Business Issues and the Contexts of Human Resources
Internal and External Factors that Shape HR Agenda in an Organization
The main role of HR department in any organization is to promote generation and application of new ideas to give the best solutions or outcomes. The mission of HR department in any organization is to establish powerful and productive workforce to achieve the organization’s targeted goals. However, achieving the goals would require HR department to focus on major forces (internal and external forces) that affect HR agenda.
Various external factors influence HR agenda by encouraging organizations to focus on the best practices of realizing their objectives. Competition is one of the external factors that can reshape the HR agenda in ADNOC. For example, the company is forced to employ or embrace new strategies due to increased competition from other firms such as Dodsal, Dubai Petroleum, Sinopec, and Trouvay & Cauvin Group. The new strategies or practices of overcoming competitions are outlined by the HR department. Other than ensuring that the organization become successful, the new practices and strategies introduced by HR department of ADNOC are essential for increasing the competitive edges. The new strategies or practices are necessary for firms to improve their performance and outdo the potential competitors (Akoyo and Muathe, 2017). The other external factor that could reshape HR agenda is the economic trends experienced within the industry. The economic trends force HR managers to reshape their production lines and objectives to meet the prevailing demand introduced by such changes. For example, favorable economic situations would force ADNOC to implement HR strategies and practices that promote high production to meet the high demand. Technological changes are also external factors that could reshape HR agenda by forcing HR managers of the company to identify new practices that correspond to the prevailing technological advancements. HR managers use modern technologies to maximize their potential of achieving organization’s desired goals since technological developments introduce various opportunities to the company. Demographic is also an external factor that could reshape HR agenda since it influences the company to consider the number of workers required to maximize their outputs in a given market (Alcaraz et al., 2019). Demographic factors would also force HR managers to design their production goals to meet the expectations of different customers. Having knowledge in the above external factors would help HR managers to develop and implement new practices to enhance organization’s ability to remain competitive and achieve the goals.
The internal factors make it easy for HRs to focus and promote the best practices by enhancing collaboration with the management team. One of the internal factors that could affect HR agenda in ADNOC is the number and competency of employees. Having knowledge about the internal factors would force HR department to hire the right employees and qualified persons to deliver the best for the organization. The existing gap in the organization also reshape the HR agenda by forcing the department to determine the most appropriate actions to achieve the desired goals (Obeidat et al., 2020). For example, ADNOC could consider introducing employees’ training and educational program to empower its employees by equipping them with the best competencies. Empowering employees through regular training would also promote specialization in terms of skills and areas of expertise to ensure that the organization achieves the best outcomes. The organization’s mission and vision statements also dictate the direction of HR functions. For instance, HR departments would always design organization’s strategies that comply or align with the vision and mission statements.
Different Tools for Analyzing the Business Environment
Analysis of the environment is essential in every organization to collect and analyze data for the purpose of generating information that is useful in the achievement of the organization’s objectives. The tools for analyzing business environment are also significant in understanding the structure, policies and goals of an organization. There are different tools that are used in the analysis of the business environment which include SWOT, PESTLE, Scenario planning, and Porter’s Five Forces among others. The paper will compare SWOT and PESTLE tools of analyzing business environment (Obeidat et al., 2020). SWOT Analysis is an essential tool in analyzing a business at its start-up stage. It involves identifying strengths and the best opportunities that might be available to the business, and spot the threats and weaknesses of an organization. SWOT analysis is used to analyze both the internal and the external environment of a business. The four factors that affect SWOT include strengths, weaknesses, opportunities and threats.
- Strengths involves identifying the competitive edge of an organization, the areas in which an organization performs best and capitalizing on those advantages. Strengths of an organization include its core competencies, capabilities, its culture and resources.
- At this step the management find out areas in which an organization does not perform well, and that could require some improvement. The business then focuses on reducing the effects of the weaknesses on its production.
