IMPACT OF GLOBALIZATION ON GLOBAL MANAGERIAL DECISION MAKING

INTRODUCTION

Globalization of business can have a profound impact on the decision-making processes of

managers responsible for making these complex interrelated decisions. This paper explores the
global decision-making processes of global managers. The first element examined is the multiple
intelligences that global managers need to be able to address the issues associated with global
decisions. These eight IQs are considered critical elements in the decision-making capabilities of
global managers. Following this discussion, the composition of global groups and their impact on
the decision-making process is explored to determine how the composition of the group
inhibits/supports the global manager. The next step in the decision-making process discussed in the
paper is that of the nature of the task(s). The type of task can have a direct impact on the
effectiveness as well as the efficiency of global manager's decision-making. The nitty-gritty of the
issue is that a global orientation to decision-making is poised as being significantly different from
decision processes use by managers in a multinational ocontext.

Globalization as an ongoing process allows and promotes the development of economy of big
countries as well as developing countries that are seeking their place in the global market. Many
aspects of globalization have attracted the attention of scholars apart from economic issues such as
trade, labour practices, the emergent dominance of the service sector, migration, and the reduction
of national authority in economic and social policies. Barriers have been and hindrances have been
removed on fashions in art, music, films, clothing, information, technology among others which
have spread globally at an alarming speed on the wings of media advertising, multinational
organizations and mass marketing techniques induced by the economics of scales.

The management sets its strategic goals through which it will be able to carry out the plans for the
sale of products or services. Nowadays, a manager has to have interdisciplinary skills and lifelong
education because only in this way it is possible to respond to the constant and rapid changes in the
world. Global environment requires the continuous research, monitoring competition, innovation
and the ability to change rapidly.

The process of strategic decision-making has become a mix of stepwise rationality and politics,
where power determines what decisions are made. In a model where choices involve power,
rationality is bounded and chance plays an important part in decision outcomes. However, intuition
and emotion are often intertwined with the process (Patton 2003; Spender 2003). Recognizing the
limits of traditional approaches, we suggest that there is a need to look beyond the model of
organizational goals and rational decision-making and to incorporate those who encompass the
complexity and diversity of organizational life. In addition to the cognitive and political elements
of decision-making, the model should consider issues such as intuition, emotion and social factors
(Eisenhardt and Zbaracki 1992).

Meaning of Globalization
Globalization in its literal sense, is the process of transformation of local
phenomenon into global ones. It can be described as a process by which the
people of the world are unified into a single society and function together.
This process is combination of economic, technological, socio-cultural and
political forces (Sheila, 2004). Globalization is often used to refer to
economic globalization that is, integration of national economies into the
international economy through trade, foreign direct investment, capital flows,
integration, and the spread of technology (Bhajwati, 2004).
Furthermore, Tom (2008), defines globalization is “the diministion or
elimination of state-enforced restrictions on exchange across borders and the
increasingly integrated and complex global system of production and
exchange that has emerged as a result”.
Again, Obadan (2008), argued that globalization is not just an economic
phenomenon which integrates world economies but also of culture,
technology and governance. It also has religious, environmental and social
dimensions.

A Brief History of Globalization

Mason (2001), is of the opinion that globalization has been in vogue since
recorded history, through not in a steady and linear fashion. Nevertheless, it
is popularly believed and acclaimed in the literature that globalization began
in the last quarter of the19th century, and has been monitored in three phrases
(World Bank, 2002). According to the World Bank report, the first phase of
globalization spans the period of 1870-1913. This first phase of globalization
witnessed large scale cross border flows of goods, capital and people.
According to Aninat (2002), by the end of the 19th century, the globe was
intensively globalized with significant quantities of trade backed by heavy
capital flows.
World Bank (2002) cited in Obadan (2008) noted that earlier attempt at
modern globalization ended suddenly as a result of the out break of the First
World War. As a result, the period embracing the First World War, the great
depression of the 1990s and the Second World War celebrated a remarkable
set back in globalization. The second phase of globalization started after the
Second World War and ended in 1990.
Furthermore, globalization in modern form has been linked with the neo-liberal economic policies,
powerfully propagated in the last decades by the Brettonwoods
institutions, particularly the World Bank and the International Monetary
Fund (IMF) (Obadan, 2003).

