Topic 2 – Global Issues for Human Resource Managers

Contents

1.1 Introduction ........................................................................................................................................... 1

1.2 Reasons for Business globalization ............................................................................................... 1
1.3 Global Firms and HRM ....................................................................................................................... 2
1.3.1 Skills and Traits for Global HR Managers .................................................................................. 3
1.3.2 Developing and Managing Global HR ......................................................................................... 4
1.4 Strategic Human Resource Management ...................................................................................... 4
1.5 Human Resource Development (HRD) ........................................................................................... 7
1.6 Difference Between HRD and HRM ................................................................................................. 8
1.7 Readings ................................................................................................................................................ 8

By the end of Week 2, you will understand:

• Various global issues confronting HR managers
• Globalisation of business and HRM
• Global firms and HRM
• Strategic HRM
• Effectiveness management of people
• Human Resource Development

1.1 Introduction

Globalisation is the integration of an organisation’s operations, processes, and

strategies into diverse cultures, products, services, and ideas (Robertson, 2000).

Globalisation is a defining word of our age as it affects people, organisations,

employees, and consumers…globalisation affects all aspects of our lives (Paliwoda and
Slater, 2009).

1.2 Reasons for Business globalization

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 Business must adapt and capitalise on technology that transcend distance and culture.
Goods, people, and ideas must cross borders. Free flow of ideas, information, and
knowledge has reshaped ways in which people viewed the world.

Gig economy – many companies are now hiring people/teams they may never meet in-
person. It’s easy to stay in touch – you can easily manage a global business empire
without having to visit several countries in which those businesses are.

Become trusted brand – global status increases prestige of a business. Customers often
trust products with international reputation.

Economy of scale – expansion enables production of more units. The more units you
produce the lower the per unit cost.

The rise of global trading relationships. Trade blocs – group of countries that form trade
relationships thus facilitating free movements of goods across borders. Disappearance
of barriers to world trade by technology.

Many businesses are affected by global suppliers, partners, and/or customers for their
products and services; global staffing and management of workforce that are diverse in
culture and language; global labour market conditions; hunt for super-talented workers;
international organisations and global village.

1.3 Global Firms and HRM

As business moves global, its HRM becomes complex; recruiting, managing, and
retaining human resources at a firm with extensive global operation are challenging.

For example Siemen had 460,800 employees in 190 countries in 2005. Each of
Volkswagen, Nestle, IBM, Unilever, Wal-Mart, and McDonalds has more than
150,000 employees outside their home country (Cavusgil, Knight, & Riesenberger,
2016).

There are challenges around managing the mix of locals and international employees;
there are external influences of nations and cultures; alongside this comes the new HR
responsibilities such as international taxation, international relocation and orientation,
language translation services, etc.

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 There is also the need for broader perspective. For example, a fair and comparable
compensation scale for local and international employees. This is accompanied by
greater risk exposure. Exposure to political risks and terrorism may require increase
compensation and security arrangements (Cavusgil, Knight, & Riesenberger, 2016).
Also, there are challenges around culture and ethics (managing employees with different
cultural perspectives and rituals is especially difficult).

Parochialism – narrow minded world view, inability to recognise individual

difference.

Power distance (low vs. high)

Individualism vs. collectivism

Masculinity vs. femininity

Uncertainty avoidance (high vs. low)

Long term orientation vs. short term orientation

1.3.1 Skills and Traits for Global HR Managers

There are skills that HR managers would need to possess in order to manage globally;
one of which is the ability to deeply analyse, allocate, and adapt to worldview
environment; cultural awareness and ability to accommodate different cultures and
languages; strong communication skill; treat people fairly and indiscriminatingly; problem
solving and conflict management skills; adept in IT and people’s management; ethically
strong and ability to think strategically; good knowledge of employment laws and the
ability to deal with ‘grey area’ appropriately and correctly.

There are three options for global staffing:

• Home (parent) country nationals – employees who work for organisation in country
where the company is headquartered.

• Host country nationals – employees who are hired for jobs in their own country.

• Third country nationals – employees with required talent and skills needed for

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 international assignment but are not nationals of either home or host country.

There is the options of outsourcing; outsourcing – process of hiring another organisation

to do work that was previously done within host organisation;

offshoring– process of relocation of a business process (such as manufacturing,

accounting, etc.) from one country to another.

