Impact of globalization on human resource management practices
INTRODUCTION
Globalization is the process of integration of several economies with the goal of increasing economic interdependence and mobility of factors of production across the world economies (Lechner, 2009). Globalization has caused an increase in the number of multinational corporations across the globe. Globalisation has had implications on the operations of multinational corporations including especially in human resource management. Some corporations have been forced to review their human resource practices to adapt to the challenges associated with globalisation. Companies have several motives to go global.
Companies globalise for different economic, social and cultural reasons. These motives vary from one company to another and have implications on the operations of the company. Economic motives for globalization relate to the profitability and revenue maximisation. Firms globalise to diversify revenue sources and increase their profitability. Expanding operations into foreign countries helps a multinational corporation to widen its market thus increasing revenues (Lechner, 2009). Besides, it helps in the diversification of markets and production which reduces the impact of regional risks on the operations and profitability of the company (Lechner, 2009). For instance, if there is a fall in demand for a product in the North American market in a certain year, the losses can be offset if there is a strong demand in the Asian market. Companies also globalise to expand their operations to enjoy economies of scale.
Firms also globalise to exploit the differences in the cost of production across countries. Some companies shift production to countries where the cost of the main factor of production is lower than the existing country of operation (Lechner, 2009). For example, in the last few years, there has been a shift in production from the United States to countries with cheaper labour and favourable business environments such as Mexico among other countries.
Social motives for globalisation include improving the social welfare of citizens in a country. Some organizations globalise because their products and services are essential to people in other countries (Lechner, 2009). Such companies are not necessarily driven by the profit motive. For instance, there are organizations that have globalised their activities to help HIV and Aids victims across the globe.
Some firms globalise for cultural reasons such as to enhance diversity in human resource and serve the needs of different cultures. Globalisation makes it easier to attract employees from different cultural backgrounds thus ensuring diversity of the workforce (Lechner, 2009).
Organizational culture
Organization culture defines the practices adopted by the corporation in its operations. Understanding the organizational culture and cultural differences is critical in international human resource management. Besides, cultural differences can influence whether a multinational corporation succeeds or fails (Cooke, 2003). Whichever the human resource adopted by a multinational company, the human resource managers must understand and acknowledge cultural differences in dealing with employees.
Geert Hofstede conducted a research of how culture influences values in the workplace. He developed the six cultural dimensions that define the national cultures. These include power distance, individualism versus collectivisms, masculinity versus femininity, uncertainty avoidance, indulgence versus restraint and pragmatic versus normative.
Power distance is the extent of inequality between those with and those without power and the acceptance of the distribution of power in the society (Dowling, Festing, and Engle, 2008). In countries with high power distance, organizations are highly centralised, have more complex hierarchies, and there is a large pay gap between superiors and juniors (Dowling, Festing, and Engle, 2008). Besides, juniors must consult their seniors for every decision.
Individualism and collectivism define the strength of association between people in the society. A high individualism score indicates that there are weak interpersonal relationships between people outside a family.
Uncertainty avoidance shows the behaviour people towards uncertainty or anxiety (Lasserre, 2012). A high degree of uncertainty avoidance implies that people prefer stability and make life as predictable as possible. In such countries, organizations are resistant to innovations that bring disruptive changes.
Masculinity and femininity define the extent to which the roles of men and women overlap. In a highly masculine culture, roles of men and women overlap less (Lasserre, 2012). Such cultures are associated with tough working conditions such as long working hours which make it difficult for women. In high feminine cultures, there is a great overlap between the roles of males and females.
2.1 Environmental and Cultural Differences between Japanese and US multinational corporations
There are several differences in the management and cultural practices between Japanese and American countries. Most of the differences emanate from the cultural differences the two countries. Understanding these differences is critical to the success of a manager in an international assignment. Managers in foreign assignments should undergo cross-cultural training to understand how to deal with employees from different cultural backgrounds (Machado, 2015).
Japanese multinationals differ from US multinationals in the speed and consistency of decisions. In most US multinationals, decisions are quick since superiors give their juniors a greater latitude to make certain decisions relating to their areas of operation. Lower and middle-level managers can make certain decisions without seeking approval from the top level management. This is because the United States is associated with a lower power distance score. This encourages decentralization of authority this making the decision-making process faster (Miller, 2017). Due to the decentralisation and quick decision making, decisions in US multinationals are less consistent and allow for errors. In Japanese multinationals, the process of decision making is usually slower than in US multinationals. Japan has a high power distance hence its multinationals are highly centralised, and the juniors and lower level managers do not have the authority to make most decisions without consulting or seeking approval of the top management (Miller, 2017). An issue must go through a series of meetings for the approval of the top management. Japanese multinationals are less tolerant to errors and ensure consistency of decisions.
