The evolving role of HR in the contemporary business
world

IntroductionCLF1 

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The role
of HR in the contemporary business world is evolving. Internal and external
forces impact organisations and in turn the HR function within the
organisation. HR has changed in the last decade, moving from a passive role in
the business into a strategic function that provides guidance and advice and
manages the human element according to the business strategy. In a challenging
climate where competition is high and changes happen often HR is constantly
challenged. I will be looking at the key forces that shape the HR agenda, what
internal and external factors impact business and HR decisions, business
strategy and performance evaluation in this paper.

2.1: Key forces shaping the HR agendaCLF2 

The HR
agenda is strongly influenced by developments in labour markets and product
markets. In the last decade, we have seen a substantial change in the role of
HR. As our environment and the way businesses operate is constantly changing,
the demand on the HR function is also constantly evolving. Globalisation,
developments in technology and government policy among other factors affect how
HR operate within an organisation.

One of
the major changes to HR as a function is that it has become more strategic,
focusing on long term decision making and aligning its function with wider
business decisions. However, how an HR department within a company operates
depend widely on the size of the company and what industry it operates within. In
larger organisations certain parts of everyday HR, such as administrative tasks,
have been delegated to line managers, centralised or outsourced to save costs
and ensure the department operates efficiently (Taylor and Woodhams, 2016). In
smaller companies HR is more generalised and is less involved in the strategic
planning and vision of the company. For these companies, the cost of an in-house
HR Business Partner could be too high in relation to the perceived value they
add and the organisation might benefit from outsourcing certain parts of HR or
turn to an HR consultancy for certain HR needs.

With an
increasingly competitive environment all departments within and organisation
are expected to add value. In these organisations HR operate as Business
Partners who need to justify how they add value and how they can support the
organisation in reaching its goals and targets. How the HR function operates
within an organisation is also dependant on which sector the organisation
operates within. The public sector might experience less flexibility than the
private sector when it comes to following procedures and best practice within
HR. Companies where trade unions operate must include the unions when negotiating
salary or discussing employment issues.

According
to the CIPD “economic shifts, including globalisation and Brexit, is currently
the most common driver of change in UK organisations.” (CIPD, 2017). Brexit is
expected to affect UK businesses in several ways, one of the most relevant results
of Brexit for HR is the expected limitation of supply of labour in several
sectors. Once the UK has left the European Union our employment landscape is
predicted to be one where it is exceedingly challenging to successfully recruit
employees, specifically for lower skilled jobs (CIPD b, 2017). This will mean
recruitment will be increasingly more challenging and HR might have to invest
more time and money on recruiting the right people which will limit time and
money spent on other functions within HR.

Along
with Brexit, globalisation is a big driver for change in the employment market.
According to Taylor and Woodhams (2016) “Governments have acted in order to
promote globalisation in order to boost international economic development”. Globalisation
has transformed the industrial landscape, with production being outsourced to
less expensive countries, meaning we have seen a strong growth in the service
sector in the UK to be able to compete effectively (Taylor and Woodhams, 2016).
Many service sector jobs rely on unskilled labour which will mean it can be
hard to fill those roles in the coming years.

One of
the challenges for the HR function in both small and large organisations when
operating in a changing environment and a market with increased competition is
to consider the ethical implications of any business decisions. Increased
competition and potentially lower revenue would motivate an organisation to
focus on cutting costs where possible which can affect employees. The growing
trend of flexible employment and increased pressure on performance for example
can have a negative effect on the workforce. HR as a function should always
consider the ethical implications of any business decision and champion ethical
business decisions within their organisations. HR professionals that are
members of the CIPD will be familiar with the Code of Professional Conduct and
they should show commitment to adhering to this code of conduct in their work
life.

2.2: Different tools for analysing the business environmentCLF3 

To
optimize performance in a changing business environment, businesses make use of
a variety of tools such as PESTLE, SWOT (Strengths, Weaknesses, Opportunities,
Threats) and Porters Five Forces Analysis. These tools are used to analyse the
external environment as well as the internal environment. Both of which affect
the strategy and direction of a company.

