences of the society, as well as a change in the government regulations, regarding the conduct of such businesses (Porter, 1998 p33). Thus, the external macro environment of a business refers to all the political, social, economic and the technological events, occurrences and trends, which impacts on a business or its market. These factors affect the business indirectly, but the business can only respond to these factors through adopting changes and strategies that will be favorable for its operation, amidst these factors. Therefore, the decision making of a business has to rely on such factors, since they highly determine the success or failure of a business. However, the macro environment creates both favorable and unfavorable environment for the business to operate on, thus a business has to take advantage of the favorable ones, while strategizing on how to handle the negative influences of this environment. There are various ways in which these external environment factors affect a business and consequently its HR function. Owing to the changes in the business environment that requires that the business costs must be reduced to the lowest possible level, so that the profits earned by the business can reach the expected targets, the HR function of any business has to strategies appropriately towards lowering such costs (Kendon, 190 p13). Notable of these factors that have a great impact on the HR function of a business are the technological and the social factors. Under the social factors, there are such elements as the educational levels, the diversity of the work place employees as well as religion influences. On the technological front, there are elements such as technological changes, improved knowledge and communication channels, and the moral factors (Adams, 1990 p28). There are major changes that have occurred in the HR function, within organizations in the recent past years. These changes are geared towards the decentralization of the HR function within organizations to create a less centralized HR department (Porter, 1998 p45). As a result, the HR functions have been shared within the organization to include other segments and departments of the organization, and thus change the concentration of all the HR activities from the HR department to the other functional department within an organization. This sharing of the HR functions have gone a long way in reducing the costs associated with the depart within organizations, in that the manpower required in this department as well as other tools and equipment has been reduced, by having such functions being undertaken in other segments of the organization (Kendon, 190 p22). The advancement in technology has made this transfer of HR functions to other departments and organizational segments possible. Recent social changes have also created several challenges to the HR functions, forcing it to be integrated into the business strategies, to overcome such challenges. The changes that have occurred in the HR function within the last 10 years include, shared services, where, those working under the shared services segment of the organization undertake various HR activities, thus reducing the need for a centralized HR department. The segments serves the interest of the HR functions through the disbursement of relevant information sought by customer, which would otherwise have been the responsibility of the HR department through the intranets and the call centers (Adams, 1990 p32). This has necessitated the change of the HR recruitment function from focusing on the possession of knowledge and skills in HRM by prospective employees, to possession of good interpersonal and customer service knowledge and skills. This has gone a long way in reducing the staff requirement for the HR function within organizations. Thus, the changes in technology, as one of the external macro environments has affected the recruitment function of the HR, through making it possible for customers to get information and advises through intranets and call center (Porter, 1998 p47). The social change as an element of the external macro element, have influenced the HR function reporting system, where some of the employees, who would be required to report to the senior HR managers have been required to report to their line managers. This initiative serves to ensure that the bulk of work and functional activities undertaken in the HR department is reduced. This way, the work force and other resource needs for the department are highly reduced (Kendon, 190 p31). This is in line with the business strategies that a business needs to implement so as to reduce the costs associated with the department. The line managers are allowed to undertake some HR functions such as performance appraisal and reward system for the employees, grievances and conflict resolution as well as employee coaching and motivation (Schuler, 1992 p8). However, for the line managers to be effective in this area, they need to be assisted to fine-tune their HR skill, so that they can address the needs of the employees effectively. This serves to reduce the burden borne by the HR department, and consequently reduce the organizational costs incurred by the department. Therefore, there has developed over the years, distinctive approaches to managing the human resources in organizations, all meant to ensure that this department remains as effective and efficient as it can possibly become in incurring costs. Some of these changes, as they fall under the social external factors include the change in educational levels. Due to the modernization aspects of society, education has become one of the core elements that every individual in the society is pursuing (Porter, 1998 p3358). With such levels of education in the society growing higher, then organizations needs to device ways of motivating their employees, to seek more knowledge, through pursuing higher education, which has been made even more accessible by the growth in technology over the years. Education has emerged as one of the external social macro environment, by which the management and the work force of an organization is judged by the customers, collaborators as well as other stakeholders, forcing the organizations to require that their staffs attains certain levels of education, before they qualify for certain positions. This has influenced the recruitment, training, and development functions of the HR within an organization, through having it required to make plans and strategies to have the labor force in the organization achieve the target education level for the organization (Adams, 1990 p39). With increased educational levels for the workers in an organization, then, freedom at the workplace is highly demanded, while the pay needs to be increased to match the advance in education. This serves as a basis for the employees to quit the organization and seek for others, which will match their educational advancement, in case the mother organization does not act to this effect. Thus, the HR function of any organization needs to plan appropriately for the incorporation of educational advancement within its established reward system. Gender balance and equity is yet another external social macro environment that affects an organizations HR function. In the last ten years, there has been a great change in the social policies that focuses on the creation of a workforce that is gender balanced, where both female and male employees are incorporated into each department and segment of an organization equally, more so at the leadership levels (Adams, 1990 p43). This aspect of social change, has served to change the recruitment functions of the HR within an organization, in that, not only is the department meant to seek for qualified and able employees to join the organization, but also required to create a gender-balanced work