Onshoring – process of bringing back a business operation that was previously move
abroad to the country from which it was originally located. This is often done to stimulate
employment.

1.3.2 Developing and Managing Global HR

In order to achieve HR success on global scale, companies must adopt appropriate global
staffing approaches:

Ethnocentric staffing – means staffing key positions with employees of parent

company.

Polycentric staffing – means managers and employees are hired locally to

minimise cultural and communication challenges.

Regiocentric staffing – means key positions are staffed from different countries
within the geographic region of the business.

Geocentric staffing – means staff are hired regardless of their nationality.

In order to achieve HR success on global scale, companies must; select right individuals,
train them appropriately and support them with right resources; consider the implications
of international assignments such as taxation and relocation expenses; have knowledge
of global business environ; coordinate HR plans, policies, and activities globally.

1.4 Strategic Human Resource Management

As mentioned previously, strategy – the art of war, especially the planning of movements
of troops and ships etc. into favourable positions; plan of action or policy in business or
politics etc. (Beardwell and Thompson, 2014). Strategy is a set of choices to anticipate
and respond to a firm’s environment. Some choices are made, some emerge. Choices

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 have consequences which could be possibly unforeseen and unintended. Deriving HR
strategy from business strategy is difficult (Beardwell et al., 2004). Some of the key
challenges include: being viable (i.e. surviving the chosen market) & acquiring sustained
advantage (i.e. superior returns). Strategy must be executed in and through the firm’s
culture, incentives, structure, and people (Boxall and Purcell, 2008; Markides and
Geroski, 2004).

The concept of SHRM was developed in the 1990s, highlighting the importance of a
proactive, integrative, and value-driven approach to HRM (Schuller, 1992). Strategic
HRM stimulates efficient workplace performance and human capital management (Bagga
and Srivastava, 2014).

Strategic HRM delineates an organisation’s aims and plans in terms of how its objectives
should be achieved through leverage on the competencies of the organisation’s human
talent (Sahoo, 2016).

Basically, SHRM aligns an organisation’s strategic goals to improve organisational

performance and to develop a culture which nurture innovation, flexibility, and competitive
advantage (Bagga and Srivastava, 2014; Huselid et al., 1997).

With regards to international HRM, there are some strategic choices to be considered:
How central are people to the costs and resources of the firm?

What aspect of HRM should be centralised or localised?

Who should be hired to occupy non-home country positions and why?

What management style should adopted now and for the future?

How importance is social integration for the overall success of the organisation?

What determines answers to these questions is down to the HR strategy or approaches.

‘Best fit’ – HR strategy derived from corporate strategy. This approach emphasises that
HR strategies and organisation strategies must be aligned. Best fit links organisational
goal to management of individuals. Also referred to as ‘contingency theory’ meaning that

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 strategy is contingent on the organisation’s circumstances. HR strategy becomes more
efficient when it is linked/tailored to it’s the business environment.

This approach has encountered a lot of criticisms: some of which are: Hard to link
competitive strategy to HR policies. Secondly, ‘Best fit’ model ‘oversimplifies
organisational reality’ (Beardwell et al., 2004, pp. 46-47). Thirdly, there are no guarantee
that HR policies will produce a unique set of employee behaviours – ‘law of unintended
consequences’ may set in. forth, strategies for different groups of employees can vary
(Lepak and Snell, 1999). Finally, ‘Best fit’ is a problem internationally as strategy for
national institutions and cultures may be different.

Another approach is the ‘Resource-based’ – corporate strategy builds on organisational

capabilities. Resource-based sees strategy in terms of the available organisation’s
resources. Sustained competitive advantage is shaped, determined, and achieved based
on organisation’s resources, people, capital, capabilities, etc. Resource- based assumes
that successful firms must posses resources that less successful firms lack (sustained
superior return [SSR] see Barney, 1999).

The ‘VRIO’ Model

‘VIRO’ model contends that organisation’s resources must meet the following criteria in
order to earn sustained superior return (SSR). Resources must be:

• Valuable – resources must add value and enable a firm to pursue competitive
strategies that improve efficiency and effectiveness.

• Rare – resources must be rare: i.e. not all competitors should have own or have
access to them.

• Imperfectly imitable – resources must be hard and/or expensive to copy – making

them difficult to duplicate or substitute.

• Organisationally useable – the organisation’s structures and processes allow

resources to be used.

