Human Resources Management: External Influences


Like any sphere of management, human resources management can face external influences. There is a wide range of such influences, including political, economic, and social. To ensure that successful human resources management is not undermined by a certain external impact, it is necessary to analyze topical issues, explore possible scenarios of what the effects may be, assess impacts on human resources management, propose suggestions, and describe what opportunities and benefits are available to organizations that plan their approaches to external influences in advance. Four external influences will be addressed: the prospects of the NAFTA deal, possible changes in minimum wages, possible changes in pension regulations, and banks’ offshore outsourcing.

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Description of the Issue

The North American Free Trade Agreement (NAFTA) is an agreement signed by Canada, the United States, and Mexico that pursued establishing free trade among the three countries and eliminating trade barriers. After more than 20 years of implementation, it can be argued that the agreement was a less successful economic experiment than it had been expected by the participants, but it still had mostly positive impacts on the economies (Lanthemann, 2014).

Recently, the new United States administration formed by Donald Trump has expressed its desire to renegotiate the agreement and, in case their conditions are not accepted, to withdraw from the NAFTA deal (Panetta, 2017). Since the beginning of new presidency in the United States, economists and other professionals have been speculating on what the potential effects of withdrawing might be.

Two Possible Scenarios

Two possible scenarios are that the trade deal will be canceled altogether or its conditions will be significantly modified in the nearest future. According to Panetta (2017), what legal experts involved in discussing the NAFTA today are facing is a “rare political phenomenon” (para. 5): a case in which the president cancels a trade agreement would be virtually unprecedented. However, experts agree that the cancellation is possible, and even if it is avoided, the NAFTA terms and conditions will be changed to a remarkable extent.

Human Resources Impacts

According to Council on Foreign Relations, Canada has benefitted the most out of the three participating countries from the implementation of the trade agreement; one of the benefits is the creation of 4.7 million new jobs (“NAFTA and the Canadian economy,” 2015). In case the NAFTA is canceled, it can be expected that many companies will face the necessity to reduce staff. Growing unemployment will increase the volume of workforce available to human resources managers but will simultaneously decrease the hiring capacity. In case the deal is renegotiated, and trade barriers are reinstated, companies that trade with the United States will need to cut their costs; in the context of human resources management strategies, it will mean designing more efficient methods in term of redistribution of functions.


The worst-case scenario for a specific company would be the necessity to reduce staff. In this context, there are guidelines for human resources practitioners on how dismissals should be performed. Interestingly, when describing such guidelines and discussing best practices, Schwind, Das, Wagar, Bulmash, and Fassina (2013) discuss Donald Trump as a bad example and explain what he was doing wrong in his termination process. Based on the guidelines, it is suggested that human resources practitioners should ensure that dismissal interviews are held in private, other employees are subsequently notified, and the dismissed employee’s duties are covered.

Opportunities and Benefits

In fact, the human resources managers’ need to cover the duties upon terminating a contract presents opportunities for optimizing the working processes. Organizations that are proactive should pay attention to this matter in advance, before they face the need to urgently fill in a gap in functions and responsibilities. Whether the NAFTA is continued or not, organizations that engage in planning the efficiency of their operation (particularly, in the context of managing human resources) will benefit from reduced costs and increased functional effectiveness.

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Changes in Minimum Wage

Description of the Issue

Within the next two years, Ontario’s minimum wage will be raised to 15 CAD in two stages: 14 CAD on January 1, 2018, and 15 CAD on January 1, 2019 (Grossmann, 2017). The legislation that provides for these changes also states that part-time and temporary employees should be paid equally compared to full-time employees; also, the new law will increase the amount of time employees can spend in leaves, on days off, and on vacations and will create new enforcement agencies that will monitor organizations’ compliance with the newly imposed regulations. The legislation is expected to increase property taxes and other costs.

Two Possible Scenarios

There are two major ways in which organizations may be affected by the external impact of increasing minimum wages: workforce reduction (hiring fewer people, decreasing current working hours, or dismissing people) and increasing the prices. Assuming that an organization hires employees (it may be on a full-time, part-time, or temporary basis) at a wage that is lower than the upcoming minimum wage, the organization will face higher costs and, similar to the case presented above, it might need to either decrease costs (primarily associated with paying for employees’ work) or increase revenues.

