The environment furnishes the macro context and the organization is the micro-unit. The external environment is comprised of those factors which affect an organizationâ€™s human resources from outside the organization. Important among them are: economic, social, political, Governmental and legal, technological, manpower in the country, tradition and culture, customers, other organizations and trade unions in other organizations.
Each of these external factors separately or in combination can influence the HRM function of any organization. Personnel manger canâ€™t perform his job in a vacuum as a number of environmental factors affect the HRM. In fact, these factors influence the organization through human resources. The term environment in HRM has reference to the totality of all factors which influence both the organization and HRM sub-system. Further, changes in these factors make personnel managerâ€™s job a challenging one.
The internal environment also affects the job of a personnel manager. The internal environmental factors include organization objectives, policies, organizational structure, the functional areas of the organization with which the personnel manager works continuously like finance, marketing and production.
Impact of internal environmental factors is profound as they frequently and closely interact with HRM function in an organization. For instance, the objectives of HRM are formulated based on the organizational objectives. Jobs are designed and analyzed based on the organizational structure.â€™ The personnel manager works closely with other functional (line) managers in solving their personnel problems through counseling, advising, providing information etc. The levels of wage and salary, various allowances — incentive compensation etc., are heavily influenced by the level of finance and success of marketing functions. Most of the personnel problems are linked with the production function of an organization. Thus, the internal environment of an organization influences heavily the HRM.
The influence of macro or external environment on HRM is equally important, though the severity is comparatively less. People are essentially self-managing. In other words while other resources are managed by people, personnel are managed by themselves. People themselves decide about the nature, time and place of their employment. And people react to the changing conditions and to the techniques of management unlike money, materials and machines. Further in the present day industries, where the principles of democracy influence the management of labor, the relationship between employers and employees is conceived of as a â€œpartnership in constructive endeavor to promote the satisfaction of the economic needs of the community in the best possible mannerâ€?.
The changes in the external environment of an enterprise have a profound impact on the personnel. These changes include technological obsolescence, cultural and social changes, changes in the policies of the Government, politics and the like. With the result, the work-environment changes thereby affecting their productivity level. It is often said these peculiarities and changes complicated the task of personnel management. Modern managers face new, bewildering, and often contradictory ideas and situations.
Further, a number of impressive changes have taken place in the level, aspiration, values and position requirement of human resources. These are due to changes in technological innovations, more moral education, demands of the Government trends in the employee roles, changes in the values of workforce, demands of employers, changes in structure of employment etc.