- This is the step where an organization identifies the weaknesses of its competitors. It involves doing research about the performance of an organization’s competitors to spot the areas where competitors perform poorly (Obeidat et al., 2020). Opportunities include external forces that result in competitive advantages. An organization then does the best out of the available opportunities in order to outperform its competitors.
- Threats involves spotting the dangers that an organization might face. It involves identifying areas that an organization’s competitors perform best. The business then adapts strategies for minimizing the effects of the available threats on its performance.
SWOT analysis is important because it enhances the understanding of an organization, builds the strengths of an organization, enable management to address the weaknesses of an organization and helps in the development of business objectives. The model is also significant since it is useful in analyzing both the internal and the external environment of the business, and the procedure for analysis is simple and clear to understand (Prouska and Kapsali, 2020). However, the model does not provide alternative decisions, can generate excessive information which might not be useful in decision making and it fails to prioritize factors in an organization.
PESTLE Analysis tool is used to examine the external factors such as political, legal environmental, technological and social (macro-environment) that affect business operations. SWOT and PESTLE analysis tools are all planning methods that are used by organizations to gain insights about their business operations and successfully execute their development projects (Prouska and Kapsali, 2020). The two tools are simple and easy to use since they do not require in-depth analysis. However, the two tools also exhibit various differences. For example, PESTLE analysis considers external factors only while SWOT analysis consider both internal and external factors. SWOT analysis can be used to compliment PESTLE analysis by highlighting the strengths and weaknesses while PESTLE analysis cannot be used to compliment SWOT analysis.
Internal and External Factors that Impact on Organization’s Business and HR Functions
The radical transformations in the business environment have eliminated the application of traditional models to sustain organization’s objectives, including ADNOC. Therefore, the company is required to strategize beyond balancing profit and loss account to mitigate the challenges such as climate change, globalization, technological changes, competition, demographics and social inequality. The company should be aware of the internal and external factors that affect business activities and HR functions to achieve sustainable growth using the scarce resources. The impacts of such factors on HR functions include devising the best change management strategies and styles depending on the anticipated changes (Singh et al., 2020). The HR strategies and activities must also comply with the changes in internal and external factors to ensure delivery of the organization’s strategies and objectives. HR departments must also acknowledge and work towards achieving the various expectations of each stakeholder in the organization.
One of the external factors that affect business operations and HR functions is competition. Competition introduces elements of fear among organizations due to uncertainties and unpredictable business changes. Currently, organizations often find it difficult to strategize their activities beyond 5 years due to complications brought by competition. Therefore, ADNOC is expected to be more agile and regularly updated to offset the challenges brought by competition through various mechanisms such as downsizing, offshoring, upsizing, outsourcing, acquisitions and mergers. The organization should also design and implement policies and practices that would promote rapid response to potential competitors in any business circumstance and meet stakeholders’ expectations (Singh et al., 2020). The other factor that affects business operations and HR functions is competition. Competition affects the arrangements of HR functions to approach the organization’s objectives. For example, ADNOC focuses on revenue generation and the HR functions are designed to manage the daily transactional services within an organization through the HR shared services center approach and Ulrich Model. The company also advances to include a team of HR specialists to handle specific areas such as workers’ rewards and compensation, employees’ management, and employees’ training and development.
The roles of HR functions in the organization also include change agents who ensure that organization’s activities align with its vision and mission even when changes are implemented. The line managers and HR business partners also work together to influence business strategies that would promote organization’s success in a competitive business environment. Competition would also force an organization to reduce production costs and improve quality of services delivery to ensure successful operations in the competitive business environment. The company could also consider having HR generalist working alongside operational management to deal with specific projects. The HR generalists are introduced to wealth of knowledge and expertise to successfully work with multiple tasks (Thunnissen and Buttiens, 2017). Organizations workforce is also a significant internal factor that affect business operations and HR functions. For instance, HR functions should be flexible to accommodate various conditions introduced by employment. Most organizations would consider short term contracts to prevent them from making redundancies especially during change. There has also been significant shift from the traditional ways of employing workers on full time, permanent and job for life contracts to the new ways of sub-contracting, self-employment, and zero hours’ contracts. The changes are essential for the organization to minimize redundancies and cost overheads caused by production slacks and peaks.