Developing these skills in global managers is a unique challenge to HRM in global organizations
and one that needs to be developmental (i.e., continuous) in nature.

The organization’s willingness to commit resources to this long-range management skill

development is indispensable for managers to develop a global mindset. Global managers’
decision-making processes should be aligned with the strategy that a global organization pursues.
In a global context, managerial decision-making is particularly important and complex owing to
the spatial and cultural distance between home and host countries (Roth 1992). For global
business, managerial decision-making is complicated further by the need to ensure that decisions
are not just implemented partially or watered down when implemented globally.

A major challenge is providing consistent management globally, while still allowing sufficient
flexibility at local levels to enable businesses to function effectively. A change in strategic focus
from multinational to global poses significant challenges for global human resource management
(Harvey, Speier and Novicevic 1999). Human resource development efforts should be directed
at instilling and accordingly evaluating the skills needed to effectively adapt decision- making
processes to global markets and competitors.

MANAGERIAL DECISION MAKING CHARACTERISTICS

The importance of understanding managerial decision-making characteristics is that they are linked
to the strategic choices that businesses make, which in turn is reflected in performance. Managerial
decision-making characteristics, through their links with performance, may provide firm-specific
competitive advantage by creating a capability to implement a particular strategy (Roth 1992).
Risk-taking is a part of the decision processes for all organizations engaged in international
business. However, higher levels of risk are associated with global business because of greater task
uncertainty occurring across global markets. Higher levels of risk add to the complexity of
managerial decision-making in a global context. Managers must develop a means for addressing
the high levels of stress associated with making decisions in a global context as well as developing
the agility needed to make decisions that are locally appropriate but in addition or consistent with
decisions being made in the global marketplace.

The paper proceeds as follows: first, this paper utilizes reference point theory (RPT) as a
foundation for examining global decision-making by introducing it as a theoretical foundation for
better understanding how global managers make complex global decisions. Second, a model of
global decision-making is introduced that applies the concept of multiple IQs as the basis for
recognizing the key knowledge points that global managers will need to be successful in the global
marketplace.
Third, we will discuss group-level decision-making and its impact on global managers. Fourth, the
importance of considering the task environment and other characteristics in the decision-making
process is addressed. Finally, the paper concludes by summarizing/restating the importance of the
collective consideration of dimensions of global decision-making that would allow for a solid
process/model by which decisions could be instilled and evaluated in the light of the profound
impact globalization has and will have on global decision-making processes.

Reference point theory

The dynamic reference points used by global managers provide assistance in establishing the
risk/return ratio for each decision in a global context. The assessment of the conduciveness to
adjust one’s conceptual decision-making framework when entering other environments may be
based on past, present and future experiences of the global manager (e.g. each decision has a
temporal dimension to it and may remain a constant for all decisions made by managers).
Two primary reference indices for constructing risk assessments made on an ongoing basis in an
organization are internal (i.e. group, individual managers) as well as external (i.e. differences in the
macro environments). These may be perceived as the various potential referent points that may
change over a time continuum of past, present and future. Therefore, global decision-makers may
use this reference
point perspective to assess the various points-of-view related to strategic decisions at
different points in time relative to each macro environment (Hopfensitz and Winden
2008; Cohen, Etner, and Jeleva 2008). Policies may be directed at modifying the
global decision-making process as global managers move from one environment (i.e.
both macro and organizational) to another over time.

RISK TAKING DECISION

There are potentially three models of risk-taking decision behaviour of global managers relative to
addressing the adaptive decision-making skills of each global manager. First, the global decision-
maker may assume the risk adverse when making any decisions that pertain to strategic decisions.
The global managers’ propensity to address issues associate with making the adjustment in the
organization’s strategic choices is reduced if the return/reward is insufficient to stimulate a
willingness to undertake such risks. Global managers, on the other hand, may make decisions that
maximize utility and, therefore, have a positive slope to the risk-taking curve (Schoemaker 1982).
Therefore, a segment of global managers, at the same time, may be risk-takers (i.e. the rewards
outweigh the cost/consequences).

