External influences: need to know

Describe the main external influences on your business

There are essentially five external factors that might influence your business, and an understanding of what they are will help HR people to determine the HR strategy in the wider context. For most businesses, they are:



  • What is happening in the market, and the economy in general
  • What your competitors are doing – their strengths and weaknesses and how these relate to the strengths and weaknesses in your business
  • What your customers are demanding and how those demands are changing and being met
  • How attractive you are as an employer, as judged by the calibre of your people, your ability to attract talent, and your retention record
  • Your brand, your image in the market and how you are perceived.

To find out about these external factors, HR people need to be plugged in to what is going on in the economy of the countries in which you operate, and particularly the impact the economy has on your sector.

Keep up-to-date with news stories that are relevant to your business: if necessary, you can use a news clippings service to help keep track. But also be aware and keep an eye out for things that will have an impact on your business. For example, British Airways will currently be responding to the impact on its business and reputation from the Terminal 5 opening problems. This is a major event, but be aware of smaller things that might impact your business in a similar way.

You can also draw on the knowledge of people within your network to help you to keep up-to-date with what your competitors are doing: Are they growing? Downsizing? Are they on the acquisition trail? If you’re aware of this activity and understand how it will affect your business then it will help you to determine relevant HR strategy and give informed advice.

Your network will be able to help you determine how your business compares as an employer. This will mean that you can ensure your reputation, remuneration and employment packages are competitive so that you can attract the right calibre of staff and, more importantly, retain them.

Having an overall awareness of the wider context in which your business operates and understanding the external influences on it will enable you to have more meaningful conversations with your clients and give credible advice.

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