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Managing People for Performance

MBA 5712

Globalization & The

challenges of HRM

“World is Flat”
Thomas L. Friedman
Prepared By: Ahmed Mujuthaba ( )
Ahmed Waheed (10169777)

Lecturer: Mr.


Managing People for Performance
MBA 5712


How Does Globalization Affect Human Resource Management....................................................5

Nature of Work................................................................................................................................5

Technological Advances..................................................................................................................6

Off-shoring ......................................................................................................................................7

Best Practices...................................................................................................................................7

Conclusion ....................................................................................................................................14

Executive summery

The purpose of this easy is to analyze and evaluate the Impact of Globalization and the
challenges of human resource management in response to the globalized world. HRM is a very
vital part and parcel of “management” in the globalized world to draw an effective workforce,
develop the workforce to its potential and maintain the workforce over the long term in response
to the world of globalization. Throughout this easy the main HRM challenges in the global
market and how does globalization affect human resource management have been outlined.
Gimps on the role of HRM in the globalized world is also been discussed while strategic HRM
has been used as a tool for the response of the challenges of Globalization. Further managing and

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training for global business is also been discussed to reduce the uncertainty of multicultural and
Multilanguage barriers. Finally implications for HRM practices as a measure of readiness is been
evaluated through this easy.


Globalization symbolizes the structural making of the world characterized by the free flow of
technology and human resources across national boundaries presenting an ever-changing and
competitive business environment. A vital aspect of globalization is the way diverse challenges
are being faced by nations in an increasingly inter dependent world. This easy is to provide
comprehensive analysis of human resource management and its challenges in contrast with
globalization. The study of International globalized Market with the cultural and legal barriers

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and the importance of Strategic human resource management has been despised throughout this

Why this is such a burning issue?

Globalization symbolizes the structural making of the world characterized by the free flow of
technology and human resources across national boundaries presenting an ever-changing and
competitive business environment. A vital aspect of globalization is the way diverse challenges
are being faced by nations in an increasingly inter dependent world. No country can
meaningfully progress today without efficiently responding to demands and pressures generated
by international organizations and processes. World Trade Organization (WTO) for instance is
bound to lead in a whole new system of trading relations. Human factor is the key in the new era
of globalization. A conceptual framework for effective management of human resources as a
response to the growing interaction of globalization and business performance is inevitable in
today’s world. Training is important for fulfilling strategic goals and especially during times of
technological growth and development in the modern world of ever changing information and
innovation in order to meet the challenges of globalization.


This millennium has possessed distinctive HRM challenges to business especially those
operating across national boundaries as multinational or global enterprise. Competing in global
markets demand many factors and centralization of its human resource practices is certainly vital
to improve global competitiveness and empower employees for global assignments. To achieve
success in global marketplace, the challenge of all businesses regardless of their size is to
understand global corporate cultural differences and invest in human resources. There are certain

Managing People for Performance
MBA 5712

human resource management issues that are particular for the global enterprise. The key issues
involve are staffing policies, selecting and retaining talented employee, training and development
whilst encouraging employees to be innovative and creative, culture barriers, and legal frame
work. Others issues include understanding the challenges of living and working overseas,
performance appraisals from a distance, training and management development, compensation
packages, and labour relations and organized labour laws.

How Does Globalization Affect Human Resource Management

Globalization refers to the shift towards a more integrated and interdependent world economy.
The drivers of the globalization are the declining barriers to the free flow of goods, services, that
has occurred since the end of World War II and the dramatic technological development in
recent years, particularly in the fields of communication, information processing and
transportation technology (Jain and Hill, 2008). Globalization influences organizations that
compete for customers with high expectations for performance, quality and cost. Globalization
also exerts pressure on Human Resource Management (HRM) function to adapt to organizational
needs and add greater value (Friedman, 2007).
Further globalization leads to more competition and more competition pressure to be “world-
class” to lower costs, to make employees more productive, and to do things better and less
expensively. As one of the expert place it, “the bottom line is the growing integration of the
world into a single, huge market place is increasing the intensity of competition in a wide range
of manufacturing and service industry”. Firms like Dell cut off their global HR communication
cost, formulating selection, training and compensation policies for expatriate employees.
Managing globalization in world class firm is a major human resource challenge (Dessler, 2007).
Globalization has affected human resource management in terms of nature of work,
technological advances, demographic factors, best practices and exporting of jobs.

