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Human resources or, as some would call it, human capital, is becoming the most important asset for most organizations in the world. As the New Economy pervades in the world’s communities and organizations, it becomes necessary to study and pay close attention to the impact of Globalization and Technology in shaping today’s strategy for managing human resources.
As a practitioner and student of human resource management, among other things, I believe that the globalization and the advancement of technology influences how organizations react and adjust to the changing times and economy.
This afternoon, I would like to discuss the impact of the New Economy as well as its implications to today’s global organizations. These factors necessitate specific responses and strategic moves from corporate, social, and country organizations to craft an optimum human resource strategy.
Globalization and Its Impact on Organizations
The first step in creating a Human Resource strategy in the New Economy is taking into consideration the effects of globalization and technological advancement on organizations.
Slides 1 and 2 on the PowerPoint presentation show data from the International Monetary Fund (IMF), the World Economic Outlook, and the United Nations about the increasing Foreign Direct Investments from the early 1990’s to year 2000. Slide 3 shows data from the World Bank on the rise of exports in East Asia, Southeast Asia, and South Asia. Slide 4 shows data on increasing mergers and acquisitions in Developing Asia, East Asia and Southeast Asia.
These slides are evidence of globalization through an ever-increasing movement of investments, business activities and alliances across countries. The globalization of business activities coupled with the innovations in technology creates tremendous impact on organizations; in the way they compete and manage resources.
First noticeable effect is that the business scenario has become more competitive as local companies compete with global players. As more companies compete in the same industry, customers are given more choices. With increasing choices, customers are becoming more sophisticated and more demanding of the best quality product and service at the lowest possible price.
Second, as the business landscape becomes more competitive, organizations have to be more efficient in their operations and strive for innovation in research and development. For companies to survive and grow in a dynamic and highly volatile marketplace, they must have more flexibility, responsiveness and speed to market their products.
Third, organizational flexibility and responsiveness require organizations to create alliances to strengthen relationships with partners, suppliers, and foster innovation among its employees. The challenge in creating alliances is determining how to promote cooperation and mutual trust. Cooperation and mutual trust, within the organization and throughout its partner firms, are only possible if an organization is able to harmonize and synthesize the various cultures among its employees, suppliers and partners – blend eastern philosophy with western paradigms, or merge local customs with foreign practices.
Fourth, while globalization fosters intense competition, the advancement in technology has created a new breed of employees – more educated and knowledgeable, more innovative, and more mobile. This new breed of employees, considered knowledge workers, is in turn invested into organizations as human capital. As such, they seek reasonable returns to investment and greater value in terms of personal development and professional advancement.
The challenge for Human Resource leaders is really to understand the role of Human Resource Management in an organization competing in a global business environment and effectively define the critical issues and responses necessary in implementing a strategic Human Resource Program.
Organizational and Human Resource Challenges
If organizations are to survive and grow in a global business environment, they must respond by (1) building a responsive organization; (2) fostering innovation; (3) and sustaining organizational capability.
Strategy I: Building Organizational Responsiveness through a Learning Organization
To build a responsive organization, firms must become more efficient. Efficiency means rationalizing and streamlining business processes. Streamlining business processes means new work modalities for employees. For new work modalities to be implemented, an organization has to upgrade the competencies and skills set of its employees.
While organizational efficiency calls for a rationalization of business processes within the firm, it also necessitates employees to work with people from partner companies that have different cultural and organizational backgrounds. The role of Human Resource Management, therefore, is to create cultural literacy. This means providing employees with training on cultural sensitivity, cross-functional work relations, and strategic direction. Cultural literacy is critical in making alliances work in the way top management intends it to. Accomplishing this allows employees and allied partners to think on the same wavelength and thus respond more intelligently and efficiently to the demands of the new economy.
Second, as business processes are streamlined, it becomes important for companies to harvest knowledge across the organization. Harvesting knowledge means codifying information, knowledge and experience and to leverage these for organizational learning. Knowledge sharing helps build organizational capability and responsiveness by creating an employee mindset that is customer-focused, updated and dynamic. A major challenge, however, in harvesting knowledge is employees’ resistance to change. Employees may resist new modalities of work processes or may be hesitant to share knowledge and experiences to other members of the organization.
