In their book, ‘Managing Human Resources,’ Luis R. Gómez-Mejía, David B. Balkin, Robert L. Cardy  contest that on a strategic level, the major HR challenges facing managers today can be divided into three categories:

  • environmental challenges,
  • organisational challenges, and
  • individual challenges

The environmental challenges are rapid change, rise of the Internet, workforce diversity, economic globalisation, legislation, evolving work and family roles, skill shortages, and the rise of the service sector.

The organisational challenges are choosing a competitive position, decentralisation, downsising, organisational restructuring, the rise of self-managed work teams, the increased number of small businesses, organisational culture, advances in technology, and the rise of outsourcing.

The individual challenges involve matching people with the organisation, treating employees ethically and engaging in socially responsible behavior, increasing individual productivity, deciding whether to empower employees, taking steps to avoid brain drain, and dealing with issues of job insecurity.


If they are to survive and prosper, firms need to adapt to change quickly and effectively. Human resources are almost always at the heart of a fast response system.

The figure below depicts the major HR challenges facing today’s managers:the environment, the organisation, or the individual.

Source: Managing Human Resources

Environmental Challenges

Environmental challenges are the forces external to the firm. They influence organisational performance but are largely beyond management’s control.

Important environmental challenges include:

  • globalisation and digitisation
  • workforce diversity and inclusion
  • evolving work-life balance
  • skills shortages and reskilling
  • legislation and compliance
  • the rise of the as-a-service economy

Managers need to monitor the external environment constantly for opportunities and threats. They must also maintain the flexibility to react quickly to challenges

Organisational Challenges

Organisational challenges are concerns or problems internal to a firm. Effective managers spot organisational issues and deal with them before they become major problems. One of the themes of this text is proactivity: the need for firms to take action before problems get out of hand. This can be done only by managers who are well informed about important HR issues and organisational challenges.

Competitive Position: Human resources represent the single most important cost in many organisations. How effectively a company uses its human resources can have a dramatic effect on its ability to compete (or survive) in an increasingly competitive environment.

HR policies can affect an organisation’s competitive position by controlling costs, improving quality, and creating distinctive capabilities.

A way to gain a competitive advantage is to use people with distinctive capabilities to create unsurpassed competence in a particular area (for example, 3M’s competence in adhesives, Carlson Corporation’s leading presence in the travel business, and Xerox’s dominance of the photocopier market).


Organisations commonly centralise major functions, such as HR, marketing, and production, in a single location that serves as the firm’s command center. Multiple layers of management execute orders issued at the top and employees move up the ranks over time.

However, the traditional top-down form of organisation is being replaced by decentralisation, which transfers responsibility and decision-making authority from a central office to people and locations closer to the situation that demands attention. The Internet helps companies to decentralise even faster by improving the communication flow among the workforce, reducing the need to rely on the traditional organisational pyramid.

Brain Drain

With organisational success more and more dependent on knowledge held by specific employees, companies are becoming more susceptible to brain drain—the  loss  of intellectual property that results when competitors lure away key employees. This brain drain can negatively affect innovation and cause major delays in the introduction of new products and services.