IMPORTANTS ABOUT HRM. (Chapter- 08)

 Economic Constraints for HRM in Srilanka.

The business environment is subject to constant change, the most striking changes are now mainly related to the technological and demographic environment. Employers' war for a skilled workforce is on the rise, and a highly competitive environment forces enterprises to look for new ways to increase efficiency and performance, requiring HR managers to implement new, sophisticated approaches to managing human resources. Can universal, long-term valid HRM practices be used in this dynamically changing environment? The paper focuses on the study of a phenomenon that, unlike other environmental factors, has a cyclical character, and its behavioral patterns can be predicted as they were scientifically researched and documented. This phenomenon is the economic cycle and is examined in the context of its impact on HRM practices. The study examines whether it is possible to include a formula reflecting the individual phases of the economic cycle in HR management practices. When asked whether there are individual practices or sets of practices that HR managers should apply at specific phases of the economic cycle, the author analyses the behavior of selected macroeconomic factors in three successive economic cycles and defines their impact on applied HRM practices.
Understanding the economic environment is crucial for any business or investor, especially in a dynamic market like India. Economic environment refers to the external factors that influence a company's operations, including economic policies, market conditions, and broader economic trends. These elements are pivotal as they determine how businesses plan, execute, and expand their operations. 

A sound grasp of the economic environment enables companies to navigate risks and leverage opportunities better, thus playing a critical role in strategic decision-making. This blog explores the intricate details of the economic environment, shedding light on its definition, factors, and importance in the business landscape.

What is the Economic Environment in Business?

The economic environment, meaning in business, encompasses all the economic factors that affect business operations directly or indirectly. These factors include the overall economic policies of the country, the economic system in place, the nature and structure of the economy, and economic conditions that impact business performance, such as inflation rates, interest rates, GDP growth, and unemployment levels. 

Knowing these elements makes businesses make informed decisions, predict future trends, and align their strategies accordingly.

Factors of Economic Environment

The business economic environment is shaped by many factors that influence business performance and sustainability. These factors can be classified as internal and external elements that businesses must monitor and adapt to ensure success.

1. Macroeconomic Indicators

• GDP Growth: The Gross Domestic Product reflects the overall economic health of a country. A growing GDP indicates a flourishing economy, offering business opportunities to expand. Conversely, a declining GDP signals economic stagnation or recession.
• Inflation: High inflation reduces purchasing power and affects demand, while low inflation may encourage spending but could indicate an economic slowdown.
• Unemployment Rates: High unemployment levels affect consumer purchasing power, reducing demand for goods and services, while low unemployment supports market stability.

2. Government Policies

• Fiscal Policy: Taxation and government spending influence economic activities. High taxes can reduce disposable income, impacting consumer demand, while government spending on infrastructure boosts economic growth.
• Monetary Policy: Central bank policies on interest rates and money supply impact borrowing and investment decisions by businesses.

3. Global Economic Trends

• Globalization: Increasing interconnectedness impacts trade, outsourcing, and international investments.
• Exchange Rates: Currency fluctuations affect the cost of imports and exports, influencing pricing and profitability.
• International Trade Agreements: Tariffs, trade restrictions, and free trade agreements shape the business economic environment.

4. Technological Advancements

Technology impacts productivity, market access, and innovation. Businesses leveraging emerging technologies such as artificial intelligence and automation can achieve operational efficiency and competitive advantages.

5. Consumer Behavior

Economic factors like income levels, cultural trends, and market confidence influence consumer preferences and spending patterns. Businesses must adapt their offerings to align with these preferences.

6. Market Conditions

• Competition: Market dynamics such as monopoly, oligopoly, or free-market competition dictate pricing and market strategies.
• Demand-Supply Dynamics: The balance between demand and supply affects product availability and pricing.

By comprehensively analyzing these factors, businesses can predict changes in the economic environment and adopt resilient strategies.

Technological Adaptation

What is HR Technology (Human Resources Tech)?

HR technology (human resources technology) is an umbrella term for hardware and software used to automate the human resources function in organizations. HR technology, often referred to as HR tech, optimizes core HR functions with the goal of helping HR professionals streamline time-consuming tasks. Core technology systems include employee payroll and compensation, talent acquisition and management, workforce analytics, performance management and benefits administration.

HR tech has developed rapidly in recent years, with large employers around the world widely adopting core HR technology systems from enterprise software companies such as Oracle, SAP and Workday, as well as specialized HR tech vendors. Many of these employers are entering a second generation of HR technology by migrating from their on-premises systems to cloud platforms, including software as a service (SaaS). Small and midsize businesses (SMBs) are also digitizing their human resource functions, commonly turning to SaaS platforms or cloud-based HR technology outsourcing vendors.

Why is HR Technology Important?

HR technology helps HR professionals manage tasks throughout the employee lifecycle. Its tools aid several processes, including reducing the amount of administrative work. Because of the automation features these tools provide, HR professionals have more time to focus on other functions, such as improving recruitment practices or increasing employee engagement and retention.

For employees, HR technology reduces the time they spend waiting for HR to make changes, updates or to respond to requests.

What is Human Capital Management?

Human capital management (HCM) refers to a set of practices and tools used for recruiting, managing and developing employees. HCM views employees as valuable business assets to be managed objectively and invested in.

Technology and globalization have significantly impacted human resources management (HRM). Technology allows for the streamlining and automation of various HR processes through the use of software and other tools.

At the same time, globalization increases the diversity of the workforce and changes the role of HR professionals, which significantly changes the whole process in the field. HR professionals must be proficient in cross-cultural communication and adapt to the standardization of HR practices and the trend towards outsourcing and offshoring certain functions.

Both technology and globalization present advantages and challenges for HR professionals, but it is clear that these forces will continue to shape the way HRM is conducted in the future. Let's take a closer look at the impact of globalization on business and how technologies have changed the useful way of human resource management.

Technology's Impact on HRM

Technology has had a significant impact on the field of HRM. One of the major ways in which technology has impacted HRM is through the streamlining and automation of HR processes.

With the advent of HR software and other technological tools, many of the tasks and responsibilities previously carried out by HR professionals can now be automated. This includes tasks such as payroll and benefits management, performance evaluations, and even hiring and recruitment.

The nature of recruitment and hiring has also changed with the incorporation of technology. Many companies now use online job boards and social media platforms to advertise open positions and attract potential candidates. As a result, this has made the recruitment process more efficient, as HR professionals can easily search for and review the resumes and profiles of a large pool of candidates.

Technology has increased the use of tools for HR management, such as HRIS and performance and learning management systems. These tools allow HR professionals to store and manage employee data, track and assess employee performance, and provide training and development opportunities.

Overall, technology has had a significant impact on HRM, improving efficiency and streamlining processes. However, it is important for HR professionals to stay up-to-date with the latest technological developments in order to effectively utilize these tools and continue to provide high-quality HR services.

REFERENCE 

• https://relik.vse.cz/20
• 18/download/pdf/172-Letkova-Natalia-paper.pdf
• https://timespro.com/blog/what-is-the-economic-environment
• https://www.techtarget.com/searchhrsoftware/definition/HR-technology#:~:text=Artificial%20intelligence%20(AI).,satisfaction%20or%20automating%20resume%20scoring.
• https://www.dzconnex.com/blog/what-are-the-effects-of-technology-and-globalization-on-human-resources-management#:~:text=Technology's%20Impact%20on%20HRM&text=One%20of%20the%20major%20ways,professionals%20can%20now%20be%20automated.