3 The Human Resource Environment – Strategic Human Resource Management and Development, 1e


The Human Resource Environment

“An intelligent company is in a perpetual state of learning, adapting, moving forward and seeking feedback, closing loops. Such organisations are never completely satisfied with what they know, how they uncover that knowledge or how they apply it. They are constantly seeking smaller nuggets of knowledge with highly refined approaches to data collection.”.


Prabhir Jha as CHRO, Reliance Industries

  • Globalization
  • Workforce diversity
  • Knowledge management
  • Technological advancements
  • Impact of PESTLE on the HR practices
  • Technology
  • Organisation structure
  • Changing management trends
  • Workforce demography
  • Workforce utilization
  • Globalization


ITC Infotech is a service technology solutions provider with the global operations. ITC Infotech has Digitaligence@work,  which blends technology with domain, data, design, and differentiated delivery to provide enriching experience and efficiency. This facilitates the clients to differentiate and disrupt their business. The company’s portfolio is expanding and it provides solutions for various critical business challenges especially to supply chain and service industries. Since the company aspires to create an innovation-friendly people culture, it focuses on Learning and Development (L&D) of its employees to helps them realize their actual potential. Another feature of the people centric culture of ITC Infotech is the alignment of the employee goals with the organisational goals and providing challenging opportunities at work.

But the changing technological environment is persuading the organisation to transform its technological ethos. The company has faced challenges in transforming traditional L&D methods to the arena of virtual learning making it possible to learn anywhere and anytime. The virtual learning would facilitate continuous and self-directed learning.

Continuous learning is crucial for the dynamic and complex business environment and decision-making aspects. Earlier, the organisation would identify the training needs monthly and would arrange for training in the next 6 months, which would generally be a 2–3 days training module. But with the introduction of virtual learning systems, the lead time to arrange for training was reduced from 6 months to 3 weeks. Approximately half an hour to above an hour every day is spent by an employee on virtual learning system. This has shifted the onus to learn in employees. The employee is required to share his or her L&D needs and is vetted by their supervisor.

But this was not a cake walk as it meant sustained behavioural change among employees, who would accept the digital platform and appreciate continuous learning. The younger tech-savvy generation is quick to adapt the technological change but seniors should also be counseled and supported to adapt the change. The behavioural change would take a long time since it requires a complete overhaul of the traditional mindset.

To build the learning culture, the company is emphasizing on “learning channels” and “mentors.” It has also optimized learning budgets and efforts.

Will this learning culture facilitate growth to ITC infotech?


Innovation, individualism, changes in politics, the global economy, and dynamic demographics have fuelled a number of dominant trends for the next millennium. As a result, technology, workforce demographics, and work culture and their influence on the workplace will transform the employee of the next millennium.

Economic environment is changing rapidly and this change is characterised by phenomena such as globalization, changing customer and investor demands, ever-increasing product–market competition. To sustain and be successful in this environment, organisations continually need to improve their performance by reducing costs, innovating products and processes and improving quality, productivity, and speed to market. The source of improved performance is the human resources of the organisation. Traditional sources of success such as product and process technology, protected markets, economies of scale, and so on can still provide competitive leverage but an organisation’s human resources are more vital for its sustainability. Organisations are becoming aware that successful human resource policies and practices may increase performance in different areas such as productivity, quality, and financial performance.


The analysis of business environment: PESTLE–political, economic, sociological, technological, legal, and environmental, is to understand its influence on the organisation guiding the strategic decision making. In the dynamic business environment, it is essential to keep pace with the changes and be proactive to adapt them. Though these environmental dimensions might not directly impact organisational performance, but understanding them and utilizing that information to assess the opportunities and threat and strategize to leverage the opportunities and reduce threat. Conducting a strategic analysis entails scanning these economic environments to detect and understand the broad, long-term trends.


The analysis of business environment is PESTLE–political, economic, sociological, technological, legal, and environmental.

Understanding the environment and utilizing that information to assess the opportunities and threat and strategize to leverage the opportunities and reduce threat.

Political Factors

The political environment does have an impact on the business environment and hence the HR environment as well. Political environment gives shape to business. Political stability, government administration, philosophy of the political parties are some of political factor that affects the business environment. For example, if there is change in the government, there are changes in the regulations as per the philosophy of the ruling political party. In fact, the very recent incident, when Tata Nano plant had to shift from West Bengal to Gujarat, was due to political reasons. Pay freezes or pay hike might happen in the public sector.