It has been hypothesized that global decision-makers are able to increase returns and reduce risk
simultaneously by selecting an appropriate reference-point for their strategic decision. In addition,
making long-run organizational decisions in an information vacuum or that are not tied to some
decision context (as explicit or implicit reference points) would be unrealistic and lead to
suboptimal global decision-making. When global managers make decisions that are new in an
unfamiliar decision contexts (e.g. global) then they need to develop a new set of reference points
on which to base their strategic decisions (Miller and Ireland 2005).

There is a third stream of RPT research which speculates that global decision-makers make
decisions that are clearly above a reference point and at the same time make other decisions that
are below the same reference point. The conclusion that can be drawn from this is that global
managers are both risk-averse and risk-takers, depending on whether the decision-makers perceive
themselves to be in a domain of gains or losses relative to changing their concept of social time
(Fiegenbaum, Hart, and Schendel 1996). It has been argued that the top management team (TMT)
level, global decision-makers become internal reference points in a specific organizational context
for issues such as visualizing the concept of time (Kahneman and Tversky 1979). The question
becomes how and which reference point global managers will use when they make decisions
relative to global strategic choices.

DEVELOPING A GLOBAL DECISION-MAKING MODEL FOR GLOBAL MANAGERS

In an effort to develop a cadre of global managers, human resource management must integrate
into the global managers’ training how to learn the nuisances of cultural novelty and the need to
continually adjust to overseas markets. This requires the assessment of the decision-making skills
of global managers and the development of a programme to strengthen the global decision-making
skills of the managers in question. HRM can initially start this assessment of decision-making
skills by using a set of multiple IQs as indicators of the potentially diverse abilities of global
decision-makers.

IQ INDICATOR FOR DECISION MAKING

The multiple IQ sets can be grouped into three categories: analytical, practices and creative
intelligence, as suggested by the tri-archic theory of human intelligence (Sternberg 1985, 1996).

(1) Analytical intelligence involves the planning, implementation and evaluation of problem-
solving processes and knowledge acquisition, which include cognitive intelligence – the
traditional measure of intellectual ability, i.e. the ability to reason, learn and think
analytically (Binet and Simon 1916; Wechsler 1950) – and emotional intelligence – the
ability to use one’s own effective state to tap the effective state of others to accomplish
objectives, i.e. the ability to display an appropriate emotional state and to respond to
others’ emotions in an effective manner (Cooper and Sawaf 1997; Goleman 1995).
(2) Creative intelligence is the individual ability to develop innovative solutions to new
problems encountered in novel environments. This involves intuitive IQ – the ability to
have quick insights and without processing information actively or formally (i.e. being
‘street smart’) – and creative IQ – the ability to diverge/innovate in thinking to create fresh
and novel ideas and solutions to problems. Creative intelligence is the ability to address
problems with insight.

(3) Practical intelligence is individual tacit knowledge that draws on commonsense, intuition
and ‘street-smart’ knowledge to adapt to an environment or to shape the environment to
the problem at hand. Four separate IQs are included in this category; they include