force. This has resulted to having some positions and roles remain reserved for women, even though there could have been men who would have qualified better and vice versa. This aspect of affirmative action has completely changed the recruitment approach of organizations, shifting it from the focus on prospective employees’ knowledge and skills to entail their gender (Kendon, 190 p36). Though such a social policy change is welcome in that it serves to ensure that both the female and the male are represented in organizations, serving to create that aspect of equality, it can undermine the performance of an organization. The requirement that certain percentage of the positions within an organization ought to be held by a given gender can result to the neglect of the requisite knowledge, skills, and experience required in filling such positions, thus affecting the ability of such individuals to effectively deliver as per the organizations expectation (Porter, 1998 p69). With the change in the mix or organizational workforce, then the value system of the organization changes as well. This way, such an external macro environment serves to change the organizational culture and its core values. Over the last ten years, there has been a great concern over the health issues of an organization workforce (Schuler, 1992 p27). Such issues as the health and safety of the work place have been granted a big attention, requiring that an organization must operate at the highest levels of organizational safety. Thus, in planning for the labor requirement of an organization, the HR function of such organizations have to put into consideration the safety measures that will be adhered to, so that its work force remains safe. Thus, the HR function is hindered from creating such employee positions, as would threaten their health conditions. This, as an external macro environment of an organization makes the costs incurrence of such organizations increase, as the organization has to equip its work force with the relevant health and safety equipment and apparatus. More to this, there has been a change in the issues regarding the disabled in the society, where they are required to be considered in all aspects of an organization. As such, organizations are required to equip the work place with facilities and equipments that will favor the disabled and make their life in the work place worthwhile (Adams, 1990 p46). Thus, in planning its work force needs, the HR function of an organization is required to ensure such facilities and equipment is catered for. Consequently, health and safety issues have served as external social macro environment, which influences the strategies and the decision making of an organization, making the HR function of an organization expand its focus regarding employee planning and welfare. The great emphasis on human dignity, as experienced in the last decade underlines the need for the organization to plan effectively for the needs of the less fortunate in the society. Employee motivation and reward system is another of external social macro environment that has gained a great focus in the last ten years. The ways in which employees in the work place can be motivated and rewarded to ensure that they perform well as per the expectation of the organization, has become one of the strategies that any organization needs to incorporate within its objectives and strategies (Adams, 1990 p50). Various studies undertaken in the last decade has shown that the performance of an employee, which determines the success of an organization as whole is directly related to the level of employee motivation. Therefore, the motivation of the employees has emerged as the core focus of organizations within the last decade, requiring that the HR function plans appropriately for the appropriate motivation and reward system that an organization should have in place, to ensure that its employees are always satisfied and excited about their work place (Porter, 1998 p74). This gives them the morale to give their duties and roles all their efforts, thus ensuring they deliver in the best way possible. Technology is another external macro environment that has greatly impacted on the HR function within an organization. Great technological innovations and advances have been witnessed in the past decade, which has affected both the organization managers and the employees (Adams, 1990 p49). This innovations and technological changes has made it possible for the work force to access more and diverse information, increase their communication channels and access to other employment opportunities, thus making the HR function one of the greatly affected department of many organizations. This has had a great impact on how employees remain in the organization or the job market, before they shift to indulge in other areas of employment or to opportunities that create self-employment. With such challenges facing the HR functions of an organization, then a need to plan on how to recruit and sustain employees within an organization, ensuring that the organization acquires quality workforce, has been created (Kendon, 190 p41). The development in medical technology that has been witnessed in the last decade also affected the HR function in organizations, making the need for retirement ages to be raised, as many people attains their retirement ages when they are still strong and capable of delivering in their line of duties. Thus, the organizational policies regarding the medical and pension schemes has been forced to change. This has affected the overall organizational planning and strategies, to accommodate such changes, as were deemed necessary. The other impact created by the technological advancements over the last decade is the reduction in the cost of obtaining and dissemination information (Porter, 1998 p82). Consequently, the labor force requirement for organizations had to be leaned, since most of the task that could be performed by several employees became possible to be performed by a single machine. As a result, the HR functions in many organizations had to plan for the layoffs of some of their employees, an aspect that served to create conflicts and confusion within organizations, regarding which employees are to be laid off and such basis that should be used to effect the layoffs. Determining which employees to eliminate in an organization, and which positions and roles are to be merged are some of the tough decisions that the HR function in many organizations have been forced to deal with (Adams, 1990 p53). The changes in technology have also forced the HR function to plan for the issues of ergonomics, since the increased interaction of the employees with machines requires safety measures. Further, the advancement in technology and the increased innovations have created an avenue through which employees can use their time entertaining themselves with the technological devices and services, at the expense of undertaking their duties. This serves to reduce the performance of the employees and thus the organizational performance. Thus, the external technological and social macro environment has provided the HR function with such challenges that it needs to address, thus altering the whole strategy and decision making of the HR function, within an organization. Works Cited Adams, K. (1990). Externalization vs. specialization: What is happening to personnel? Human Resource Management Journal. 20-54. Kendon, A. (1990). Conducting Interaction: Patterns of Behavior in Focused Encounters. Cambridge: Cambridge University Press.12-57. Porter, M. (1998). Competitive strategy: techniques for analyzing industries and competitors. New York: Free Press. 30-96. Schuler, R.S. (1992). Strategic human resources management linking the people with the strategic needs of the business. Organizational Dynamics. 1-32. Read More