Environmental Context of HRM

8/12/2019 Environmental Context of HRM

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HUMANRESOURCEMANAGEMENT

Environmental Context

By Geetha RaviShankar

Lecturer RJSIMS


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N E W E C O N O M I C P O L I C Y ( N E P ) A N D C H A N G I N G

B U S I N E S S

Objectives of NEP-

To pull the country out of economic crisis.

To accelerate the rate of growth

Salient Features of NEP

Liberalization

Privatization

Globalization


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Reasons for NEP

Fall in prices

Fall in foreign exchange reserves

Poor performance of PSUs

First Gulf war caused spike in oil prices which caused a major

BoP crisis in India in India

India asked for $1.8 billion to bailout loan but IMF in turn

demanded reforms. As a result NEP was inaugurated by PM P.V.Narasimha Rao under

guidance of FM Manmohan Singh in 1991

Reasons for NEP

Fiscal deficit was 5.4% of GDP which rose up to 8.4 in 1990-91.

In 1991 interest liabilities rose up to 36.4% of the government

expenditure.

Country was moving towards debt trap

There was-mounting adverse Balance of Payment situation


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LIBERALIZATION

Liberalisation is a neweconomic policy by whichseveral restraints on the

Indian Economy likelicensing, price control,

financial control,etc.that ledto corruption, undue delay

and inefficiency werereduced.


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ECONOMICREFORMSUNDERLIBERALISATION

Tax reforms

Efforts to ensureVAT reforms inall states

Foreignexchangereforms

Foreign tradepolicy reforms

Role of RBI shifted froma regulator to a facilitator

FIIs were allowed toinvest in India

Domestic andinternational banksemerged

Abolition of licensing

De-reservation ofproduction areas

Expansion ofproduction quantity

Freedom of importingcapital goods

Industrial

sectorreforms

Financial

sectorreforms

Fiscal

reforms

External

sectorreforms


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PRIVITISATION

Privitisation is a process of involving the private

sector in the ownership or operations of a state

owned enterprise

The ownership of PSUs is being sold-off gradually

to private entrepreneurs.

PrivitisationOutright sale of Government

Enterprises

Withdrawal of GovernmentOwnership and Management

from Mixed enterprises


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GAINSFROMPRIVITISATION

100%

Commitment

and efficiency

Competition

Up gradation &

Modernisation

Self Interestsupersedessocialinterest

Promotes

ConsumerSovereignty &

Diversificationof

Production

Weakersectionsuffers

Evil effects of

Privitisation


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GLOBALISATION The increasing internationalization of trade, particularly financial product

transactions. The integration of economic and capital markets throughoutthe world.

Bringing the world closer through better world-wide communication,transport and trade links. The creation of a "Global Village", where

members of the same industry from around the world interact on a largescale.

Unrestricted flow of goods and services, technology and expertise amongdifferent countries of the world

Process associated with increasing openess,growing economicinterdependence deepening economic integration in the world economy


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IMPACTOFGLOBALISATIONONHR

i. Democratization and pressures for more labour rights incountries where such rights have been restricted.

ii. More liberalization and deregulation .

iii. Competition for investment

iv. Increased economic interdependence of nations.v. Capital, information and technology flows are on the

increase .

vi. Internationalization of enterprises and creation of mergersand alliances .

vii. Customer-driven (and not product-driven) global and localmarkets, but at the same time segmented markets .

viii. Competitiveness increasingly based (not on low wages ornatural resources) on knowledge/innovation, skills andproductivity.


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POSITIVEIMPACTOFNEP

Economic activities have picked up and GDP has shown

a significant increase.

It has stimulated industrial production

Increase in Government revenues and decrease in fiscal

deficits

Substantial increase in forex reserves

It has checked inflation and flow of goods and services

has increased

Consumer sovereignty has widened.

India has been recognized and emerging super power.

Monopoly replaced by competition.

Flow of foreign investment has increased.


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NEGATIVEIMPACTOFNEP

Agriculture has been totally neglected

Growth process concentrated to urban areas

Consumerism has increased

Lopsided growth process Might result in economic colonialism

Cultural erosion


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BUSINESSENVIRONMENT

Business environment includes al l those

internal and external factors wh ich d irect ly o r

indirect ly inf luence business.

