Globalization and Cross-Cultural Business - Essay Example

? The HR policy changes that brought by globalization in the nature and behaviour of companies that engage in large-scale international coordination Contents Marchington, M. & Wilkinson A. 2005). Human resource management at work. CIPD Publishing, 2005 12 1.0 Introduction According to Reich (1998, p.5) globalization is a process through which the activities done in one part of the world affects people on other parts of the world. Globalization has brought huge changes in the global business world. International business or cross cultural business has been increased a lot in recent past because of globalization. Outsourcing and offshoring of business, workforce exchange, and diversity at workplaces are other important contributions of globalization. Offshoring is the process of establishing business units in overseas countries. It helps companies to exploit the natural resources and cheap labour available in other countries. For example, global organizations are currently competing each other for establishing business units in China and India like cheap labour oriented countries. It should be noted that cost cutting is necessary for international companies to stay competitive in international market. Since American and European countries are facing severe manpower shortage, companies in these countries forced to establish business units or manufacturing units in cheap labour oriented countries. Pepsi, Microsoft, Apple Inc. Dell, Sony, Samsung etc are some of the prominent organizations which have already established manufacturing or business units in China. It is impossible for an American company to use only American workforce in their business units in China. Same way, it is impossible for a Chinese company to operate successfully in India or Europe with the help of Chinese workforce alone. Since locals have better knowledge about domestic market, it is necessary for international companies to employ locals so that the company can exploit the market potentials well. Even though offshoring business helps companies to increase their competitive power, it brings certain challenges also. Management of diverse workforce is one of the prominent challenges facing by international companies while operating cross culturally. This paper analyses the HR policy changes that brought by globalization in the nature and behaviour of companies that engage in large-scale international coordination. 2.0 Globalization and cross cultural business Outsourcing and offshoring are some of the revolutionary business strategies introduced by globalization. As part of outsourcing and offshoring, business travels from one country to another country. In other words, cross cultural business is increasing day by day because of globalization. It would be difficult for international companies to limit their attention in one country alone, when many other countries offer huge opportunities. Majority of the international companies are already saturated in their domestic soil and they need opportunities in overseas market to grow further. For example, Starbucks is an American company which has coffee shops virtually in every corner of America. In other words, it would be almost impossible for Starbucks to formulate its expansion strategies based on opportunities in America alone. Globalization has offered many opportunities to Starbucks like companies in overseas countries. In fact countries are currently competing each other, in attracting foreign direct investments. In short, the global climate for international business is extremely good at present and no major companies can stay away from the opportunities offered by other countries. According to Ivancevich (2006, p.5), “human resource management is action oriented, people oriented, globally oriented and future oriented”. It is necessary for international organizations to integrate HRM issues into their strategic plans (Beardwell, & Claydon, 2007). It would be impossible for modern organizations to work with a single cultural workforce in a heavily globalized business world. Nobody thinks that companies can operate independently now or in future because of the increased acceptance of globalization policies by the global community. It should be noted that even communist countries such as China are more interested in welcoming globalization even though they had few concerns earlier. Earlier, China thought that globalization was the brain child of westerners and a hidden agenda was there behind the globalization concept. China and other communist countries argued that westerners are trying to loot the resources of other countries in the name of globalization. Such illusions and prejudices became old stories now. At present, China is the number one exploiter of globalization. In short, it is impossible for companies or countries to go back to a period that existed before globalization. It would be wise for international companies to formulate wise strategies to exploit the diverse human resources since the global business order may not be changed in near future. 3.0 HR policies necessary for companies that engage in large-scale international coordination According to Boddy (2008, p.354), Human Resource Management (HRM) is “the effective use of human resources in order to enhance organizational performance”. Instead of HRM, SHRM is common in most of the companies that engage in large-scale international coordination. According to Bratton (N.d. p.37), “Strategic human resource management is the process of linking the human resource function with the strategic objectives of the organization in order to improve performance”. The way of doing business in the past and present are entirely different. Since modern organizations are operating cross culturally at present, they have to make drastic changes in the HR policies to operate successfully in overseas countries. According to Brewster (2007, p.242),“the focus of HRM in the USA is Organizational, or in some cases the sub-organizational whereas Europeans are more likely to assume that HRM can apply at a variety of levels”. Even though USA and Europe have many similarities with respect to culture, HRM practices in these two regions are entirely different. Majority of