Globalization is the system of interaction among the countries of the world in order to develop the global economy. Globalization involves technological, economic, political, and cultural exchanges made possible largely by advances in communication, transportation, and infrastructure.
The advent of the era of globalization along with the advancements in information technology (IT) has transferred the world around us. It has brought to center stage the importance of human resources, more than ever before.
The pressures it poses on IHRM include:
- Remaining competitive throughout the world;
- Efficient Locally;
- Responsive;
- Flexible and adaptive
- Capable to transforming learning across their globally dispersed units.
Other obstacles to effective HR management are:
- Cross-cultural adaptation,
- Different organizational/workforce values,
- Differences in management style, and
- Management turnover.
Doing business globally requires that adaptations be made to reflect these factors. It is crucial that such concerns be seen as interrelated by managers and professionals as they do business and establish operations globally. Each of those factors will be examined briefly.
i) Legal and Political Factors
The nature and stability of political systems vary from country to country. In many nations, the legal and political systems are turbulent. Some governments regularly are overthrown by military coups. Others are ruled by dictators and despots who use their power to require international firms to buy goods and services from host-country firms owned or controlled by the rulers. In some parts of the world there is pervasive corruption, while in others governments’ changes constantly. Also, legal systems vary in character and stability, with business contracts sometimes becoming unenforceable because of internal political factors.
HR regulations and laws also vary among countries in character and detail. In many countries, laws on labor unions and employment make it difficult to reduce the number of workers because required payments to former employees can be very high. In some countries, laws address issues such as employment discrimination and sexual harassment. In others, because of religious or ethical differences, employment discrimination may be an accepted practice. All of these factors reveal that it is crucial for HR professionals to conduct a comprehensive review of the political environment and employment-related laws before beginning operations in a country. The role and nature of labor unions should be a part of that review.
ii) Economic Factors
Different countries have different economic systems. Some operate with a modified version of communism, which has essentially failed. But as the government attempts to move to a more mixed model, it is using unemployment and layoffs to reduce government enterprises bloated with too many workers.
Many lesser-developed nations are receptive to foreign investment in order to create jobs for their growing populations. Global firms often obtain significantly cheaper labor rates in these countries than they do in Western Europe, Japan, and the United States. However, whether firms can realize significant profits in developing nations may be determined by currency fluctuations and restrictions on transfer of earnings.
iii) Cultural Factors
Cultural forces represent another important concern affecting international HR management. Culture is composed of the societal forces affecting the values, beliefs, and actions of a distinct group of people. Cultural differences certainly exist between nations, but significant cultural differences exist within countries also.
One only has to look at the conflicts caused by religion or ethnicity parts of the world to see the importance of culture on international organizations. Getting individuals from different ethnic or tribal backgrounds working together may be difficult in some parts of the world. Culture can lead to ethical differences among countries.
iv) Power Distance
The dimension of power distance refers to the inequality among the people of a nation. In countries such as Germany, the Netherlands, and the United States, there is a smaller power distance which means there is less inequality. As power distance increases, there are greater status and authority differences between superiors and subordinates.
One way in which differences on this dimension affect HR activities is that the reactions to management authority differ among cultures. A more autocratic approach to managing is more common in countries with greater power distance while participatory management is prevalent where power distance is small.
v) Individualism
Another dimension of culture identified by Hofstede is individualism, which is the extent to which people in a country prefer to act as individuals instead of members of groups. On this dimension, people in African countries tend to be less individualistic and more group-oriented, whereas those in most European countries score the highest in individualism. An implication of these differences is that more collective action and less individual competition is likely in those countries that deemphasize individualism.
vi) Talent Gap
Finding and retaining the talent for highly skilled jobs or the one that knows the national and international markets can be tough. In some countries there is acute shortage of people with the required skills. In such cases, an organization may need the help of immigration departments or to leverage on the international talent pool. Sometimes, organizations may rely on executive search firms to search for the right employees who may not be aware of organizational culture.
vii) Labor Law Conflict
Changes in various labor laws, from a local level to national and international level is very relevant in making sure employees perform tasks in accordance with them. An international human resource manager must be aware of the labour laws in all the host nations where the organization is operating as well as international regulations which must be complied with.
viii) Global Health and Safety
Health and safety issues may be of concern to employees overseas, and security has become a very difficult issue in certain areas of the world. Safety and health laws and regulations vary from country to country, ranging from virtually nonexistent to very stringent.
With more and more expatriates working internationally, especially in some of the less-developed countries, significant health and safety issues are arising, and addressing these issues is part of the HR role.
Another consideration is provision of emergency evacuation services. For instance, how to evacuate and care for an expatriate employee who is working in a country when war breaks out or there are disease outbreaks such as Ebola.
ix) International Security and Terrorism
As more firms operate internationally, the threat of terrorist actions against those firms and the employees working for them increases. Many of the terrorism acts target company facilities and offices. Nevertheless, individual employees and their families living abroad must constantly be aware of security issues. Countries vary in the extent to which they are likely to see violence at the workplace. In addition, Kidnapping, murder, home invasion, robberies, and car-jacking are relatively frequent in some places.
