The story of human resource management so far is an example of substantial development. As noted by Mukkelli (2015), the role of Personnel Managers in the past was confined to organizational issues like payroll and industrial relations. However, over the past decades, this area of management has evolved to include all aspects of human resources planning and management.
Today, HR managers are the key to every company’s success and profitability. Today’s products are made mostly for people and by people, making the role of Human Resources Managers one of the most important in today’s business environment. The 21st century has created many opportunities for business development, including technological advancements, globalization, outsourcing, changes in customers’ needs and wants, and more. However, with new opportunities have come new challenges that put increasing pressure on HR managers all around the world. This essay aims to discuss the main forces that influence the business environment in which HR managers operate as well as to explain the changes to HR roles and the challenges that the managers of the 21st century are facing.
The 21st century is widely perceived as the time when the development of the business industry has occurred most quickly, substantially impacting companies all around the world. There are five main megatrends, as outlined in PwC’s (2014) report, that influence today’s business environment, creating both opportunities and challenges for managers.
Although developing countries are usually considered to be behind other countries in overall development, in the 21st century the development of these regions will occur faster. According to the UN, by 2050, 72% of the global population will be residing in cities, comparing to 50% in 2014 (PwC, 2014). The rise in the number and size of cities will occur mostly due to the urbanization of developing regions (PWC, 2014). Expedited urbanization has many implications for businesses. For instance, it opens new business niches for technological companies, as highly populated cities will require new, more efficient energy sources, lighter and smaller cars, and other adjustments.
Moreover, the increase of urban populations in developing regions will likely increase the profitability of local businesses as production and distribution in cities becomes easier. However, there are also some drawbacks to accelerated urbanization. For example, the rise of local businesses will likely cause an increase in competition. Today, many international companies gain more profits in foreign markets than the local businesses. However, as cities in developing countries grow, their power also increases (PwC, 2014), which helps local businesses to become more established, making it difficult for international companies to gain a solid market share. Another challenge is presented by growing environmental concerns. As cities develop, the contamination of air and water in the surrounding areas is inevitable. For manufacturers, this creates a need to manage environmental threats by reducing emissions and optimizing the use of resources.
Climate Change and Resource Scarcity
Apart from the need to reduce pollution, companies also face the challenge of responding to global environmental changes by finding new resources. By 2030, the population of the Earth is predicted to rise to 8.3 billion, and people will need 50% more energy, 40% more water, and 30% more food resources (PwC, 2014). The scarcity of resources may open new opportunities to businesses that strive to introduce new energy sources and other technological advancements.
However, for most other companies, the limitation of resources will pose a significant threat. For instance, government regulations on the use of resources are likely to become stricter in the next few years, with higher taxation for certain business sectors (PwC, 2014). Moreover, the struggle for natural resources increases political tension between countries, which may impact international trading (PwC, 2014). Finally, if new sources of energy, food, or other vital resources are found, certain business sectors will be deemed obsolete. For instance, if a safer, more efficient, and readily available alternative to oil or gas is found, the companies working in the oil and gas sector today are likely to shatter.
There are two main areas in which demographic shifts affect the business environment. First, as noted by PwC (2014), “Youthful, growing populations must be fed, housed, educated, and employed for productive potential to be realized” (p. 5). Secondly, in developed countries, new medical technologies and overall better quality of life have led to a higher life expectancy, which means that a larger share of the population is older (PwC, 2014).
Older adults are becoming healthier and more active, which means that they are able to stay in employment for longer; however, businesses may be required to make special accommodations for older workers, which affects the role of human resources managers (PwC, 2014). Younger populations, on the other hand, may also require new approaches to hiring, retention, and talent management (PwC, 2014). One of the main challenges to HR is posed by the millennial generation, which is believed to have a different work ethic and a different set of life goals that influence their employment (Solomon, 2016).
Global Economic Power
The accelerated development of emerging economies will likely cause a shift in global economic power within the next few years (PwC, 2014). For instance, “Asia will represent 66% of the global middle-class population and 59% of middle-class consumption by 2030, up from 28% and 23%, respectively, in 2009” (PwC, 2014, p. 7). The shift in buying and manufacturing power will prompt a change in the competitive environment for many business sectors (PwC, 2014). Moreover, the rise of planned economies could provide support for some companies while at the same time impairing the profitability of the others (PwC, 2014). Another influence of global development is the increase in education quality in developing countries, which will offer a higher number of talented and qualified workers to companies all over the globe. Multicultural business environments require new and improved HR practices for effective management (Mukkelli, 2015).
Technological breakthroughs have a significant influence on businesses and their operations. For the most part, technological development makes business operations more efficient (PwC, 2014); in some cases, technologies may become a suitable alternative for human resources, which can decrease the costs of production and raise the quality of products. It is essential for HR managers to understand the development of technologies, both to find ways to increase the efficiency of certain operations and to protect the interests of employees (Mukkelli, 2015).
The Changing Role of Human Resources Managers
The changes in the business environment, driven by the factors discussed above, has already influenced the role of HR managers in many businesses. Mukkelli (2015) provides a useful overview of the shift in human resources management. The author states that, previously, HR workers were only involved in the operational side of personnel management, such as setting up payroll, managing relations between the company and its workers, and improving conditions for employees (Mukkelli, 2015). Today, however, HR managers have to answer to an entire variety of challenges posed by demographic changes and the development of the business industry. For instance, there is a growing concern about employee retention in many companies: “In view of multiple opportunities available at present, job hopping has become a natural phenomenon, as the present job becomes obsolete” (Mukkelli, 2015, p. 171).
