Why it is necessary for HR practitioners to monitor the external macro Essay

Why it is necessary for HR practitioners to monitor the external macro environment - Essay Example The business environment is made up of many such factors that can affect the business in the shot and long term both. Therefore it is important to know and study about these factors and evaluate the changes and their impact on the organization. The external environment is made up of the all the forces present outside the organization that affects or has the ability to affect business’s ability to achieve its objectives. The external business environment is broadly categorized as the micro and macro external environment, the paper focuses on the external macro environment therefore we will discuss about that in detail. External Macro Environment: The external macro environment is made up of factors which are beyond the control of the organization. These include the PESTEL (political, economic, social, environmental and legal) factors. These factors are interlinked and cannot be distinct from each other easily. The effects these factors have on the businesses vary business to bu siness and from time to time. The effect of changes in the macro environment over the business is indirect, that is it affects the business through some changes. However the change in business doesn’t affect the environment in return. ... However the changes in the environment that affects the business occur constantly and they are difficult to predict. (BATES. 2005; KROON. 1995) When we speak about environment and its relationship with human resource management it refers to the combination of factors that influence the working and execution of the HR department. Any function of the organization, as mentioned earlier, cannot work in isolation and are interdependent on a lot of factors internally within the organization and outside the organization too, therefore for smooth operations and decision making it is essential to take into account of these factors which can influence HR polices, procedures and practices. The best framework to study the external macro environment, its components and how they affect the functioning of HR department is by the PESTEL analysis. I will further discuss the possible factors that lie in the PESTEL analysis and influences the HR function. Economic Factors: Economic environment is compo sed of many economic factors like populations, fluctuation in economic and trade cycle, national income, labour market conditions, interest rates and globalization of economy. This is the most important of all the factors prevailing in the environment that affects an organization the most including the HRM function. This could be made evident by the scenario for e.g. when company’s performance in well due to the boom in the trade cycle, it will attract more business and due to increase in business it may need to hire more labour from the market and it might face difficulty in hiring the required labour from the market. To serve the purpose the organization may be willing to pay extra compensations