US multinational corporations place less emphasis on meetings and meetings are made as efficient as possible. They don’t like taking long hours in meetings and having many meetings. Most employees in US multinationals tend to resist if there are several meetings. This is partly contributed to by the fact that Americans prefer remote communication means such as phone or emails and are not much interested in face to face meetings (Miller, 2017). On the other hand, Japanese multinational corporations usually have several meetings and spend a lot of time in meetings. They value meetings as the process of bringing on board everyone involved in a project or activity. This is contributed by their preference for face to face meetings. Besides, they pay keen interest to process and not to the outcome of activity alone.
The roles of employees in US multinational companies are highly individualized. They pay a keen interest to the contribution of an individual and links such to the goals of the organization (Miller, 2017). Thus, US multinationals, in most cases, appraise the performance of individual employees and not groups of employees. Employee of the year awards are more common in American multinationals than in Japanese multinationals. Japanese multinationals corporations are more concerned about the contribution of an individual to the performance of a group of employees than to the contribution of the individual itself (Miller, 2017). Thus, the contribution of an individual is meaningless is the group of employees does not achieve the desired outcomes (Miller, 2017). Therefore, individual awards for employees in Japanese multinationals are less common than in US multinationals.
US multinational corporations are only concerned with the result of their operations. They measure the performance using the return on investment ratio. They are less concerned of how a high return on investment was achieved and spend less time establishing processes (Miller, 2017). On the other hand, Japanese multinational corporations measure performance based on the return on investment but are more concerned of how the performance was achieved (Miller, 2017). They pay attention to processes.
Japanese companies also prefer structured working styles with fixed and predetermined office hours and do not tolerate working from home (Miller, 2017). They have an open office layout where there are no walls separating employees and their superiors. US multinational companies are flexible and can allow some employees to work from home depending on the nature of their work.
Employees in US multinational companies give priority to family and personal life. They create a balance between work and family life (Miller, 2017). They usually allocate time for socialising with people outside of work. Group social activities are not sufficient for these employees. In Japanese companies, work and career have priority over family and personal life. Work is the center of life, and any other activity must revolve around it (Miller, 2017). The companies organise socialising activities for employees with their co-workers.
International Human Resource Practices at Google, Inc.
Multinational corporations have to decide on the human resource management practices to apply at its foreign offices (Cooke, 2003). These choices are influenced by cultural differences as well as the company’s objectives, among other factors. Strategies in international human resource management include divergence, convergence, and best practices (Briscoe and Schuler, 2009). A divergence approach to international human resource management involves appreciating the cultural differences between countries. In this case, the multinational firm applies human resource practices that are suitable for the country's cultural dimensions (Martinez-Lucio, 2013). Thus, this involves deviating from the human practices at the headquarters or country of origin. For instance, a US multinational corporation operating in Japan will have a centralised organization structure at the branch in Japan where all employees and middle-level managers must consult the top decisions for almost all decisions (Martinez-Lucio, 2013). The approach is effective since it recognises the cultural differences (Lawler and Hundley, 2008). However, the multinational can lose its identify and best practices especially if the human resource practices that suit the country’s culture are not best practices (Kaufman, 2014).
A convergence approach to international human resource management involves applying the same practices to all branches of the corporation (Brewster, Sparrow, and Vernon, 2007). This implies that the company does not consider the cultural differences between countries. Human resource practices will be similar at both the headquarters and at all the branches (Harzing and Pinnington, 2014). Globalization assists in the convergence of human resource practices as it makes peoples’ behaviour to be similar across the globe (Harzing and Pinnington, 2014).
The best practice model involves the application of human resource systems and methods that have positive, addictive and universal effects on the performance of the organization (Parry, Stavrou and Lazarova, 2013). Globalisation enhanced the application of best practices approach in different cultural backgrounds. It leads to the exchange of information and technology thus enabling the best practices to be easily accepted in diverse cultures (Harzing and Pinnington, 2014). There seven best-known HR practices of successful firms:
Employment security. Employees should not be rapidly dismissed due to economic downtowns or strategic mistakes of their supervisors (Rowley and Jackson, 2010). Retrenching workers should be the last resort in best HRM practices.