RBV can be applied to HRM; as HR has a responsibility for managing and developing
resources that are hard to copy: not just policies or practices, but how these are

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 implemented. Resource-based stresses ensuring that valuable and rare resources can
be used in terms of organisational capability or core competence (Hamel and Prahalad,
1994). It has to fit for organisational reality and should be adaptable to turbulent times.

The HR strategy options may not be mutually exclusive; in practice, a combination of

elements of the three approaches ‘pure’ approach is likely to be found; different strategy
may apply to different organisations and different workforce.

1.5 Human Resource Development (HRD)

The concept Originated in the US. HRD is a subset of HRM that specifically deals with
training and development of employees in the organisation.

This includes training of employees when they are first hired, providing them with
opportunities to learn new skills, providing the them with resources to execute their tasks,
and other development activities.

HRD can be defined as an organised learning experiences provided by employers, within

a specified period of time, to bring about the possibility of performance improvement
and/or personal growth (Nadler and Nadler, 1989, p. 4).

HRD is a process by which employees are helped to:

(1) Acquire or sharpen capabilities required to perform various functions associated with
their present or expected future roles;

(2) Develop their capabilities as individual and discover and exploit their own inner
potential for their own and/or organisational development purposes;

(3) Develop an organisational culture in which superior-subordinate relationship, team

work and collaboration among sub units are strong and contribute to professional
wellbeing, motivation, and pride of employee.

HRD is needed by any organisation that wants to be dynamic and growth-oriented or to

succeed in a fast-changing and very competitive environment; HRD is needed for the
purpose of creating ‘enabling’ organisational culture – when employees use their
initiative, take risks, experiment, innovate, and make things happen, the organisation may

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 be said to have an ‘enabling culture’; HRD is needed to adapt to changing environment
– for stability or renewal of capabilities.

The functions and goals of HRD system is to develop: the capabilities of each employees
as an individual; the capabilities of each individual in relation to his/her present and
expected future roles; the dyadic relationship between employees and supervisors; the
team spirit and functioning in every organisational unit; collaboration among different
units of the organisation; the organisation’s health and self-renewing capabilities which,
in turn, increase the enabling capabilities of individuals, dyads, teams, and the entire
organisation and continuous and systematic process of learning.

1.6 Difference Between HRD and HRM

Both are very important concepts of management and are specifically related with HR of
organisation. They are different on these grounds:

• HRM is mainly the maintenance oriented whereas HRD is development oriented

• Organisation structure in HRM is independent whereas HRD creates a structure

which is inter-dependent and interrelated

• HRM mainly aims to improve the efficiency of the employees whereas HRD aims
at the development of the employees as well as organisation as a whole

• Personnel/HR department is responsible for HRM – specifically the personnel/HR

manager whereas every managers at various levels of the organisation is
responsible for HRD

1.7 Readings

Barney, J. (1999)‘Looking inside for competitive advantage’ in Schuler & Jackson

(1999) Strategic Human Resource Management. Oxford: Blackwell.
Barney, J.B. and Clark, D.N. (2007) Resource-based Theory. Oxford: Oxford University
Press.
Beardwell, I., Holden, L. and Claydon, T. (2004) Human Resource Management a
Contemporary Approach (4thedn). Harlow: Prentice Hall.
Boxall, P. and Purcell, J. (2008) Strategy and Human Resource Management (2ndedn).
Basingstoke: Palgrave Macmillan.
Cavusgil, S. T., Knight, G. & Riesenberger, J. (2016). International business: The new

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 realities. Pearson: Harlow, England.
Hamel, G. and Prahalad, C. (1994) Competing for the Future. Boston, MA: Harvard
Business School Press.
Marchington, M., and Wilkinson, A. (2012) Human Resource Management at Work
(5thedn), London: CIPD.
Markides, C. and Geroski, P. (2005)How smart companies bypass radical innovation to
enter and conquer new markets. San Francisco, CA: Jossey-Bass.
Nadler, L. and Nadler, Z. (1989). Developing human resources. San Francisco: Jossey-
Bass.
Paliwoda, S.J. and Slater, S. (2009). "Globalisation through the kaleidoscope",
International Marketing Review, 26, 4/5, 373-383.
Robertson, R. (2000). Globalisation: Social theory and global culture. Sage publication;
London.

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