An
organisation must look to the external environment as well as their own
internal environment before creating a sound strategy. Internal analysis is
often done by performing a SWOT analysis which is essentially a planning tool.
This method was developed by Albert Humphrey in the 60’s and 70’s and the CIPD
(2015) states “It involves stating the objective of the business or project and
identifying the internal and external factors that are either supportive or
unfavourable to achieving that objective”. When carrying out a SWOT analysis
you would identify your strengths by looking for positive traits which can be
controlled by the organisation and in effect are internal. Weaknesses would be
found by considering internal factors that might hinder the organisation in reaching
its goal. Opportunities are external factors that might allow the organisation
to grow and develop and the threats would be external factors that the
organisation is not able to control (CIPD, 2015).

The SWOT analysis works well to
understand the opportunities and challenges the organisation faces, however if
it is not carried out on a regular basis it loses its value. It is a good tool
to facilitate strategic thinking and it would enable leaders to see what
strengths to focus on and what areas offer opportunities for growth. As a SWOT analysis
is often not very structured it can be easy to miss out on important elements,
the analysis is often also based on assumptions made by the people carrying out
the analysis, which means decisions taken after performing a SWOT analysis
might not be the best for the organisation (CIPD, 2015).

To analyse
the external environment many organisations would use a PESTLE analysis. According
to the CIPD (b, 2015) “A PESTLE (Political, Economic, Sociological,
Technological, Legal, Environmental) analysis is an audit of an organisation’s
environmental influences, with the purpose of using this information to guide
strategic decision-making”. A PESTLE analysis offers a broad analysis of the
external environment and it is a good tool to use alongside a SWOT analysis. PESTLE
analysis provides organisations with a view of the current environment and
should highlight areas where the organisation believes there will be changes so
these can be considered when a business strategy is created.

While a PESTLE analysis can be very
useful to understand the environment an organisation operates in, encourage
strategic thinking and potentially provide an organisation with information to
anticipate future threats and act before they come into force, there are also
disadvantages. If the data used is not wide enough decisions can be made based
on incorrect or lacking information and the cost of external data can often be
high. In our fast-developing environment, it is hard to define which
developments might affect the organisation down the line (CIPD b, 2015).

The value of any analysis, PESTLE or
SWOT, depends on who carries out the analysis and the variety of opinions of
the involved parties (CIPD b, 2015). Having a varied group of people contribute
to the analysis guarantees a broader view on the internal and external
environment an organisation operates within.

1.1: Factors which impact an organisation’s business and it’s HR
functionCLF4 

An
organisation, and within it the HR function, is affected by factors in the
external and internal environment which should be identified and analysed on a
regular basis. To analyse the external environment, I will use the PESTLE
analysis mentioned previously as an example. The 6 elements of PESTLE have a
great impact on how we operate, and the changing role of the HR function. The
first element considers anything happening politically in our environment.
Political changes would often affect labour and employment and this would
include employment laws, government regulations and restrictions. This can also
affect an organisations performance as there might be tax related changes or
regulations for trade. An HR professional would be specifically affected by
changes to employment laws and changes in the labour environment for example
regarding the ease of recruiting the right people at the right time.

In 2007
when we started seeing the beginnings of the financial crisis which affected a
very substantial part of the world’s economy, a PESTLE analysis for an
organisation would take the impending economic crisis into consideration as
this would most likely heavily affect how an organisation operate and their
strategy. Interest rates and minimum wage are two other economic factors that
need to be taken into consideration, specifically for HR as this can affect
salary and employment budget. The sociological factor refers to issues such as
changes in culture, the population and its age. 2012 saw the first of the Baby
Boomer generation reaching retirement age (Bingham, 2012) which means a loss of
skilled and knowledgeable employees and a challenging time for HR to replace
the part of the workforce they are losing to retirement.