the American companies have their own customized HRM strategies whereas EU companies formulate their HR strategies based on national institutions, national legislation, cultural issues and trade union etc. Moreover, HRM in America is manufacturing oriented, whereas that in Europe is service oriented. As a result of that employees may not get much flexibility in their work in America whereas in Europe, employees get more flexibility in their works. These differences in the views of HRM concepts may create problems while an American company establishes collaboration with a European company. It should be noted that collaboration, joint venture, merging and acquisition are the order of modern business era because of globalization. However, all these business strategies bring many challenges to the HR professionals. It is easy to manage a single cultural workforce than a multicultural workforce since the needs of the needs of the single cultural workforce could be similar in nature whereas that of the multicultural or diverse workforce could be different in nature. For example, Fridays are sacred for Muslims and hence they would like to have weekly offs on Fridays. On the other hand, Sundays are sacred for Christians and they would like to have weekly off on Sundays. If an organization has Christian or Muslim workers alone, the allotment of weekly off may not be a problem for the organization. “Diversification may lead towards incompatibility and lack of coordination amongst the workforce which can obstruct the required performance of tasks and create personal differences”(Budhwar, & Mellahi, 2006, p. 299). According to Bratton & Gold (2012, p.8), “Labour is not a commodity. It is people in work organizations who set overall strategies and goals, design work systems, produce goods and services, monitor quality, allocate financial resources and market the product and services”. Even though an organization has many resources such as materials, machines and money; manpower seems to be the most important one. It should be noted that except manpower, none of the other organizational resources have the ability to take independent decisions. In other words, the mobilization of all the organizational resources can be done only with the help of manpower resources. Therefore, HR policies and HR management are extremely important for an organization while operating internationally. If a manager of an Asian enterprise wants to initiate a SHRM system, he should make it absolutely include the following four points: (1) Create an efficient way of communication. (2) Launch an education campaign to help the employees to deal with international business. (3) Introduce different cultures and customs to the staff so that they can understand some activities of western business. (4) Institute a feedback system in which employees are ready to feed back the progress of the business so that decision makers can make decision as soon as possible (Jianxin & Zhengping, N.d. p.12). Communication problem is another major challenge facing by HR managers while managing a diverse workforce. For example, Microsoft’s Chinese business might have Chinese as well as American workers. The English proficiency and accent of Chinese people are extremely poor. Same way, it would be difficult for Americans to learn Chinese language. As a result of that effective verbal communication may not take place in between the Chinese and American employees in Microsoft’s Chinese office or business unit. Nonverbal means of communication is also important in business communications. However, because of the cultural differences, nonverbal communication means of Chinese and American people are entirely different. For example, Chinese people bow their head in front of others to mark their respect whereas Americans shake hands with others to mark their respect. In short, verbal and nonverbal means of communication are different for different cultures and hence HR managers of international companies should implement policies necessary to enhance the communication among diverse workforce. Training and development is another important aspect of HR policies, while large organizations engage in large-scale international coordination. “A number of studies have shown that results of training affect overall performance of an organization such as productivity, turnover rate, absence rate and organization commitment, etc” (Lin et al. 2011, p.927). Even experienced employees may face lot of difficulties while joining a new organization since the work culture of different organizations could be different. It is not necessary that a Chinese organization and an American organization have same work culture. It should be noted that China and America are two entirely different countries in terms of politics, economy, culture, environment, legal systems etc. An experienced American employee may struggle to adjust with the work culture of a Chinese organization. Training is the only way to help such employees. When an employee; fresh or experienced, joins an organization, he can be considered as a raw material. Training converts him from a raw material to a finished good. In other words, training is necessary to fine tune the capabilities of the employee so that the organization may benefit from that. “Training and education are not only seen as the way of helping individual to become more adaptive in their work, but also of providing more knowledge and skills” (Marchington & Wilkinson, 2005, p.52). Management of diverse workforce often brings cultural problems. Culture plays an important role in the build-up of a society. Leung et al (2005, p.357) defined national culture “as values, beliefs, norms, and behavioural patterns of a national group”. Cultural norms such as values, beliefs, and behavioural patterns of different cultures are different. Some cultures give more value to honesty or universalism whereas others give value to relationships or particularism (Ghemawat and Reiche, 2011). Those who have belief in universalism or groups may exhibit more care towards others whereas those who have belief in particularism or individuals work only for the selfish interests. These differences in beliefs of employees from different cultures may cause problems to HR professionals