Effects of Globalization on International Human Resource Management - Literature review Example

Effects of Globalization on International Human Resource Management Department: Introduction Globalization refers to complex changes that affect the social, emotional, economic, political, intellectual and cultural dimensions of people throughout the world. The effect of these changes does not exclude multinational companies. Globalization has brought with it many issues such as economic recession and security matters. The trends have also affected market liberalization. Therefore, it means that the human resource management has to adjust itself to fit in the changing world. According to Markovic (2012), many international companies have made several changes in their local and international human resource management to keep up with globalization. This paper uses a case study of Shell Company to discuss changes in international human resource management, and how they are affected by the crisis brought about by globalization. It also discusses the implications for extensive human resource management. According to Harzing and Pinnington (2010, p.83), international human resource management refers to worldwide management of human resources. Its main purpose is to enable a multinational enterprise to be successful globally. A multinational company achieves success in its operations at current times by being competitive throughout the world, efficient, locally responsive, flexible, adaptable and capable of transferring knowledge and learning over its global units. Therefore, effective international human resource management can make a difference between survival and failure for many international companies. Discussion Shell is a global company dealing with energy and petroleum products. Its headquarters is in The Hague, Netherlands. The parent company is Royal Dutch Shell, which is in England. The company’s strategy involves generating profitable growth and increase investment. It also aims to deliver sustainable expansion and provide good returns to its shareholders, while helping to meet the global energy demands. The company’s emphasis is on sustained generation of revenue from existing assets and investment in wide markets. It operates in more than seventy countries with over ninety thousand employees. Changes in Shell Company In the last decade, Shell has undergone many changes in their organizational structure. Three major occurrences prompted the changes, intense activism from shareholders, human rights issues in Nigeria and the Brent Spar incident necessitated the company to make adjustments. After attacks from activists, it divided its operations into five worldwide units aimed at increasing efficiency. These units included oil products, exploration, gas and coal production and central staff functions. In order to manage the changes, the company had to make adjustments in its human resource aspect. The company had to employ a director to head the environmental and corporate department. The director had to monitor, audit and give a report to shareholders on its social and environmental policies concerning its operations in Nigeria. It also increased the number of human resource managers in its all business units to ensure efficient operations. Aspects of Human Resource Involved in Change Due to Globalization The three most important factors in achieving competitive advantage are innovation, quality of products and cost-effective leadership, with all depending on the quality of an organization’s human resources. This means that the starting point of any business should be with the companys workforce. Many people have argued that the human resource satisfies four conditions required to achieve sustainable competitive advantage such as employees are valuable, scarce, and imperfectly imitable and has no substitutes. Competitors can easily copy competitive benefits obtained through modern technology and products, but it is hard to copy competitive advantage gained through better management of employees. The company creates these core competencies via effective provision of traditional services of employee management and deals adequately with major concerns such as corporate culture and management development. According to Frynas (2000, p.157-164), globalization in the recent decades has made the company change its strategies in business to counter the changes brought by globalization. The most important change involves the human resources aspects. Since it has operations globally, the company has made several changes in its international human resource departments. The aspects of human resource that have contributed to the change in international human resource management of the company include human resource planning and employee management. These aspects were affected by crisis of globalization and assistance in bringing changes to human resource contributed to avoiding adverse effects of globalization issues such as the economic recession. The following paragraphs describe the aspects contribution to change. Human Resource Planning Human resource planning refers to process of identifying the members or the employees’ skills, occupational categories, performance and development needs of employees in the company. This plan is linked to the strategic plan of the company. The aim of human resource planning is to ensure the company has the right employees with the right skills at an appropriate cost. Human resource planning is an important management function that provides managers with information on resource flow that is used to determine recruitment needs, promotion and development plans (Burke et al, 2013, p.56). Human resource planning will also ensure that the business develops a well-trained and dynamic workforce, thus contributing to the companys ability to adapt to unexpected and changing environments. Effective human resource planning reduced the negative impacts of economic recession and loss to insecurity. The company with sufficient and skilled employees avoided recession since its production was continuous. Instead of the sales