a. Politcal IQ
b. Social/Cultural IQ
c. Network IQ
d. Organizational IQ

Each of these IQs can become an asset of the global manager and can become an integral part of an
ongoing development programme established by HRM.
. A global manager’s innovative IQ is composed of six interrelated
components:
(1) Basic knowledge – innovative creativity is generally directed by one’s
knowledge of a topic or specific area of expertise.
(2) The intellectual ability to synthesize connections, reframe complex problems
and assess the value or potential of creative innovative actions (Sternberg
1997a, 1997b, 1997c).
(3) Inventing thinking/learning style – innovative managers have a preference for
thinking in novel ways that they have constructed in idiosyncratic ways
(Andersen 2000).
(4) Motivation to focus on the task/problem and its solution – ideas in and of
themselves have value and are rewarding.
(5) Risk-taking attitude – creative innovativeness frequently conflicts with
present convention and therefore, the individual has to have the willingness
to ‘stand alone’.
(6) Dependence on supportive environment – for creative innovation to occur, the
environment has to be supportive of challenging to the status quo to promote
change and accept cognitive diversity (Beir 1995; Stein 1991).
Determining the innovative IQ of global managers is difficult to measure initially,
but over time, global managers who exhibit higher than average innovativeness can
be recognized for their continuing efforts in an organization. The problem may be
that these global managers are prone to challenge the conventional management
wisdom given the ‘newness’ of managing in a global context. These challenges of
conventional wisdom can create problems for the global manager with TMT or
managers in the home country. HRM should be willing to intervene in certain
situations to come to the ‘aid’ of global managers. In addition, the global managers
should be made aware of the potential pitfalls of having a high innovative IQ.
Group-level decision-making and its impact on global managers
Group decision-making has been studied for a number of years relative to the
resulting decision styles based upon group composition and longevity (e.g. Rowe and
Mason 1987). Although the thought processes involved in decision-making are
difficult to observe, Rowe and Mason’s (1987) decision-style model can be applied to
groups. They argue that most groups are predisposed to or maintain specific
preferences in how they organize information presented serially, spatially or
behaviourally. Furthermore, groups’ decisions or subsequent actions are based on
how they think about and visualize their environment. Groups’ decision style reflects
their predisposition toward personal objectives, situation avoidance, likes and
dislikes, communication preferences and how they approach problems as a group
(Arrow and McGrath 1993, 1995).
Rowe and Mason’s (1987) model classifies groups’ decision style into four
categories which is related to the formality that is derived from the longevity/tenure
of a group, with styles being differentiated along two dimensions: cognitive
complexity and value orientation. Cognitive complexity looks at a group’s ability
to handle an influx of diverse information. Groups’ acceptance of cognitive
complexity within decision-making process is related directly to the amount of
362 M. Harvey et al.
information needed to make a decision. In other words, some groups require higher
levels of specificity or detailed information to make decisions. Others have a higher
tolerance for ambiguity and are more comfortable making decisions with limited
information (Rowe and Mason 1987), thus they have a higher tolerance for cognitive
complexity.
A group decision-maker’s value orientation represents the second dimension of
the decision style model. Rowe and Mason (1987) suggest that a more objective
group gravitates towards the task or technical component of the decision. In
contrast, a more subjective group focuses on the social or stakeholder impact of the
decision. When combined, the cognitive complexity dimension and the value
orientation dimension can be used to create a decision style typology for global
groups that includes four decision-styles that are based to a degree on the longevity
of the group: directive; analytical; conceptual; and behavioural (Rowe and
Boulgarides 1992).
(1) Directive groups exhibit a low tolerance for ambiguity and a heightened need
for structure that typically comes with longevity of the group (i.e.
development of standard operating procedures to address routine and/or
ongoing operating decisions). These groups tend to be very logical and
efficient in their decision-making and require a greater level of detail and
codified data before making global decisions.
(2) Analytical groups tend to be more comfortable with ambiguous information
and are more willing to accept a larger volume of information and varying
alternatives before making a decision. They are innovative in their problem
solving and base decisions on forecasts derived from large volumes of data.
(3) Conceptual groups are adept at addressing highly ambiguous tasks in
unstructured situations. These groups tend to be more risk-oriented, willing
to explore new options, involve others in the decision-making process, and
tend to use information gathered from multiple sources and examine many
alternatives before settling on a solution. Ultimately, these groups make
decisions using their feelings and instincts.
(4) Behavioural groups’ decision-making styles are best characterized as basing
decisions on the development of people. They tend to exhibit low levels of
ambiguity and require structure, while focusing on the short-term effect of
their decision. This type of group pays less attention to the longevity of the
group and bases decisions on short-run impact/outcomes.
Through participation in efforts to meet group objectives, the individual is able to
achieve his/her individual goals. This is not to imply a self-serving purpose, but
rather through identification with the global group the individual works toward the
group objective, and residually toward his/her own goals (Leana and Van Buren
1999). Given the nature of associability, it has both affective (i.e. collectivist feelings)
and skill-based components (e.g. ability to coordinate activities), but it is a basic
component of global group cohesiveness.

