External Factors Impacting HRM

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  • 0:01 External Factors Defined
  • 1:02 Social & Cultural Environment
  • 2:23 Technology
  • 2:56 Economic Environment
  • 3:59 Political & Legal Environment
  • 5:11 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley

Shawn has a masters of public administration, JD, and a BA in political science.

Businesses don't operate in a bubble and neither does human resource management. In this lesson, you'll learn about some important external factors that impact human resource management. A short quiz follows the lesson.

External Factors Defined

Meet Marcy. She's the vice president of human resources for her company. Like most executives, she likes to be in control, but like all good executives, she knows that total control is an illusion. There are things that Marcy can't control. A perfect example is external factors that affect her department.

External factors are things from outside an organization that directly or indirectly influences it. Oftentimes, these external factors are outside of the control of organization. These influences include the social and cultural, technological, economic, and political and legal environments. One way to remember these factors is to link it to the word STEP:

S for 'social and cultural'

Tfor 'technological'

E for 'economic'

P for 'political and legal'

Marcy must take steps to address these factors.

Social & Cultural Environment

The social and cultural environment in which a business operates will have an important influence on human resource management (HRM). The cultural and social environment includes such things as work ethic, attitude towards work and employee motivations. For example, monetary rewards may be valued highly in some cultures, while a greater work-life balance is valued in other cultures. HRM must assess these cultural factors and match motivators accordingly. If money is king, direct financial compensation in the form of high wages may suffice. However, if work-life balance is more important, a generous vacation and paid leave package may be more motivating.

A society's social and ethical views of the role of business in society will also influence how HRM operates. For example, once upon a time, child labor was not considered unethical. Now, not only is it considered unethical, but it's also illegal.


Technology also can present opportunities and challenges for human resource management professionals. New technologies may require HRM professionals, like Marcy, to hire new employees competent in the new technologies. Current employees may need to be retrained or released if their skills are no longer relevant to organizational needs. Even something as simple as a new version of a word processing program or a new digital copier may require HR-sponsored training.

Economic Environment

Economic conditions are a major external factor that is pretty much outside of the control of HRM but which can have a huge impact on the company. Recessions, economic booms and the general rate of inflation affect consumer demand, which affects personnel needs. Another huge economic factor is the unemployment rate, which affects the market rate for wages and salaries.

Globalization also has a dramatic effect on HRM. It creates a more competitive environment requiring increases in productivity and more efficient employees. This means that Marcy and her department must do their best in selecting and developing employees to maximize productivity.

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