HR managers, therefore, need to not only manage employees but also to act as strategic partners for the company to build a stable, reliable workforce (Mukkelli, 2015). HR specialists can also act as agents of change in their companies and industries by promoting new policies and practices such as flexible working schedules, accessible environments for people with disabilities, etc. (Mukkelli, 2015). Globalization and international cooperation have also affected the role of HR. Companies in many countries can now recruit workers from a variety of cultural, religious, and ethnic backgrounds. While this can be an excellent opportunity to get fresh ideas and new points of view, multi-cultural workplaces require different approaches to management, and HR managers are expected to contribute to their development and application (Mukkelli, 2015). Other HR concerns that influence the role of HR include the anticipated brain drain, the increasing significance of corporate culture, and the growing share of outsourcing (Mukkelli, 2015).
Human Resources Issues
One of the main HR issues in the 21st century is the increasing workplace diversity, particularly in developed countries. The rates of immigration over the past decades have been relatively high, which has contributed to the increase in cultural diversity of workforces. Diversity provides many benefits, such as improved productivity, increased opportunities for marketing and recruitment, and the inflow of new ideas and perspectives (Green et al., 2015). However, it also creates many difficulties for HR departments.
For instance, U.S. federal laws provide protection from workplace discrimination for people of all cultural origins; this creates difficulties with recruitment, as applicants from minority backgrounds may seek to file a complaint against the company if they believe they were rejected because of discrimination (Green et al., 2015). There are also many ethical considerations and dilemmas that need to be resolved to successfully integrate people of different backgrounds into one corporate structure (Green et al., 2015). Moreover, for HR managers working in international companies, knowledge of diversity management becomes even more crucial: “International human resource managers have found that employee relations vary significantly from country to country and that the strategies used to motivate workers in one country are sometimes useless in another country” (Mukkelli, 2015, p. 173).
The development of technology has allowed for the rise of digital working practices. As noted by Parry and Strohmeier (2014), a new labor market cohort can be observed in the 21st century—“digital employees.” These workers are characterized by their knowledge of digital technologies, networking abilities, and desire for flexibility in work (Parry & Strohmeier, 2014). Along with this concept, the development of technologies also gave rise to new, “digital” ways of organizing work. “Digital work” refers to the increasing automation of manual and routine tasks, leaving people to perform more “brain and information work” (Parry & Strohmeier, 2014).
Overall, the digital age has changed the characteristics of potential employees as well as the tasks they perform, requiring HR managers to develop relevant practices and opportunities in response to this development. Moreover, the emergence of virtual workplaces, communities, and organizations has provided companies with a way to hire and manage employees via the Internet (Parry & Strohmeier, 2014). As a result, a new concept called “digital employee management” has been developed (Parry & Strohmeier, 2014).
This area of research focuses on the automation of HR processes, including both administrative functions, such as payroll, attendance management, and record keeping, and managerial roles, including compensation, performance management, and training (Parry & Strohmeier, 2014). These technologies are widely used today in Internet companies, and further development of the digital HR sector may expand the application of digital HR management to other types of businesses.
Most people believe that there are distinctive variations between generations in terms of life goals, motivations, values, and perceptions. At the beginning of the century, management research has been largely concerned with identifying the best approaches to managing workers from the Baby Boomer Generation. Today, however, HR management anticipates the challenges of employing Millennials. Born between 1982 and 1999, Millennials are widely perceived to be difficult to retain, motivate, and train, which has created another significant concern for the HR professionals all over the world. Indeed, Millennials are different from previous generations of workers.
For instance, Solomon (2016) explains that they do not accept authoritative leadership styles: “millennial employees are often getting a bad rap for coming into the workforce with an immediate sense of entitlement” (para. 5). They also strive to achieve a solid balance between work and personal life, and if work is too pressuring, they may quit and opt for a different position instead (Solomon, 2014). Furthermore, the millennials are increasingly concerned with ethical issues and social responsibility (Solomon, 2014), which affects their choice of company and job.
These distinctive features of the millennial generation create difficulties for HR in terms of career and talent management, retention, benefits, and performance improvement. For instance, whereas previous generations of workers would strive to get monetary benefits for their work, Millennials are less focused on money and would rather receive extensive feedback on how to improve (Solomon, 2014). Millennials want to participate in the company’s life, which is why organizational culture is important for these employees (Solomon, 2014). Furthermore, when it comes to talent management, millennials need a diverse range of opportunities to show their abilities. Retention of millennials is also a challenge for the HR, as they do not get attached to the company easily and may quit if they are not given enough training, feedback, or responsibility (Solomon, 2014).
Overall, I believe that the role of HR managers in the 21st century is particularly significant. In the age of global development, HR professionals can become both advocates for change and protectors of employee rights. However, as rewarding as it may seem, the new role of HR is also increasingly challenging. HR theories, practices, and strategies will have to evolve in order to help managers mediate the effects of development on the working populations and to help companies to adjust to these changes so that they can make the most of the opportunities offered by the new business age.
Green, K., Lopez, M., Wysocki, A., Kepner, K., Farnsworth, D., & Clark, J. L. (2015). Diversity in the workplace: Benefits, challenges, and the required managerial tools. Web.
Mukkelli, V. (2015). The changing role of human resource management in the 21st century: Challenges and opportunities. International Journal of Management Research & Review, 5(3), 170-178.
Parry, E., & Strohmeier, S. (2014). HRM in the digital age – Digital changes and challenges of the HR profession. Employee Relations, 36(4), 456-460.
PwC. (2014). Five megatrends and possible implications. Web.
Solomon, M. (2016). You’ve got millennial employees all wrong: Here are the four things you need to know now. Forbes. Web.