Human resource management is an organization’s administrative wing that handles all employee-related problems. These challenges include recruitment, workplace safety, benefits & compensations, policy administration, performance management, training, etc.
The HR policy of every organization depends on the labor laws and legislature of the country where it operates. And with globalization, the ever-changing competitive business environment started expanding with the free flow of human resources and technology across borders. Naturally, this impacted the day-to-day operations of all businesses, and HR management is no exception.
To understand the impact of globalization on human resource management, we must first understand the changing priorities of recruitment, added benefits, and the challenges of globalization in HR management.
Impact of Globalization on Human Resource Management
In the era of globalization, HR management is slowly shifting from its previously assigned traditional tasks, such as administration, transactional, and personnel roles. But as modern businesses face several complex hurdles, their HR departments must also make a few adjustments to adapt..
This transformation directly stems from globalization and competition trends in human resource management. Today, businesses want their HR Management to add value to the strategic utilization of employee programs.
In the face of global competition, the decision-making system in organizations has become complicated. They need advanced HR systems that can interpret the data to deliver business insights, anticipate future requirements, and devise strategies to cater to pressing needs. The challenge becomes further aggravated as there’s a significant shortage in the global talent supply compared to its long-term demand. Hence, the next-generation of organizations will likely suffer from the lack of highly skilled workers as the skill gap will deepen over time.
Considering the impact of globalization on HR practices, companies will need to prioritize investment in human capital over financial capital. After all, effective HR management is the foremost determinant of whether or not a company can become a global leader.
Major Areas of Impact of Globalization on Human Resource Development
Due to globalization in human resource management, modern HR managers must conceive strategies catering to both local and remote employees. For instance, a Germany-based business hiring people in Europe and Asia must ensure that its HR strategy adheres to local and international standards while being culturally appropriate.
Hence, the impact of globalization on human resource management pushes HR management to rethink their core strategies.
Globalization’s impact on HR management is directly related to a country’s labor laws. For example, the minimum wage in Canada will vary from that in the US. In the same way, Australia and China’s rules on employee benefits and compensation differ. The minimum working hours in Malaysia, India, Britain, and Hong Kong will depend on the country-specific labor laws.
So, global organizations must keep such factors in mind while drafting their HR strategies. Their HR management must possess a thorough knowledge of the domestic and international labor laws of the relevant countries. Violation of labor laws can lead to severe legal issues.
Employers recruiting foreign employees can vouch for the rapid change in the hiring dynamics. Different countries have varying names and follow unique evaluating criteria for educational qualifications and certificates. For example, you want to hire a candidate for a position with a minimum educational requirement of an MBA degree. The evaluation method for the MBA degree will vary from country to country, ranging from the degree name to the grades or credits offered in the course.
Thus, HR departments must be aware of the country’s evaluation criteria for educational qualifications from where they are hiring and judge candidates accordingly.
Companies usually offer extensive training to new recruits, detailing their job responsibilities and the company policies. However, the impact of globalization on HR practices demands distinct training modules for a global workforce. For example, if an employer transfers a local employee overseas, they must train them per offshore work expectations and culture.
Thanks to globalization, companies must train their employees to function in different countries with their regional offices. In fact, globalization in human resource management demands HR departments to develop exclusive strategies for recruiting, training, retaining, and motivating expats.
Communication procedures are a prime example of how globalization is influencing human resource management. The varying time zones pose a severe problem for multinational companies operating in different countries. For instance, while the regional head office in one country wraps up work, an office in another country might just start its workday.
Consequently, the HR department must design specific communication strategies to establish synchronized coordination among the different regional head offices, keeping in mind remote employees as well.
Major Challenges of Globalization in Human Resource Management
Since globalization brings numerous global tenets together, modern businesses face multiple challenges. HR departments must tackle these issues efficiently to help businesses flourish and stay competitive.
Some of the major challenges of globalization in human resource management include:
Attracting and retaining talent
With ample entrepreneurship opportunities and employment prospects available today, employees choose organizations having an excellent work culture and pro-employee stance. Hence, the best way to attract talent in this era of globalization in human resource management is to comprehend their workplace expectations during the interview. To retain employees, HR teams must create effective engagement plans, provide them with ample scope for growth, and help them strike a work-life balance.