Selective hiring. Organizations are required to give specific attributes and skills needed to absorb any new people (Rowley and Jackson, 2010). Selected and recruited employees should be thoroughly trained and inducted.
Self-managed teams. These are critical areas for any performing management. They allow employees to contribute their ideas and values to motivate them to bear good and creative solutions for any matter arising thus substituting hierarchal control.
Performance-based compensation. Employees should be rewarded based on the achievement of set targets (Truss, Mankin and Kelliher, 2012).
Training. High performing organizations emphasize on the need of training employees to provide the motivated and skilled team with excellent capability and knowledge in carrying out the assigned duties (Truss, Mankin and Kelliher, 2012).
Google Inc. has unique human resource practices. Its human resource management function is called Peoples Operations (Manjoo, 2017). The company has a very vigorous recruitment process that ensures that it picks the best of the best. Google HR decisions are guided by the People Analytics team which analyses data on human resource issues. Human resource decisions must be backed by accurate and comprehensive data analysis (Mello, 2014, p. 154). It has developed hiring algorithms that ensure that company selects the most suited candidates to fill its vacant positions (Mello, 2014, p. 154). The PiLab helps Google to conduct experiments and determine the best approaches for managing people. The retention algorithm proactively identifies employees that could present a retention problem and take necessary actions.
Another important HR practice at the tech company is its support for innovation among its employees, especially engineers. Google implements an Innovation Time off Policy. Under this policy, Google engineers are given 20% time off to work on their individual projects (Nytimes.com, 2007). This has greatly contributed to most of the innovations at the company. It later abandoned the Innovation Time off policy.
Google also operates a decentralised structure through the creation of project teams. Project teams can make decisions on matters relating to their projects without necessarily seeking approval of the top management. Google values highly the need to empower and motivate its employees.
Google maintains most of these practices at its operations in foreign countries. Google engineers are given the latitude to work on their projects and innovate new technologies. The operations are decentralised to allow employees make certain decisions thus empowering and motivating them.
The analysis of Google's international human resource practices indicates that it applies the best practice approach. Its human resource policies, even at the headquarters, are guided by people analytics, which is data driven. There is no evidence of the company making any significant modifications to its human resource practices to accommodate cultural differences. It maintains the best practices, and that is why it has a unique HR function. However, there are a few instances where Google’s human practices are modified to reflect cultural differences, especially in the relations between employees and the management. It maintains the basic HR best practices across its businesses irrespective of the area of operation.
Conclusion
As globalization intensifies, multinational firms will no longer face the dilemma of choosing the human resource practices to apply (Harzing and Pinnington, 2014). Convergence and divergence approaches to international human resource management both have inherent limitations that may adversely affect the operations of the multinational corporation. Countries have cultural differences that affect the behaviour of individuals. Managers must understand such differences to develop a good relationship with his/her employees. As discussed above, significant differences exist between Japanese and US multinational corporations. Using the convergence approach may not work well due to the cultural differences. On the other hand, a divergence approach may lead to the loss of the company's identity. It is also difficult to apply since the corporation uses different practices for each foreign branch. Besides, some of the practices may contradict the company's values.
Globalisation of markets and production has enabled people to learn different cultures and consume goods and services from different cultural backgrounds. This is because it promotes the free movement of people and goods across nations (Harzing and Pinnington, 2014). Multinational companies have also embraced diversity in their workforce by employing people from various countries. This further improves cross-cultural learning thus eliminating some of the cultural differences. When a multinational corporation expands its operations into a foreign country, the management adopts certain practices to accommodate certain cultural differences as identified by Hofstede (Schuler and Jackson, 2007). Other activities promoted by globalisation such as cross-cultural training of employees and managers of multinationals, exchange programs for employees between foreign branches of the same company, inter-marriages, among other activities promote the convergence of behaviour across different cultures.
The only limiting factor to the globalisation of international human resource practices is the cultural differences that exist among different countries. Globalisation is expected to increase in the near future, and when countries fully liberalise their markets and allow free movement of people, cultural differences will decline. Best practices in human resource management will be applicable and widely acceptable across various cultures since they will no longer be assessed on the basis of cultural beliefs (Harzing and Pinnington, 2014). Globalisation of human resource practices will help multinational corporations since the management of human resources will become a less significant factor in evaluating the decision to globalise or not. Therefore, I agree with Harzing and Pinnington (2014) that in the near future, globalisation will affect the behaviour of individuals, especially in organisations, more similar in future than the current situation. This will enable the globalisation of human resource practices (Schuler and Jackson, 2007).
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