HRM Challenges in Multinational Companies

Introduction

Human resources managers are continuously encountering heightening challenges in managing people while working as HR practitioners in multinational or transnational companies in the wake of globalisation. Srivastava and Agarwal (2012) assert that HR “managers are facing many changes in the present business scenario like globalisation workforce diversity, technological advances, and changes in political and legal environments coupled with the need to embrace information technology” (p.46).

These challenges exert immense pressure on the HR functions of seeking effective strategies of recruitment, training, developing, and retaining the most talented personnel within a global organisation characterised by tremendous workforce diversities. This paper explores two main challenges encountered by HR managers operating in multinational or multi-transnational companies. These challenges are associated with globalisation coupled with challenges and opportunities of communication and information technology affecting HR functions.

Challenges of HR in of the age of globalisation

Overview

From political and economic perspectives, globalisation refers to the markets, legal, and political denationalisation. It leads to the integration of financial systems coupled with trade markets.

Globalisation exposes HR to various challenges including the establishment of unfamiliar laws affecting HR functions, differing work ethics, attitudes, communication challenges due to language barriers, competition, and differing managerial styles in the quest to have people work effectively in a bid to attain the goals of a transnational or multinational organisation. In the light of this realisation, Srivastava and Agarwal (2012) assert, “HR managers have a challenge in dealing with more functions, more heterogeneous functions, and more involvement in the employees’ personal life” (p.46).

Among the different challenges encountered by HR, while working in globalising transnational or multinational organisation, is integrating people from different cultural backgrounds, which presents the leadership challenge in global organisations’ HR functions.

Globalisation and management of workforce diversities

As organisations globalise, the HR department recruits, trains, and seeks to retain people from diverse cultural and ethical backgrounds. Effective management of people from diverse cultural backgrounds calls for HR managers to put extra effort and look for strategies of mitigating cultural conflicts within a global organisation.

Dessler (2004) argues, “The importance of diversity management has been communicated by academics and professionals alike, citing the many benefits of having a heterogeneous organisation as opposed to a homogeneous organisation” (p.43). A homogenous organisation is a non-diversified organisation while a heterogeneous is diversified organisation, which means that it employs people of varying backgrounds in terms of race, age, physical abilities, and geographical regions among other factors.

Inferring from this argument, a globalised or transnational organisation is an independent organisation. Globalisation poses a significant challenge the HR, which is the challenge of effective management of diverse employees. Scholars note that a good management of workforce diversity should have the ability to improve workforce productivity, improve workforce engagement, and foster reduction of staff absenteeism coupled with a decrease of workforce turn over (Dessler 2004).

For instance, at Google Company, workforce diversity management is critical in the endeavour to increase the ability to address the various needs of more diverse Google customer base. Particularly, Google gains from the valid viewpoints of its diverse workforce for such a workforce provides increased problem-solving capacities coupled with enhanced creativity levels, something that is critical for the success of the organisation in the future of the unknown changing business environment.

This aspect exemplifies the increasing challenges of HR to deploy diversity as a source of competitive advantage as opposed to a cause of organisational failure due to diversity conflicts. A growing body of literature reveals that a direct correlation exists amongst employees, attendance, job performance, dedication, and perception of being valuable resources of an organisation. According to Pope, “if management and team members fail to value women and minorities, company productivity will likely suffer as a consequence” (2004, p.63). This assertion infers that mismanagement of workforce diversity translates to affecting an organisation’s costs.

In this context, organisations that do not support diversity existing in their workplaces are likely to plunge into expensive lawsuits and out of court settlement cases, which are contributed mainly by poor management of various talent pools. Additionally, globalised organisations are susceptible to costs linked to replacement of employees (Jayne & Dipboye 2004). In a situation where an organisation is constituted of people of varying ethnicities coupled with higher proportions of women compared to the general industry average, an interrogative arises seeking HR audience on how the reconciliation of differences among employees can be achieved without truncating into undue friction during day-to-day interactions of the employees.

In this context, managing workforce diversity becomes a crucial endeavour. Otherwise, the performance of an organisation becomes negatively impaired, and hence its productivity and profitability. Development of plausible knowledge by today’s management professionals is indeed crucial since many of the issues encountered in the work environment prompting intolerance for the differences characterising differing workers can only be solved by use of astute approaches of workforce diversity management.

Pless and Maak (2004) argue that many of the issues that cause friction in an organisation are mainly attributed to perspectives of minority and majority workforce differences (p.129). This friction usually is more pronounced in organisations with the majority of the workforce coming from a collective ethnic group or race. Where minority groups mostly perceive themselves as being oppressed or discriminated against, it is apparent that they would consider taking steps that are unhealthy to the performance of an organisation.

This aspect is perhaps widely probable since globalisation has fostered free and quick flow of information on awareness of the minority rights coupled with the existence of stricter organisational codes of conducts and regulations predominantly formulated to govern behaviours within workplaces.

In this context, having workforce-diversity management knowledge is critical for the purposes of allowing HR managers to achieve their jobs mandates. This assertion is perhaps more practical especially by consideration of Pope (2004) argument that it “is in the interest of the management of any firm to sensitise its workforce towards race and gender issues and ensure that the workplace is free of discrimination against minority groups as well as women” (p.64).

From this dimension, managing workforce diversity has a chief contribution in aiding people working within a globalising company to connect in an attempt to further the organisation’s goals, create positive changes within the corporate community without negating promotion, and strengthening global organisations business partnerships.

Summary

Globalisation increases the challenges of HR function within an organisation by creating more complex workforce akin to increased workforce diversity characteristics. Kersten (2000) notes that managing diverse employees in a multinational or transnational organisation “begin with desirable social and political goals” (p.236).

