Essay: Business Issues & HR Context Overview

Provide an overview of the business issues and context of human. Discuss about the steps of strategy formulation and implementation and role of HR along with its contribution to ethics and accountability.

How HR Looks Different Across Organizations

According to Collings, Wood and Szamosi (2018), it is important for every organisation to understand the resources it contains and the manner in which these resources are effective in providing an advantage to the organisation. For this reason, it is necessary to conduct an analysis of the factors that may affect the steady growth of business and at the same time take into consideration internal capabilities of an organisation. At the same time, it is necessary that the role of an HR in an organisation be assessed so that ethical considerations as well as accountability of the business can be maintained.

This report aims at providing an overview of business issues and contexts of human resources.

The report provides an overview of key business issues and the main external factors affecting different organisations and the impact of HR. It provides an understanding of how organisational and HR strategies and practices are shaped and developed.

The report puts forward a SWOT, PESTLE and Porters Five Forces Analysis and discusses the steps of strategy formulation and implementation, the role of HR along with its contribution to ethics and accountability.

Finally, the report explains how to identify and respond to changes in the business environment.

HR is required in all organisations that employ people however, HR can diver vastly between organisations, although every organisation regardless of size, industry or location will work to the same core principles and legislation, their approach will be very different.  Some organisations will be renowned for having lots of HR issues i.e. organisations with big turnover however banking for example maybe more stable and as a result have fewer HR issues.

For example, HR will look different within all of the following sectors

Multi-National Limited Business Small/ Private Companies

Public Sector Military of Defence   Government Organisations

Public regimented – private not bound by government

Large, multinational and public-sector organisations are likely to have structured policies and procedures and as a result takes longer to come to decisions than smaller, private companies will have the flexibility in their processes thus allowing them to come to decisions quicker, allowing them to act on changes.

As well as sector, other reasons, which make HR, look different including

• Size
• Type
• Management
• Location
• Multi-sited organisations across the UK
• International organisations
• Industry

Let us take the Armed Forces for example; their HR will be very structured and regimented. The HR model within the Armed Forces, is likely to be a pyramid structure, this is very common within large organisations.

The Importance of Ethics and Accountability in HR

Directors

Managers

Administrators

The pyramid model is a very different structure to HR within a small business that may have HR as a stand-alone role or an independent, external HR consultant.

If we look at a multi-sited organisations such as Sainsbury’s, they are likely to have a centralised function in head office who will manage HR throughout the organisation, implementing policies, procedures and deciding how HR looks through the entire organisation and individual site will have an employee responsible for HR within that site.

There are numerous HR set-up’s including both specialist and generalists; generalists are responsible for all areas of HR whereas specialists have an area of expertise and are responsible for one particular area such as;

• Recruitment and Selection
• Absence Management
• Training and Development
• Reward and Benefits
• Employee Relations

Thus, large organisations can have several specialists that make up their HR function.  

Over the years, HR has changed and adapted significantly, historically Human Resources were referred to as Personnel and was very administration based. In the late 80’s, early 90’s HR matured and became more policy and procedures based, today HR as well as the above has a heavy focus on engagement and performance. Organisations are not legally required to focus on the areas however, it can help an organisation stand out from its competitors and make them a better place for people to work. Society has changed and there is now a strong ethos of looking after people in the workplace and as a result, organisations have much more of a people culture now.  

Regardless of the Organisation, today HR needs to be ethical and have strong sense of responsibility to its people. The HR department has a responsibility to deal with issues correctly, consistently, fairly and they are accountable for their actions and decisions.

Management also impacts how HR looks within an organisation, Organisation’s that have strong leadership and manage people manage well will look differently to organisations that have managers with poor leadership skills.

Other things that can influence how HR looks within organisations include;

• Legislation e.g. GDPR
• Case Law
• Management structure
• Society changes e.g. family friendly/ women back to work – more supported – financial environment

Organisations need to be aware of the internal and external factors, which impact their business.

Analysing these factors allows HR and senior managers to gain an insight into the influences and risks, which may affect their industry and organisation, the knowledge gained from analysing these factors, can then be considered when making business decisions and strategies.  

The importance of considering the internal and external factors is imperative when considering plans for change; it helps to identify and highlight the potential for additional costs and can prompt research into plans.

Factors Influencing the Business Environment

There are various methods that can be used to analyse a business – the three models of analysis the report will confer are;

1. SWOT
2. PESTLE
3. Porters Five Forces
4. PESTLE

A PESTLE analysis is used to explain external factors influencing the business of an organisation and what affect the forces this will have on the business. PESTLE is aimed at determining how six external forces affect an organisation and what affects each of these have on the business.
The external forces are; political, economic, social, technological, legal and environmental.

