Factors affecting HR Policies

The following factors will influence the HR policies of an organization:

Laws of the country

The various labour laws and legislation pertaining to labour have to be taken into consideration. Policies should conform with the laws of the country, state, and/or province otherwise they are bound to cause problems for the organization.

Social values and customs

Social values and customs have to be respected in order to maintain consistency of behavior throughout the organization. The values and customs of all communities should be taken into account when framing policies.

Management philosophy and values

Management philosophy and values influence its action on matters concerning employees. Therefore, without a clear, broad philosophy and set values, it would be difficult for employees to understand management.

Financial impact

HR policies may affect productivity and an organization’s overall finances if they create unnecessary burdens or red tape for the organization’s workforce. Organizations may also want to consider how realistic it is to enforce a policy fairly or keep it up-to-date as these have the potential to create issues amongst employees.

Factor 1. Company Business Policy:

After having designed a business policy, a company would want to ensure that it has the right number of employees with the right type of skills and commitments to carry out the policy. It would also like to close the gap between the required number and the qualities of employees and the available number and qualities at the shortest possible time.

In other words, a company’s human resource policy is designed with the objective to execute its business policy irrespective of whether it is market driven or resource driven. It should be kept in mind that the execution of a business policy becomes easy when at the first place it is formulated taking into account the company’s internal human resource environment, its strengths and weaknesses adequately.

In the absence of such integration of human resource assessment with the business policy design, an organization may find that despite a very well-designed business policy the business outcome of the organization is far from satisfactory.

The problem with such business policies is that because the company did not consider the internal organizational structure, employee competencies, their culture and beliefs adequately, the post-facto alignment of human organization with its business goals becomes very difficult if not impossible. The more is the number and variety of employees in an organization, the more would be the level of difficul­ties that the organization is likely to face in shaping its human organization to meet its strategic require­ments.

Example: Let us take the case of a manufacturing company that uses lots of purchased items in its production and assembly shops. Over a period of time, it finds that its economic space is shrinking due to the entry of new players. To stay alive, the company decides to cut its operating cost substantially. It finds that most of the new players in the industry are already using SAP (Systeme, Anwendungen, Produkte or System Application and Products) technology to manage their supply chain and are reaping good benefits of reduced operating cost and more effective stores management.

However, the company took a lot of time in deciding to adopt the SAP technology because it was worried over the lack of managerial expertise to use SAP technology. It checked with a vendor who was willing to supply the SAP package and as a part of the contract was willing to provide the required training to all its man­agers. The company went ahead and signed a contract with the vendor for a year to impart SAP training to all of its managers who comprised more than 1000.

What happened was that even after the training was successfully completed by the vendor and all the trained managers went back to their respective po­sitions, no more than 50% of the managers were using the SAP technology. The question is what went wrong?

In organizations where business policies are driven by employee strengths in terms of their un­derstanding of business opportunities and their confidence to cope with the challenges of creating a niche for themselves, the task of executing a business policy becomes much easier. It becomes easy because the business policy has already factored the areas of organizational issues that could pose a challenge and made adequate resource provisions including the time to achieve the business goal.

Factor 2. Social Forces:

Social forces and their effects on the supply of educated and experienced manpower in the economy are important considerations that a company has to take care while formulating HR policies and strategies. A policy which may appear very appropriate from the business point of view may be non­-executable because the manpower supply position of the market is quite inadequate.

Similarly, certain types of rewards and incentive policies which may appear very attractive because they have been tested in organizations in other countries may turn out to be quite inappropriate in one’s organization because they are not well aligned with the cultural beliefs and values of the employees. A workforce with varied ethnic background poses another challenge and obstacle in implementing a very individual- oriented performance management system.

Factor 3. Regulatory Forces:

The HR managers when designing HR policies should be fully conversant with the existing labour regulations. A good number of regulations aim at protecting the workers from undue hardship and strain.

It is important that the strategic design of a HR policy takes the extant of labour regulations into account lest unwarranted labour query and interventions from labour commissioner and/or judiciary come in the way which may not only delay the implementation of certain HR policies but in a worst-case scenario damage a company’s reputation very severely.

Factor 4. Technological Forces:

Due to availability of information technology and communication system, new types of HR policies, and practices are emerging. When others are already using a new technology and are executing employment contracts with the new technology, its non-use in a com­pany is likely to make the operating cost higher than those of its competitors.

As such when strate­gically designing the HR policy, the company should consider the emerging technological scenario and opportunities that such change may provide in all important areas of HR functions.

Factor 5. Competition and Competitor Behaviour:

While designing HR policies, labour market conditions and employment practices of competitors are important considerations to be taken care of. Under conditions of tight labour market, a company may have to adopt a very flexible approach. It must be willing to spend more for maintaining a stable workforce and motivating the employees for higher work effort.

On the other hand, workers of an or­ganization may show higher receptivity to tough employment condition when overall labour demand is low and not much new business investments and opportunities are coming in the neighbourhood.

The presence of a good number of strong competitors for manpower could be a threat to one’s own policy as well as opportunity to experiment with new types of employment practices. A company could learn from the successes and failures of new HR initiatives and experiences of others. It could even use others’ practices as a justification and selling point for a new policy.

Example: A few decades back temporary employment practice as an HR policy was totally unacceptable to labour unions in India. Many of them went on strike and resorted to other forms of disruptive activities. But now we see temporary employment practice has become the standard business practice with little resistance from the labour unions.

Factor 6. Internal HR Environment:

The external human resource environment is an important factor that helps in shaping the human resource policies of a company. However, an HR policy shaped entirely by considering the character­istics of the present external human resource environment and company business goals may not yield much worthwhile business result for a company that has been working for a good many years with a completely different HR system.

When designing any new HR policy an assessment should be done of the internal HR environment of the company including the expectations, beliefs, and values of the employees who got used to certain kind of HR services from their managers.

The areas of internal HR environment critical to the success of any new HR policy are employee number and their com­petencies, organizational structure and power relations between different groups, employee belief, value and organizational culture, managerial experience, expertise and philosophy on the use and role of HR.

HR Policies Options

The HR strategy or HR policy of an organization emerges after considering six factors:

(i) Company business strategy

(ii) Labour market competition

(iii) Labour market regulation

(iv) Social forces

(v) Technological forces

(vi) Company internal HR environment.

Then what are the possible HR policy options that an organization can pursue to achieve its long-term business goals.

Some of these policy options are as follows:

1. Strategy on employment contract: Short-term employment, contract employment, long-term employment.
2. Strategy on employee number: Manpower expansion, manpower contraction, selective area spe­cific expansion and contraction.
3. Strategy on manpower variety: Diversity of age, gender, ethnic background, learning background.
4. Strategy on HR system: Selective expansion along specific areas of HR systems.
5. Strategy on work system: Functional separation to integrated system, mixed system of functional separation and integration.
6. HR strategy to meet generic business strategy: Cost leadership, differentiation, and focus.

The design, delivery, and goal of HR services under each of these strategies are different.