Business Issues and the Context of Human Resources

This report evaluates different factors that impact the organisational business and its HR functions. It also focuses on analysing factors that shaped the HR agenda and compared different tools that assist the HR managers in analysing the business environment.

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Business Issues and the Context of Human Resources

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Table of Contents
Introduction...............................................................................................................................2
Forces which shape the HR agenda...........................................................................................3
Internal Factors impacting organisational performance and HR function............................3
External factors impacting organisational performance and HR function............................4
Comparison of environmental analytical tools..........................................................................6
Stages of strategy formulation and implementation.................................................................8
Role of HR in business ethics and accountability...................................................................9
Evaluation of Business Performance........................................................................................10
Role of HR in business planning and change management.................................................11
Evaluation of different sources of business and contextual data in planning purpose...........12
HR metrics............................................................................................................................13
Industry information............................................................................................................13
Conclusion................................................................................................................................14
References................................................................................................................................15

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Introduction
In today’s competitive business world, corporations are struggling to generate and sustain a
competitive advantage due to fierce competition. Effective human resource management
(HRM) strategies assist companies in ensuring that they hire an adequate number of staff
members who are skilled and qualified in order to achieve their corporate goals (Albrecht et
al., 2015). However, there are many contemporary human resource challenges which are
faced by corporations that resulted in making it difficult for them to build a strong and
talented workforce to conduct their business operations. The HR manager has the
responsibility to form HRM strategies to make sure that the staffing requirements of the
company are fulfilled based on the requirements of the company (Albrecht et al., 2015). This
report will evaluate different factors that impact the organisational business and its HR
functions. This report will also focus on analysing factors that shaped the HR agenda and
compared different tools that assist the HR managers in analysing the business
environment. The key stages which companies have to follow in order to formulate and
implement the role of HR will also be analysed in this report along with an evaluation of the
HR’s contribution to business ethics and accountability. This report will compare the PESTLE
and SWOT framework and identified the ways in which business performance is measured
in organisations. This report will also evaluate how different sources of internal and external
data should be considered while planning for HR strategies in organisations.

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Forces which shape the HR agenda
Internal Factors impacting organisational performance and HR function
There is a wide range of internal factors that affect the HR agenda of organisations by
creating challenges and opportunities for them. The impact of these factors is necessary to
be assessed by the HR manager to make sure that the company remain prepared for these
factors in order to reduce their negative impact and create an overall positive impact on its
operations (Marler and Fisher, 2013). Following are the key internal forces that shape the
HR agenda of organisations.
 HR Strategies
The HR strategies implemented by organisations in order to manage their human capital
requirements affect their business operations as well. Through these strategies, companies
focus on identifying their human capital requirements to identify the number and skills of
the employees which are necessary in order to achieve its corporate objectives (Stone and
Deadrick, 2015). These strategies assist in building the gap between the strategic plan and
HRM in the corporations; thus, companies have to consider a wide range of factors while
developing these strategies. The agenda prepared by the HR manager focuses on ensuring
that an adequate number of skilled and qualified members must be present in the
organisation to make sure that they focus on promoting the success of the enterprise (Stone
and Deadrick, 2015). These strategies not only focus on analysing and filling the human
capital requirements, but they also focus on creating a positive workplace culture in which
needs of employees are fulfilled so that they are motivated to work with high productivity.
 Strategic objections
The strategic objectives or goals set by the top level management are necessary to be
fulfilled by the company in a particular timeframe. It is the responsibility of the HR
department to make sure that it hires an adequate number of staff members which are
crucial to achieve the strategies goals in the organisation in an efficient manner without
wasting resources (Marler and Fisher, 2013).
 Stakeholder expectations

