Globalization and Factors Influence Human Resource Management - Essay Example

Globalization and Factors Influence Human Resource Management Introduction The human resource management of the firms have undergone evolutionary changes over the decades. Their practices have changed gradually to conform to the global standards. One of the most contributing factors for the changes in the management practices is the advent of globalization (Kapoor, 2012). Globalization has led to a more interconnected world where the business houses can easily communicate with each other and conduct business activities with ease. This as a result has lead to the integration of several HR practices, leading to their convergence to a single standardized practice. However, at the same time, the diversity in the HR practices has also been exhibited. The cultural differences among the countries are clearly reflected in the organizational structure and practices, which gives rise to several independent HR management processes. This makes it quite important for the international organizations to adopt cross cultural practices (GPF, 2015). The process of globalization and its impact on the human resource management (HRM) have been discussed in the paper. The factors involving the social, political, legal, economic and cultural aspects that influence the management of cross border business practices have been added. What is Globalization? Globalization can be described as a process or a set of processes that leads to integration of international entities leading to exchange of views towards business, culture, technology and national economy (Pieterse, 2015). It is a process by which the world is becoming more interconnected, owing to the cross border trade and adoption of cultural practices. It has allowed the firms to have access to new target customers in different nations, thereby increasing their target customer base (Held et al, 1999). This in turn has also increased the production of goods and services over the decades. The large companies have now been transformed to multinational organizations, as they own multiple subsidiaries in several other nations. It has also made it easier for the firms to conduct their business operations, as they can now leverage the comparative advantage of other countries by outsourcing resources or activities. In terms of the global economy, globalization has helped to improve the economic conditions of several developing countries. However, it has also been argued that globalization in certain cases have led to suppression of local firms in the developing countries (BBC, 2014). Apart from changing the scenario of the global business market, globalization has also reshaped the way the social world and human culture is perceived (Pieterse, 2015). Flow of ideas across borders along with the adoption of new technologies has also been facilitated by the process. It led to the formation of a globalized economy, which includes development of new production systems, consumption pattern and integration of economic practices (Robinson, 2004). As a result it has formed a network of interdependent economies in the world. Moreover, globalization has also helped in the formation of “global cultures” which consists of transnational cultural patterns and practices. The interconnected nations have learnt about the cultural practices of each other, thereby leading to the adoption of new practices among the citizens. The interconnectedness of the countries has also led to the development of the global political process. New governance structures and rise of transnational institutions have created a global political scenario that has made it easier for the nations to conduct business in a foreign land (SHRM, 2015). The growing job opportunities in foreign countries have also led to massive multidirectional movement of people all around the world. The process of globalization have created an open world, where the business entities can easily communicate with each other and at the same time they can also conduct cross border business activities seamlessly. Globalization is also responsible for the gradual change in the cultural practices and norms of the society. The culture of one nation is being influenced by the other, thereby giving rise to new cultural trends and practices. The globalization is playing a major role in changing the organizational practices. The firms are adopting standardized practices to create (Stephan et al, 2014). The globalization has played major role in shaping the HRM practices of the modern day organizations (SHRM, 2015). The globalization has not only occurred in the field of international business, but it also evident in terms of cultural and social changes. It has lead to the migration of technology, lifestyle and consumption pattern; the diffusion of these aspects is gradually changing the cultural background of the nations. This as result influences the HR practices of the organizations. The cultural homogeneity is caused by the increased number of migration and the rapid development of communicational technology, leading to intermingling of different cultural elements together (The Economist, 2013). The globalization of HR management practices leads to the convergence of several organizational and workforce management practices that gives rise to the adoption of one standardized mode of practice. This in turn creates a globally networked work force, leading to improved performance and sustainability in the global business market. Globalization has brought about several changes in the business market environment and one of the most prominent changes is in the HRM processes (Shiri, 2014). The people management practice of a firm is a reflection of its cultural norms. Thus, the impact of globalization on the management practices of an organization also includes the HR practices. The roles and responsibilities of the human resource departments of the organizations are eventually transforming so that the firms are capable of facing new challenges and leverage new opportunities brought by globalization (Scholte, 2005). As the global business environment has become more interconnected and the barriers have been suppressed, the decision making of the HR department have become more complicated, encompassing a large number of aspects. Globalization has opened new window of opportunity for the firms to have access to global pool of talent. The companies can now recruit skilled employees from other nations, thereby providing a wider spectrum of choice while selecting employees. Moreover, the organizations can also outsource their activities to other countries where cheap and skilled labours are available. The HR managers often face challenges to balance the supply and demand of the