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Running Head: Context and practice of personnel management


Context and practice of personnel management

[Author’s Name]

[Institution’s Name]


An organization is a social arrangement which pursues collective goals, which controls its own performance, and which has a boundary separating it from its environment. The word itself is derived from the Greek word ὄργανον (organon) meaning tool. The term is used in both daily and scientific English in multiple ways.

In the social sciences, organizations are studied by researchers from several disciplines, the most common of which are sociology, economics, political science, psychology, management, and organizational communication. The broad area is commonly referred to as organizational studies, organizational behavior or organization analysis. Therefore, a number of different theories and perspectives exist, some of which are compatible, and others that are competing.

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  • Organization – process-related: an entity is being (re-)organized (organization as task or action).
  • Organization – functional: organization as a function of how entities like businesses or state authorities are used (organization as a permanent structure).
  • Organization – institutional: an entity is an organization (organization as an actual purposeful structure within a social context)

A business is established with the objective of making a profit. The business may be raising something to sell: sugar beets, livestock, wheat, Christmas trees. The business may be the performance of a service: altering clothes, housekeeping or painting. Or the business may be manufacturing or making something: fishing waders, coats or wedding gowns. 

Regardless of the product or service provided, every business owner needs to decide what form of business organization is most appropriate.

1) The sole proprietorship;
2) The partnership, which may be a general partnership, a limited liability partnership or a limited partnership; 
3) The corporation, which for tax purposes may be a C or an S corporation; or 
4) The limited liability company. 

Company Background

ABCD, Co. was established in 1971 in Deerfield, Illinois as certified public accountants and consultants. It was initially set-up as a partnership between AB and CD. The company has annual revenues of over $15 million and its net worth is approximately $44 million. The company is mainly involved in the following areas:

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- CPA & Management Consultants
- Litigation Support
- Tax Advisory Services
- Financial Statements Compilation
- Audit & Review Services

The company's hierarchy is in the following order:
Position Number
Managing Partner 1
Partners 7
Managers 14
Senior-Incharge 18
Staff 30

No organization can exist in a vacuum; each is set in a particular country and region to which it is inextricably linked. This setting provides multiple contexts that influence how the organization operates and how and what it produces. Thus, the concept of "external environment" is an important consideration for as it attempts to understand the research institutions it supports. An analysis of the external environment is an attempt to understand the forces outside organizational boundaries that are helping to shape the organization.

Forces outside the institution's walls clearly have considerable bearing on that which transpires within. The external environment can provide both facilitating and inhibiting influences on organizational performance. Multiple influences in the immediate or proximal environment form the boundaries within which an organization is able to function; these influences likewise shape how the organization defines itself and how it articulates what is good and appropriate to achieve.

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Key dimensions of the environment that bear on the institution include the administrative/legal, technological, political, economic, and social and cultural contexts, the demands and needs of external clients and stakeholders, and relations with other pertinent institutions. Some examples of environmental consideration that will be important to when profiling an institution.

Most organizations face external contexts that are complex, dynamic and increasingly global. This makes the context increasingly difficult to interpret. To cope with often incomplete and ambiguous contextual data, and to increase their understanding of the general external context, organizations engage in a process called 'external environmental analysis'. All managers, including HR managers, need to be aware of the importance of scanning the external context in a systematic way.

A number of models exist that can help managers in analysing the external environment. Such models provide a framework to identify external opportunities and threats. Opportunities arise when an organization can take advantage of conditions in its external environment to formulate and implement strategies that enable it to improve performance. Threats arise when conditions in the external environment endanger the integrity of the organization's activities.

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As shown in Exhibit 1 an organization's external environment has two major parts:

  • macro environment
  • industry

Duncan defined business external environment as all the factors outside an organization that are taken into consideration by the organization in its decision making. These factors depend on the complexity and dynamism of the environment. Thus, business external environment has been classified as being "stable", when it does not show any changes, "unstable" when it shows relative changes, and "dynamic", when it shows changes continuously. However, perceptions of the organizations about the type of the business external environment may depend on their size and industry in which operate.