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The importance of fulfilment of social responsibilities of companies has grown, and it is
expected from the top level management that they will maintain a balance between the
interests of stakeholders by fulfilling their expectations. This also affects the HR agenda of
the organisation since the HR department has to hire an adequate number of employees to
make sure that they deliver high-quality products and services to customers as per their
expectations (Makela et al., 2013). The expectations of the shareholders of the company are
also achieved by the effective management of human capital in the workplace since it
promotes the profitability of the organisation. Assessment and compliance with regulatory
policies are also crucial to fulfil government expectations, which can be achieved through a
skilled and qualified workforce.
 Financial health
The financial health of a company also affects its ability to attract and retain talented
employees in the organisation. In the financial health of a company is poor, it cannot offer
high incentives or salary packages to its employees, which demotivates them (Makela et al.,
2013). Sound financial health assists the company in paying high packages to its employees
to retain them for a longer period of time in order to achieve corporate goals.
 Communications
The communication policies implemented by the organisation affects the HR agenda since
lack of communication between employees, and the management leads to creating a hostile
working environment in which employees face issue such as demotivation, bullying,
harassment, mental health issues, poor performance and others (Den Hartog et al., 2013).
On the other hand, effective communication enables the management to learn about the
factors which affect the performance of employees in order to implement policies which
allow them to address these issues to improve their performance; thus, communication
policies also affect HR agenda in organisations (Den Hartog et al., 2013).
External factors impacting organisational performance and HR function
 Government policies
The government policies of a country affect the performance of organisations and HR
functions by bringing challenges or opportunities for them. The rapid change in government

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policies resulted in imposing new taxes on companies, and it also affects their operations by
the introduction of new legal standards which they have to comply with (Kim, 2012).
Similarly, the government also provides a wide range of employment legislation and other
compliances which are necessary to be followed by the HR department in order to avoid
legal consequence such as changing in the minimum wage, maximum working hours, bonus
policies, and others. A good example is Brexit that will result in creating challenges for the
companies operating in the United Kingdom since it made it difficult for them to conduct
their operations in the European Union which affects their performance (Orazulike, 2018).
Moreover, the multinational companies that operate in both nations have to make sure that
they comply with the employment standards which are brought by the government through
Brexit in order to avoid legal consequences.
 Prevailing economy and market conditions
Prevailing economy is one of the biggest factors that affect the performance of
organisations because companies proliferate in strong economies. They receive a plethora
of opportunities while conducting their business operations to make sure that they reach a
large customer base (Thite, Wilkinson and Shah, 2012). Economic downturn also affects the
HR function of organisations since they have to lay off employees and reduce their benefits
to cut their costs, which further harm their performance as well. It is estimated that Brexit
the economy of the UK could be 3 per cent bigger if the Brexit would have never happened,
and it is likely to slow down the economic growth of the country in the future as well which
will increase unemployment rates, reduction in salary packages and bonuses and the HR
department will find it difficult to retain talented employees in the organisation (Nelson,
2019).
 Demographic, social and technological trends
The changes in demographic resulted in altering the business patters, which affects its
performance, and it also affects the HR function. The wants of the older generation are
different from the new generation, which are necessary to be taken into consideration by
the HR department (Ulrich et al., 2013). For example, millennial employees are less likely to
retain in the organisation as compared to baby boomers, which create challenges for the HR
department to reduce employee attrition rates (Ulrich et al., 2013). The social and

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technological challenges also affect the operations of organisations since they make current
products, services and processes obsolete. A good example is the shutdown of Blockbuster
and Nokia since they failed to innovate like Netflix and Samsung. Similarly, the HR
department has to ensure that its hires employees as per the current technological
requirements of the organisation to make sure that the flow of the organisational
performance can be maintained accordingly (Ulrich et al., 2013). An aging employee
demographic can be challenging for the company to sustain its performance in today’s
highly competitive and innovative marketplace.
 Globalisation
Globalisation has a substantial impact on organisational performance since it opened a
plethora of opportunities for companies to expand their operations in overseas markets.
However, it also brought new challenges such as management of diversity in the workplace
and managing multicultural teams to make sure that the company continues to expand its
operations on an international marketplace (Hurn, 2014). The HR department has to make
sure that it implements effective policies to ensure that diversity among employees can be
maintained by creating a positive and supportive workplace culture and it also assists in
ensuring that companies sustain their performance even in adverse market conditions.
Comparison of environmental analytical tools
Environmental analytical tools assist companies in identifying key internal and external
factors that affect their business operations which allow them to develop strategic policies
to sustain their growth in the market (Srdjevic, Bajcetic and Srdjevic, 2012). SWOT and
PESTLE are two of the most popular environmental analytical tools that are used by
companies while developing business strategies. Generally, organisations and their HR
department implement both of these frameworks together while forming HR strategies to
achieve better results. Both of these tools are cost-efficient, and they assist companies in
highlighting their critical problems (Srdjevic, Bajcetic and Srdjevic, 2012). They also assist the
HR department in identifying key challenges which all them to implement policies to ensure
the effectiveness of the HR functions.

