LECTURE 14: THE IMPACT ON HRM OF THE UNPREDICTABLE

GLOBAL ENVIRONMENT:

In a global economy, business processes can be copied anywhere in the world.

Work requiring little training or specialist skill will go to the lowest cost
operators. Producers in Asia, where labour costs are significantly lower, have
overtaken manufacturers in Europe and America. Likewise, call centers have
moved to India. In the twenty first century it is the quality and added value of
your people that will determine whether or not your organization will be
successful. Work will go to where staff are competent and where the costs are
lowest.

Is globalisation an issue for HR?:

Globalization is the process by which national barriers are breaking down in the
market within which organizations operate. Some companies already regard the
entire world as their target market, whilst for others this will not be so for many
years. For example, Coca Cola is a truly world brand, readily identifiable by
consumers in virtually every country. On the other hand, the giant life assurance
industry has few global players – even when companies such as Zurich
Insurance and Allianz work across frontiers, their products tend to follow the
requirements of each single market place.

The move towards a global market place has been accelerated by the growing
acceptance that barriers to trade are essentially unproductive and serve only to
reduce the level of demand for goods and services overall, as well as inhibit
customer choice. Initiatives by the World Trade Organization (formerly GATT)
constantly improve the prospects of free trade. Whereas once, the existence of
trading blocs such as the European Union was seen to favour only the select few
member countries to the detriment of outsiders, the increase in cooperation
between different nations and trading organizations is gradually breaking down
the barriers.
The most vivid illustration of global markets is in money business. The UK and
more specifically London, is an acknowledged global financial centre, although
the various markets for money and financial products and services is not yet a
perfect one. Different institutions know the considerable advantages of trading
across international frontiers as well as the many drawbacks.

Paul Hirst, writing in 1992, stated that

“national economies and cultures are dissolving before the great flows of trade,
finance and information.... unconstrained global markets for capital and goods
allow companies to allocate resources to maximise benefits for consumers”.

This supports the view that the world is becoming a single market as if borders
did not exist. The global market is an aspiration rather than a reality. In Britain
you can buy a car made at home (Rover), the EU (BMW), Japan (Mitsubishi) or
Malaysia (Hyundai). This does not automatically mean that the global market is
with us yet. Many services remain subject to trade restrictions and others will
never cross international frontiers due to their very nature.

The global market for labour has developed slowly, though it is unlikely that this
will ever mature to a significant level, given immigration controls and different
international emphases on skills and other technical requirements.

What impact has globalization had on managers?:

Although globalization is a modern trend, multinational companies have been

with us for some time. Managers in such companies have to be aware of the
different dimensions brought to their organizations by the home and host
countries’ sets of values, customs and attitudes.
If the entire world is the market place, it follows that this market must be
observed not only in the context of the final product but also in terms of
resources for production, financing and marketing. There are many aspects of
this that affect the manager.

 Decision-taking:
Different countries have entirely different cultures, so it is inevitable that
decision-taking processes will vary across frontiers. For example, there has been
much benefit for those UK companies that have imported the Japanese quality
circles concept and adapted it for their own use but it is impossible to transplant
an entire system successfully from one country to another. One major difference
between UK and Japanese companies is that the UK ones get into action
relatively quickly on a given problem, whereas the Japanese spend significantly
longer forming a consensus about what the problem actually is and
formulating alternative courses of action. This is partly due to different company
processes but may also be explained by the fact that the two relevant groups of
managers think in different ways. For a start, the UK is a Christian democracy
whilst the Japanese are Shinto Buddhists.

 Leadership Styles:
Some countries have much more didactic (instructional) approaches to
leadership. In the UK one is taught to “consult before you decide” whenever
possible – elsewhere this may not be so. In France it is much more acceptable to
“speak one’s mind” before staff than in the UK. What a French person would
regard as a frank discussion might be taken as an insult by a British worker.

 Motivation:
People from different cultures, understandably, respond to different motivational
stimuli. In developed countries, the manager can often focus on recognition,
advancement and meaningful, interesting work as motivators. In poorer
countries, the lack of fulfilment of Maslow’s lower order needs, such as basic
physiological needs and safety security needs, may predominate.

 HR Policies and Practice:

Security of job tenure is extremely variable from country to country. So, too, are
terms and conditions of employment. A white-collar worker such as a teacher
will get paid if they take a day off due to illness. In many countries, there would
be an automatic deduction of one day’s salary for the sick leave, as the person is
expected to insure against loss of pay due to sickness; or the attitude would
simply be that as the person had not worked, it is logical to withdraw the
remuneration. Some EU countries have personnel policies that are more liberal
than those in the UK, partly due to legislation arising directly or indirectly
through the Social Chapter.
 Organisation Structures:

If companies are to operate globally, then organization structures must

inevitably become more complex. Reporting lines may become extended and
there must certainly be less regular direct contact time between different parts of
the enterprise.

 Communications:
Globalization has serious implications for the way different parts of the
enterprise communicate with one another. The potential for face-to-face
communications must recede, whilst dependence on more indirect methods (fax,
e-mail, Internet, video conferencing, etc.) must increase. Perhaps Herzberg’s
aspiration to lower quantity but more quality in business communications will
become a reality.
When communication is face-to-face, the manager must be aware that cultural
differences are highly important. Personal presentation skills are very important
to American managers. Japanese managers instinctively “weigh up” the status of
the person with whom they are communicating before selecting the words they
use. Polish managers are extremely direct in manner but highly status conscious
– they also expect to tell the person with whom they are communicating when
first name terms are acceptable, just as the French reserve the right to switch
from “vous” to “tu”.

 Geographical Dispersal:
Dispersed production and marketing bring new challenges to the manager. In
some cases a good will be produced in one country, processed in another and
then exported back to the original country, posing control and coordination
problems for the manager. Look at Fayol’s mechanics and dynamics of
management, set out in the first study lecture of the course- management.
Virtually all of them are affected in this situation.

 Technological Transfer:
Technology is a critical variable in establishing competitive differential
advantage but are the technologies employed in different countries compatible?
An otherwise straightforward implementation programme in a single country
can be complicated by such problems. Lawrence and Lorsch point out the
extreme difficulties of harmonizing the efforts of generalist managers and
specialists in a single country – this problem multiplies across frontiers.

 Costs:
If a company produces and markets its products on an entirely domestic basis,
the relative costs of labour and capital are known and choices can be made. The
trade-off between these costs may be different in other countries, making
allocation decisions less straightforward.
 Legal Environment:
Each country has its own laws in respect of manufacturing, company statutes,
employment and marketing, etc.

 Planning:
Planning is made more difficult in a global market due to such issues as:
(i) Greater risk
(ii) Less knowledge of local conditions
(iii) Lack of market intelligence
(iv) Currency risk
(v) Different inflation rates
(vi) Differing worker expectations of the enterprise.

The global market, therefore, presents managers with the opportunity to use
their skills in a wider context but with this come inevitable new management
issues to resolve.