Human Resources Impacts

In cases of staff reduction efforts, the responsibilities of human resources managers include not only carrying out the termination process and ensuring that the duties are redistributed and covered properly but also engaging in relevant employee relations and communications activities (Schwind et al., 2013). Specifically, it is needed to explain to the employees why the reduction is necessary, why it affects particular employees and not other ones, and what the extent of reduction will be. All this is needed to ensure that morale in an organization is not damaged or undermined. Concerning increased price, this is unlikely to have significant direct effect on the human resources management department.


In case employees need to be dismissed, their working hours need to be reduced, or fewer employees need to be hired, human resources managers should ensure that the information of these needs is properly conveyed to the employees. Poor employee communication can lead to decreased motivation among employees, especially remaining employees in staff reduction situations (Armstrong & Taylor, 2014). To avoid this, a system of delivering messages to employees and receiving feedback from them should be in place.

Opportunities and Benefits

Designing such a system is exactly the opportunity that proactive organizations should seize in their human resources management planning. External impacts can damage organizations’ ability to compose their workforce according to their needs and prospects, which is why it is necessary to establish communication channels through which the members of the workforce can be constantly in contact with the decision-makers. Ensuring that employees understand how their efforts are managed is a predictor of their higher motivation and higher willingness to perform better.

Changes in Pension Regulations

Description of the Issue

The Sears bankruptcy story raised once again the issue of pension-related employee protection (Ireton, 2017). Sears employees and people receiving pension from the company still do not know anything about the forms in which settlement with them will be carried out, and it is claimed by experts that years can pass before any settlement occurs. Moreover, retirees may never receive any compensation because they are not prioritized in the process of liquidation of assets. In the future, the regulations may change toward better pensioner protection.

Two Possible Scenarios

After several bankruptcy scandals in Canada, there was an attempt to propose a law that would provide for regarding “workers seeking to claim the unfunded portion of their pensions…as preferred creditors in bankruptcy proceedings” (Ireton, 2017, para. 16); however, the proposed law was not adopted. One of the possible scenarios is that, in the nearest future, new pension regulations will be imposed on organizations; e.g., in terms of corporate directors’ personal liability for meeting the standards of the capitalization of pension funds. Another scenario is that relevant regulations will not be enforced, and organizations will limit their responsibilities for the protection of pensioners’ rights.

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Human Resources Impacts

Ensuring that an organization complies with pension plans and pension regulations, which can be regarded as parts of a broader notion of employee protection, is an important part of human resources management work. New pension regulations may require human resources practitioners to deliver additional employee education on how to manage pension plans in accordance with new requirements and corporate policies. Also, internal procedures associated with pension plans may require revision. In case regulations are not enforced, organizations may face employee dissatisfaction caused by the raised awareness of violations of pensioner rights.


The latter impact, in fact, can be considered the worst-case scenario. More and more employees can see now how poorly they are protected from their organizations’ failures, and this may cause dissatisfaction in case no measures are taken. A suggestion for the community of human resources management practitioners is to advocate the adoption of appropriate legislation that could relieve the tension (e.g., the legislation of prioritization of pensioners as creditors in bankruptcy proceedings). Low levels of protection may cause low motivation and job satisfaction (Ali, Anis, & Yadav, 2015); therefore, it is needed to ensure that employees perceive their pension plans and conditions as proper protection of their future income.

Opportunities and Benefits

In the context of the external impact of possible changes in pension regulations, proactive organizations have an opportunity to engage in employee rights advocacy by promoting the idea to ensure better pensioner protection and contributing to the legislative efforts to do so. Using this opportunity can help organizations gain a competitive advantage. First, employee satisfaction and motivation will be raised (and these are predictors of better performance), and second, it will help organizations build a more favorable image of themselves in the general public, and this will help increase customer loyalty and attract new customers.