One of the most difficult issues associated with group creativity is developing the appropriate
metrics to calibrate the level and value of creativity in the group. Given that the nature of the
creativity processes is highly subjective/intangible, developing measures of what is being created
and the value of these creative output is a difficult task. This is particularly true at the
organizational level of decision-making in global
organizations. From a HRM development standpoint, this is one of the more
difficult skills to develop in global managers, and if one is to learn this skill it
will take an extended timeframe to gain mastery of it.
Global managers must resolve the following four distinct types of contracting issues
in hybrid type of ownership scheme, which arise with the increase in risk and
uncertainty of expected cooperative behaviour: coordination issues; division issues;
defection issues; and adaptation issues (Mohrman, Cohen, and Mohrman 1995;
Marquart and Horvarth 2001). The coordination issues arise if the global manager
misperceive the feasibility of cooperating with others in the organizational structure
and risk potentially negatively can affect significant others (e.g. partners). The
expected outcome of cooperation must meet the condition that a global manager
expects shared relational behaviour with other units (i.e. other global managers
representing share-ownership would allow the global manager to make the decision).
364 M. Harvey et al.

Summary/conclusion
The rate of change and the magnitude of change taking place in the global marketplace have been
difficult for many human resource managers to integrate the necessary skills to be effective in the
global market context.
The rate of change has kept most/many of the human resource decision-makers
reacting to global change rather than proactively addressing changes that will occur
in the future.
It can be argued that global
managers must develop new decision-making reference points that can be used in
developing new global skills.
Global decision-making is envisioned to take into consideration the individual,
group, environment and task that is to be managed by the global manager. The
individual level of decision-making needs to develop an inventory of an individual
manager’s multiple IQs. This set of competencies is used to calibrate the global
manager mix of IQs to effectively as well as efficiently address the managerial tasks
facing them in the overseas environment. The group context must be addressed
owing to the complexity of global tasks; groups will be used more predominantly to
insure that there is sufficient talent to address global decisions. The interaction
between the individual and the group becomes more important given the increased
use of groups and the need for more competencies than most global managers
possess.
The nature of local and global environments must be addressed to help insure
that the context of decision-making is considered, given the number of different
environmental configuration global managers can/will face. Additionally, the level of
economic development (e.g. stages of development less developed, developing,
industrialized and post industrialized) can have a direct impact on strategies that can
be employed by the global manager. The rate of economic growth can also influence
the types of decisions and the overall strategy employed by the global manager. In
addition, the internal organization environment in each of the global locations of the
MNC can also created a decision-making maze that the global manager must
address. Each ‘local’ organizational environment will be unique, yet decisions need
Human Resource Development International 367
to be made in the context of what is needed throughout the global organization. The
tasks that the global manager is to address during their assignment also have a
direct/indirect impact on the decision-making process. To effectively staff and
manage the global organization each of these dimensions of decision-making must
be considered to address the ‘on-the-run’ compression of social/economic time to
make decisions.
There is no gaining-saying the fact that today, the world has become a global
village. Although globalization is a new word for an old phenomenon, the
way and manner in which the impact of globalization is felt all over the
world I more overwhelming than what it used to be in the 18th or 19th century,
however, globalization has its own good and bad sides. Management
challenges now abound for organizations that are global in their scope of
operations. Some of the challenges include; building a competitive
advantage, maintaining ethical standards, managing a diverse workforce
among others.Nowadays it is extremely important to take care
of the business environment in the global market,
along with potential development within the company.
Globalization is part of the present and the
management should focus on it despite its flaws and
shortcomings. Adapting to the new conditions is
necessary if one wishes to successfully operate and
develop the company’s products and services in the
global market.
The Internet, which made the whole world available
to each individual, provides great opportunities for
creating and developing businesses.
Through entrepreneurial initiatives, the availability
to business partners becomes unlimited and immediately
enforceable using virtual offices and similar
ventures.

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