Globalisation and Concept of International Human Resource Management - Literature review Example

GLOBALISATION AND CONCEPT OF INTERNATIONAL HUMAN RESOURCE MANAGEMENT Introduction The pressure that modern businesses face from globalisation has been said to be enormous now than it was two decades back (Lawler, 2003). This is because the world on a daily basis continues to reap real time advantages on the benefits of globalisation. Because of the pressure for modern businesses to go about their way of doing things from a globalised context, the roles and responsibilities of Human Resource (HR) departments, and for that matter Human Resource Management (HRM) has also been noted to have changed significantly (Noe et al., 2006). As HRM entails the functions of the organisation aimed at maximising employee performance, Poutsma, Ligthart and Veersma (2006) argues that it is only prudent that approaches to HRM will change to make employees better oriented for the new global market. In this paper, the real impact of globalisation on international human resource management are analysed from all facets of organisational management. These include political, social, technological, cultural, and economic perspectives. By so doing, it will be possible to appreciate the different ways in which organisations are responding to globalisation from the perspective of their HRM. The paper therefore makes it possible to critique existing approaches to HRM to know how well they fit into the dynamics of globalisation. Conceptual frameworks relating to internationalisation and globalisation Globalisation has been explained to be the advancement in the international integration of world view, products, ideas and components of culture that unifies the world as a common platform and marketplace (Fulcher, 2005). There are several conceptual frameworks that have come to highlight the core internationalisation processes that go into the creation of the concept of globalisation at the international business level. Two such conceptual frameworks are the Uppsala internationalisation model and eclectic paradigm. Uppsala international model is known to have its roots in behavioural theory of the firm and thus focuses on the processes that go into the growth of the international involvement of an enterprise (Evans, Pucik & Barsoux, 2002). As part of the behavioural theory which explains the Uppsala internationalisation model, companies using it go about internationalisation and for that matter globalisation from a systematic perspective. The systematic perspective aims gaining deeper understanding of any target international market before finally making destination on that market (Giles, 2000). The eclectic paradigm on the other hand focuses on the theory of internal maturation whereby national firms are thought to have the potential of being nurtured to transform into being multinational companies (Wild, Wild & Han, 2003). Robb (2004) argued that both Uppsala and eclectic are important for globalisation because they both lead to the conveyance of world view, products, ideas and components of culture to the enterprises in question. Impact of globalisation on convergence in human resource management practice The debate of whether or not globalisation has led or will lead to convergence in HRM practice continues to go on. This is because there are many who think that globalisation has come to centralise HRM practice, leading to a universal way of doing things. Below, four major forms of changes namely political, economic, social and technological changes, which have come about as a result of globalisation are discussed to verify if these changes have or will converge HRM practices. Political change According to Friedman (2004), globalisation has greatly affected the politicking dynamics within organisations and outside the organisations. This is because internal pressures continue to mount as employees and other internal stakeholders continue to fight for limited placement. Once this happens, there are two major effects which are positive and negative effects. The positive effects come in as employees seek self empowerment in order to be attracted by firms. The negative effects also come to play as internal wrangling and struggle for promotions lead to organisational conflicts (Haworth & Hughes, 2003). As this form of internal politics take place, HRM practice become affected and more converged towards the achievement of a common goal which is how well to attract and retain best talents. From an external political context, companies are now seen competing more feverishly with the utilisation of strategic positioning modalities that ensure that they gain competitive advantage (Guthridge, Asmus & Lawson, 2008). This external politics have made it almost a norm and common practice that such model as Porter’s generic options and Bowman’s clock be used by HR managers in positioning their companies well for the global competition. By extension, the political change have made HRM practice also the same and thus converged. Economic change The major economic change associated with globalisation has been said to be one which looks at profitability from the perspective of minimising waste or expenditure so that the hard earned revenues of the company can be retained (Weiss, 2005). Before the intensification of globalisation, most companies had fewer competitors and so demand often exceeded supply. Because of this, the companies had the luxury of exceeding their revenue targets due to the fact that they could increase prices as a response to the high demand (Kostova & Roth, 2002). Today the dynamics have changed as they are fewer demands than supply due to increased number of competitors coming on border as a result of globalisation. Because of this, the revenue levels of most companies have reduced, causing the need to slash spending heavily if they can avoid losses. Because of this economic change, such approaches to HRM as lean thinking which was thought to be the preserve of some few companies such as Toyota and Coca Cola has now been taken and practiced worldwide (Mosley, 2005). This is also a confirmation of how convergent HRM practice has become due to globalisation. Social change From a social perspective, the most significant form of change that can be pointed to is the one that has to do with the promotion of management-employee relationship. This is because Hamel and Prahalad (1994) observed a situation where the type of employee management that was taken from a bossy position where those below the ranks had no business contributing in decision making is now a thing of the past. Instead, employees are now appreciated as an integral part of organisational development, leading to the need for massive employee engagement. In the light of this, HR managers have responded by ensuring that they give their employees types of training and development that make them effective developmental partners when relating with those at the higher hierarchy. This situation has also impacted on HRM practices when it comes to issues such as organisational