The pressures of globalization mean that increasingly there is one best way of managing and developing human resources, critically discuss.Globalization is not a new factor in the world and its effect is cannot be over emphasized in every country.
Globalization is a non-stop economic process. Individuals, companies or government are always on the lookout for new processes or innovations, and so the economic and power structures of the world are ever dynamic. Innovations are important not only to the field of technology, but also to people, culture and communications. Globalization is rather perceived as a transfer of existing jobs, technical know-how and wealth of developed countries to the new and rapidly growing economies. A globalized world is one in which there is a free movement of ideas, people, values, and systems across the globe. It is a prime force for spreading knowledge and technology. In the words of Wolf (2004) globalization is described as the integration of economic activities, via markets.
The driving forces of this integration are technology and policy changes, falling costs of transport and communications and greater reliance on market forces. Globalization is merely the extension of markets across frontiers. As it is true of any market structure, the quality of the product one obtains from the international market depends on the value of what one can offer. It is not a question of desert or intrinsic worth; rather, it is a question of opportunity and incentives. Therefore, if a country is unsuccessful in obtaining as much as its desires from its integration with the world economy, it is because its people have failed to meet up with the requirement of the market which can result from their insufficient ability to met up or they are been prevented by some barriers. This is true for both people of a country, as a whole, and of groups of people or individuals within it.THE PRESSURES OF GLOBALIZATION MEANS THAT INCREASINGLY THERE IS ONE BEST WAY OF MANAGING AND DEVELOPING HUMAN RESOURCES is the topic/question in Module 3 that the student would like to undertake.
The student would like to adopt the issues stated in the materials of the Center for Labour Market Studies (2009: 2-17), whether globally operated organizations such as MNCs and TNCs require new approaches in order to handle HRM and HRD effectively and whether HR practitioner operating within global or multinational corporations need to adopt practices to take account of the global context.The materials (CLS 2009) states that exploring the antecedents of international HRM and the ultimately global of HRM/HRD, inevitably involves exploring the development of HRM/HRD more generally. The beginnings of international HRM (IHRM) as a discrete set of ideas and practices can be traced back to the development of an overseas personnel function typically adopted by multi-national corporations (MNCs) in the 1950s and the 1960s. It is important to note that during this period, the predominant orientation of human resources in most developed nations can be described l as personnel management. In essence, personnel management encompassed many of the activities that are now commonly recognized under the label of HRM; however, they were relatively more administrative oriented than strategic. Such activities included rewarding, recruiting, selecting, developing and directing employees in order to meet organizational objective.
Moreover, personnel management at this time also included a HR planning component especially in large and internationally operating organizations. However, this was largely restricted to forecasting staffing figures and ensuring a sufficient supply of labor including staffing overseas subsidiaries and branches typically with home country nationals otherwise known as expatriate (ibid).The Center for Labour Studies elucidated that by the end of the 1960s, the term personnel came to be considered increasingly out of vogue particularly among practitioners in the United States and in its place came the concept and practice of HRM. The shift from personnel management to HRM encompassed more components including the structure, orientation and process. Personnel management characteristically covered a range of activities centering on the supply and development of labor to meet the immediate and short term needs of the organization. Under the personnel management, the activities of recruitment, selection, rewards, development and many more were much viewed as separate individual functions though they might be administered by the same unit. These activities were not integrated into a coherent strategy.
Thus, the issue of international staffing was viewed as overseas assignments of deploying or recruiting appropriate personnel as position emerged, a largely reactive approach. However, HRM, aimed to integrate all of the personnel functions into a coherent and potentially more pro-active strategy (Ibid).Legge (1989) stated that there were a number of other key differences between personnel management and HRM. Firstly, in personnel management, managers was directly involved with the subordinates, HRM took a more developmental approach to organizing employees. Secondly, as Boxall (1993) added, personnel management was intimately related to a more traditional models of individual relations (such as union based collective bargaining), whereas, HRM signaled, at least in part, a move towards a strategy of union avoidance, a move towards workforce governance exercised through ostensibly more devolved and participative forms of management which emphasized the importance of organizational culture as a vehicle for the development and maintenance of worker control and commitment. The focus on organizational culture can, in turn, be seen to be related to a shift towards the influence of the Human Relations School and its emphasis on group psychological state and a shift away from individual-based psychological theories of worker morale.