The other internal factor that influence business operations and HR functions is management performance. Currently, the company has increasingly associated its HR functions with development of strategies to enhance management performance. For example, HR functions currently include adopting high commitment working practices such as accelerated management development programs, active employees’ engagement, and company branding to facilitate management performance (Thunnissen and Buttiens, 2017). Management performance also characterize change in organizational structure and culture to introduce new ways of managing employees. Organizational changes are characterized by conflicts and resistance, especially when stakeholders are not effectively involved and successful implementation of organizational change depends on proper management of employees. HR managers are also tasked with the responsibility to build and maintain culture and structure that embrace changes in the organizations.
Key Stages in Strategy Formulation and Implementation
Strategy formulation could be implemented using three alternatives; rational/classical approach, emergent strategies, and symbolic approach. Rational approach involves using senior managers to monitor the internal and external environment of an organization to successfully plan the organization’s actions and activities. Emergent strategies are not planned but are mainly trials and errors that emerge overtime when an organization needs to respond to a particular circumstance or changing situation (Ulrich, 2016). Symbolic approach involves maintaining the usual business operations while trying different approaches and success depends on luck and not judgement. Organizations use strategy formulation to determine their current position in the business environment, their desired future position, and the required process to achieve such positions. Organizations should set clear, realistic, and time-bound objectives to promote flexibility and ability to achieve the desired goals.
The three main types of strategy include corporate, competitive, and operational strategies. The corporate strategy addresses the overall organization’s scope and purpose to meet the expectations of stakeholders and provide ground for decision-making regarding business operations. Competitive strategy exposes an organization to successful competition by achieving the maximum competitive edges over the potential competitors (Ulrich, 2016). For instance, an organization could merge with other companies in the market to improve its competitive advantages. On the other hand, operational strategy concerns with involving different sectors of an organization to plan and effectively use the resources for delivering corporate and business strategies.
The key stages of strategy formulation that could be applied in ADNOC include;
- Reviewing the mission, vision, goals, and objectives
- Carrying out environmental scanning
- Reviewing and updating the strategic goals
- Establishing strategic objectives
- Establishing strategies for each strategic objective through operational planning
- Developing an annual action plan and finalizing the strategic plan
- Executing the reviews
McKinsey 7S model is a strategic analytical tool that consider the seven internal elements of an organization such as structure, strategy, shared values, style, systems, staff, and skills to determine whether the organization’s objectives are effectively aligned and achieved. Organizations use the model to align the elements of an organization and increase the overall organization’s effectiveness. Organizations also use SWOT analysis to scan the internal and external environment of the business by assessing their strengths, weaknesses, opportunities, and threats (Thunnissen and Buttiens, 2017). Gap analysis is used to analyze the existing strategies and business models by identifying the gap between current and future strategies. Companies should evaluate their current culture and structure to determine the required future culture for successful strategy implementation. Ethical stance and business beliefs must be incorporated and aligned with any needed differences to achieve the goals of change. Defining the competitive strategies would help an organization, for example, ADNOC to formulate the best corporate and functional practices to achieve the desired goals and gain competitive advantages. Strategies are implemented by acting on the strategic plan to achieve the targeted results through resource planning, organizational structuring, developing new systems, and implementing change management techniques (Thunnissen and Buttiens, 2017). Organizations use three levels (suitability, acceptability and feasibility) to monitor strategy evaluation. Organizations are also required to monitor strategy evaluation and revise the process to make necessary adjustments and develop new strategies of achieving the desired goals.
Role of HR in each stage of Strategy Formulation and Implementation
- HRs assist senior managers to formulate and implement change management strategy.
- HRs investigate and conduct SWOT Analysis to determine the strengths and weaknesses of an organization while benchmarking against the potential competitors.
- The roles of HR also include preparing and organizing the workforce team to identify and analyze any problem and required training for strategy formulation and implementation.