structure. This is because most HR managers have a feeling that the social environment of their workplace can now be managed best and easily if they have flatter structures as against the hierarchical structures which was commonly associated with local firms (Schramm, 2006). Technological change Making mention of globalisation without technology certainly makes the concept incomplete as technology is said to be the vehicle that has singly driven globalisation than any other phenomenon (Kim, 2002). Indeed through technology, most people and businesses have gained global penetration that they would never have had if they were to do everything physically instead of virtually. A typical example of technological change that can be associated with globalisation is electronic commerce (e-commerce). Through e-commerce, companies that operate from single offices now have global representation because it is possible for consumers across the globe to place orders for products, pay for them online, and have their products shipped to them in no time. Because of this change, there is now a common place where almost all companies converge to do business and that is the new media. As HR managers have to equip employees to maximise productivity, they have also been forced to make the use of information technology (IT) systems an integral part of their management. It is therefore not surprising that the need to have IT competence is now a major requirement in any job search. International applicability of the concept of HRM According to Hutchinson and Purcell (2003), when the scope of HRM is expanded for the larger global context, it constitutes international HRM. Meanwhile, while managing across national boundaries, there are key theories taken across social, political, legal, economic, and cultural perspectives that explain the international applicability of the concept of HRM. Some of these theories are discussed below. Social context It has been agreed that the social environment of the organisation is as relevant in affecting employee performance as all other aspects (Ulrich, 1996). In the light of this, while managing employees across national boundaries as a means of applying HRM in an international context, there are various social factors that are important to consider. In the estimation of Tung and Punnett (1993) there are two broad social contexts which can be identified in relation to HRM. These are internal and external social contexts. Whiles the internal social context relates to the kind of interpersonal relations that exists among employees in the delivery of their roles, the external social context looks at the relationship between employees and the lager society. In order to contextualise these two contexts under a single paradigm for HRM, the Universalist approach or theory to HRM may be used. This is because according to the Universalist approach, all organisations have the potential of seeing benefits and improvements in performance if they are able to identify, gain commitment to and implement HRM best practices (Schramm & Burke, 2004). Meanwhile, such best practices are said to reside within the human resource of the organisation, meaning that any social opportunities that are created for employees to get along well with each other will lead to the realisation of the ultimate goal of HRM. Political context The political context of HRM from an international perspective has been said to be one of the most significant for any organisation. This is because the whole process of international trade and competition among firms going international has been said to be a political process, involving how well one firm is able to gain dominant following through competitive advantage. When the employees of an organisation is managed in a way across national boundaries that makes it possible for there to be sufficient industrial lobbying therefore, that organisation is said to have applied the political context of international HRM. Having said this, the use of Porter’s five forces has been said to be one important theory that helps HR managers to better manage across national boundaries from a political context (Seo & Hill, 2005). This is because in applying the five forces, the organisation gains a general overview of the industrial positioning that it has (Alas & Svetlik, 2004). This way, it is possible to strategise in a manner that ensures an ability of the company to compete well for an advantage over competitors. This is done by strategising towards forces including new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and intensity of competitive rivalry. Legal context One unique characteristic of globalisation is that even though it allows a universal platform on which cross-border business and relationships can be built, it does not have an absolute power to destroy the preserved sanctity of national sovereignty (McGovern, Gratton & Hope-Hailey, 2007). In the light of this, there continues to be legal issues that companies going international have to deal with as part of their HRM practices. One of these issues has to do with employee benefits and remuneration. According to Sivakumar (2001), employee benefits and remuneration comes as a HR issue with legal dimension as it has the potential of both motivating employees to deliver more and it also guided by law. For companies going international therefore, it is a requirement to ensure that labour laws pertaining to benefits and remuneration are well known and adhered to. The classic motivational theories including goal theory, reinforcement theory, and equity theory remain some of the commonly referenced when the issue of benefits and remuneration comes up (Gaál, 1999). In managing people across national boundaries, it is very important that HR managers will understand that by fulfilling legal provisions of ensuring equity and fairness in the pay structure, they are also implementing the provisions of the classic motivation theories which encourage competitiveness between employees of their companies and those in other companies. Economic context It is common knowledge that all companies work towards economic fulfilment, even not for profit organisations. This is because even if the company is not a profit making organisation, it is still required to balance its books well so that it does record losses so that it can continue with operations (Wild, Wild & Han, 2003). From a HR perspective, the economic context of the management of people can be taken from a utility theoretical framework where it is expected that HR managers will create utility out of their employees (Dowling & Welch, 2004). This is certainly something that cannot be done as a single event as the utilitarianism portal explains that utility is process (Dowling & Welch, 2004). When the management of employees of the company is put in specific context, the practice of talent management has been noted to be one important way of ensuing utility from the human resource. This is because through talent management, the HR manager identifies unique qualities in employees that can be developed