Thirdly, Mahoney & Deckop (1986) contributed that HRM involves a move, away from the focus on task-specific training, towards more holistic development, ‘job enrichment’ group working and an engagement with more qualitative aspect of work. This trend has continued with more recent development within HRM field to include organizational learning, high performance work practices and knowledge management. (ULCLS 2009; 2-17)Also the emergence of national HRM meant that before long, HRM incorporated an international dimension. Accordingly, we can now understand HRM so as to extend this focus across national border, with the organizational context conceived not as a geographically contained entity but as something that spanned a plurality of nations, cultures and socio-political frameworks. This IHRM, whilst retaining aspects of international personnel management – employee resourcing, expatriate remuneration and so forth – it also incorporated activities that could be described as international labor affairs (Reynolds 2004) which involved everything from negotiating immigration policies to developing a coherent corporate response to local trade union and perhaps formulating strategic means by which MNCs could avoid or transcend industrial action.
Moreover, HRM centrally involved the understanding that managing workforce from different national environments required a different set of demands and different kind of knowledge, skills and strategic responses to the management of a domestic labor force (Schuller and Jackson 2005).Elmuti and Kathawala (2000) approached globalization from a perspective of identifying potential problem. In particular, the authors described globalization as a potential problem for managerial control and maintaining employee morale. Using out-sourcing as a case study, Elmuti and Kathawala (2000) identified issues of important lessons all of which mean that HR practices and training should be conducted within a broad perspective of global partnerships – for example how other jobs, may affect the host country jobs, selection of partners, planning, cultural awareness, etc.Global outsourcing has received considerable attention in the popular and business press over the last few years. Global outsourcing is the strategic use of outside resources to perform activities that are traditionally handled by internal staff and resources.
It is a management strategy by which an organization delegates major, noncore functions to specialized and efficient service provider. Corbett, a leading consultant on global outsourcing assert, outsourcing is nothing less than the wholesale restructuring of the corporation around core competencies and outside relationships (Corbett 1999). The traditional global outsourcing emphasis on tactical benefits like cost reduction – cheaper labor cost in low cost countries – have been recently replaced by productivity, flexibility, speed and innovation in developing business applications and access to new technologies and skills (Wild et al. 1999).The trend is for global outsourcing relationships to function more and more on partnerships.
Outsourcing providers are taking increasing responsibilities in values that have traditionally remained in-house, such as corporate strategy, information management, business investment and internal quality initiatives (Sunderman 1995). Byrne (1996) reported that activities most frequently outsourced are manufacturing, transportation and distribution. Outsourcing has totally altered many business structures nowadays. Cheaper labor, more skilled expertise, freer cash flow, a more flexible working environment and a more effective use of staff has made outsourcing a global phenomenon. Today, businesses from all across the globe are now outsourcing work so that they can save more money by getting specialists to work at a more affordable rate which will help the companies to utilize their own resources for more productive ventures.The efficient transaction of international business is made more challenging because of several kinds of obstacles or differences. Companies that enter global markets must recognize that these markets are not simply mirror images of their home country.
Attractiveness of each country’s foreign investment differs from country to country. These differences determine the economic viability of building an operation in a foreign location and they have a very strong impact on HRM in that operation (Noe and Hollenbach 2009:661). Several researchers in international management have identified a number of factors that can affect HRM in global markets; however, Peiper (1990) focused on four factors namely culture, education-human capital, the political-legal system, and the economic system. Cultural barriers include several factors that make human interaction more difficult – differences in languages, values and behavior. Sathe (1995) defined culture as the set of important assumptions that members of a community share. Harrison (1992) argued that culture is important to HRM for two reasons.
First, it often determines the other three factors affecting HRM in global markets. Culture can greatly affect a country’s laws, in that laws are often the codification of right and wrong as defined by the culture. Culture also affects human capital, because if education is greatly valued by the culture, then members of the community will increase their human capital. Moreover, culture and economic system are closely intertwined. However, the most important benefit of culture to HRM is that it often determines the effectiveness of various HRM practices.
