Formulation of Human Resource policies is a complex process. One needs to consider many angles, such as social forces, political environment, legal environment, local labor market, company's as well as external economic environment et cetera, et cetera.
Social forces impinging on Human Resources Management begin with the local society's norms about work and employment in general. What in the society lends status to individuals? What sorts of behavior are frowned upon and what sorts are condoned? What are viewed as the social responsibilities of the firm? What types of organizational control are (not) acceptable and legitimate?
Concerning the political environment, how do political pressures work on the organization in terms of Human Resources policies and practices? What do local governments expect? What support can be obtained from the political system? What impediments are imposed by the political system? Are aspects of employment relations subject to centralized bargaining and negotiation? Are employees and employers politically organized and mobilized?
Moving a small step to the legal environment, what are the statutory responsibilities of the organization? What rights do workers have, both individually and collectively? What sorts of employment practices are sanctioned? What legally enforced distinctions must be made among workers (e.g., exempt versus non-exempt in Europe)? What distinctions are impermissible?
As for the economic environment, what conditions exist in the local labor market? How great is labor mobility? What economic pressures does the organization face in other product and factor markets?
As an example of how the external environment can affect Human Resources practices and policies, consider how the employment systems and internal labor markets of aggressive Japanese corporations are supported by Japanese institutions and environmental conditions. These practices involve a lot of investment by the firm in the employee's skills and training, early in the employee's career. These practices make sense for the firm if the firm can be relatively sure that employees will not depart for other jobs-that is, if labor mobility is low. And, in Japan, it is: Putting it a bit thickly, it is sometimes said (among Japanese) that it is better to be a substitute on the championship team than to be the star of a second-place team. Status accrues to workers at the elite firms, status that they (at least until recently) lose if they shift jobs, especially to move to a lower status firm, even in a higher-status position. This is complemented and enhanced by low economic rewards for mobility. Finally, Japanese labor unions are organized on a company basis. These external social and economic factors work together to lower labor mobility and thus complement the array of Human Resources practices employed by the Japanese elite firms. Of course, to the extent that economic and social conditions are changing in Japan, elite Japanese companies are changing their Human Resources policies. And when they go overseas, these firms both adapt to the different environments they face and consciously attempt to locate their facilities in locales that foster low labor mobility and so fit relatively better their distinctive Human Resources practices.
Environmental factors are particularly important for multinational firms, especially those that seek (sometimes under political or legal pressure) to have a workforce that is representative of the host country. Note, for example, the relative difficulties that Japanese firms have had abroad in building paternalistic relationships with workers, faced with a culture of labor-management antagonism and legal limits on what can be discussed directly with workers.
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