and nurtured for the betterment and growth of the larger organisation (Alas & Svetlik, 2004). In an international business environment, the competition for talent is even greater, requiring that additional effort be put in place to ensuring that the best pool of talent that maximises profitability can be acquired. Cultural context It is virtually impossible to think of globalisation without talking about culture. This is because as there is the transfer of people and businesses across the globe, these move from one culture to the other, creating the need for cultural integration and diversity (Rosenblatt, 2011). For any international firm, the issue of culture becomes even more intensified as it involves both organisational culture and social culture. In order to combine these two effectively, the use of Hofstede’s cultural dimensions is easily referred and preferred. This is because the model identifies culture from dimensions that can easily fit into any global or international context. The dimensions used are five and include power/distance, individualism, masculinity, uncertainty/avoidance index, and long term orientation (Hofstede, 1980). As noted by Hofstede (2001), when the HR manager has an understanding of how different people within the organisation react to each of the identified cultural dimensions, it becomes easier to manage them by applying cultural variables they will find most acceptable. One merit about the Hofstede’s cultural dimensions is that it varies each of the five dimensions based on national orientations. It is therefore possible for the HR manager to easily associate a group of employees with specific cultural outcomes based on their nationality. Fostering diversity in human resource management practice Even though it has already been said that globalisation has led to convergence of HRM practices, Lado and Wilson (1994) held the opinion that the extent of diversity and dynamism in implementing the converged practices of HRM will go a long way to differentiate ordinary firms from great ones. In the light of this, some of the different ways in which international organisations have approached HRM in diversified ways while practicing specific components of HRM are discussed below. Recruitment and Selection Whiles appreciating the convergence in HRM practices, there are a number of ways that most international organisations have succeeded in becoming models for diversified recruitment and selection. A typical example that can cited in this instance is Samsung, whose international production plants such as the one in Vietnam has been referenced in various literature for employing diversity in recruitment and selection (Barakonyi & Borgulya, 2013). Very specifically, in order to respond to the variety of consumer needs within the larger global market, the company and most others like it ensures that its recruitment and selection process openly embrace and welcome entries based on such workplace diversities including gender, age, race, socioeconomic status, and lately disability (Kostova & Roth, 2002). Because of the consideration made for all these forms of diversity, it has always been the case that the company has been able to land on employees who understand the needs of different categories of consumers within the larger global marketplace. Repatriation of expatriate staff To ensure that there is a perfect blend of the organisational culture that is practiced in their head quarters with international markets, companies such as Apple, Arcatel, and General Electric have been said to exhibit a special practice where they always transfer staff from the head office to new markets (Kobrin, 2008). After years of working, there are arranges made to send these expatriate staff back to their countries as part of repatriation programmes. As a means of fostering diversity, it has often been the case that before the repatriation programmes are finalised, arranges are made for the expatriate staff to orient themselves back into the culture of the head office. Indeed before taking the foreign positions, similar arrangements are made to ensure fair balance of culture between expatriate staff and local staff. The rationale for this practice is in the effects that poor cultural blend has been noted to carry for organisations that refuse to undertake effective repatriation of expatriate staff. Succession planning According to Rosenblatt (2011), HRM is continuous and cyclical. What this means is that the activities and practices that go into HRM in ensuring the maximisation of employee competence is expected to be in place regardless of who occupies which position. By inference, the positions at the workplace are expected to make the employees and not the employees making the positions. This is a principle that has been used by most international organisations, the outcome of which is the use of succession planning at the workplace (McGovern, Gratton & Hope-Hailey, 2007). As part of the succession planning, mentees are trained within the lower ranks to look up to, and take after senior employees after the latter are no longer with the organisation. By so doing, there has always been a backup system that ensures that the same kinds of skills, competences and knowledge needed to make the organisation functional are never in short demand in making the organisation productive. Conclusion The paper has revealed that globalisation is a modern day concept that no business or organisation can run away from. This is because globalisation has become the dictating pace at which modern business is run. For this reason, it is only prudent that any organisation or company that aims for competitiveness would find ways of fitting into the dynamism of globalisation rather than living above it. In fitting into the dynamism of globalisation, one area that has been found to be very crucial is employee performance. As employees act as the pivot of productivity for any organisation, it is very important that they will have what it takes to respond positively to globalisation. Meanwhile, the overall function of the organisation that is designed to maximise employee performance has been noted to be HRM. This means that one of the first areas of change for any organisation in today’s globalised business environment is HRM. As it has been revealed in the paper, the only way to achieve success with HRM in a changing global business environment is to do so comprehensively by capturing political, social, technological, economic, and cultural factors and changes. Once this is done, it should be possible to integrate the changes into specific HRM practices including selection, talent management, and succession planning. References Alas, R.& Svetlik, I. (2004): Estonia and Slovenia: Building Modern HRM Using a Dualist Approach. In: Brewester, C.- Mayrhofer, W.- Morley, M.(eds.): Human Resource Management in Europe Evidence of Convergence? Elsevier, London Barakonyi K.& Borgulya I ( 2013): Company Culture. (In Hungarian). Nemzeti Tankönyvkiadó, Budapest Dowling, P. 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