Impact on HR

A changing regulatory environment is likely to create additional workloads at all levels. It will create more change and uncertainty which will affect staff. Pay freezes will impact on staff morale, given that pay is highly rated for achieving staff satisfaction. On the other hand, when after Sixth Pay Commission of India has announced the pay hikes for public sector employees, the employment interests in public sector has increased drastically and hence private sector has to compete with the public sector to attract talent.

Economic Factors

The change in economic factors in the wider economy reflects the changes such as change in living standards or the general level of demand, change in interest rates, inflation, change in taxation, labour demand and supply, recession.

Impact on HR

The HR needs to redesign the compensation and benefits packages to meet the changes in the living standard or taxation. During recession, they need to devise a policy of either lay off or have to work out the alternatives to lay off and when the economy is on boom, they need to attract the talented pool to their organisation.

Sociological Factors

The sociological factors concern with society as a whole; it covers health, media, education, minorities, women, organized labour, legal system, and demographics.

The biggest challenge to firms is the society’s changing demands.

Impact on HR

The changing sociological factors are posing new challenges to HR, in terms of work force diversity. Now, the women workforce is increasing and even dual career couples (DCCs) are common. The social structures are changing from joint family structure to nuclear family and if the DCCs are there in the workforce, the flexi policies need to be implemented.

Technological Factors

Technology provides opportunity to improve working practices, particularly through communication and workflow processes. Technology is about application of tools, methods, and techniques to improve production and processes. Technology is life for growth and competitiveness of business.

Impact on HR

The HR strategy needs to integrate the IT strategy so that the staff can work as efficiently as possible. The work-from-home policy is possible only because of upgradation of technology. ERP and SAP have made it possible for the HR  department to keep the record of every employee and use it for the different HR processes like training, performance appraisal, and so on.

Legal Factors

Legal environment has a permanent and lasting impact in shaping business. Labour Law Act, Industrial Dispute Act, Minimum Wages Act, Law of Contract, Provident Fund Act, and Tax Law Act are few legal factors.

Impact on HR

Any change in the law and especially labour law affects the HR functioning. Whenever there is revision in the minimum wages, the HR has to manage the wage bills accordingly. The recent change is the change in the provident fund deductions. Earlier, it was on basic plus dearness allowance but now it has been changed to the percentage of the gross salary. This would again affect the wage bills and the cost to company. The government has proposed to amend the Company’s Act 1956, so that companies have to mandatorily spend 2 percent of their average net profit for corporate social responsibility (CSR) activities. Now to abide by the law, HR department has to ensure this expenditure by sensitizing and training the employees.

The HR department has to ensure that there is provision to keep abreast of the changing laws to remain legally compliant.

Environmental Factors

Use of modern technology, sometimes, involves huge social cost in terms of deterioration of environment and ecological imbalance. So business environment should also consider about natural resources, weather and climatic conditions, health hazards, and so on. The need to reduce our carbon footprint should be in line with government policy.

Impact on HR

Encourage staff to use more environment friendly methods to get to work, and residents to reduce their carbon footprint. Nowadays, the HR department arrange for staff bus or car pool for commutation between workplace and home. They need to sensitize employees about their responsibility toward environment protection.



Globalization refers to the tendency of firms to extend their sales, ownership, and/or manufacturing to new markets abroad. Marketing has become global, for example, Ford, Revlon, The gap, and Nike market all over the world. Ford and Hyundai have set up their production facilities at many places all over the world, including India.

Globalization has strategic implications and has changed the business environment drastically. The competition has increased by leaps and bounds. The firms that once competed only with local firms now face competition from across the globe.

The market deregulation is another trend which is off-shoot of globalization. The countries have eliminated the legal barriers that protected certain industries. Now, Air India has to compete with the Jet Airways. Bank of Baroda has to compete with the ICICI Bank.