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SWOT Analysis PESTLE Analysis
It analyses strengths, weaknesses,
opportunities and threats faced by an
organisation (van Wijngaarden, Scholten and
van Wijk, 2012).
It focuses on identifying political, economic,
social, technological, legal and
environmental factors that affect the
operations of a company (Zalengera et al.,
2014).
The strengths of a company are referred to
the competitive advantages which the
company has over its competitors while
operating its business in the industry. The
weaknesses are the challenges which the
company faces that put it at a position of
disadvantage when compared with its
competitors. The opportunities identify
trends in the external environment that
assist companies in taking advantage of
them to improve their outcomes (van
Wijngaarden, Scholten and van Wijk, 2012).
The threats are referred to movements in
the external environment that adversely
affect the operations of the companies and
their HR functions.
This framework evaluates the political
factors which include regulations, global
issues, future and current taxation policies,
labour laws, trade restrictions and others
factors that affect organisations in a positive
or negative manner (Srdjevic, Bajcetic and
Srdjevic, 2012). The economic factors include
stock market trends, interest rates, inflation,
consumer confidence and other factors that
affect the operations of companies. Social
factors include age distribution, career
attitudes, lifestyle attitudes, cultural barriers,
population growth rate and health
consciousness, which have an impact on the
operations of companies (Zalengera et al.,
2014). Technological factors that affect
operations of companies include R&D
activities, level of innovation, technological
initiatives and technological awareness
(Zalengera et al., 2014). Legal factors include
discrimination laws, employment laws,
health and safety laws, consumer protection
guidelines and others. Environmental factors
include climate change, weather, pressure
from NGOs and others.
SWOT analysis focuses on identifying internal
and external micro merits and demerits of a
company that creates opportunities for their
or hinders their current operations. These
factors assist them in developing strategies
which allow them to generating a
competitive advantage in the market (van
Wijngaarden, Scholten and van Wijk, 2012).
This analysis focuses on evaluating external
macro-environmental factors that affect
organisations. These factors identify
directors of companies and assist them in
identifying reasons for growth and decline in
the market (Zalengera et al., 2014).
SWOT assists in identifying the current
market position of companies.
PESTLE assists in identifying the impact of
external factors on organisations.

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Stages of strategy formulation and implementation
There are various steps involved in the strategy formulation process that assist companies in
achieving their goals and objectives. The entire process is divided into six steps which are
given below along with an evaluation of the role of HR in each step.
1. Identification of objectives of the organisation
While developing strategies, the first step focuses on identifying the targets or goals of the
company. The objectives should be designed for the long term, which assists in setting a
direction and mission of the organisation (Bamberger, Biron and Meshoulam, 2014). After
setting the goals, further strategies are developed for the achievement of these objectives.
The HR department evaluates the current goals set by the company to identify the human
capital requirement for achievement of these goals. The HR department sets its own goals
as well that interlinked with the organisational goals (Bamberger, Biron and Meshoulam,
2014).
2. Organisation Environment Evaluation
This step focuses on assessing the current operational environment of the company, which
include the economic and industrial environment. This step identifies the competitive
position of the company, which is reviewed through both qualitative and quantitative
methods (Azhar et al., 2013). This step assists in identifying the strengths and weaknesses of
the company in regards to the achievement of its corporate goals. The HR department
evaluates the current and future HR trends to evaluate the current HR capabilities of the
company. The strengths and weaknesses of the current workforce are analysed by the HR
department as well to determine whether it is suitable to achieve corporate goals.
3. Setting up Quantitative Targets
Next step is setting target values for the organisation that focuses on meeting organisational
objectives of the company. This step assists the company in evaluating the contribution
made by different operating departments in the achievement of goals. In this stage, the
contribution of the HR department plays a crucial role (Dayan, Heisig and Matos, 2017). The
HR manager also works along with the head of other departments to identify their human