Internal EnvironmentProduction

Finance

MarketingHuman Resource

R&D

OrganizationalStructure

Management

&

LeadershipStyles


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EXTERNALENVIRONMENTOFBUSINESS

ExternalMicro Environment

(All Stakeholders)

Shareholders

Creditors

CompetitorsSuppliers

Customers

Marketing Intermediaries,etc.

Macro Environment

(STEPIN)

Socio-Cultural factors

Technological factors

Economic Factors

Political Factors

International factors

Natural Factors


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SOCIO-CULTURALENVIRONMENT

Attitude of the people towards-

work

Wealth

Family Marriage

Religion

Education

Ethics

Human Relations

Social responsibilities


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CULTURALENVIRONMENT

Culture is-

Prescriptive

SociallyShared

Learned

Subjective

Cumulative


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TECHNOLOGICALENVIRONMENT

Technology-

Reduces the cost of production

Reduces the size of inventories.

Reduces delivery time Reduces incidents of lock-outs and lost sales

Reduces rush orders

Responds to market changes quickly

Cuts down over production

Reduces unnecessary movement of forwarding and back-tracking Reduces paper work and wasteful process

Facilitates planning production level accurately

Avoids physical movement of employees, suppliers and customers


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TECHNOLOGICALENVIRONMENT

Availability and developments in technology can

have a powerful influence on global business

strategy:

e.g.

Access to bandwidth

PC ownership

Technology and salesprocessing payments and sales

Compatibility of technologies in Business Management

accounting systems, language differences, etc.


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ECONOMICENVIRONMENT

All these factors need to be considered in any

global business venture:

Tax System

Economic Systems-(Capitalistic, Mixed or Communistic)

Investment Considerations and Allowances Sophistication of Financial Marketsease with which capital can be

moved and raised

Economic Growth & Economic Transition

Inflation

Monetary and Fiscal Policiesinterest rates, tax regimes,

government aid

Balance of Payments

Exchange Rates


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ECONOMICTRANSITIONCANBEACHIEVEDBY-

Liberalisation of economic activities.

Optimum utilization of resources

Dispensing with licensing system and regulated

markets Macro economic stabilization through market-

oriented instruments

Privitisation

Establishment of legal frame-work to secureproperty rights and transparent market regulations


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Economic Union

Free trade area

Free tradeamong members

Common External Trade

Policy

Customs

Union

Factor

Mobility

Common

Market

Harmonization of Economic

Policies

Economic

Union

Regional Economic Trading Blocs

Free Trade Area (FTA)

Customs Union (CU)

Common Markets

Economic Union

Political Union


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POLITICALENVIRONMENT

The form of

Government(Democracy,Totalitarian,etc.)

Political rights and Civil liberties of Citizens

(free & fair elections, minority rights,equality,libertyand justice)

Political stability

Political risks-

Confiscation-nationalization of property withoutcompensation.

Expropriation-nationalization of property with

compensation.


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POLITICALENVIRONMENT(CONTD.)

Nationalization- It refers to the shifting of ownership

of private property to the government.

Domestication- foreign business firms relinquish

control and ownership in favour of domestic

investors.

General Instability risks -These are risks due to

social, political religious unrest in the host country.

Operation risk - These are due to the imposition of

controls on foreign business operation by the host

Government.


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INDICATORSOFPOLITICALINSTABILITY

Corruption

Social Unrest

(Communal conflicts, ethnic conflicts,etc.)

The Negative Attitudes of Nationals( Exploitation,colonialism,repatriation,

to foreigners,etc.)

Policies of the Host Government


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LEGALENVIRONMENT

Kind s of Legal Systems

Common Law-

(Traditions ,customs,culture,precedent andassuage)

Civil Law-Detailed set of laws

( It includes contracts and agreements)

Theocratic Law-based on religious precepts likeHindu law,muslim law,etc.


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PROPERTYRIGHTS

Property right refers to usage of others resources for

a price.

Methods of violation of property rights- Private Action-(theft, blackmailing and piracy)

Public Action-Collecting income from individuals

by the Government or by politicians

Labour Legislations- They are mostly enactedbased on the resolutions of IMF.