Privacy and Security
A company’s employees and data are the responsibility of the HR department. As countries function across borders, the amount of data generated every day increases exponentially. This compels HR teams to monitor their human and intellectual resources strictly and protect them from security breaches. They must implement adequate security measures and draft well-thought-out confidentiality agreements for vendors.
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Organizations now hire employees from diverse cultural and social backgrounds. Managing a diverse workforce can get challenging due to cultural sensitivity and may sometimes lead to disputes in the workplace. As an impact of globalization on HR practices, HR executives must clearly define acceptable workplace behavior and encourage open communication channels to avoid conflicts during work.
Managing diverse workforce
The globalization of the workforce has created a mixture of remote and on/off-site teams across different genders, cultures, locations, and ages. So, it becomes crucial to cater to the needs of a diverse employee group, which demands a global HR policy. HR practices must percolate across different company parallels, teaching employees to respect their co-workers while maintaining workplace boundaries.
Globalization in human resource management means devising innovative evaluation measures to keep employees focused and motivated. HR teams can create a constructive feedback system for regular evaluations instead of yearly assessments. The rise in the enrollment for performance management certification is another example of how globalization is influencing human resource management.
It is a challenge for companies to devise balanced benefits and compensation packages for all employees across different countries. So, a company’s HR department must create a definite system by considering the labor laws of the countries where it operates to avoid penalties and legal complications.
Globalization in Human Resource Management: Advantages & Disadvantages
Globalization has rapidly changed how organizations operate and run their business. The impact of globalization on human resource management is mainly evident in the cross-cultural communications of companies. Different countries have different cultural sensibilities, time zones, labor laws, legislature, and regulatory impositions. Hence, HR management must always consider these factors while designing company HR strategies.
Advantages of Globalization in HR Management
Globalization offers numerous advantages to businesses. For example, a company can pay significantly lower wages and have lower overheads in comparatively lesser developed nations. They can also benefit from lower corporate tax rates, reduced business set-up costs, etc.
New ideas due to cultural diversity
A global workforce comprises crews operating across various locations, functioning across a wide range of work ethics and practices. By taking a unique approach to HR management, organizations can infuse diverse insights, perspectives, and ideas into their work culture.
Globalization has opened up unique possibilities for corporations to sell their services/products on the international market, increasing sales and profits. Globalization in human resource management means more qualified employees can handle sales and marketing remotely.
Ability to tap into a wider talent pool
A positive impact of globalization on human resource management is that companies need not restrict themselves to specific locations while hiring. Thanks to robust internet facilities, online meeting platforms, and rising work-from-home opportunities, companies can hire the best candidates worldwide.
Disadvantages of Globalization in HR Management
One of the major challenges of globalization in human resource management is the necessity to learn the varying cultural differences of a diverse employee pool.
HR departments must continuously stay updated with the labor laws of different nations, devise communication strategies, integrate diverse value systems, and coordinate the activities of all employees to achieve company goals. They must have a deep understanding of foreign labor issues, international labor relations laws, and employment regulations to devise suitable employee packages. This can be pretty time-consuming, overwhelming, and complicated.
Today, human resource management has evolved into a core part of any business. However, it might be challenging for companies functioning overseas to create inclusive HR policies without proper guidance and legal knowledge. Multiplier is a global PEO-EOR firm that can be your one-stop solution for all HR issues. Our in-house experts can inform you about the local laws of over 150 countries, thereby helping you comply with national and international regulations.
Q. What is a major trend of globalization in human resource management?
As a result of globalization, employers can now recruit personnels globally. This particularly helps small businesses with limited resources to hire the best talents even if they do not live in the same city.
Q. What is the main impact of globalization on human resource management?
Globalization pushes organizations to face competitive threats effectively by organizing their business around their core competence.
Q. What are the major challenges of globalization in human resource management?
Some of the major challenges faced by HR management due to globalization are varying labor laws in different countries, different cultural aspects of employees hailing from different countries, and the need to stay competitive to thrive in a larger market.