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capital requirements to make sure that an adequate number of skilled and qualified
employees can be hired to achieve corporate goals.
4. Divisional plans
In this step, the identification of contribution made by different sub-departments is
identified after considering different strategic planning factors that are analysed above. The
contribution of sub-department of HR is analysed in this report to make sure that other
areas that affect human capital such as work culture, bonuses, remuneration, diversity and
others work accordingly to achieve common goals (Dayan, Heisig and Matos, 2017).
5. Performance analysis
This step focuses on identifying the gaps between actual and expected performance of the
company. During this stage, the past, present and future condition of the company is
analysed critically to identify gaps and predictions are made for the future (Dayan, Heisig
and Matos, 2017). The HR department also evaluates the gaps in the human capital
requirements in the organisation to determine the number and skilled employees who are
necessary to be hired to achieve corporate goals.
6. Choice of Strategy
The best possible option is selected in this stage after considering a number of alternative
options based on organisational goals, potential and opportunities. After this step, the roles
and responsibilities of different departments and individuals are identified for the
achievement of corporate goals (Azhar et al., 2013). The HR department also selects the
most suitable strategy for the organisation that assists the company in achieving its goals.
This strategy enables the company in ensuring that it hires an adequate number of skilled
and talented workers who work dedicatedly to achieve the targets of the company in an
efficient manner.
Role of HR in business ethics and accountability
 Equality: The HR department focuses on maintaining equality in the organisation by
ensuring that equal pay is given to employees for equal work. The HR department
should take corrective steps for eliminating the gender pay gap between its

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employees and policies should be implemented to avoid unethical behaviour in the
workplace such as bullying, harassment, misbehave and others (Janssens and
Steyaert, 2012).
 Fair treatment: The HR plays a major role in ensuring that employees receive equal
treatment in the workplace and they should be discriminated based on their age,
gender, caste, race, religion, colour or disability (Janssens and Steyaert, 2012).
Discrimination should be strictly prohibited during the recruitment, selection and
promotion process to make sure that employees are not discriminated.
 Diversity: The HR department should focus on promoting diversity in the workplace
by ensuring that employees who belong to different cultural backgrounds are not
discriminated based on their differences. Training sessions should be conducted by
the HR department to make sure that diversified is proliferated in the workplace
(Parboteeah, Seriki and Hoegl, 2014). The HR department should also try to hire a
diverse workforce and implement policies to make sure that they work together to
achieve common organisational goals.
Evaluation of Business Performance
Performance appraisal is referred to the method which is used by organisations in order to
assess how their employees are performing and sharing such data with them to find ways
through which they improve their performance (Ahmed et al., 2013). Through evaluation,
the link between different factors can be established such as purpose, relationship, optimal
production, relationship, motivation, rewards and recognition, empowerment and flexibility.
Through the evaluation of business performance, the corporation can assist in identifying
the organisational viewpoint and maintaining its controls in order to make sure that its work
with efficiency (Ahmed et al., 2013). The evaluation promotes harmony between different
departments and functions, and it also identifies the factors that affect the performance of
the organisation. Following are traditional and modern indicators that assist companies in
performance appraisal.
Traditional methods Modern Methods
Ranking method Cost accounting method

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Checklist method Management by objectives (MBO)
Forced choice 360-degree appraisal
Confidential report Assessment centres
Grading Behavioural anchored rating scales
Critical incidents methods
Essay method
Forced distribution method
Paired comparison
Graphic scale method
Field review method
Traditional methods focus on the rating of an individual’s personality traits such as
intelligence, initiative, drive creativity, leadership potential, dependability and others. On
the other hand, modern methods focus on job achievement rather than personal attributes,
which make them more objective and worthwhile (Yalcin, Bayrakdaroglu and Kahraman,
2012). Moreover, review of a business plan, SWOT analysis, benchmarking, financial
analysis, employee satisfaction, customer satisfaction and financial ratios are also used in
order to critically evaluate the performance of organisations.
Role of HR in business planning and change management
The HR department focuses on managing human capital in the organisation, and as the
company grows the requirement of skilled workforce increases as well. Thus, the HR
department plays a major role in business planning and change management. Following are
different roles of HR in planning and change management.
 Selection and staffing: After setting organisational goals, companies have to fulfil
these needs due to which finding the right individuals for the right post is necessary.
Thus, the HR assist in creating employee section and staffing criteria to make sure
that an adequate number of skilled and talented employees can be hired in the
organisation (Vora, 2013).