- HRs are also responsible for developing a shared vision to match the organization’s culture during strategy formulation and implementation.
- HRs appoint the change champions and develop consensual culture to facilitate employees’ engagement during strategy formulation and implementation.
- HRs also communicate the changes in strategic plan to prepare the organization to overcome resistance by developing a culture that would embrace the change.
Contributions of HRs to Business Ethics and Organizational Accountability
- The roles of HR include devising, implementing and monitoring policies, practices and procedures that enhance ethical behaviors in an organization.
- HRs also build and promote a culture that focus on business moral values.
- HRs also play significant roles in prohibiting all forms of discrimination by developing fair terms and conditions of employment.
- HRs have the moral and ethical duty to handle employees’ data and restrict the various assumptions of consent in a typical contract.
- HRs also ensure that mergers and acquisitions meet the legal requirements to ensure that treatment of employees and other stakeholders aligns with the organization’s ethical values.
How Organizations Evaluate their Business Performance
Organizations use traditional approaches such as the financial measures to evaluate the business performance. The financial measures used to evaluate business performance include ROI, RI, EPS, net profit, and contribution margin. The traditional approaches mainly focus on the organization’s past financial performance and not the contributions of the managers towards future shareholder value. Therefore, the traditional approaches of evaluating business performance are short-term-based. Applying traditional techniques to evaluate organization’s performance involves tracking a single performance dimension and managers often find it difficult to tell whether they have implemented the correct strategies (Singh et al., 2020). On the other hand, the modern approaches are long-term based and focus on various areas other than financial performance such as customer satisfaction, product/services quality, public responsibility measures, and employees’ satisfaction. The modern techniques are up-to-date relevant to the modern business environment. The modern techniques would help ADNOC to focus on the process and provide the useful corrective actions. For example, the organization would find easy to analyze the process and devise mechanisms of delivering customers’ needs. Managers use modern techniques to mix the past, present, and future organization’s conditions to express concerns about the three perspectives.
Roles of HR in Evaluating Business Performance
The roles of HR in evaluating business performance include ensure maintenance of the strategic plans through integration of HR department into strategic planning and evaluation processes. The main role of HR during the evaluation process is to develop and implement different programs that inspire, motivate, and reward employees to reinforce values of effective management of human capital. In addition, HRs design and implement performance appraisals while acting as the mediator between the parties involves such as functional heads, reviewing authorities, and staff. Therefore, HRs are responsible for smooth implementation of appraisal and evaluation process. The designed performance appraisals should be clear and transparent and HR department is tasked with the responsibility to provide employees’ training to make stakeholders understand the conducted appraisals (Singh et al., 2020). HRs also call all the stakeholders and inform them about the importance of such appraisals and how the appraisals would help them to advance their careers and productivity levels. HRs uphold the key values, for example, integrity, efficiency, and credibility that are vital for performance evaluation. HR team also sits with the reviewing authorities to ensure that the appraisals are done within the scheduled time and the employees’ benefits are well-served.
How Different Sources of Business and Contextual Data can be Assessed and Utilized for Planning Purposes
The various sources of business and contextual data could be primary or secondary and quantitative and qualitative data. Primary data refer to new data that is collected for specific area while secondary data refer to the previously researched data that is reviewed and compared against the present statistics. Qualitative data involve expression of data in terms of words and meanings while quantitative data are expressed in terms of numbers and one can use statistical tools and software to analyze the quantitative data. Qualitative data are collected through surveys by addressing questions to investigate employees’ opinions and complaints. The collected data are evaluated to determine the effectiveness of current ADNOC’s plans towards enhancing employees’ satisfaction and plan measures of improving employees’ engagement and satisfaction (Prouska and Kapsali, 2020). The designed surveys should focus on drafting and implementing various strategies of improving staff morale and encouraging active employees’ participation. The data could be used to develop cross-functional teams to implement the action plans and provide required support after identifying areas of improvement. The planned actions could include organizing regular employee training and education programs.