Political represents the political factors that can affect a business, several aspects of government policy that can affect the way a business may operate and this can directly affect the overall profit of a business. Brexit for example will affect both an organisations current work force and how employees are recruited going forward. Workers from overseas may not be eligible to stay within the UK and going forward recruitment may not be easy if free movement within Europe is not granted. This would mean European Union migrants will have to follow the same procedures as individuals from outside of EU if they want to work in with UK – this process can be lengthy and will require individuals to apply for work permits and VISA resulting in increased administration costs. The result of this could be skills shortages within certain industries.

Economic Factors:  These factors include all determinants of the economy and their condition. For example, this includes the interest rate, inflation rate, monetary and fiscal policies, and foreign exchange affecting the exports and the imports (Bratton and Gold 2017). Businesses need to analyse these factors based on the environment and build in strategies that fall in place with the changes.

Social Factors: Every country is different with unique mindsets that have an impact on business and the sale of the products and its services. For example, these factors include connected and generated demographics, social lifestyles and the domestic structures. Organisations study them to get a better picture of consumer and the market (Schaltegger and Wagner 2017).

Technological Factors: Unquestionably, technology influences a business. Technology changes take place every minute and organisations need to stay up to date with developments to allow them to stay current and grow within their industry, integrating developments as and when required. Technological Factors also help in understanding how consumers react to the technological trends allowing the organisation to utilise them for their benefit.
The internet for example has changed the way consumers shop and organisations need to adapt to these changes to ensure their survival.

SWOT, PESTLE, and Porter's Five Forces Analysis

Legal Factors: These include the legislative change that affects the business environment. For example, if a regulatory body implements regulation for industries then the laws have an impact on all the business and industries within the economy (Doppelt 2017).

Environmental Factors: These factors include the climate, geographical location and weather. For example; increased awareness of the accumulation of plastic products in the UK and the impact plastic pollution has on wildlife, marine life and indeed humans led to a law been passed that required all large retailers in England to charge 5p for all single-use plastic carrier bags from October 2015.

• SWOT been an acronym for;
  Strengths
  Weaknesses
  Opportunities
  Threats

Albert Humphrey from Stanford Research Institute founded the SWOT analysis between 1960 -1970. It is an analysis to understand internally the business and its competitive position, by identifying its strengths, weaknesses, and opportunities open to you and threats that you face. Used in a business context, it helps you to carve a sustainable niche in your market.”

Strength refers to the capabilities and the resources of the company that allows it in the engagement of activities for the generation of economic value and competitive advantage. For example, the strength of the company either lies in its abilities of creating unique products or higher-level customer service or presence in the numerous markets (Teece 2014). The strengths might also include things like the organisation’s culture, its training and staffing methods and the quality of the managers. In other words, the capabilities of the company are considered its strengths.

Weakness refers to the lack of capabilities or resources that prevents an organisation from the generation of an economic value or gain in competitive advantage when used for enacting the strategy of the company. For example, a firm might have a bureaucratic and large structure that limit the ability of competing with smaller and dynamic companies (Teece, Peteraf and Leih2016). Weakness of a company is also defined when an organisation has a higher labour cost compared to its competitor who can achieve similar amount of productivity from the lower cost of labour.

Opportunities provide an organisation with a chance for improving the performance and competitive advantage. While some of the opportunities are anticipated while others are unexpected. Opportunities also arise when an organization deliver niche of new products or services or when the products or the services are offered at the different times in the varied locations. For example, the increase in the use of the internet has put forward innumerable opportunities for various companies in expanding their product line (Jones and Jones 2013).

Threats might refer to a group, organization or an individual outside a firm that aims at reducing the level of performance of the company. All companies face some form of threat within the environment. In fact, the successful companies face stronger threats since there is a tendency on the part of the other companies to be a part of the success. Threats might also be due to the new products or services from the other companies that aims in taking away the competitive advantage of the company (Sadgrove 2016). Regulations from the government and the presence of consumer groups might also act as threat.

Developed by Harvard Business School’s Michael E. Porter in 1979, Porters 5 Forces analyses an organisations competition by looking at 5 specific factors;

Bargaining power of suppliers

Bargaining power of customers

Threat of new entrants

Threat of substitute products

These factors help determine whether a business can be profitable, based on other organisations within the same industry.