Banks’ Offshore Outsourcing

Description of the Issue

It was recently revealed that TD Bank is using offshore labor; specifically, the work of investigating compromised cards has been given to a multinational corporation in India (The National, 2017). A former employee of the bank claims that the organization is concealing this information because it does not want to know that Canadian workers lose their jobs due to overseas outsourcing. The bank, however, claims that no Canadians workers have lost their job due to hiring offshore workforce, but experts expressed their doubts in this regard. The bank’s revealed practice attracted criticism from customers and employees; the criticism was mainly associated with the bank’s intention to use cheaper labor.

Two Possible Scenarios

From a broader perspective on the presented case, two possible scenarios can be examined. First, if a certain bank that outsources work overseas continues to do so, it may demonstrate job loss and face client and employee dissatisfaction. In this scenario, attempts aimed at optimizing costs may lead to more losses (e.g., reputational) than profits (from cheaper labor offshore). Second, the bank may face difficulties associated with information exchange; if certain functions that require using confidential client information are outsourced, it is much more challenging to control information flows and ensure confidentiality.

Human Resources Impacts

In case the described bank pursues cheaper labor (thus depriving its current employees of work) and fails to admit it or work toward improvements, human resources managers cannot help because those are the bank’s policies, and human resources management strategies should not be aimed at concealing policies that may be harmful to the workforce. Therefore, human resources departments might be damaged, and their ability to work effectively with the employees may be undermined by the bank’s current policies. For the second scenario, the impact would result in the need to conduct additional employee education on new or alternative ways of protecting confidential data (prior to this, the bank should ensure the introduction of a better data protection system).


It cannot be stated with certainty which of the scenarios would cause the bank more damage. However, the general suggestion for human resources practitioners is to deliver to the decision-makers the message that failure to comply with employee and client expectations on protecting jobs and paying appropriately for work may cause serious reputational losses. In order to avoid data losses, the bank should engage human resources efforts in increasing employees’ skills and ensuring that the outsourced workforce is skillful and qualified enough to comply with data security standards.

Opportunities and Benefits

A proactive bank can seize the opportunity to improve its perceived compliance with ethical standards among its employees and clients by refusing to outsource cheap offshore labor. Long-term benefits of this strategy may include higher client loyalty. Also, there is the opportunity to engage in improving current data exchange systems to ensure that, if the bank expands its operation, it will be capable of building a secure network in which confidential information can be shared without the risk of being compromised.

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The four issues examined above show that major activities in which human resources managers should engage to address external influences include employee communication, education, and advocacy. Also, it may be needed to resort to specific human resources management procedures, such as properly terminating contracts and ensuring coverage of duties, in case external influences cause the necessity to reduce workforce. It has also been demonstrated that taking proactive measures based on the analysis of current situations and possible scenarios instead of reacting to external influences is a potentially beneficial approach that allows organizations to be prepared for negative impacts along with improving their ongoing operation.


Ali, M., Anis, M., & Yadav, A. (2015). Antecedents of job satisfaction. International Journal of Economics, Commerce, and Management, 3(12), 350-360.

Armstrong, M., & Taylor, S. (2014). Armstrong’s handbook of human resource management practice (13th ed.). London, England: Kogan Page.

Grossmann, P. (2017). Opinion: The hypocrisy of the Liberal’s minimum wage hike. Toronto Sun. Web.

Ireton, J. (2017). Sears demise is Nortel all over again for pensioners, says expert. CBC News. Web.

Lanthemann, M. (2014). NAFTA and the future of Canada, Mexico and the United States. Geopolitical Weekly. Web.

NAFTA and the Canadian economy. (2015). Web.

The National. (2017). TD insider says bank doesn’t want you to know it’s outsourcing work overseas. Web.

Panetta, A. (2017). American lawyers gather to ponder Trump’s NAFTA options: Can he cancel it alone? CBC News. Web.

Schwind, H., Das, H., Wagar, T., Bulmash, J., & Fassina, N. (2013). Canadian human resource management: A strategic approach (10th ed.). Whitby, Ontario: McGraw-Hill Ryerson.

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StudyCorgi. (2020) 'Human Resources Management: External Influences'. 7 November.

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