Increasing competition demands lowering cost, increasing productivity of the employees and innovating. This makes the role of HR very crucial and vital as only the right kind of people can help the organisations achieve the targets. Hence, constant if not continuous changes in how organisations employ and manage human talent require practices and systems that are well conceived and effectively implemented to ensure high performances and continuous success. According to Robert et al., the key HR challenges of globalization are as follows:

  • Skill deployment: Getting right skills to where they are needed irrespective of the geographical location.
  • Information dissemination across all locations and talent identification and development on a global basis (2000, p. 94).

The key HR challenges of globalization are skill deployment and information dissemination across all locations and talent identification and development on a global basis.

Technological Advances

There is a challenging task of adapting workplace to rapid technological changes which influence the nature of work and generate obsolescence. Today, technology is outstripping our ability to use it. The technological advancements are so fast that before one learns to use it, there is a higher version or the new technique. Hence it implies that if the people in the organisation can take the quicker and better advantage of the technology than the competitors, then we can create a sustainable competitive advantage. This ability to adapt the technological change faster than others creates a continuing advantage over competitors who either don’t have people with as much knowledge and as many varied skill sets, or don’t have people who want to assist the organisation because they are not engaged and not satisfied. Advanced technology has tended to reduce the number of jobs that require little skill and to increase the number of jobs that require considerable skill. There is a shift from manual labour to knowledge work.


Advanced technology has tended to reduce the number of jobs that require little skill and to increase the number of jobs that require considerable skill. There is a shift from manual labour to knowledge work.

With the change in technology, the required skills and work habits of the employee also changes and hence the HR needs to manage the change by providing them training. Telecommuting is increasing and also is expected to significantly increase worker productivity. Organisations have recognized the following benefits to telecommuting: reduced costs, increased productivity, and improved recruitment and retention.

The benefits to the worker include reduced stress, reduced travel time, increased job satisfaction, and better balance between work and personal time.

Thus, it is evident that telecommuting has a significant impact on the workplace. Increased computer literacy and access to personal computers increases telecommuting and redefine the culture of the workplace. Technology and telecommuting enable the development of virtual teams and virtual management and leadership. Organisations, through their use of  technology, use virtual teams of employees to work on a variety of tasks without physically meeting.

The virtual team concept allows the present day organisation to assemble a group of employees based on needed skills and from any location in the world. This concept of a virtual team of employees requires the development of virtual management and leadership skills. Managing teams of employees who are located around the world will require different communication and leadership skills.

The Work

Technology has impact on the nature of work. The job of accountant never required the knowledge of computers as the competency for the job but now, with the changing technology, the accountant need to have computer literacy and not only this, but one must also have operative knowledge of few accounting software.

Besides that, there is also a continuing shift from manufacturing jobs to service jobs and now to knowledge jobs not only in India but also abroad. This shift, in turn, requires new type of employee who are “knowledge” workers and hence new HR management methods to manage them, and a new focus on human capital. The organisations need new, world-class HR systems to select, train, and motivate the knowledge workers, and to win their commitment to the technologies and continuous improvement programs firms today depend on. Talent management has become the important technique in HR.


There is a continuing shift from manufacturing jobs to service jobs and now to knowledge jobs not only in India but also abroad. This shift, in turn, requires new type of employee who are “knowledge” workers and hence new HR management methods to manage them, and a new focus on human capital.


Globally, there is a drastic shift in the workforce demographics. Most notably, the workforce is becoming more diverse as women, minority-group members, and people of different nationalities and culture have become the important part of the workforce. Workplace diversity refers to the variety of differences between people in an organisation, which sounds simple, but diversity encompasses race, gender, ethnic group, age, personality, cognitive style, tenure, organisational function, education, background, and so on. Diversity not only involves how people perceive themselves, but how they also perceive others. The role of HR is critical to leverage diversity and effectively deal with communication, adaptability, and change. Diversity will increase significantly in the coming years. 

India has advantage over the rest of the world, as it is the nation with the youngest population. After a period of four decades since independence, when the population growth rate was maintained between 2.1 and 2.2 percent per annum, it has come down <2 percent during the 1990s, the current rate as per the Registrar General (2008) being 1.57 percent only. As a consequence, the percentage of population in the age group 15–59 years is likely to go up in the next three to four decades. Further, worker population ratio has been rising in recent years, more particularly for women. Women’s work participation rate, which was 19.7 percent in 1981, rose to 25.7 percent in 2001.