Nature of Work

Globalization and the improvement in technology have changed the nature of work in
organizations. Due to the competition pressure, organizations try to lower costs, to make
employees more productive, and to do things better and less expensively. To keep costs down
there has been a shift to using non-traditional workers. ‘Non-traditional workers include those
who hold multiple jobs, or who are “contingent” or “part-time” workers or people working in

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alternative work arrangement’ (Dessler, 2007). In order to hold multiple jobs, workers require
multiple skills and knowledge. There is a growing emphasis on knowledge workers and human
capital. Human capital refers to the knowledge, education, training skills and expertise of firm’s
workers (Dessler, 2007). These responses have increased the necessity for employers to make
more investments in skills training, to offer incentives to employees to improve their skills, and
for workers to take, upon themselves, some responsibility for their own development.
The impact globalization has made work more mobile, capable of being performed in different
parts of the world without the need to actually set up physical facilities in other countries.
Alternative work arrangements such as decreasing number of people working under 'permanent'
contracts of employment, and the proliferation of other types of work arrangements such as part-
time and temporary work, work from home and online jobs are practiced by most of the
organization worldwide. Thus, traditional HR has been challenged to accommodate different
types of employment contracts, and different types of pay systems to reward performance and

Technological Advances

Rapid development in technology has affected human resource management worldwide. Even
factory jobs are demanding more technological skills, for example knowledge intensive high tech
manufacturing in industries as aerospace, computers, telecommunication etc. Therefore, every
industry requires highly skilled workers with good knowledge in related technologies.
Information technology has changed the way the human resource function handled in
organization. The information technology can save everyone’s time and expense once he or she
learns how to use it efficiently. Human Resource will be impacted more than any other
department. HR departments are harnessing technology to meet their goals to enhance efficiency
and reduce cost. Systems are being implemented in the organizations such as Human Resource
Information Systems (HRIS) that allow Human Resource Departments to enhance their
efficiency for transportation of data, enabling them to store, manage and analyze critical
employee data without requiring the user to actually maintain the data. Human Resource
Department must be a leader in the implementation of emerging technologies. HR face the
challenge of quickly applying the technology to the task of improving its own operations

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Off-shoring refers to the exporting of jobs from developed countries to less developed countries
(Hollenbeck and Wright, 2006). Competitive pressures and the search for greater efficiencies are
also prompting the more employers to export jobs abroad. Most of the countries exporting high-
paying service jobs to other countries, only export the work can be done at a lower cost. An
example is USA exporting jobs to India particularly in information technology. The company
that off-shore the work, enjoys the benefit of lower costs because the wages in developing
countries is far lower than that of developed countries. The workers in the developing countries
get employment. Developing countries get access to the latest technology. When exporting jobs
into low-cost countries they increasingly affect also bring about competitiveness with other
organizations and strategic HRM options worldwide. One of the vivid examples is that, The
Shanghai Automotive Industry Corporation (SAIC) is one of the oldest and largest automotive
companies. The company has 50 manufacturing plants in China producing autos, motorcycles,
trucks, busses and automobile parts for both wholesale and retail. The company is also involved
in car leasing and financing. SAIC has had highly successful joint ventures with General Motors
(GM) and Volkswagen to produce GM and VW automobiles for the growing Chinese
automobile market. The majority of SAIC’s sales in the 1990’s and 2000’s have come from these
joint ventures. In fact, driving in any major city in China shows the popularity of the GM and
VW autos in that country. Yet, some analysts believe that GM and VW may have become too
dependent on SAIC.
SAIC also owns almost 51 percent of the Korean automaker SSangyong also which is marketed
in Sri Lanka. SSangyong stretchers further by allowing their vehicles to be assembled in Sri
Lanka for the local market to maximise profits by cutting down on duties etc.. This in short
relates to the trend of globalization.

Best Practices

Impact of globalization on HRM may come via the opening up and penetration of economies to
external forces and influences. This may be two-way, with both indigenous and 'foreign'
multinational enterprise (MNE) operations and investment leading to exposure to other countries'
HRM practices, greater publicity and even direct importation. For the universal approach there is
a set of 'best practices' that have additive and generalizable effects on performance. Furthermore,

Managing People for Performance
MBA 5712

'best practice' used by MNE can be transferred globally. Here benchmarking is seen as useful
with its implicit assumption that 'best practice' effects are not firm specific, but rather universal
and transferable. Without benchmarking, firms may be at a competitive disadvantage and HRM
practices cannot be copied easily; hence they result in sustained competitive advantage (Bae and
Rowley, 2001). In order to manage employees for competitive edge in a period of globalization,
human resource personnel must possess competencies relevant for effective implementation of
such strategic HRM policies and practices.