Third, as organizational processes change, the upgrade and development of skills become imperative. The changes in business processes require an upgrade in competencies to ensure the integration of skills creation with technological advancement. In the complex and fast-moving workplace, Human Resource Management must ensure that all employees are well trained, work seamlessly with each other, and have access to technology tools.
Strategy II: Building an Innovative Organization through Service Assets
Globalization and advances in technology have given rise to knowledge-based economies and have redefined the basis of competitive advantage. Physical resources such as production equipment and facilities have become less important compared to service assets such as competencies, goodwill and patents. The creation of service assets in the knowledge economy requires a new set of competencies, competencies that are more creative, proactive and entrepreneurial. Moreover, the creation of service assets entails the development of knowledge workers who are more creative and innovative. As Alexander Fliaster, who wrote on the Development of Knowledge Workers, cited that in the knowledge economy, competencies have shifted from relatedness, interdependence and harmony to that of individuality, independence and self-responsibility. The focus has shifted from generalists to professionals or knowledge workers with distinctive, market-related skills and values.
In this regard, Human Resource Management must then focus on developing creativity, individuality and entrepreneurship among employees as opposed to the traditional model of consistency, hierarchy and seniority. Companies must create a work atmosphere where distinctive personalities, non-traditional experience, and talented individuals are greatly appreciated. In the knowledge-based economy, it is the employees who become the investment that create an organization’s competitive advantage.
Second, while creativity and innovation are crucial for competitive advantage, the creation of organizational trust is also important. Trust is important in promoting innovation within the organization. The role of Human Resource Management, therefore, is to strike a balance between promoting intellectual elites and high performers and securing loyalty and commitment from consensus seeking employees. The challenge is to balance organizational unity with diversity, to balance homogeneity and conformity with proactiveness and flexibility.
Strategy III: Sustaining Organizational Capability through Talent Management and Retention
Lastly, if companies are to move forward and respond well to the implications of globalization, they must develop strategies in sustaining long-term organizational capability. Sustaining capability has become an issue in the knowledge economy because of higher workforce mobility. Workforce mobility is a result of employees who are more informed, more aware of their choices and of their importance in the organization. Technology through the Internet also adds to workforce mobility by disseminating information on employment options and opportunities. An informed workforce in the new economy understands their role as talents and human capital in business, and demands return for their investment.
To retain knowledge workers and sustain organizational capability, companies may choose to adopt several strategies in talent retention and management. For instance, companies may diversify contract forms for its knowledge workers. In lieu of the traditional longer-term contracts, companies may opt to employ yearly contracts. This arrangement allows organizations to attract professionals with creative ability, and at the same time provide them with employment flexibility and mobility. This type of arrangement is appropriate for technology companies, or for organizations that want to enter new markets, where creative and entrepreneurial competencies are important.
Another option is to diversify the professional experience of knowledge workers into master degrees, mid careers, foreign researchers, temporary hired contracts, and various industry backgrounds. The diversity of experience and industry background among employees will provide the impetus for innovation and creativity.
The third option is to diversify the recruitment criteria for knowledge workers. The objective is to balance the traditional recruitment criteria focused on relatedness and interdependence with that of individuality, originality and creativity. For instance, this strategy is useful for software companies where innovation and speed in marketing products are key competitive advantages.
A fourth strategy is to modify compensation packages in order to retain the most innovative knowledge workers and to allow an organization to foster job performance based on meritocracy.
Lastly, companies can diversify the schools and universities from which they recruit new employees. This system ensures a heterogeneous workforce and recruitment of talents with unconventional academic background.
The Role of Human Resource Management
In summary, what then is the role of Human Resource Management in addressing the imminent trends affecting global organizations? The goal of Human Resource Management in the new economy must be three-fold: to build an adaptive organization with a responsive workforce; to build an innovative workforce that values creativity rather than commonality; and to manage and retain talents through diversification of workforce engagements. An organization’s human resource management must address the organization’s needs for market responsiveness, innovation and organizational capability if it is to survive the ever-changing landscapes of the New Economy.
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