The future success of any organisations relies on the ability to manage a diverse body of talent that can bring innovative ideas, perspectives, and views to their work. The challenge and problems faced of workplace diversity can be turned into a strategic organisational asset if an organisation is able to capitalize on this melting pot of diverse talents. With the mixture of talents of diverse cultural backgrounds, genders, ages, and lifestyles, an organisation can respond to business opportunities more rapidly and creatively, especially in the global arena, which must be one of the important organisational goals to be attained. More importantly, if the organisational environment does not support diversity broadly, one risks losing talent to competitors. This is especially true for multinational companies (MNCs) who have operations on a global scale and employ people of different countries, ethical and cultural backgrounds. Thus, a HR manager needs to be mindful and may employ a “think global, act local” approach in most circumstances. The changing trend toward workforce diversity is the employment opportunities to the disabled and transgender. The organisations like Motif and AT&T hires people with disabilities, and Kochi metro rail has considered transgender for the job.

Diversity is an important issue in HR planning. Not only does a successful organisation actively seek to recruit qualified women and minorities, they also are proactive in minority retention and development efforts. Furthermore, these organisations will seek to eliminate discrimination in the workplace, create an environment in which all groups show power and influence and embrace the contributions and interests of the diverse culture and social groups within the organisation. Organisations that fail to embrace  diversity  as an effective competitive strategy will experience dysfunction and other problems, such as increased employee turnover, increased litigation, low productivity, increased absenteeism, poor communication.


Organisations that fail to embrace  diversity  as an effective competitive strategy will experience dysfunction and other problems, such as increased employee turnover, increased litigation, low productivity, increased absenteeism, poor communication.


The changing trends have had an impact on the managerial functions and have prompted the managers to devise strategies that balance the opportunities and threats posed by the changing trends.

Global Expansion

The changing trends like globalization has opened up avenues for the organisations to go global, that is, expansion and spreading the business across the globe. Today, even the smallest entrepreneurial venture is pushing itself to expand globally. For example, even the small restaurants and sweet shops have their outlets abroad.

Improved Competitiveness

The aspects of competitiveness have been discussed earlier. This leads to rightsizing, to boost productivity; to form alliances, to increase size but deduct redundant costs; focuses on continuously improving operations; and to use the web to integrate channels.

Organisational Change

Organisational change is a result of global expansion and improved competitiveness. The organisation structure is becoming flatter. Leaderless teams are formed to empower employees. The concept of virtual organisation is taking shape.

Knowledge Management

The knowledge management has become a key word and it stands on the pillars of HR and Information technology. The knowledge sharing, storage, and retrieval have to be made possible by the organisations.

Industrial Insight 1: HR’s Tryst with Challenges

Sakaar Anand (Vice-President HR, India, CA Technologies) shares the course of action the fiscal demands of the Human Resources Issue Date-01/04/2012

Businesses often face conflicts from various functions or processes within the system. We consider the traditional formula and gear up for the impact, simultaneously feeling that anticipating the shock will not be enough and being prepared to get beyond may be a better approach. It is definitely a cause-and-effect theory and not to mention the same cause will have the same effect. It means if we stick to the same structure and functioning models, as we witness the shorter cycles of delivery and aim for faster transitions, it will be a death knell for an organisation. As Jack Welch aptly puts, “When the rate of change outside exceeds the rate of change inside, the end is insight.”

Rapidly evolving markets, increasing competition, and changing economic conditions have put the role of HR on the path of evolution. HR function has to keep pace with evolving needs a combination of both anticipated and unforeseen. Other than economic crisis, there is a crisis of management and organisation models that has caused erratic behaviours and has led us to the point we are now at.

The need of the day is to assess the risk in the entire gamut of HR function in relation to the objectives of the organisation. Similar to any business, HR function risks need to be assessed, analysed, and estimated to be managed successfully. Risk management is a critical area that needs attention. This is a new challenge for the HR professionals. The term “human” in human resources is the source of risk. Shortage of the right kind of employees at the right time, attrition of experienced employees, employee leaving after completion of a 1-year training programme, employees doing sloppy work due to lack of competencies, handling customers badly, unwillingness to take on additional responsibility by employees or absenteeism are risks that an organisation faces.