Demographic Factors
As a result of globalization, the workforces of many organizations are more diversified, which
includes women, minorities, disabled workers and immigrants. Therefore, another factor that HR
needed to be concerned about is – the successful management of a diversified workforce. To
manage a diverse workforce, managers must develop a new set of skills, including:
communicating effectively with employees from a wide variety of cultural backgrounds.
Coaching and developing employees of different ages, educational backgrounds, ethnicity,
physical ability, and race; providing performance feedback that is based on objective outcomes;
creating a work environment that makes it comfortable for employees of all backgrounds to be
creative and innovative (Hollenbeck and Wright, 2006).


The world has undergone a dramatic change over the last few decades, the forces of
globalization; technological changes have greatly changed the business environment.
Organizations were required to respond in a strategic manner to the changes taking place in order
to survive and progress. Strategic Human Resource Management (SHRM) involves a set of
internally consistent policies and practices designed and implemented to ensure that a firm's
human capital contribute to the achievement of its business objectives. Strategic human
resources management is largely about integration and adaptation. Its concern is to ensure that:
• Human resources management is fully integrated with the strategy and the strategic needs
of the firm;

• HR policies cohere both across policy areas and across hierarchies; and

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• HR practices are adjusted, accepted, and used by line managers and employees as part of
their everyday work. SHRM practices are macro-oriented, proactive and long term
focused in nature; views human resources as assets or investments not expenses;
implementation of SHRM practices bears linkage to organizational performance; and
focusing on the alignment of human resources with firm strategy as a means of gaining
competitive advantage.

The global business environment today is a multi-cultural one. While general business
considerations are essentially the same the world over, business styles differ greatly from country
to country. What is customary and appropriate in one country may be considered unusual or even
offensive in another. The increasingly competitive environment calls for an individual approach
to each national market. The success of any venture outside the home market depends largely
upon preparation and training within the company. Thus due to globalization HRM has to be
more dynamic in terms of recruiting, training and developing the employees to assure that they
can function effectively anywhere around the world. And meet the new challenges faced every

While general business considerations are essentially the same the world over, business styles
differ greatly from country to country. An employee may be well equipped, trained and ready to
face the situation, but he acts according to the challenges and the requirement of the situation as
it comes. Globalization of business has increased the international competition rapidly. The
organizations of today have become increasingly heterogeneous due to globalization. Some
actually welcome change and the opportunities it presents, while others are reluctant to give up
familiar ways of doing things. The human resource or the workers are proactive in finding out
what skills and qualifications will be required to be an employee of demand in the coming
situations. Thus globalization has increased the requirement of skill among employees and
managers drastically. Thus we have no doubt that the roles of HRM have been affected largely
by the globalization. Human resources manager of today must ensure that the appropriate mix of
employees in terms of knowledge, skills and cultural adaptability is available to handle the
global assignments.

Internationalization 9 Localization
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The “Industry Standard” Globalization Model

Industries typically refer to “Globalization” when talking about the overall process, and
“Internationalization” when describing the development of a culture-independent/world-ready
application. The above model is the most accepted.


The role of people in the implementation of strategic responses has a significant bearing on the
success rate. It is therefore imperative for organization to look at the human issues involved
before implementation of any strategic responses. At this connection the question is: How can
organizations effectively adopt, implement and maximize HRM practices for valued firm level
outcomes? That is, how can firms increase the probability that they will adopt and then
effectively implement appropriate HRM practices? ensuring that members of the HRM personnel
have the appropriate human capital or competencies is one way to increase the likelihood of
effective implementation of HRM practices .The future HR professional will need four basic
competencies to become partners in the strategic management process. These include business
competence, professional and technical knowledge, integration competence and ability to
manage change.
HR professional competence describes the state-of-the-art HR knowledge, expertise and skill
relevant for performing excellently within a traditional HR functional department such as
recruitment and selection, training, compensation, etc. This competence insures that technical
HR knowledge is both present and used within a firm

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Business-related competence refers to the amount of business experience HR personnel have had
outside the functional HR specialty. These capabilities should facilitate the selection and
implementation of HRM policies and practices that fit the unique characteristics of a firm
including its size, strategy, structure, and culture .In other words, these competencies will enable
the HR staff to know the company's business and understand its economic and financial
capabilities necessary for making logical decisions that support the company's strategic plan
based on the most accurate information possible.