According to Milliken environmental uncertainty arises from the organization's inability to predict its environment, or in other words, to predict the factors that characterise its environment. These factors are usually classified into two groups; "general" and "task" business external environment factors:

The general environment is a relatively remote environment and the elements that compose it have an indirect influence on the organization. This environment is typically composed of factors such as social values, educational, political, economic, legal, behavioural, demographic, natural environment, natural resources, and technological.

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The task environment is the closest environment of the organization and the elements that compose it have a direct influence on the organization. This environment is typically composed of factors such as consumers, competitors, suppliers, labour market, industry, and financial resources

The results show that perceived uncertainty of the general and task business external environment factors depend on the type of the environment, size of organization, and industry where the organizations operate; organizations adapt their scanning strategy to the complexity of the environment; personal sources of information seem to be more important than impersonal sources; external sources of information are equally important with internal sources; and higher levels of environmental uncertainty are associated with higher levels of scanning the various sources.

Strategic uncertainty that arises from environmental factors pushes organizations to seek information and to try to diagnose the conditions that prevail in the environment. The higher the uncertainty is the greater the amount of time and resources organizations place on environmental scanning. Thus, for organizations to be efficient in scanning the environment appropriate "scanning strategies" should be followed and specific "sources of information" should be used.

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Sources of information are usually classified as "external" and "internal". External sources of information originate outside the organization whereas internal sources of information originate within the organization. Furthermore, these two categories are sub-classified into "personal" and "impersonal" sources. Personal sources originate from personal contacts with people inside and outside the organization, whereas impersonal sources originate from sources such as documents, databases, etc.  Although evidence referring to the importance of personal versus impersonal sources and internal versus external sources is not consistent), it is generally argued that personal sources are more important than impersonal resources, and that external resources are more important than internal resources

The macro environment is composed of social, economic, political and technological elements in the broader society that can influence an industry and the organizations within it.  The industry environment is the set of factors that directly influences an organization and its actions and responses. Managers have to analyse competitive forces in an industry's environment in order to identify the opportunities and threats confronting an organization. A popular framework for doing this is Michael Porter's 'five-force' model. This model identifies five competitive forces that shape industry's profit potential (as measured by the long-term return on investment): (1) the bargaining power of suppliers, (2) the threat of new entrants, (3) the threat of product substitutes, (4) the bargaining power of buyers and (5) the intensity of rivalry among established organizations within an industry.

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Within most industries, there are groups of organizations in which each member follows the same basic strategy as others in the groups but follows a different strategy from that of firms in other groups. These groups of organizations are referred to as strategic groups

The external environment

Analyzing the macro environment
To increase their understanding of the macro environment and to help develop a ‘strategic plan’, human resource managers can engage in a process called ‘external environment analyses. This process typically includes four activities:

  • Scanning-identifying early signals of macro environment changes and trends
  • Monitoring-detecting meaning through ongoing observations of macro- environmental changes and trends
  • Forecasting-developing projections of anticipated outcomes based on monitored changes and trends
  • Assessing-determining the importance of macro environmental changes and trends for the organization's strategic plans.

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Step 1: Identify potential opportunities

Scan the macro environment around your own organization or an organization you are studying. Consider economic, technological, legal, political, social, demographic and global trends.

Step 2: Identify potential threats

Scanning the macro environment, and identify potential threats that can endanger the integrity and profitability of the organization's operation.

Step 3: Conduct an analysis of industry environment

The five-force model allows an organization to systematically analyse its relationships with other strategic competitors. In general, an attractive industry (in terms of long-term ROI) has high entry barriers, suppliers and buyers with low bargaining power, few threats from product/service substitutes and relatively moderate rivalry. Conversely, a less attractive industry has low entry barriers, suppliers and buyers with strong bargaining positions, strong competitive threats from product/service substitutes, and intense rivalry among competitive firms. Use the following checklist to identify potential threats to your organization or one you are studying.

  • Increase in bargaining power of suppliers?
  • Increase in bargaining power of buyers?
  • Increase in new domestic competition?
  • Increase in new or substitute products or services?
  • Increase in rivalry among established firms?