Qualitative data could also be collected through interviews where open-ended and conversational questions are addressed. The collected data are evaluated to determine the effectiveness of current performance management structure and the required improvements (Prouska and Kapsali, 2020). HRs are responsible for engaging the senior managers and employees through discussions to devise the approaches of change implementation. The action plan would entail employees’ retention and engagement, establishment of global leadership pipeline, and improved employees’ learning.
On the other hand, quantitative data is used to monitor turnover changes due to retention of skilled works, performance and cost. Data on turnover is used to analyze, benchmark and assess various metrics upon which strategies would be implemented. The metrics provide information about the number of employees leaving an organization and the reasons for leaving. Organizations should monitor and evaluate the metrics to understand the cost-benefit analysis (Obeidat et al., 2020). HRs are responsible for engaging the senior managers and employees to determine the strategies of addressing the identified problems. Organizations are expected to develop effective practices such as training, team building and workers’ rewards to reduce turnover rates. Other organizations use benchmarking approaches to identify areas that require improvement to advance their competitive edges by gaining insights about their potential competitors.
Quantitative data on employees’ absenteeism are also used to determine the level of employees’ dissatisfaction and possible staff resignation. The collected data would also show patterns and trends of employees’ absence and such information is important for the organization to plan new strategies of reducing absenteeism rates. HRs keep records of employees’ absenteeism rates (Beatty et al., 2019). Organizations use various strategies such as return to work interviews, employees’ well-being, using trigger points, and creating open culture to facilitate the planning process. The sources of business data should be properly aligned to the overall organization’s strategies to provide precise and accurate analysis.
Conclusions and Recommendations
The paper provides insightful information about the importance and impacts of internal and external factors on business and HR functions. The paper also confirms that understanding the internal and external factors is vital for strategy planning. HR functions are also instrumental in planning and implementing the organizational strategies. Development of HR functions and organizational culture should focus on providing valid strategies and solutions to achieve the business and stakeholders’ requirements. However, designed organization’s structure and culture should account for business ethics and accountability. The analysis also reveals that having adequate knowledge about the past and present business performance is necessary for every organization to implement the strategy changes. Organizations should also collect high quality and objective data to increase the accuracy and effectiveness of the business planning tools. Development and application of well-planned strategy would help an organization to raise its competitive edges. Therefore, the following recommendations would apply:
- ADNOC should use PESTLE analysis to examine the various external factors such economic, social, environmental, and technological factors.
- The company should also review and assess the current HR structure to determine the suitability of the structure to the implemented organization’s strategies
- The codes of practice should also be reviewed to ensure alignment with vision and mission statements of the company.
- Collection of data should also measure employees’ engagement account for employees’ opinions and complaints when planning changes in business strategies.
SWOT Analysis of ADNOC
|· Attributed to high contribution towards the industry and economy
· Has well-established processing and refining businesses
· Has established long-term and productive partnerships
· Develops local and global marketing distribution channels
· Proactively respond to environmental protection movements
|· ADNOC is unlisted company with low level of disclosures|
|· The joint venture with OCI N.V. significantly created a new global nitrogen fertilizer leader||· Decreased global market share due to competition from companies with advanced exploration machines
· The new trend and shift to renewable energy
· Political instability in Middle East regions.
- The 7 Emirates have individual government organizations that promote flexible management
- Constant political conflicts in the United Arab Emirates over the ownership of the oil reserves and land
- The healthy trade relationship between the United Arab Emirates with other countries worldwide
- High GDP per capita in the United Arab Emirates region
- Very low unemployment rates in the region
- High direct foreign investment in the region.
- Comfortable lifestyles of people living in the United Arab Emirates due to well-paying jobs
- Globalization has brought different cultures together in the region
- People value religion in the United Arab Emirates
- Most companies in the region leverage technology due to the exposure of young population to technology
- The region has wealth to purchase the new technologies
- The legal factors are only attributed to the consequences of malpractices due to the highlighted political factors
- The United Arab Emirates region is located near a few coastal areas that promote trade.