Drawing from this argument, it is clear that HR management has a proactive role to play in ensuring that workforce diversity is appropriately managed to avoid conflicts of interest among the minority and majority groups of workers. Additionally, HR managers cannot conduct this noble task if they are not fully cognisant of the relevance and importance of managing the workforce diversities appropriately in globalising organisations.

Communication and information technology in HR

Overview

Advancement information and technology introduces challenges in organisations related to adaptation of work to meet changes in the technologies used to create products and services to prevent obsolescence of an organisation.

According to Mishra, and Akman (2010), “advanced technology has tended to reduce the number of jobs that require little skills and to increase the number of jobs that require considerable skills, a shift called moving from touch labour to knowledge works” (p.243).

The most significant challenge of HR is to seek a mechanism for ensuring that their globalising organisations can take advantage of information and technology to enhance the development of their employees’ skill levels and productivity.

Opportunities and challenges of information and communication technology (ICT) for HR

ICT presents several opportunities for organisations amid their size and resource levels. Currently, through the development of Internet-based business platforms such as e-commerce, a small organisation located at the Silicon Valley can do business not only within the Silicon Valley suburbs but also in other places including Shanghai and London or any other city or nation across the globe.

This aspect implies that technology and information developments have made it possible for small and mediums sized organisations to compete with giant organisation in the global markets (Finkelstein 2005, p.368). Information and technology scholars accept that trends in globalisation at all levels of economic drivers within all nations present opportunities that have not been experienced before; however, these scholars also agree that new brand of challenges are also registered in terms of ensuring that people working for organisations remain happy and committed to their employer.

In an empirical assessment conducted by Mishra and Akman (2010), it emerges that technology and HRM “have a broad range of influences upon each other, and HR professionals should be able to adopt technologies that allow the reengineering of the HR function” (p.243). This observation implies that information technology creates an opportunity for enhancing the effectiveness of the HR function within an organisation in creating climates for innovations coupled with development of information-based organisations (Hempel 2004).

The development of such advances in technology for HR functions managements is fostered by the need of the HR department to conduct its functions in the global markets in a manner that ensures speed, costs reduction, and efficiency.

In some situations, the HR personnel should interact physically with employees to resolve some of the challenges that affect their productivity.

This aspect is particularity important when the employees’ concerns are emotional, which explains why HR personnel should have skills such as emotional intelligence. Sufficient resolution of the challenges encountered by employees requires ardent communication. IT communication platforms provide room for verbal and written communication. Unfortunately, non-verbal communication does not work optimally through the HR virtual platforms.

Although to resolve this challenge, an organisation can create both virtual and non-virtual HR systems in the globalised organisations, “HRM must meet the challenge of simultaneously becoming more strategic, flexible, cost-efficient, and customer-oriented by leveraging information technology” (Snell, Stueber & Lepak 2002, p.83). In this regard, information and technology are becoming a vital prerequisite tool for professionals in the field of human resource.

The sophistication of external structural alternatives coupled with IT-based tool for management has led to the emergence of virtual HR. IT enables organisations to avail state-of-art human resource services, which reduces organisational costs irrespective of the size of an organisation through availing cheap and efficient HR technologies.

Although virtual HR reduces instances of direct interaction of the HR and the employees tremendously, Mishra and Akman (2010) maintain, “ HRM could support the efforts of technological innovation’s to achieve high performance by focusing more on value-added activities to realise the full potential of technology and organisational strategy” (p.244). This goal is realisable via freeing HR various intermediary roles to enable them to focus entirely on human resources strategic planning coupled with development of organisations.

Information technology is essential in aiding the process of automating various functions of the HR, including the payroll processing administration of numerous workforce benefits and a myriad of transnational chores. Operating in a globalising world, HR encounters the challenges of dealing with workforce derived from cross-cultural backgrounds akin to recruitment of employees from differing nations, political systems contexts, and cultures.

Although this aspect presents a significant challenge for HR in the efforts to develop strategies for ensuring that amid the differences between people employed by organisations, they are satisfied with their jobs, Tansley and Watson (2007) argue that IT is an incredible tool for handling the challenge. Tansley and Watson (2007) reckon, “IT has considerable potential as a tool that managers can utilise, both generally and in human resourcing functions in particular to increase the capabilities of the organisation” (p.115).

However, even though IT can enhance quick and precise communication to the employees, challenges are still encountered in the derivation of strategies for communicating to multicultural employees pools. For organisations operating in the global markets, this challenge is even amplified. Such organisations often find themselves employing people that the HR can only interact with through virtual means.

Consequently, the best mechanism of making people happy continues to be a challenge to the HR whose functions are essentially realised through information technology platforms.

Summary

Information technology allows organisations to conduct their business management functions from a centralised location without necessarily having to create physical offices in their global outlets. Some organisations, such as Amazon.com, only have one physical location, from where all the operation, including supplies and logistics among others, are conducted through interaction of e-business platforms such as B2B and C2B.

Although such functions require employees, often located in different nations, the HR has no way of directly interacting with them in an effort to resolve their challenges, which may affect their productivity and especially problems that create heated emotions. However, amid these challenges, application of information technology creates immense opportunities for the HR to conduct its function in fast, effective, and efficient ways, which include automation of specific HR roles such as administration of employees’ benefits systems and processing of payrolls.

Through IT, organisations are in a position to reduce the costs associated with the execution of HR functions within global organisations. The repercussion of such a move is the creation of productive and competitive organisations in the global markets.

Reference List

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Tansley, C & Watson, T 2007, ‘Strategic exchange in the development of human resource information systems (HRIS)’, New Technology, Work, and Employment, vol.15 no.2, pp. 108-122.