employees. Globalization has given access to a wide pool of employees from all across the world, which helps to meet the immediate demand in the workforce. The global human resources management can be segregated into Global staffing and global leadership development processes (Hirst, Thompson and Bromley, 2015). The firms can potentially leverage these two components to strength their HRM process. In order to succeed in the global competition, the multinationals need to amend their human resource practices so that they can adapt to the changing global labour market scenarios. This will also help them to attract, retain and develop the required talents to achieve competitive advantage. Will Globalization lead to convergence in Human Resource Management practice? The discussion of the convergence of HRM practices cannot be completed without covering the difference between the local and global HR practices. The localization of HRM includes isolated practices which is exclusive to one particular region or nation. However, owing to the impact of globalization, these several localized and isolated practices are eventually diffusing in to one, to create a single standardized human resource practice which can be considered a global practice. This process of diffusion in to one standardized process is the convergence of global HRM. The pace at which globalization is progressing to bring down the national borders, it can be stated that the HR practices are converging. However, studies have also show that the cultural practices and norms in different nations are quite prominent to ascertain that the HR practices will converge in the future. According to the six dimension model proposed by Hofstede (2001), the needs, presence, behaviour and perception of the people varies largely from one country to another. Thus, the local HR practices are limited within the cultural bounds of a particular region. According to Stephan et al (2014), a global business must have global HR functions following standardized policies and practices. However, at the same time, a localized approach is also required in order for the organization to succeed in diverse markets. The companies need to ensure that they have the required skill and infrastructure to recruit, manage and train staff locally. In order to achieve that, the local culture and local labour market conditions need to be thoroughly analyzed. The multinational firms often outsource some of their operational activities to countries where cheap labour is available or they expand their business to several different host countries. In order to run these business units or subsidiaries, the company needs to ensure that HR practices are in line with the local practices (Robinson, 2003; Scholte, 2005). Thus, an organization entering into a new country needs to follow the local cultural practices in their HRM functions. However, a global approach is also required where a firm can train their employees in such a way that there is mobility in the company. A globally integrated HR strategy will help to move the talent pool from one location to another to meet the talent gaps. Thus, the organizational practices clearly indicate that there is no evidence that HR practices are likely to converge in the near future. Author like Prentice (1990) have agreed to the fact that the competitive forces in the global business market environment is forcing the firms to adopt a universally accepted best practice model. Following a single model by all the firms will help the companies to avoid ambiguity and establish global HR functions more easily. This proposition has been contrasted by authors like Pudelko (2006) and Hofstede (2001) by putting forward the divergent approach. It strongly focuses on the fact that the management practices are mostly influenced by the socio-economic condition of a particular nation. Thus, in order to foster a harmonious relationship between the human work force of the organization and its strategic mission, focus on the ‘best-fit’ approach is necessary. These two paradigms: the convergent (or globally standardized practices) and the divergent (or the contextual and locally focused practices) approach, are clearly being witnessed in the field of HRM. Khan (2011) has mentioned in his article that, the HR practices of the multinational firms are neither diverging into several contextual best-fit practices, nor are they converging to a single universal practice. Instead, the firms have recognized the importance of the balance between the both, which Khan (2011) have stated to be the ‘middle of the path’. In this approach, the multinational organizations try to balance between the local and global HR functions, which help in achieving the best possible output. At one hand, the employees recruited from the host country are provided with a work environment that they are comfortable with, whereas on the other hand, the expatriates are equipped with sufficient training that will help them to make business communications across different borders. The extent to which the multinational firms should practice localization along with globalization of HR practices has also been under speculation. Based on the article by Myloni, Harzing, Mirza (2007), the apparent conflict between the local isomorphism and adhering to global standards can be solved by assessing the scenario from the point of view of the organizational benefit. Owing to the process of globalization, the HRM has evolved from simply being a supporting tool in an organization to one of its strategic pillars (Hirst, Thompson and Bromley, 2015). However, it has been mentioned that the HR department is often faced with chief constrains when a multinational company tries to apply a global strategy, to simply the HR practices. Since globalization has connected the multinational organizations, they often tend to learn each others’ practices, which they find to be successful. Thus, the transfer of HRM practices from one nation to another is largely responsible in shaping the organizational culture of a firm. From the discussions made above it can be clearly stated that even though the globalization has changed the organizational culture over time. But considering the cultural diversity and their prominence, it can be stated that the complete convergence will not occur in the HRM practices. Instead, a harmonious combination of global and local practices will be conducted depending on the organizational needs. Factors leading to diversity in the Human Resource Management practices Human resource practices often vary from one country to another, which is mostly because of the difference in cultural practices (Tyagi and Grewal, 2012). According to the reports of The Economist (2009), more than 55% of the global firms strongly