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Entry: Erect barriers to entry : create and exploit economies of scale, differentiate products, reduce costs independent of scale, implement contrived deterrence, use government policy to deter entry

Rivalry: Compete on dimensions besides price: cost leadership, product differentiation, cooperation, diversification

Substitutes: Improve product attractiveness compared to substitute: cost leadership, product differentiation, cooperation, and diversification.

Suppliers: Reduce supplier uniqueness: backward vertical integration, development of second sources

Buyers: Reduce buyer uniqueness: forward vertical integration

Step 4: Evaluate the importance of the changes for the organization’s strategies 

This step focuses on determining the timing and importance of external environmental changes for the organization’s strategies. Managers must include both macro and industry changes in their analyses. Common questions to pose include: How will macro environmental forces impact on the organization? What will our competitors do in the future? Where do we hold an advantage over our competitors? How will this change our business strategy?

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This list should be discussed with your key stakeholders to ensure consensus.

The five-force model has been criticized for giving insufficient attention to the importance of internal organization differences (for example the quality of a firm’s human resources, and technological, physical and financial resources). An organization will not be successful just because it is based in an attractive industry. As strategic management and leadership theorists remind us, to be successful, an organization requires distinctive competencies, resources, capabilities and leadership.
SWOT Analysis

Internal environment

External environment





The distinction between the external environment and the internal environment of the firm is common to most approaches to designing and evaluating business strategies. For example, a common approach is the SWOT framework: Strengths, Weaknesses, Opportunities, and Threats. This framework distinguishes between two features of the internal environment, strengths and weaknesses, and two features of the external environment, opportunities and threats.

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The management can form a "social committee" that would organize socially responsible activities such as a Christmas Gift Drive where employees can donate gifts to a charitable institution. A socio-active company will create a positive image about the company and will boosts employee morale. Employees who contribute something to the community will feel good about themselves.   We also propose that the company give advance notice of downsizing to its employees. If management needs to downsize, it should at least inform the employees in advance in order to give them time to look for new jobs. Management should be honest and should inform employees of what is going on in the company. This kind of policy would make the employees feel secure about their jobs because they know that there are no secrets between them and the management.  

Since the company does not have a favorable track record in terms of diversity, they also wish to rectify their image. The company must realize that in order to maximize their potential , they have to utilize the skills and talents of all employees. They must tap into a workforce that does not exclude any group. By supporting an inclusive work environment, Berger & Goldstein can attract high quality job candidates. This will also allow them to better serve and diversify their customer base.

Through these measures the company will develop a positive relationship with its employees and lay the foundation for its long-term viability and success. By providing a safe and healthy workplace, treating all employees with dignity and respect and encouraging meaningful employee involvement, Berger & Goldstein can help nurture employee loyalty and morale, thereby improving productivity.

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Organizations and Institutions by Richard Scott; Publishers:  China: Parragon Publishing, ISBN 0-13-266354-6 (2001).

Understanding Organizations by Charles Handy; Publishers: The Interstate Printers & Publishers, Inc (2004).

Organizing from the Inside Out by Julie Morgenstern; Publishers: Owl Books ISBN 0-8050-5649-1 (1998).

Organization Design: Fashion or Fit" by Henry Mintzberg;  Publishers: Harvard Business (l98l).   

Organization theory by Thomas Marshak; Publishers: Century     Communications (1997).  

Comparison of sole proprietorship, partnerships, S corporation and C corporation by Juras, K; Publishers: (1996).  

Strategic Management: Competitiveness and Globalization   Concepts by M. Hill; Publishers: (2002).  

Leading Change by Kotter, J; Publishers: Boston, Mass: Harvard Business (1996).  

Competitive Strategy by Porter, M.E; Publishers: New York:    Free Press (1999).

Characteristics of organizational environments and perceived     environmental uncertainty by Duncan, R.B; Publishers: New York, NY: MacGraw-Hill. (1996)

Dimensions of organizational task environments by Dess, G.G. & Beard, D.W; Publishers: New York, NY: Harper Collins   (2004).


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