Technological
changes affect our society and it is an area that is constantly experiencing
rapid growth. An example of this is mobile phones and social media which have
both positive and negative effects on the workforce. We as employees are more
connected than ever and we can work from home, on our commute, on holiday,
which means we never switch off. The lines between our private and working life
are often blurred and we spend less time taking care of ourselves. Constant
connectivity can be a challenge for HR and to define if it is a positive
development as it might increase productivity and revenue for the organisation.
On the other hand, employees that never switch off might end up with health
issues that will affect the organisation negatively in the long run and prove
challenging for HR professionals. The fifth and sixth parts of the PESTLE
analysis are legal and environmental factors. Legal refers to any changes in
the law which is very relevant for HR professionals in the next few years after
the vote to leave the EU and potentially replacing current EU legislation with
legislation that is set specifically in the UK. Environmental factors such as environmental
regulations and issues will also have an impact on the organisation and its
success.

Internal
factors such as the demands from stakeholders and the culture in the
organisation are also important to HR professionals as this will influence
decision making in all areas where HR is involved.

2.3 and 2.4: The key stages in strategy formulation
and implementation

All
organisations should adopt a strategy to increase their chance of success in
our highly competitive world. There are three different approaches to strategy
formulation: rational, emergent and symbolic. A rational strategy is set by
senior management who has assessed the internal and external environment. An
emergent strategy is one that develops over time as the organisation responds
to relevant opportunities within the market it operates. Symbolic strategy is
one that is set after the organisation has experienced success and therefore it
did not have any impact on said success (Taylor and Woodhams, 2016). HR
professionals work best with rational strategies as these are defined and can
be followed, for example when planning the recruitment strategy for the
organisation. An HR department working without a strategy can still operate
efficiently and with success, however when the organisation has set goals and
objectives and a defined strategy, HR professionals have tools to apply to all
areas they work within; recruitment, managing the employee lifecycle, learning
and development, employee relations and compensation.

A
strategy is formed in several stages, starting with setting the mission and
objectives of an organisation. Once the mission and objectives of the
organisation have been decided an organisation should first analyse their
internal and external environment. With tools such as SWOT an organisation can
identify their strengths and opportunities which will guide which type of
strategy to adopt.

There
are 3 generic strategies an organisation can choose to adopt, according to Porter
(1980): Cost leadership, differentiation or focus. For HR the choice of
organisational strategy has a significant impact on the HR strategy. If the
organisation has chosen a differentiation strategy the HR function will often
focus on recruiting skilled people that can assist the organisation in
providing a unique product to its customers. On the other hand, if an
organisation chooses to focus on cost leadership such as Primark, costs must be
kept low and this will affect salaries and in turn recruitment as it can be
challenging to recruit skilled people when remuneration and benefits are low.

 

3.1 Evaluating business performance

Organisations
traditionally evaluate their performance by using financial measurements such
as return on investment and sales growth. However, to accurately measure
performance, modern tools such as the Balanced Scorecard provides an
organisation with a more accurate view of their performance. Financial measures
are still important when measuring success, however the Balanced Scorecard
measures financial performance along with other measures which are; Customer
Perspective, Internal Business Perspective and Innovation and Learning
Perspective (Kaplan and Norton, 1993). In the 4 areas listed an organisation
would look at how it can be different to its competitors, define the critical
success factors for the organisation and define its measurements of success.

Another
modern measure is Human Capital which measures the knowledge and skills of an
organisations employees (CIPD c, 2017). HR professionals gather and analyse the
data relating to human capital, both quantitative and qualitative data such as
turnover and employee engagement. Such data provides the organisation with an
insight into which areas that need attention to be able to successfully retain
productive and happy employees. If human capital is not taken into
consideration before changes are implemented the change initiatives might not
be successful. According to the CIPD (2016) “Failure to introduce effective
change can have a high impact: loss of market position, removal of senior
management, loss of stakeholder credibility, loss of key employees, and reduction
in engagement”.

