The 21st Century has seen at least three areas of major change, each impacting how businesses function: technological advancement, demographics and diversity, and globalization. Of the three, the last might be one of the most difficult to overcome. After all, organizations today face a critical dilemma affecting how they manage their employees from a global perspective. And of course, the challenges of globalization fall largely on Human Resource Management because of its direct line to workers across the world. So, we’ve taken a look into some of the challenges to assess how HRM managers can start tackling them.
The Current Business Context
We no longer live in a purely domestic economy. In fact, the current business context is highly globalized, and international trade is at a level never seen before. Hence, constant if not continuous changes in how organizations employ and manage human talent require practices and systems that are well-conceived and effectively implemented. Otherwise, ensuring high performance and continuous success becomes difficult at best.
The need to develop a global perspective on human resource management has been part of the managerial landscape for well over a decade. However, there is no clear direction one could easily gather through current literature. Organizational strategy (the what) is internationalizing faster than implementation (the how), and much faster than the executives themselves (the who). So, the key HR challenges of globalization derived from their research are:
- Skill Deployment: Getting the right skills where needed, irrespective of the geographical location.
- Information dissemination across all locations, and talent identification and development on a global scale.
Complexities of distance, language, economic, regulatory, educational, technological, and socio-cultural differences also overlay these basic issues. Here, we’ve attempted to diagnose the different aspects and trends of globalization with relevance to the challenges it poses for the field of HRM. But furthermore, we’ve tried to propose strategies that global HR managers could adopt to overcome these challenges.
Globalization and Devising a Global HRM System
The extent to which the HRM practices of one country or culture could be translated into another when the companies start growing overseas has been a subject of considerable debate. But it is significant to decide how to create a balance between standardization and localization of HRM practices. Particularly with an eye toward providing a sustainable, competitive advantage to a firm over its rivals.
Strategic HRM approaches as to how a company could set up its HRM practices in a foreign country divide into three categories:
- Exportive approach
- Adaptive approach
- Integrative approach
In the exporting approach, the parent company attempts to transfer the same HRM systems to foreign subsidiaries without modification. Alternatively, the adaptive approach attempts to respond to the local environment by adopting its HRM practices. The integrative approach instead blends both by diffusing best HRM practices to other units across the world.
Global HR Practices for International Business Performance
Having an understanding of various approaches that can be taken by organizations in managing their human capital in a globalized environment, it is relevant to understand how HR strategy could be aligned with business strategy. When developing global HRM strategies, HR teams need to closely ascertain the business strategy the company intends to adopt. And not only in the domestic market but also in a global context.
At a macro level, many multinationals are making a significant endeavor to harness the value of diversity to create a truly global culture. However, how this directly links to the business strategy of the organization demands further thought.
In devising the global HRM strategy, companies need to consider all three levels of strategy in an organization. These include corporate, business, and functional levels. Some of the approaches suggested in the literature, mainly for staffing, based on the parent company’s corporate approach and management philosophy follow.
Ethnocentric
Home country systems and procedures will be implemented with a majority of expatriates from the home country. However, it adopts the underlying assumption of home country nationals being superior to that of the host country.
Polycentric
This approach attempts to adapt to the local environment. It accepts the differences in various countries and tries to incorporate them between countries and cultures. Hence, it would encourage employing more local nationals.
Regiocentric
This approach is more applicable to companies with many sub-companies in a region. Under this approach, employees move only amongst companies in the same geographic region. The basic underlying assumption would be that the countries in a region share common characteristics, hence the similarities are greater.
Geocentric
This approach tries to employ the best people for a job, irrespective of their nationality.
Whilst these approaches might help provide a basic guideline and a structured approach to some aspects of HRM strategy, especially recruitment and staffing, much deeper thought must go toward the overall global HRM strategy. Otherwise, it will fail as a means of distinct, competitive advantage.
Wrapping Up
Globalization creates new challenges for Human Resource Management. Technological advancement, demographics and diversity, and globalization are major areas of change in the 21st Century. The HR challenges of globalization include skill deployment, information dissemination, talent identification, and development on a global basis.
Organizations can respond to the local environment by adopting an exportive, adaptive, or integrative approach to HRM strategies. Aligning HR strategy with business strategy requires consideration of corporate straegy, business strategy, and functional strategy.
Approaches like ethnocentric, polycentric, regiocentric and geocentric can be used to provide a guide for recruitment and staffing.
If you want to know more about the challenges of globalization, be sure to check out our course on Navigating Global Culture or our full Human Resources option.
Article written by Hannah Butler, a content writer and editor assistant at Assignment Pay, a leading online essay writing company. With a passion for detail-oriented work, Hannah has an exceptional ability to produce high-quality content for a wide range of online platforms.
Last updated September 18, 2023.
