Description of the module
External forces impact the business environment, and these influence the business operations in the process. The HR of any organization’s responsibility is to provide the best learning environment, promising approaches to developing the learning skills to grow the employees’ personal and professional skills by introducing innovative learning approaches.
As taken by HR, the initiatives help the employees in the organization’s open and informal environment to get motivated towards their work and realize their true potential.
This module enables the learners to identify and review the business and external contextual factors affecting organizations and assess these factors’ impacts on the HR function.
This module also examines HR’s role in strategy formulation and implementation. The module is designed to encourage learners to adopt a critical perspective of these contexts and to provide workable organizational and HR solutions to address them.
External factors impacting business and HR
Several factors affect day-to-day operations. This is seen in human resource management. Studying this field is essential because new regulations or rules may be passed and are required to take effect immediately the HR should be ready for these changes, not to feel the brunt.
Analysis tools help in planning business functions; they are SWOT analysis, PESTLE analysis, and Porter’s Five Forces analysis tools. Additionally, these tools help assess the external factors that affect the businesses and the functions. They are instrumental for organizations to gain insights to execute projects successfully.
PESTLE analysis refers to:
- Legal factors
- Social factors
- Economic factors
- Technological factors
- Environmental factors
Porter’s analysis refers to:
- Buyer Power
- Supplier Power
- Competitive Rivalry
- Threat of Substitution
- The threat of New Entry
A SWOT analysis looks at:
Forces that are currently shaping the HR agenda
HR should expect some changes, and this calls’ for them to develop appropriate ways to support an organization’s plan and functions; HR plans and activities should align with stakeholders’ plan and that of the business. Additionally, HR must consider stakeholders’ needs, such as employees, shareholders, and business managers, among others.
The high competition has affected how the HR department organizes itself and how it handles the business’s objectives. For instance, large public and private sectors mainly concentrate on revenue generation, and they have notable HR function that adopts similar styles as outlined in Ulrich Model(1998)
In a progressive changing business environment, Models used in the traditional business may not guarantee organizations’ continuity. To counter problems like globalization, climatic change, technological change, competition, demographic change, and social inequality, organizations need to focus beyond profit maximization and loss accounts’ bottom line.
Organizational success, i.e., cultural and structural change, will depend on how well the workers are managed. It is also important to note that change initiation can cause conflict, and that’s why HR is essential as they build the culture that embraces change.
This unit will help students gain knowledge and understand different strategies that help bring change effectively. Moreso, they will understand the procedures and activities they have to get involved in for HR functions’ smooth running.
Compare different tools for analyzing the business environment.
Business analysis models are valuable tools and techniques that can help you understand your organizational environment and think more strategically about your business. There are several generic strategies available, but some of these have high priority than others. These include:
- Strengths, Weakness, Opportunities, and Threats (SWOT)
- PESTLE analysis considers Political factors, Economic factors, Social factors, Legal factors, Technological factors, and environmental factors
- Porter’s Five Forces framework
Porter’s Five Forces frameworks check where the power lies. When the customers are more than the supply, the supplier can control the price ( Bargaining power of supplier). On the other hand, PESTLE’s concern is how different external factors may affect its competitive position.
However, the two analysis tools only consider the external factors different from SWOT analysis, which addresses external and internal factors.
This knowledge is essential to the learners as these tools will enable the organization to develop various issues that need to be taken care of.
Formulation and Execution of Strategies
This unit will help learners understand that the strategic management process is more than just a set of rules to follow. Human resource management is the bridge between a company’s HR and its goal, functions, and objectives, and it aims to:
- Advance in adjustability, creation, and competitive strategy.
- Develop a fit-for-purpose organizational culture.
- Improve business performance.
Formulating strategies is a concept where an organization determines its position, sets a goal, and devises methods to get there. This requires an organization to come up with clear goals, clear objectives and allow for some adjustment.
Corporate level strategy: This is a level where clear goals to be achieved are set. Is it growth, stability, or decrease?
Business level strategy: This is a level focus is on how you’re going to compete. Will it be through customer intimacy, product or service leadership, or the lowest total cost? What’s the differentiation based on?
Market level strategy: This strategy level puts more effort into how the business is going to grow. This is where it’s decided whether to follow:
- Market penetration strategy
- Market development strategy
- Product or service development strategy
- Diversification strategy
Business ethics and Accountability
HR managers can help ensure that organizations operate with due concern for fairness, integrity, and justice to reduce the likelihood of ethical conflicts arising and dealing with them.
HR can play a dual role in change management by initiating and leading the change and serving as a facilitator for changes that other leaders and departments created. But what happens when the HR department becomes the epicenter of transformation?
These kinds of transformations, such as moving to a shared services model, integrating with another HR function following a merger, or delivering new services to new clients, can be more challenging for human resource professionals to manage than other types of organizational changes.
In this approach, learners should promote their expertise as this will equally promote the organization’s business to the best level.
There are vast examples of planning tools that will help assess a business’s performance in the fluctuating environment and give the best strategies to ensure its continuous growth. Examples of these tools are:
- Benchmarking tool
- Lewin’s Model
- value chain model
These tools help improve performance by putting into practice best-demonstrated operations. Additionally, comparing an organization’s product to that of competitors helps learn and enhance strategies to perform best.
The Sources of business data used for HR planning purposes
When you use HR data, it can be legally and ethically challenging but precious, probably the most significant HR team’s asset. Why? When the information is used to improve decisions, the employees are happy, and also processes are optimized, which will add value to the business.
Completing this unit will equip the learner with information that clearly shows data sources in the business and how to relate mined data to evaluate its performance and how to use it to improve that business.
The main goal of this unit is to:
- Help learners understand the external factors that influence the HR agendas.
- Help learners understand different analysis tools, i.e., SWOT, Porter’s five, and PESTLE, among others.
- Help learners understand the role of HR and essential steps in the implementation of business strategies.
- Help learner embrace and conduct changes experienced in business
As we have seen, HR has an essential role in most parts of the organizational strategy. Mainly, HR offers valuable methods, clear understanding and possible solution that meets business and stakeholders needs.
After completing this course, the learners will have the knowledge and skill to run the business and manage changes within the business effectively.
Lastly, we recommend using PETLE’S tool to analyze external factors that affect the way business is conducted.