dropping, they went up because its production was not affected by the changes brought about by globalization. Effective human resource planning ensured that the company adopted current technology without affecting its employees negatively. However, globalization and its outcomes such as a recession, insecurity and increased competition to an extent have affected human resource planning in the multinational company. It forced the human resource planners to change the policies regarding human resource to go in line with the changing world. It went even to the extent of forcing the whole policies of the company to be altered to maintain its competitiveness in the market. The issue of globalization forced the human resource managers to change strategies of planning to meet the demands of the business. Management of Employees This entails three areas including recruitment, employee development and performance appraisal. All these have contributed in the development of international human resource of the company. These aspects of human resource reduced the negative effects brought about by recession and insecurity. Employee management was also affected by the crisis, which then prompted the changes to occur. The following paragraphs describe the process of recruitment, employee development and performance appraisal and their effects on globalization. Recruitment This involves the process by which the company acquires new employees. It involves several steps such as job description, advertisement, selection and indoctrination. In a changing business market, the benefit of finding the right employee for the job cannot at the lowest cost cannot be over emphasize. The new environment challenges the traditional approach to recruitment of new personnel. The company has adopted the current methods of recruitment. With the aim of lowering the expense of hiring, it posts job positions on its website therefore reducing the expenses incurred in advertising at other media. Selection of potential candidates is done online which reduces the cost of travelling to different places of the world to select candidates for the job. Development of Employees According to Burke et al. (2013, p. 82), the changing world, for example, invention of new technology has necessitated changes to activities in human resource management. In addition, competition from other businesses requires competent workforce throughout the company. Therefore, the international human resource management has changed its strategies of managing employees by introducing workshops for staff development. There is an urge to continuously train and develop the employees to make them competitive. Training ensures that the workforce develops the right skills, attitudes and knowledge that will allow them to perform their jobs effectively and efficiently. This will bridge the gap of competition from other companies and increase the company’s competitive ability. Performance Appraisal According to Burke et al. (2013, p. 102), managing the performance of employees is a fundamental company’s strategy to gain advantage of mobilization of resources. Performance appraisal entails the process of assessing the employees’ performance in their jobs. Appraisals provide an analysis of a person’s overall capabilities and potentials allowing decisions to be made in the process of managing the employees. Effective performance appraisal ensures employees work according to set standards. It also offers an opportunity to motivate them to work harder in achieving the company’s targets. According to Martinez and Crowther (2008, p. 13-22), employee management affected the crisis caused by globalization in a positive way. It has reduced adverse effects of the crisis on the firm’s global growth. Even with high competition from other multinational companies, the company maintained its revenue due to competent and motivated team. Good employee management made the company achieve its targets hence increasing its economic growth. In addition, the crisis forced the company to abandon some of the old methods of employee management and adopt new ones. It had to do so because of competition from other companies in retaining and developing their workforce. Implications for Wider Human Resource Management According Harzing and Pinnington (2010, p. 83), human resource management is universal in terms of strategies, processes and policies. International human resource management is increasingly recognized as a challenge to multinational companies. Human resource management model emphasizes on the need to introduce new ways of working and the main role of managing change. It also emphasizes on treatment of employees as individuals and encouraging them to consider management as partners rather than opponents. One of the theoretical bases of human resource management is to help the company to achieve its strategic goals by attracting and retaining staff and manage them effectively. It assumes that employees are individuals with varying goals and needs, therefore, the management should not think of them as business resources. Therefore, managers should take the role of increasing the employee productivity via training, development and motivation. International human resource management refers to process of recruiting, developing and rewarding individuals in international or global organizations. It involves the worldwide management of people. Human resources managers at such international organizations should attend to international influences on their business. Wider human resource management entails the management of companies’ human resource in international levels and a comprehensive manner. It involves taking care of all the employees’ needs to allow them to work towards organizational goals. This concept of human resource management has many implications with, most of which are positive. The following paragraphs explain the implications for wider human resource management. Schuler and Jackson (2009, p. 241-267) says that a strong international human resource management has benefits to both the company and the employees. The employees