In the last 2 years, HR function has become more reactive by helping business leaders cope with the abrupt downturn. HR faces extraordinary demands to be effective, efficient and, most importantly, responsive to address changing organisational and business realities. HR professionals need to become champions of high performance which adds measurable value to both the top and the bottomline of business, employee satisfaction, and retention of talent. It is not easy to enter an entirely new field of assessing HR risk areas. One needs to work systematically to change the traditional HR role and embrace new ideas. 

As multicultural workforce becomes a common jargon in the corporate language, HR needs to evolve and adopt the right strategy. There is also the challenge of workforce mobility that needs to be addressed by HR managers.

It is not easy to transform the local managers into international managers overnight. The competition is tough and the knowledge of various regulations is extremely important depending on the countries where your organisation will operate.

As the variety of challenges increase, the reasons for the changing role of HR becomes focused. There will always be effective ways of managing different employees; large organisations have accepted “people”are their most important assets. Finally, strategic position of people in leveraging an organisation’s competitive advantage based on their skills, knowledge, and personalities is another important reason.

Therefore, major HR challenges for organisations in the present year are rapidly evolving markets and ever increasing competition, economic crisis, risk management in HR, managing a global workforce, and finally the evolution of the HR function. However, in our enthusiasm to focus on business results, let us not lose sight of the genesis of HR function, that is, “human touch.”


  • The analysis of business environment is PESTLE-political, economic, sociological, technological, legal, and environmental.
  • Understanding the environment and utilizing that information to assess the opportunities and threat and strategize to leverage the opportunities and reduce threat.
  • The key HR challenges of globalization are skill deployment and information dissemination across all locations and talent identification and development on a global basis.
  • Advanced technology has tended to reduce the number of jobs that require little skill and to increase the number of jobs that require considerable skill. There is a shift from manual labour to knowledge work.
  • There is a continuing shift from manufacturing jobs to service jobs and now to knowledge jobs not only in India but also abroad. This shift in turn requires new type of employee who are “knowledge” workers and hence new HR management methods to manage them, and a new focus on human capital.
  • Organisations that fail to embrace diversity as an effective competitive strategy will experience dysfunction and other problems, such as increased employee turnover, increased litigation, low productivity, increased absenteeism, poor communication.


Harvey, Barron H.(1999). Workers-Forecasts and Trends Technology-Forecasts and Trends Work Environment-Forecasts and Trends. HRMagazine. Vol. 44, No. 11.

http://www.cipd.co.uk, HR Resources>Factsheets>PESTLE Analytcs, accessed July 2018

HR’s tryst with challenges, Human Factor, http://www.thehumanfactor.in, accessed July 2018

Bill Goodwin, Nokia Rethinks HR with Web Portal, http://www.computerweekly.com accessed on 20th Jan 2015.

Review Questions

  1. Explain PESTLE for HR strategy.
  2. Discuss about the strategic changes affecting the HR policies and practices.
  3. What are the challenges confronted by the HR professionals, in context of changing environment?

Time to Apply Theory to Practice: Assignment

Prepare a report on “dual career couple”

  1. Prepare a questionnaire or the structured interview for the issues and challenges faced by the HR professionals due to DCCs.
  2. Conduct the survey and list the challenges and the possible solution.

Critical and Analytical Thinking: Nokia Rethinks HR with Web Portal

Nokia, mobile phone manufacturer, has reduced its HR costs by between 20 to 30 percent after rolling out a web-based HR portal to its 60,000 employees.

The portal, part of a major rethink of the way Nokia manages its HR, has given the company a clear view of the capabilities of its worldwide workforce for the first time.

Its development comes at a critical time for Nokia, as it battles with cost-cutting, restructuring, and a strategic gamble to jettison its own smartphone operating systems in favour of Microsoft technology.

The magnitude of the challenge facing Nokia was revealed to staff in a leaked internal memo in February. Nokia’s CEO, Stephen Elop, compared the company to a man standing on a burning oil platform, who might just survive if he jumped in time. Nokia needed to find billions in savings fast as Elop warned.

Single HR system Covering 60,000 Employees

In human resources, at least, Nokia had a lot of the pieces in place to make the restructuring possible, says Andrew Winnemore, director of global HR services.

Unlike most multinationals, which have a multitude of HR systems to contend with, Nokia had a single SAP HR system in place. It had a single set of HR data, covering its 60,000 employees in 73 countries.

