PESTLE Analysis for Human Resources: How PESTLE Affects HR

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Human Resources (HR) is such a vital part of a company. This department hires new talent, accessing performance, handling documentation, and so much more.  Without a good HR system, many companies will struggle when onboarding employees, handling worker disputes, and maintaining a safe environment for the business and employees.

The six factors that make up PESTLE analysis — political, economic, social, technological, and environmental factors — impact how HR has and will. You’ll see why as you keep reading.

Political factors of HR: Changing how we think and feel about workers

Political factors can have a huge impact on how the human resources department functions.

Replaceable employees.

More people are feeling replaceable by organizations. In their eyes, companies don’t care about loyalty. Employers and HR are on the hunt for new talent. In fact, HR keeps an eye out for new talent even when they don’t need to replace someone, although this is more prevalent in some industries over others.

For instance, retail has a high employee turnover. It’s not uncommon to see the same job posted every few weeks, looking for new applicants. Rather than introducing ways to keep existing employees, retail HR use recruitment as the main strategy for company growth.

A shift in focus.

Companies are shifting management styles: instead of performance-based, HR are implementing talent-based management. What’s the difference?

Talent management requires HR to search for, cultivate, and motivate employees to maintain high-performance rates. Performance management would require HR to focus on creating a welcoming and motivational environment so all employees can improve their performance. The former focuses on individual performance while the latter emphases group employee performance.

You’re on your own.

Individual employees can have different salaries, benefits, and other perks — even if they have the same title and experience as another worker. This is individualism. Rather than maintaining the same perks of the job for all qualified employees, each person has to fight for what they want. This is more prevalent than ever, especially when employees are encouraged to not discuss their pay with others.

A change in pay methods.

The changing economy and political landscape has led to a change in how employees are paid. Some get performance-based pay rather than results-based pay. What does it mean?

Well, if your work performs well, you may get more pay. If it performs worse, then you may be paid less. This is a payment system that certain workers (like copywriters) can take. Additionally, copywriters may ask for royalties — for every dollar made, they make a percentage. This way of payment wasn’t as easy to implement twenty odd years ago. But now? It’s becoming common, especially among contractor work.

Economic factors of human resources: A new way to hire and work

The economy has shaped the world of HR.

The impact of globalization.

Globalization has changed how we work, who we hire, and how we hire them. Labor markets change depending on who and how we hire too. Unless HR can keep up with these market changes, they can’t hire the right employees. For instance, more companies are open to hiring remote workers. It opens the talent pool. Hiring overseas workers can be cheaper too.

If HR managers don’t realize this, they may end up costing the company valuable time and money.

New accommodations for oversea workers.

If you do hire companies overseas, HR may have a difficult time training these new workers. It’s much easier to keep everyone on the same page when they work in the same office, clock in at the same time, and are available for weekly face-to-face meetings as necessary. But when workers live further away, keeping track of everyone’s more difficult. It may strain HR workers who have to adjust how they manage workers’ information and communication.

Social factors of HR: How to make everyone happy?

The people of the world has changed, and so has HR.

Understanding a variety of demographics in one workplace.

As I’ve said above, companies don’t need to hire employees based on location anymore. With the hundreds of productivity tools and instant messaging services, it’s possible to hire and work from anywhere in the world. Companies will likely have a variety of workers from all over. And each one may have different expectations in payment structure, training, and communication. HR needs to accommodate all these employees, ensuring they have proper access to information, training, compensation, benefits (if applicable), and more.

The rights of the people.

Employee rights differ by location. HR must ensure the company isn’t infringing on employee rights, while also ensuring employees are following all regulations while working for the company. What these regulations are may differ based on the location of the company or employees.

Read: How to Brainstorm, Research, and Write a PEST Analysis From Scratch

Technological changes in Human resource departments: Fast information, too much information

How does technology impact HR decisions? The answers below.

Fast, simple communication.

Thanks to technology, workplace communication is easy. HR can instantly send out emails or text messages. Employees can sign up for specific messaging apps, like WhatsApp, and join workgroup chats. If this isn’t convenient, HR can still call people or talk face-to-face with employees (if possible).

Simple recruitment.

It’s just as simple to recruit talent as it is to communicate with them. HR can put up a job ad in minutes. Then they can use the database to sort through applicants until only the top choices are left. Or HR can scout through forums, websites, and social media for new hires. Regardless, it’s much less time-consuming and easier to vet than asking your friend if he knows someone looking for a job.

Information overload.

All of this information is good… until it’s too much. Although HR is privy to different data analysis methods to gather employee intel, it may also make employees uncomfortable. They may feel like their security is at risk. How much info is too much? It’s hard to tell at the moment.

Legal factors of HR: A strict confidentiality agreement

HR manages employee contracts and other legally binding information.

A legal responsibility.

HR must abide by many legalities, but the most important to confidentiality. It’s both ethically important, but also a legal responsibility for HR. If not upheld, HR workers can be fired. In worse-case scenarios, managers can face jail time.

Proper verification needed.

HR verifies new employees, which often means conducting a background check. If HR doesn’t vet this information, the company could face legal consequences.

Environmental factors of human resources: Cutting back on paper and pollution

Saving the tree.

Thanks to the internet, HR doesn’t need so much paperwork. Rather than printing out handbooks, contracts, and other documentation, much (if not all) of this paperwork is digitally managed. The only thing companies need is a digital storage system to keep all the information straight.

More remote work means less driving pollution.

Working with worldwide talent less driving back and forth to the job site and home. This means less carbon emission in the air because everyone can work from their computer or smartphone.

PESTLE Analysis for Human Resources: Final thoughts

PESTLE impacts HR significantly.

The HR department is there to ensure the company is compliant and safe from legal repercussions. The company will always come first; never employees. This is why employees feel companies lack loyalty.

It’s true that HR is often on the lookout for new talent and must accommodate each one, regardless of where they’re located. This puts plenty of strain on HR workers, who may have to be creative to achieve this goal. Luckily, technology makes HR managers’ lives easier — everything is accessible online.

PESTLE will continue to change HR and it needs to accommodate changes in the workforce. The only way to do this successfully is by keeping an eye on political, economic, social, technological, legal, and environmental macro-environmental factors.

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