promote diversity in HR practices and workforce. Although the concept of diverse HR practices is contradictory to the adoption of a standardized global HR practices, but it has been proven to be quite effective for firms which owns subsidiaries at different countries (Pudelko and Harzing, 2008). Thus, an organization with different HR practices can facilitate an effective workforce management in all the subsidiaries (Shiri, 2014). The factors leading to the diverse nature of the organizational practices in workforce management include the socio-cultural diversity in the global business environment (Arizpe, 2015). Every nation has their own cultural, social, political and legal aspects which vary across national borders. A company while designing its HR functions ensures that those aspects are being considered (Liu, 2015). Thus, the recruitment policies, motivational initiatives, wages and the overall treatment of the work force depend on these factors (Kaufman, 2014). As long as the nations are being identified by their social, cultural, political and legal factors, the diversity in the HR practices will persist. The cross-cultural management is quite vital for an organization operating in a diverse environment (Panda, 2013). Globalization has allowed a firm to create a workforce consisting of employees from different cultural background. This often becomes a challenge for the multinational firms to work with different employees at the same time. As a result, the firms need to conduct training program for the employees to help them adapt to the new environment. As mentioned by Hofstede (2001), the cultural background of an individual dictates his psychosocial nature, so it is imperative for the employer to have a clear idea about the cultural background of their employees. The political and legal factors influencing the HR functions have been brought to light by Hatcher (2003) who mentioned that the political and legal structure is one the dominant forces that influence the economic globalization and brings changes in the workplace of international firms. The local government often dictates the terms under which the organizations are bound to operate, which also influence the HR practices (Chung et al, 2013). The political and legal influences include anti-trust laws, minimum wage limits, working hour limits, human rights regulations, etc. These factors often differ across nations thereby forcing the firms to create diverse HR policies across different subsidiaries. The natural environmental conditions are also influential to the HR practices. The climatic and ecological variance among different nations is often put into consideration while making the HR policies. Policies like working hours, employee security and duration of shifts are dependent on the climatic and environmental conditions of a region (Genc, 2014). These factors (political, economic, social, legal and environmental) are the key reasons behind the diversity in the HR practices. The five stated factors are varying largely across the national borders (Reddi, Kumar and Amarnath, 2013). Hence, in order to ensure that an organization is able to design a set of HR functions which are compatible with its host countries, it needs to have a deeper understanding of the political, economic, social, legal and environmental factors. The diversity in the HR functions will continue to persist as long as these factors are present and are varying across different countries. As mentioned by Kaufman (2014), the unity of diversity concept can be applied in the management of Global HR policies. It has been mentioned that although the diversity of socio-cultural practices are quite evident in different countries, the organizations have adopted effective cross cultural management techniques to deal with the diverse cultural practices and norms (Almond and Menéndez, 2013). The unity among the culturally diverse people can be only possible if they have the sufficient knowledge and respect for each other’s culture (Jeong, 2012) According to the studies of Bae and Rowley (2002) conducted in South Korea, the implementation of the Global HR practices or the ‘best-practices’ failed to deliver the desired results. Although, its implementation was triggered by the process of globalization, it has been evidenced that the acceptability among the employees was quite poor. One of the primary issues that surfaced was the misalignment of the organizational practices and the newly implemented HR policies. It has been argued that it is possible for a firm to realize multiple values from the global HR practices simultaneously, if they are being applied at the right place and right time. The global practices can only be properly implemented if the architectural, structural and cultural aspects are adequately aligned. Conclusion The globalization can be considered as a massive momentum that has the ability to change the global business environment. It has the ability to impact the way in which the organizations conduct their business operations and communicate across borders. It has been found that globalization has a massive impact on the HR practices of the firms, particularly on the MNCs. The diffusion of technology and lifestyle practices has made cross border business practices quite easier. The cultural and organisational practices of one nation have found its way into another, thereby creating a strong tendency of convergence of HR practices in to one globally accepted practice. Simultaneously it can be also stated that the diversity of national cultures and the prominent differences in HR practices still continue to prevail in almost all the nations. These cultural differences need to be properly managed by the organizations to deliver the best HR practices. Thus, a combination of both global and local practices of HRM can lead to long term organizational success. The factors responsible for the persistence of the diverse HR practices can be attributed to the political, economic, social, legal and environmental aspects. The HR policies are mostly designed based on these factors which largely vary across different nations. Thus, the variation of the contributing factors lead to persistence of the diversity of HR practices. Reference List Almond, P., and Menéndez, M. D. C. G., 2013. The Changing Nature of HRM, Organizational Change and Globalization. International Human Resource Management: An Employment Relations Perspective, 37. Arizpe, L., 2015. Cultural diversity as a source of creativity for globalization. Boston: Springer International Publishing. Bae, J., and Rowley, C., 2002. The impact of globalization on HRM: The case of South Korea. Journal of World Business, 36(4), pp. 402-428. BBC, 2014. Globalisation. 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