Firms competing in a global market place, and organizations are to survive and prosper in the
modern world of rapid change, they need to be more flexible, faster-moving and faster-learning
than before. For that firms are implementing special global training programs, the reason for
doing to avoid lost business due to cultural insensitivity, improving job satisfaction and retention
of overseas staff and enabling a newly assigned employee to communicate with colleagues
abroad. Providing training for employees not only helps them develop their skills and
knowledge, but it is also motivational and a building block to organizational success. Global
training programs opt for prepackaged programs it involves (by Gary Dessler).
• Executive Etiquette for Global Transactions: This program prepares managers for
conducting business globally by training them in business etiquette in other cultures.
• Cross Cultural Technology Transfer: This program shows how cultural values affect
perceptions of technology and technical learning.
• International Protocol and Presentation: This program shows the correct way to handle
people with tact and diplomacy in countries around the world.
• Language Training: Language training delivered by certified instructors, usually determined
by the learner’s needs.
The interaction of globalization and business performance especially within the challenges from
the perspectives of human resource is not neglect able. It’s the key for success. If the
management of human resource is fail in any organization, the organization is failed too. The
rampant pace of global competition, the speeds of technological developments, rapidly changing
demographics, and the incredible increase in information technology have resulted in a business

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MBA 5712

environment that changes day to day, hour to hour. To remain competitive in such a dynamic
environment, businesses must continually improve their human resource management systems
and organizational changes. Addressing the most important and reliable resource, which is
human resource management is necessary step towards facing the challenges of globalization.

Gimps on HRM in the world of Globalization

The discovery of competitive advantage through "excellence syndrome", or the idea that
personnel policy must be linked to strategy and people are an asset (Keenoy, 1990). Normative
HRM proposes that there is a simple, linear relationship between strategy and HRM. However,
there are problems in the integration of HRM policy with business strategy and evidence
indicates that HRM is more ad hoc than strategic. Whilst employment practices are changing
there is doubt about the strategic focus of these changes. The soft model of HRM, suggests a
relationship exists between the use of “appropriate” HRM practices and positive employee
attitudes, and while theoretically these relationships remain poorly developed (Guest, 1997,
2001) the unitary framework of normative HRM which elicits that what is good for the
organisation is good for employees is problematic as the needs of the business do not always
coincide with the best interests of the workforce (Keenoy, 1990). It is evidence to indicate that
there is a gap between rhetoric and reality in workforce management. Research has shown that
HRM rhetoric is generally soft and reality mainly hard. Even when implementation appears soft,
such initiatives are often constrained by a hard framework. Consequently we see that Total
Quality Management whilst promoting empowerment delivers increased management control
and job related training can increase without considering the development needs of employees
required by the concept of 'employability' which has replaced organisational career paths. These
dilemmas mirror the contradictions with normative HRM itself, which is unable to deliver its
dual promise of maximising the contribution of human resources to achieve business strategy.

Evidence of Globalization Characteristics (how globalization has wide spread? Throughout

the world or the impact of globalization? ) or can we say “ types of changes globalization
has brought into the world?”

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• The technical developments of global systems of communication and transportation; The

change from local, regional, and national economies into a global economy thereby increasing
interaction among societies.
• The world-wide political interdependence that is altering traditional boundaries between
domestic and international politics;
• The impact of human activity upon the planet’s ecosystem and the constraints on human
activity imposed by limits of the system;
• The power of art and popular culture to communicate common affective and cognitive
experiences around the globe.
One method of coping with globalization is the education on the subject. Global education and
international education are complementary approaches with different emphases. The terms
global education and international education are used to describe strategies for:
 gaining knowledge of world cultures;

 understanding the historical, geographic, economic, political, cultural, and environment

relationships among world regions and peoples;

 examining the nature of cultural differences and national or regional conflicts and
problems; and

 Acting to influence public policy and private behaviour on behalf of international

understanding, tolerance and empathy.

Multicultural Education: Multi-cultural education is a closely related approach that explores

the interactions among differing cultures within a political region.
Second Language Learning: Here the primary object of study is language as a form of
communication and as a powerful vehicle of culture and identity. The major goal of second
language learning is the development of both the language skills and the cultural understandings
needed to function in and to appreciate another culture. In addition to study of the linguistic
structure, the second language classroom integrates experiences that focus on patterns of
everyday living, such as social mores, occupations, and family live, as well as history, literature
and the fine arts. Students are encouraged to compare another culture with their own in order to
gain a better understanding of both.

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Globalization has increased the connectivity and interdependence of the world's markets and
business. Globalization has its positive side as well as its negative side. It affects the economic
dimensions; that is trade, finance, aid, migration and ideas. Increase in these dimensions of
globalization, if managed in a way that supports development in all countries, influences
organizations that compete for customers with high expectations for performance, quality and
cost. With the acceleration of globalization, organizations have had to change and new trends
have set in, even in the management of human resources. Globalization also exerts pressure on
Human Resource Management (HRM) function to adapt to organizational needs and add greater
value. Globalization has affected the human resource management in terms of nature of work,
technological advances, exporting jobs, best practices and demographic factors.