 

 

 

3.2 How to assess data and use this for planning
purposes.

To make
educated decisions and strategic moves an organisation should always consider
the internal and external data available. Human capital data for example
provide an organisation with excellent information on the internal environment.
Human Capital data is, among others, performance management results,
productivity data, length of service, employee turnover, demographics, employee
surveys, pay and benefits (CIPD c, 2017).

While
internal data will provide information on the workforce and how the
organisation is performing. External data such as government reports will
provide an organisation with information which can guide HR and organisational
strategy and decisions. Competitor analysis will highlight what competitor
organisations are doing and might provide an organisation with ideas in regard
to operation and strategy. Organisational strategy should be guided by all the
information that is available which can provide the most complex picture of
both the internal and external environment.

Conclusion

To
conclude, the evolving role of HR means HR professionals are more involved in
business decisions and formulating organisational strategy. For an organisation
to operate successfully they should analyse their internal and external
environment before formulating a strategy. An organisations HR strategy is
created to align with the wider organisational strategy and the aim is to
provide great HR to the organisation and support its stakeholders. With the use
of HR metrics and external data the organisation can continue to develop and
analyse its strategy so it can keep its competitive edge in the contemporary
business world.

 

References:

Bingham,
J (2012)Record Numbers Reach Retirement Age as Baby Boomers Turn 65. The Telegraph online, 25th
September 2012, Available from: http://www.telegraph.co.uk/finance/personalfinance/pensions/9563647/Record-numbers-reach-retirement-age-as-baby-boomers-turn-65.html
accessed: 1st July 2017)

CIPD
(2015) SWOT Analysis, Chartered
Institute of Personnel and Development online, Available from: https://www.cipd.co.uk/knowledge/strategy/organisational-development/swot-analysis-factsheet,
accessed 1st July 2017

CIPD b
(2015) PESTLE Analysis, Chartered
Institute of Personnel and Development online, Available from: https://www.cipd.co.uk/knowledge/strategy/organisational-development/pestle-analysis-factsheet,
accessed 1st July 2017

CIPD (2016),
Change Management, Chartered
Institute of Personnel and Development online, Available from: https://www.cipd.co.uk/knowledge/strategy/change/management-factsheet,
accessed 2nd July 2017

CIPD (2017) Economic transformation is the biggest driver
of change in organisations, Chartered Institute of Personnel and
Development online, Available from: https://www.cipd.co.uk/news-views/news-articles/drivers-of-change,
accessed: 25th June 2017

CIPD b
(2017) Brexit impact on workforce trends,
Chartered Institute of Personnel and Development online, Available from:
https://www.cipd.co.uk/news-views/brexit-hub/workforce-trends, accessed: 25th
June 2017

CIPD c (2017),
Human Capital, Chartered Institute of
Personnel and Development online, Available from: https://www.cipd.co.uk/knowledge/strategy/analytics/human-capital-factsheet,
accessed 15th June 2017

Pershing,
J.A. (2006) Handbook of Human Performance
Technology, 3rd Edition, San Francisco, Pfeiffer

Porter,
M. (1980), Competitive Strategy:
Techniques for analysing industries and competitors, New York, The Free
Press

Taylor,
S and Woodhams, C. (2016), Studying Human
Resource Management, 2nd Edition, London, Chartered Institute of
Personnel and Development

 CLF1A good opening Christine which sets the content and the environment
that HR is operating in.

 CLF2You discuss the main areas that impact on organisations, referring
to the product and labour markets  You go
on to reference the models for HR structures that would be considered based on
certain factors (cost of HR against size of organisation).  You correctly identify that both Brexit and
Globalisation will continue to affect how the HR agenda will develop and the
need for professional ethics.  This is a good
answer with some well-developed points.

 CLF3You provide a good overview, description and application for SWOT
and PESTLE, you may want to consider the inclusion of some diagrams to aid
understanding.  You refer to Porters Five
Forces however do not describe or provide an an analysis.

 CLF4This is a very comprehensive application of PESTLE Christine.  You have covered some interesting areas, and
provide a good analysis of the impact on HR of those environmental factors.