The bad news was that Nokia’s SAP system was heavily customised, which made it expensive to maintain and upgrade, says Winnemore.

Nokia opted to roll out a portal that would give employees and managers the ability to access and update their own HR data.

The portal aims to free Nokia’s HR managers from the burden of administration to focus on more strategic areas of the business.

Once it is fully rolled out, Nokia predicts HR staff will be able to reduce the proportion of the time they spend on administrative tasks from 60 to 20 percent; and double the time they spend supporting the business.

Immature Technology

Nokia made its first attempt to introduce a company-wide HR portal in 2004. But the project ran into difficulties.

The technology was immature, with few off-the-shelf solutions available, says Winnemore.

Second, reaching a consensus about how to manage HR processes in the organisation proved unexpectedly difficult.

“The project team felt they had an agreement on how the workflow should go, but we realised there had to be a deeper sign-off and commitment,” said Winnemore.

For example, there was the question of who should approve the appointment of new members of staff, he says. Should it go to the manager, the manager’s manager, the trade union or the HR department?

Clarity in Process

“Unless you get clarity behind that, you end up having workflows and approval flows which are very difficult to customise, build and maintain.”

Nokia took these lessons on board when revisited the project in 2008. The project team took time to study and understand the day-to-day tasks and problems facing HR.

It became clear that Nokia’s HR data were not as consistent as it should be. HR managers in each country were entering data into the SAP system in different ways.

“We found that moving people from one country to another country was just an horrific nightmare.” he said.

Winnemore and his team developed a detailed change plan before rolling out the portal.

At its core was a proposal to create consistent records by centralising HR data entry in one place.

“Part of that was driven by costs, so we could allow our HR consultants in each country to focus on what’s important. But the other underlying factor was to simplify and streamline the approach,” he said.

Nokia created a processing centre in Chennai, India, and a series of regional HR centers to provide HR expertise to managers and employees. The process took 2 years.

The second plank of the strategy was a complete re-evaluation of the work flows and policies in HR.

At its heart was a fundamental change in the role of HR, away from policing to providing a support and consulting service to the rest of the business.

“We looked at each transaction and asked questions like, ‘can you change your job title yourself, or not?’; ‘When you do recruitment, who is involved in recruitment?’; ‘When you do a promotion, how do you do a promotion, who is signing off the promotion?’,” he said. “We looked at everything linked to every HR transaction that we have.”

Nokia based the portal on SAP’s off-the-shelf web technology, opting for the minimum amount of customisation to keep the project as simple as possible.

Winnemore and his team rolled the portal out gradually between 2008 and 2010. The plan was to go live with one component and develop it before moving on to the next.


“There were lots of problems at the beginning, lots of complaints, and we just went through it systematically step by step, fixing-improving, fixing-improving.”

Nokia slowly began to encourage staff and managers to use the portal, rather than taking their queries to HR.

Making the portal understandable for non-HR specialists and eliminating HR jargon form the portal was a priority, says Winnemore.

At the same Nokia worked to change the way its HR staff work.

“Rather than saying to a manager, ‘Yes, let me do it,’ it was a matter of the HR person saying, ‘Let me walk you through what you need to do, then do screen sharing’ and coaching them to go in,” he said.

Technically, the challenge is integrating SAP HR system to Nokia’s country-based payroll systems, says Winnemore.

The company has been working to create a single model for payroll across its geographies over the last year. It is rationalising the number of systems it uses to make integration easier.

Data Analytics

Next, Winnemore plans to build on the project by developing systems to exploit HR more effectively.

The company uses an analytics package from Inform Business Impact, now owned by HR specialist Successfactors, to monitor recruitment and diversity trends.

“We do feel that there is a lot more we can do there. And it’s one area we are looking at more consciously,” he said.

For example, data analytics could be used identify managers who were particularly skilled at hiring high-performing recruits.

“If a manager ends up being really talented at picking out the right people, we should be able to use this information in the future to say, if we have the manager focusing more on this role, we can generate value,” he said.


  1. Identify the problem faced by Nokia due to technological changes.
  2. Draw a matrix, with the change, problem caused due to change and the solution. 
  3. Crically examine the Winnimore’s change plan.

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