Practices found to be effective in the United States may not be effective in a culture that has different beliefs and values (Adler 1991).A country’s economic system influences HRM in many ways. A country’s culture is integrally tied to its economic system, and these systems provide many of the incentives for developing human capital. In the socialist economic systems, there are ample opportunities for developing human capital because the education system is free. However, under these systems, there is little economic incentive to develop human capital because there are no monetary rewards for increasing human capital.According to Adler (1997), culture has pervasive impact on the management of human resources.
Culture influences how black and white collar workers respond to pay and non-pay incentives, how international firm are organized and even how executives compose and implement business strategies. The design and management of an international workplace must take into account all the cultural differences in values, expectations, behaviors, negotiations and communication styles. Graham (2001) argued that the implication of culture for organizational design and employee recruiting, selection, training, motivation, compensation, evaluation and control are now considered.
The first step in managing an organization is its design. Based on analysis of current and potential market condition, the local work environment, competition and the firm’s resources and capabilities, decisions must be made regarding the numbers, qualities and assignments of personnel. All these design decisions are made more challenging by the wide variety of circumstances in the global work and market places.
A company’s potential to find and maintain a qualified workforce is an important consideration in any decision to expand a foreign market. Thus, a company’s human capital resources can be an important HRM issue. Snell and Dean (1992) defined human capital as the productive capabilities of individuals – that is, the knowledge, skills and experience that have economic value.
Countries differ in their levels of human capital, for example, the United States suffers from a human capital shortage because the jobs being created require skills beyond most new entrants into the workforce, whereas, in East Germany, there is excess human capital in terms of technical knowledge and skill because of the country’s huge investment in education. However, East Germany’s business schools have not incorporate management development into their curriculum, hence; there is a human capital shortage for managerial jobs.The regulations imposed by a country’s legal system can also affect HRM. The political-legal system often dictates the requirements for certain HRM practices, such as training, compensation, hiring, firing and layoffs. In general, the legal system is an outgrowth of the culture in which it exists (Ledwinka 1991). For instance, the United States has led the world in eliminating discrimination in the workplace and because of its importance in our culture; we also have legal safeguards such as equal employment opportunity laws that regulate the hiring and firing practices of firms. Similarly, the legal regulations regarding HRM in other countries reflect their societal norms. For example, Germany employees have a legal right to ‘codetermination’ at the company, plant, and individual levels.
We will take up micro-level issues which include topics such as perception,, selection, leadership and performance appraisal. In other words, we will look at international management from the perspective of individual employees or groups of employees. How well MNCs manage their human resources around the world can mean the difference between success and failure in international business. Odenwood (1993:23-31) talked about some positive outcome that resulted when MNCs effectively manage international human resource issues: an improved ability to identify new business opportunities around the world; competitive advantage over other international firms; a satisfied and committed overseas staff with low turnover; a low risk of losing business due to the violation of cultural norms and values; an ability to successfully adapt in the face of rapidly changing business condition worldwide.But how should MNCs go about building a globally competitive workforce? The answer is by selecting, training and developing outstanding employees. However, this is easier said than done, especially when cross-cultural issues are thrown in.
Let us examine basic human resource management issues from an international perspective. Specifically, Cascio (1995:15-36) suggests investigating the following points: options for selecting and staffing personnel in international operations; how MNCs can develop employees with international management skills and issues surrounding the selection, training and repatriation of expatriates. Adding an international dimension to these traditional human resource issues makes them much more difficult to manage; MNCs should integrate their approach to international human resource management with overall strategic planning.There is a need to distinguish between parent countries, host countries and third countries. A parent country is the country in which the company’s corporate headquarters are located.
For example, the United States is the parent country for General Motors (GM). A host country is the country in which the parent country organization seeks to locate a facility. Thus, Great Britain is the host country for General Motors because GM has operation there.
A third country is a country other than the host country or parent country and a company may or may not have a facility there.There are also different categories of employees. Expatriate is the term generally used for employees sent by a company in one country to manage operations in a different country. Parent country nationals (PCNs) are employees who were born and live in the parent country. Host country nationals (HNCs) are those employees who were born and raised in the host country, as opposed to the parent country. Finally, third country nationals (TCNs) are employees born in a country other than the parent country and host country but who work in the host country (Noe, Hollenbech. & Wright 2009:670).