(Minimum wages Act,stipulations regarding work

conditions)


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IMPLICATIONSOFSTRUCTURALREFORMSON

HRM ININDIA

1.Impact on Job Design& Analysis

Introduction of BPRE(Business Process Re-Engineering)

(team work,multi-skills,flexible work,work-sharing)

Team-design is taking precedence over job-designing

Transformation through computerization and automation

Broad-banding replaced narrow jobs

Retrenchment strategies

Training & redeployment

Industry free from unionism


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Impact on Human Resource Planning

Outsourcing certain operations

Shifts in organization Structure(flat structures wereadopted)

Team-designing replaced job-designing

Internal skill mobility planning

Government stopped insisting on choosingemployees from disadvantaged community afterglobalization in order to attract FDIs

Trade union insistence on internal candidaturedisappeared post-globalization.

Eliminated interference of Trade Unions andGovernment on Human Resource Planning


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Impact on Employment Practices

Reduction in the gap b/w national business environment andinternational business environment

Mobility of labour between countries

Development of modern HR recruitment techniques likeemployee-referrals,outsourcing,e-recruitment,walk-in,consult-

in,etc. For achievement of competitive strategies by emphasizing on

soft skills of employees like aptitude,attitude,emotional testing,etc.

Elimination of trade union/Government/political interference

for recruitment Reduction in supervision and enhancement in productivity

Selecting candidates with multi-skills rather than withexpertise in a single area.

Empowerment of employees

Reduction in cost due to on-lineinterviews and selection


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Impact on Performance Appraisal(PA)

PA ratings used for employee development(through identification of employee weaknesses)rather than for their punishment

Evolution of modern PA techniques like- the 360

degree PA system where all-round feed back istaken.

Developing performance measures to assess thevalue addition of HR

Alignment of PA systems with strategies

Creation of internal performance consultants

Shift in PA systems has eliminated the need forunionism in organizations


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Impact on HRD(Human Resource

Development)

Downsizing of organisation structure

Building Organization structure based on the characteristics

of organization structure

Job enrichment at all levels

Creating autonomous jobs Performance planning and development

Employee empowerment

Encouraging team-work

Culture building and competence building Motivation ,confidence and commitment building

Structuring business groups

Providing training and retraining

Developing reward system leading to HRD


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IMPACTONHRDCONTD.

Introducing innovative techniques for organizational

development

Developing the skill of adoptability

Encouraging proactive learning

Developing value system centered around

competition

To develop programmes to satisfy the social needs

of employees


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Impact on Salaries and Benefits

Higher Salaries and Benefits for employees

Salaries based on employee performance levels.

Individual bargaining taking precedence over

collective bargaining.

Salaries fixed on the basis of skill,talent and

commitment of the workers.


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Managing Workforce Diversity

Coping with ethnic diversities

Diversity due to age,religion,etc.

Diversity due to physical capabilities

Cultural diversity Geographical diversity

Cross national diversity

International diversity


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Response of management to structural

adjustments

Change in Organization Structure

Globalization has replaced

functional,geographical,matrix organization

structures

by

flat,teambased,strategic,empowered,flexible,decent

ralized structures.

Employee participation encouraged in management

activities

Companies aim at acquiring competitive advantage.


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Response of management to structural

adjustments(Contd.)

Employee empowerment.

Performance based payment and compensation.

Few rules.

Humanistic principles replaced mechanisticprinciples.

Individual bargaining is replaced by collective

bargaining.

More fringe benefits given to employees Employee motivation is assuming significance.


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Response of workers to structural changes

Employees started preferring individual negotiations

to Collective Bargaining

Employees prefer to participate in management

activities and decision making

Individual grievance redressal assumed

significance over industrial disputes

Attrition rate is increasing since employees shift

jobs for higher compensation and better benefits

Productive efficiency of workforce is increasing

Workers are becoming more versatile and multi-

skilled

They have become more adaptive and flexible to

changes


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Response of Trade Unions to structural

changes

Trade Unions are decaying slowly

Insistence on internal candidature is not there

Individual Bargaining is Replacing Collective

Bargaining

Individual grievance redressal is replacing Industrial

Conflicts

Trade Union Membership is declining

Unions size is also declining after globalization.

Environmental Context of HRM

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