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 Organisational Development: During change management, the importance of the
development of the capability of employees increases. Thus, the HR department
focuses on developing the professional and personal capabilities of employees to
make sure that the company is able to effectively manage changes in the
organisation (Arrowsmith and Parker, 2013).
 Training and development: Through training and development policies, the HR
department ensures that the company has an adequate number of skilled and
talented employees to achieve its corporate goals. Training employees did not resist
to changes in the organisation since they are prepared for them, which promotes the
growth of the company (Arrowsmith and Parker, 2013).
 Being proactive: Effective planning is necessary for organisations to effectively
manage change strategies in the workplace. The HR department plays a major role in
this by being proactive to make sure that it encourages employees to be prepared
for key changes and implement policies for the achievement of future objectives of
the company.
Evaluation of different sources of business and contextual data in planning
purpose
The data which is used by companies in order to develop strategies is collected through two
mediums, which include internal and external sources. There are different sources through
which business information can be collected by organisations such as internal records,
financial statements, books, conducting survey and others which assist the management
during the business planning process and introducing improvements in the process as well
(Schlafke, Silvi and Moller, 2012). The internal information sources of a company include
shareholders and employees of the organisation. The external sources of information
include books, journals, newspaper, articles, magazine and others. With the popularity of
the internet, the data collection process has become easier for companies. They can easily
collect reliable data through online media, which allow them to stay up-to-date with
information regarding the global environment (Schlafke, Silvi and Moller, 2012). While
collecting data from these sources, it is important that parties must have adequate search
skills to collect relevant data in an efficient manner.

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HR metrics
While collecting internal data, the HR department can focus on HR metrics, which include a
number of sources for data collection. For example, HR costs assist the managers in learning
about the current and future costs which incurred in the organisation and this information
assists them in forming budgets to be prepared (Dulebohn and Johnson, 2013). The
responsiveness of the company also provides crucial information regarding the current
capability of the company to change as per market conditions. The issue management
provides data regarding the management of conflicts in the organisation. Recruitment
policies assist in identifying the current capabilities of the company to fulfil their talent
requirements (Dulebohn and Johnson, 2013). The productivity analysis provides information
regarding the current productivity of employees and their ability to perform better in the
future.
Industry information
External data can be collected from a number of sources by the HR department such as HR
trends which provide relevant information regarding the current HR abilities of the company
and the potential future challenges which are likely to affect the business. Competitive
information is also crucial, which assists companies in identifying the steps taken by their
competitors and evaluate how they affect their operations (Bharwani and Butt, 2012).
Another source is government information which assists companies in becoming aware
regarding changes in future policies brought by government policies that affect the
operations of the HR department (Bharwani and Butt, 2012). All these data can be evaluated
by the HR department during the planning process to become aware regarding factors that
affect the business and implement policies to make sure that those operations are
addressed accordingly in order to sustain the growth of the company by ensuring that
talented workforce is retained in the organisation.

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Conclusion
Based on the above observations, it can be concluded that there are various internal and
external forces that affect the HR agenda of organisations. The internal forces include
stakeholders, communications, financial health and other factors whereas the external
factors include government policies, market conditions, prevailing economy, and
demographic, social and technological trends. In order to manage these forces, the HR
department can implement strategies after collecting insights to develop a solution, which
promotes the performance of the company while ensuring stakeholder expectations.
Environmental analytical tools can be used by organisations in order to evaluate the internal
and external environmental factors that affect their business operations. This report
compared SWOT and PESTLE analysis in order to determine how they assist organisations in
being prepared for current and future challenges. This report also analysed the key steps
involved in strategy formulation process that assist companies in addressing the key issues
faced by them while linking the role of HR in each stage. This report also evaluated the role
of HR in promoting business ethics and accountability. Different ways through which
business performance can be evaluated and example of traditional and modern indicators
are identified. The role of HR in change management is also analysed in this report, along
with an evaluation of factors that affect these policies. Based on evaluation of these factors,
companies can ensure that they effectively manage HR challenges and be prepared for
future growth opportunities which must be disrupted in order to sustain the growth of the
company.

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