of international companies. Conflicts and clashes may develop among diverse workforce because of cultural difference. Vance & Paik (2010, p.150) mentioned that “Adaptability screening could be done while selecting international employees”. Some people could be adamant in their beliefs and attitudes whereas others could be more flexible in their approaches. It would be difficult for an organization to manage adamant employees. For example, imagine a Muslim employee shows reluctance to work in Fridays even when the company has over workload. Such adamant nature cannot be tolerated by international companies. Employees should keep their attitudes and beliefs aside while working in an international organization. Employees should accept the fact that “cultural settings not only determine much of behaviour, but also require varying avenues for success within the diverse environments. Thus, due to cultural differences, one cannot take for granted that practices in one country will bring about the same results in another” (Preda, n.d., p.2). They should realise that the interests of the organization is as important as their personal interests. In short, HR professionals should make sure that the employees are flexible enough to meet challenges, at the time of recruitment. Work philosophy, attitudes, skill sets, ethics, values, language, communication means, socioeconomic and cultural backgrounds of diverse workforces could be different. For example, many American companies are currently operating in India and these companies have many American employees working along with Indian employees. India and America are entirely different countries in terms of culture. India is a secular democratic country, dominated by Hindu religion whereas America is a democratic country dominated by Christian religion. American employees may face lot of problems related to culture and while working in India. HR managers are responsible for providing necessary training to such employees before sending them to India. The success of an international organization depends on how well the HR department deals with the issues related to culture among the employees. HR policies should be modified by international companies to tackle the cultural challenges successfully. Employee feedback is extremely important for HR professionals of international companies. It should be noted that the skillset of employees could be different. Even CEOs may not have the right answers always to complex questions. Under such circumstances, it is necessary to accept the feedbacks of the employees so that the organization can take wise decisions. 4.0 Conclusions Globalization has brought tremendous changes in the business world. Many of the traditional business principles have given way for modern business principles such as outsourcing, offshoring, diverse workforce etc. The barriers against international business are getting weaker and weaker as time goes on because of the increasing readiness of countries in attracting foreign direct investments. At the same time, cross cultural business is bringing many HRM challenges also. It is impossible for international companies to stick with traditional HR strategies while operating cross culturally since the diverse workforce could have different needs and attitudes towards work. Training and development of employees are necessary to empower the diverse employees about the needs while working in an international organization. Communication problems among the diverse workforce can be addressed with the help of proper training and development. At the time of recruitment itself, companies should make sure that the recruited employees are flexible enough to adjust with the organizational climate and culture. Apart from the employees, companies should also honour the culture and values of the diverse workforce equally well to avoid conflicts. Mutual cooperation between the workforce and the organization is necessary for the successful operation of international business. In short, plenty of HR policy changes are necessary for the companies that engage in large-scale international coordination. 5.0 References Boddy, D. 2008. Management: An Introduction, 4th Edition, Harlow, FT Prentice Hall Bratton, J & Gold, J. 2012. Human resource management: theory & practice Publisher: Palgrave Macmillan; Fifth Edition, New Edition, 5th Edition (July 17, 2012) Bratton, J. N.d. Strategic human resource management. [Online] Available at: http://www.palgrave.com/business/brattonandgold/docs/bgcha02.pdf [Accessed 11 March 2013] Brewster C. (2007). A European perspective on HRM. European J. International Management, Vol. 1, No. 3, 2007. Beardwell, J & Claydon, T. 2007. Human resource management: a contemporary approach. Publisher: Financial Times/ Prentice Hall; 5 edition (30 Jan 2007) Ghemawat, P. & Reiche, S. 2011. National Cultural Differences and MultinationalBusiness. Globalization Note Series. [Online] Available at: http://www.aacsb.edu/resources/globalization/globecourse/contents/readings/national-cultural-differences-and-multinational-business.pdf [Accessed 12 November 2013] Ivancevich, J.M. (2006). Human Resource Management. McGraw-Hill Irwin, 17-Mar-2006 Jianxin, Y& Zhengping, L. N.d. Strategic Human Resource Management of Asian Enterprises in The Process of Internationalization. [Online] Available at: http://jgxy.usx.edu.cn/DAOM/071_JianxinYou.pdf [Accessed 11 March 2013] Lin Y., Chen S., & Chuang H. 2011. The Effect of Organizational Commitment on Employee Reactions to Educational Training: An Evaluation using the Kirkpatrick Four-level Model. International Journal of Management Vol. 28 No. 3 Part 2 Sept 2011 Marchington, M. & Wilkinson A. 2005). Human resource management at work. CIPD Publishing, 2005 Preda, M. N.d., Globalization and the Rise of Multinational Corporations. [Online] Available at: http://www.rau.ro/websites/e-society/lucrari/mariana%20preda%201.pdf[Accessed 12 November 2013] Reich, S. 1998. What is Globalization? [Online] Available at: http://kellogg.nd.edu/publications/workingpapers/WPS/261.pdf [Accessed 12 November 2013] Vance, C. M., & Paik, Y. 2010. Managing a global workforce: challenges and opportunities in international human resource management, M.E. Sharpe, 2010, pp. 150 Read More