benefit positively via improvement of equity between employee compensation and level of responsibility. Understanding the employee’s risks at the workplace ensures that an adequate compensation is provided in case of occupational damages. Effective international human resource management assesses the risks in any place of business. According to Schuler and Jackson, (2009, p. 256) the implications for international human resource management to the company include increment of capacity to achieve its goals and objectives. With effective human resource management, experienced employees work for the company. Human resource management ensures knowledgeable, skilled and experienced employees are recruited to work in the business. International human resource management also ensures that employees in different business units adhere to the company’s standards, goals and objectives.. Harzing and Pinnington (2010, p. 100) says that a strong international human resource management enables an organization to manage change without difficulties. A good relationship between human resource managers and employees ensures easy power to accept change. Effective communication skills by human resource managers convince the workforce to accept change. International human resource managers can also formulate employment policies that agree with the intended change. International human resource management usually carries its work in different nations with various cultures, laws and policies. Cultural differences may influence how the human resources roles are implemented across the countries. Many international human resource managers face challenges in administering company’s policies due to requirements by governments in the respective countries. Labor policies vary in different countries. The culture of people expected to work for the firm may not favor the human resources activities. International human resource management influences the organizational staffing and human resource planning. It helps the firm to counteract the effects of globalization and business integration. It assists in identifying potential successors in the global management of the firm. For example, the Shell Group recognized the need for a globally consistent framework for succession, talent management, and leadership development in its expansion process. International human resource management helps to localize firms activities in the foreign countries to reduce pressures from the governments. According to Markovic (2012, p. 24), globalization exerts pressure on the business to become efficient in several ways. For example, increased competition for scarce human resources and customers forces the firm to deliver products in an effective and cost effective manner. International human resource management ensures timely recruitment and development of employees in international business units hence reducing the cost and loss of business opportunities. It provides human resources information in several countries that assist the administration in making decisions. Human resource management determines cost-effective methods of recruiting new staff. It also ensures employees are informed about terms and conditions of working to avoid malpractice that may lead to court cases. It also ensures employees are protected from occupational hazards hence avoiding expenses from compensation claims According to Schuler and Jackson (2009, p. 247-261), international human resource management has increased employee advocacy. It maximizes the employees’ contributions to the business and advocate for their rights. It has also come up with different methods of training and developing the employees such as the introduction of e-learning in many countries. This has enabled employees with different languages to gain knowledge and skills. It has also enabled the firms to retain expatriate employees by advocating for safety, compensation and terms of work. Internalization of human resource management has also necessitated the development of a curriculum for international human resource management. This has changed the techniques of teaching management courses. The curriculum has changed to accommodate international human resource management. It has suggested realignment of human resource management curriculum to focus on cross-cultural management and dynamic multinational companies. Conclusion In summary, globalization has produced many changes in many international companies. Globalization affects the operations of many companies; hence the need to change their strategies of operation. The need to be competitive has forced many firms to venture into international markets, thus presenting challenges to human resource management because of changes in the environment. Many multinational companies have adopted new changes in the management of workforce in order to maintain their competitive nature. International human resource management has become the current trend in human resource management. Many companies have diversified their human resource management activities to business units in international markets. Adoption of international human resource management has helped many firms to increase economic growth due to successful business operations in diverse markets. References Burke, R.J., Noblet, A. & Cooper, C.L. (2013). Human Resource Management in the Public Sector. New York: Edward Elgar Publishing. Frynas, J. G. (2000). Shell in Nigeria: A Further Contribution. Third World Quarterly 21 (1): 157-164. Harzing, A.-W. & Pinnington, A. (2010). International Human Resource Management. Harrisburg: SAGE Markovic, M.R. (2012). Impact of Globalization on Organizational Culture, Behavior and Gender Role. Denver: IAP Martinez, E. O., Crowther, D. (2008). Is Disclosure the Right Way to Comply With Stakeholders? The Shell Case. Business Ethics: a European Review 17 (1): 13-22. Schuler, R.S. & Jackson, S.E. (2009). Global Realities for MNEs: Implication for International Human Resource Management, in: Berndt, R. (Ed.), Weltwirtschaft 2010, Herausforderungen a Das Management. Springer Berlin Heidelberg, pp. 247–261. Read More