Each method of analysis is used to understand the business from different perspectives depending on what the organisation is doing and what it is hoping to achieve. There is a time and a place for each method depending what you are trying to achieve.

The stages of strategic formulation and implementation are explained with the help of Andrews Model. Source: (Bamberger, Meshoulam and Biron 2014)

Why is there a need to form a strategy?

 What would happen if we didn’t have a strategy?

What different approaches can we take and why would take this approach

Give some examples of how business performance can be evaluated making reference to traditional and modern indicators should make particular reference to the role of HR in business planning and change management with some examples to illustrate HR’s key role

If an organisation did not have a strategy they then would be very lucky to be successful, organisations need to make plans to ensure the business is heading in a direction to achieve its goals. Firstly, the organisation needs to understand what it wants to achieve as a business; this could be anything from;

• Increasing Profit
• Increasing Turnover
• Increasing Share of market

Once a goal has been determined, the organisation can then put a strategy in place to ensure the overall goal is met.

The strategy will be reviewed on a regular basis to ensure

Every organisation will have a different goal, once this has been determined we then need to put a plan in place of how they are going to achieve it or it will not be successful. The type of organisation/ industry will affect the strategy used to achieve the goal

An organisation may have a strategy in place for the next year, 5 years or even 10 years – it is then imperative that the business don’t implement a strategy and review the progress regularly and not wait until the end of the year to see if you have, for example him your £1M turnover figure. Reviewing monthly allows the organisation to review how they are performing and understand if they are on track to achieve the overall goal.

The board of directors will agree goals for the business over the year; the goals will then be broken down into departments and reviewed monthly. The individual departments can then deal with issues and improvements as they go along.

Traditionally organisations only looked at the financials to understand how successful they are however nowadays all areas of the business are evaluated;

• Absence
• Targets
• Every area which has an impact on the profit line
• Time deliveries
• Product/ service quality
• Customer satisfaction

If we did not we would get to the end of the year and cross our fingers and hope for the best.

Balance scorecards provide a balanced view of business performance using a traffic light system rather than focusing purely on the financials They would be reviewed monthly to ensure the business is achieving the targets and if not, they will assess why not and what can be done to achieve them.

£x profit by month
£X staff turnover
£X number of absences goals for year

Google the term company dashboard – make look more interesting using a graph or pie chart and share with employees to show how business performing

All good and well knowing these things but are we competitive against other organisations? A way of understanding this is to benchmark salaries - is the package we offer competitive?
HR’s responsibility to benchmarking salaries against other organisations in order ensure the package offered to employees is competitive, it is also a way to understand what else is happening away from our organisation.

Whatever goal and strategy a business chooses, the Human Resources department are accountable for ensuring the strategy is fair and consistent among all employees. It is HR’s responsibility to be accountable for decisions made; we need to be seen as credible, professional and accountable for the decisions made this will ensure team members trust them. If this is not the case then the result could be de-motivated staff,

On a concluding note, it can be said that the external and internal factors plays a vital role in influencing the business and the HR functions. HR also plays a key role in strategy formulation, implementation and ethics of a business.

References:

Bamberger, P.A., Meshoulam, I. and Biron, M., 2014. Human resource strategy: Formulation, implementation, and impact. Routledge.

Bratton, J. and Gold, J., 2017. Human resource management: theory and practice. Palgrave.

Brewster, C., Chung, C. and Sparrow, P., 2016. Globalizing human resource management. Routledge.

Collings, D.G., Wood, G.T. and Szamosi, L.T., 2018. Human resource management: A critical approach. In Human Resource Management (pp. 1-23). Routledge.

Doppelt, B., 2017. Leading change toward sustainability: A change-management guide for business, government and civil society. Routledge.

Jones, G.R. and Jones, G.R., 2013. Organizational theory, design, and change. Upper Saddle River, NJ: Pearson.

Sadgrove, K., 2016. The complete guide to business risk management. Routledge.

Schaltegger, S. and Wagner, M., 2017. Managing the business case for sustainability: The integration of social, environmental and economic performance. Routledge.

Teece, D., Peteraf, M. and Leih, S., 2016. Dynamic capabilities and organizational agility: Risk, uncertainty, and strategy in the innovation economy. California Management Review, 58(4), pp.13-35.

Teece, D.J., 2014. The foundations of enterprise performance: Dynamic and ordinary capabilities in an (economic) theory of firms. Academy of management perspectives, 28(4), pp.328-352.

Tran, Q. and Tian, Y., 2013. Organizational structure: Influencing factors and impact on a firm. American Journal of Industrial and Business Management, 3(2), p.229.