In staffing international operations, human resource managers in MNCs face some confusing array of choices. For example, a traditional option is to recruit parent-country nationals (PCNs) especially for top management and important technical positions in foreign subsidiaries. PCNs have citizenship in the country where the firm is headquartered. Once abroad, PCNs are usually referred to as expatriate. The rationale for using PCNs varied but may include: the lack of technical or managerial expertise in the workforce where the foreign subsidiary is located; a desire to round out promising manager with an overseas stint before returning them to a top position at the company headquarters; and a perception that parent country personnel will allow foreign operations to be more closely monitored and controlled. However, the big draw back with PCNs is that they may not understand local culture and business practices enough to be effective (Brisco 1995).
To offset this, some MNCs seek out people who have immigrated to the U.S. or their adult children – in order to send them to foreign subsidiaries in their ancestral homes. Unfortunately, this option is not without significant risks. As a result of these problems with PCNs, many firms have turned to host country nationals (HCNs), especially to fill lower and middle level management jobs. Some MNCs have been reluctant to put HCNs in top management position overseas because they feel that it would dilute the company’s ability to control foreign operations or to maintain a unified corporate culture. Nevertheless, HCNs offer some potential advantages that are lacking in PCNs. HCNs usually have greater understanding of the local culture, business practices and language than everyone else.
HCNs tend to be less expensive for the company since bringing people in from abroad involves a variety of relocation costs and often higher salaries. Hiring local individuals to staff foreign operations can bring public relations benefits to the company. Hiring HCNs can relieve the pressure that foreign governments often place on MNCs to go local in staffing subsidiary operations. A third and increasingly popular options for MNCs is to use third country nationals (TCNs) in their foreign subsidiaries. TCNs enjoy citizenship in a country other than the country where the foreign subsidiary are based or the country where the parent company is headquartered. Many MNCs are simply looking for a particular set of skills in a TCN. For example, MNC wants someone with expertise in local culture and business practices to fill a specific management position in a foreign subsidiary, the PCNs may have many management experience but lack local knowledge.
Likewise, HCNs may understand local conditions, but, they may lack the right combination of skills and management experience… A TCN may be the best option. This is often the case when MNCs want to groom someone for a top management position in foreign subsidiaries or to set up operations in developing countries that lack a large pool of management talent. For instance, an American MNC wishing to set up manufacturing operations in Guatemala, may find appropriate candidates in Mexico – a country with a much larger pool of Spanish-speaking management talent.How many MNCs actually go about deciding which staffing options are best for particular foreign countries? Ideally, such decisions should be directly tied to the MNCs international business strategy. In many instances, a MNCs approach to selection is related to the sophistication of its international operation (Dowling & Schuller1990).
However, other factors (such as firm size, market industry, corporate culture) can also play a role. Formal or not, MNCs do sometimes embrace a particular approach or philosophy that drives their international staffing decisions. Some experts have suggested that there are four basic approaches to international staffing (Ibid): a geocentric approach which means that the MNCs emphasize ability and performance when selecting international staff. Nationality of personnel is usually irrelevant. The company goal is to develop and socialize managers who can be good corporate citizens anywhere in the world. At the other extreme is an ethnocentric approach which means that the headquarters make all key decisions and foreign subsidiaries have little autonomy or input.
All important jobs at headquarters and in all foreign operations are held by PCN (home country expatriates). In between these two extremes are the remaining approaches. MNCs using a polycentric approach essentially place human resource management control in the hands of the foreign subsidiary, although the headquarters largely make key strategic decisions for the organization. In other words, each subsidiary is set up as a semi-independent entity that controls its own staffing needs. As a result, HCNs usually hold jobs in foreign subsidiaries. Similarly, under geocentric approach, few foreign employees will ever move into a headquarters position.
Nevertheless, employees can move from country to country in a particular region. Under this approach, there may be some forms of collaboration among subsidiaries in a particular region to determine hiring and evaluation standards within the region. Overall, the goal of this approach is to develop outstanding people to serve anywhere within a particular region.Another idea is to recruit foreign students who have come to U.S. to study and want to work in their home country after graduation.
This strategy provides MNCs with well educated employees who also have the right language and cultural skills to serve in their home countries. Some MNCs have had success with training programs that bring high potential managers from all over the world to work together on a variety of projects in a classroom environment. Global training program also include courses such as developing cultural awareness, working effectively in teams and building cross-cultural communication skills.In a broader perspective that directly affect the MNCs as a whole, macro level issues includes formulating an overall international business strategy and making decisions about market entry, technology and production in overseas markets. It also includes the strategic role of human resource management in an international context.
First, we have to distinguish traditional human resource management from an approach that is also international and strategic. Traditionally, human resource management has involved planning and executing activities that help select, train, develop, appraise and reward employees to be both international and strategic. Human resource managers must also be able to ensure that human resource are involved in the overall international strategic planning process for the company and develop human resource policies and practices designed to help the organization achieve its international goals. In short, HRM includes all activities designed to help employees create and achieve a MNC’s overall competitive goals (Miller 1991:65-82).International corporate strategy is the overall plan that a MNC uses to guide its actions and make key decisions.
It is the roadmap a MNC uses to pursue its international decisions. The MNC looks at its own internal resources and shortcomings in order to determine how best they can take advantage of opportunities and sidestep potential threats. Ideally, human resource executives should be involved in all phases of the development and implementation of a MNC’s international strategy (Brisco 1995).Why is a strategic perspective or international human resource management so critical to MNCs? Sparrow (1998:267-299) stated, that a MNC that can develop a highly trained, flexible and motivated international workforce which is at an advantage relative to its competitors, especially if that workforce can be used strategically to support a corporate goals (Taylor 1996:959-958). Furthermore, developing such a workforce is much more difficult for a competitor to accomplish than buying technology or securing capital.
The growth of the global economy has increasingly pushed MNCs into all corners of the world. MNC’s are therefore likely to find themselves doing business in locations with diverse cultural, legal, economic and political perspectives. To perform well in this environment, many large MNCs must simultaneously manage globally and yet be sensitive to local culture, tastes, and needs. The challenges for many MNCs is how to balance the need to coordinate efforts across units scattered around the world against the need for individual units to have the control necessary to deal with local issues (Schuller 1996:351-401).Brisco (1995) enumerated several basic ways that human resource managers can help a MNC meet its overall strategic objectives.
These include the following: making top management understand the different cultures within its company workforce and in their operations around the world; giving advice on how the corporation can coordinate functions across these various cultures; ensuring that both managers and employees have good cross cultural skills; create management development programs and career paths that include overseas assignments; understanding international marketing, finance and related international economic issues in order to be more effective in helping top management shape international business strategy; and lastly, making sure all employees understand how HRM can help the company achieve its goals.Some experts suggested that the first thing MNCs need to do is to develop an international human resource philosophy that describes corporate values and attitudes about human resources. This philosophy will then drive the development of core international human resource policies that define how employees all over the world should be treated, regardless of where they work or who they are. These policies will provide a broad outline of what constitutes good international human resource practices.SUMMARY: Globalization presents many challenges to an organization. A key issue for domestic and global human resource development is how to have people gain more confidence, competency and control in an uncertain world. Globalization is a non-stop economic process. Individuals, companies or governments are always on the lookout for new processes or innovations – and so the economic and power structure of the world is never stagnant.
It is clear that in creation of innovations, not only technology is important, but also people, culture and communication. Globalization process is the necessity to investigate global human resource development and its differences from domestic human resource development. Some authors/writers particularly McClean (2001), Bates (2003), Marquardt and Berger (2003), suggested that HRD must include not only economic development and workplace training, but, it must also be committed to the political, social, environmental, cultural and spiritual development of people around the world. Global success depends on utilizing the resources, diverse talents and capabilities in the society.
The combination of globalized workforce and international corporations means that managers and employees must be able to work effectively with more people from different cultures, customs, values, beliefs and practices. Human resource staff with experience in other cultures and languages will be increasingly valuable assets to organization.Globalization has made the business process not only more efficient and effective, but also, more streamlined and modernized. Businesses now share with one another trade secrets that were once limited to only those who could afford it. The corporate sector has become more receptive and reactive as old business methodologies now give way to new and innovative ideas and opinions such as the outsourcing labor.
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Globalization and Interdependence.