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The roles and obligations of Human Resources departments are changing as the modern business confronts challenges of globalization. The global supply of talent falls short of its long-term demand, and the disparity between demand and supply is a challenge for employers everywhere. The shortage between the demand and supply of talent is likely to continue to increase, notably for highly-skilled workers and the next generation of business managers. Currently, organizations need to place greater emphasis on attracting human capital rather than financial capital. Global staffing and the management of a culturally and linguistically diverse workforce, spread across different countries, are the primary goals of global HR. Only those multinational enterprises willing to adapt their human resource practices to the changing global labor market will be able to attract and retain high-performing employees. Companies that can anticipate their business and workforce needs – particularly for high skills – will gain a decisive competitive advantage.
HR offices are changing as the current business confronts various and complex challenges and opportunities. The evolution of HR today is a direct response to the rapid changes within companies due to factors such as globalization. In the global competition within the flattened and connected new world, decision making in organizations has become increasingly complex. The new global world has expanded the talent pool for both skilled and unskilled workers, and for permanent and temporary employees. An organization’s talent can be a source of a sustained competitive advantage and can affect crucial organizational outcomes such as survival, profitability, customer satisfaction level, and employee performance 1. HR needs to take advantage of technology and data analysis to build a global human resource information system that collects and stores data from various sources. The system will analyze the data to provide business insights, predict future needs, and develop strategies to fulfill these needs. Companies with the ability to anticipate and manage their workforce needs accurately, especially for highly skilled professionals, will gain a decisive competitive advantage 2.
The global supply of talent is less than its long-term demand, and this disparity is a challenge for employers everywhere. The shortage between the demand and supply of talent is expected to continue to grow, particularly for highly skilled workers and the next generation of middle and senior leaders. Most emerging nations with large populations, including Brazil, Russia, India, and China, may not sustain a net surplus workforce with the right skills for much longer. Now, more than ever, organizations need to place greater emphasis on attracting human capital rather than financial capital. Since capital is globally available from investors and lenders, and innovations can be duplicated relatively quickly, effective human resource management is the best way to distinguish one company from another. Global staffing and global management development are the two components of global HR with the greatest potential for strategic use by global firms 3. Only the multinationals that adapt their human resource practices to the changing global labor market conditions will be able to attract, develop and retain the right talent, and are more likely to succeed in global competition.
The remainder of this paper is organized as follows: Section two describes the drivers of globalization, while section three discusses key challenges to it. We discuss the changing roles and responsibilities of HR due to globalization in section four. Section five will discuss the global human resource information system and its main components. The paper is summarized and concluded in section six.
How it works
The expanding prevalence of globalization is driven by various factors, including instability in developed nations, availability of low-cost labor, and growing consumers in developing countries, as well as technological progress.
Despite the current economic downturn and unemployment, most developed nations, including the United States, Germany, and Japan, will face long-term talent shortages. This is primarily due to aging and the retirement of Baby Boomers. There are more workers retiring than entering the workforce in these countries. By 2020, for every five retiring workers, only four new workers will join the workforce in most developed nations. According to one estimate, the United States will need to add 26 million workers to its talent pool by 2030 to maintain the average economic growth of the two previous decades (1988-2008), unless a technological breakthrough replaces labor. Meanwhile, Western Europe will need to add 46 million workers. The shortage of workers is projected across most industries, including manufacturing, construction, transport and communications, trade, hotel and restaurants, financial services, IT and business services, healthcare, public administration, and education.
The open door has never been more prominent for multinationals to attract top talent from emerging countries, such as Brazil, Russia, India, and China, or to outsource work to these countries. Global population growth contrasts greatly between developed and developing countries. In the developed countries – the USA, EU, and Japan – the current annual rate of growth is under 0.3 per cent, while in the rest of the world the population is increasing almost six times as quickly. According to the McKinsey Global Institute, there are about 33 million potential professionals in emerging markets and they are growing rapidly. The pool of affordable, young professional talent in emerging markets is growing at 5.5 per cent annually, while the number in developed countries is growing at just 1 per cent per year. The total number of college-educated workers in low-wage countries far surpasses the number from higher-wage countries. Currently, India produces as many young workers as the United States, and China produces more than twice as many. Russia produces ten times as many finance and accounting professionals as Germany. According to the International Organization for Migration, there were an estimated 214 million global migrants in the world in 2010, and fifty-seven per cent of all migrants live in the high-income countries. The number of migrants is likely to grow exponentially in the coming years. Moreover, the migration of workers and outsourcing of work will not be limited to unidirectional flow from emerging countries to developed countries.
Globalization is made conceivable by the advancement of financially savvy, yet efficient technologies, including the Intranet and Internet, enterprise resource planning system, data warehouse, data shop, and data analysis. Friedman (2005) defined globalization as a whole set of technologies and political events converging, including the fall of the Berlin Wall, the rise of the Internet, the dissemination of the Windows operating system, the creation of a global fiber-optic network, and the creation of interoperable software applications, which made it easy for people all over the world to interact. This leveled the playing field, creating a global platform that allowed more people to plug in, play, collaborate, compete, share knowledge, and share work on a scale never seen before. Cloud computing and new advances in remote access and support technologies also seem to fuel globalization. Many service jobs, such as call centers, animation, translation, and software development can be carried out remotely. It is estimated that 160 million jobs, or around 11 percent of the projected 1.46 billion service jobs worldwide in 2008, could be performed remotely, despite any constraints on supply. Segment five discusses a global human resource information system that collects and stores large volumes of data from various sources, including external and remote sources. The system is designed so the human resource workforce can analyze the data to gain business insights, predict future needs, and develop strategies to meet those needs.
As expressed in the previous segment, the pool of skilled people has been expanding and is expected to continue growing in the near future, chiefly due to increased educational opportunities in emerging countries. Furthermore, the demand for such talent is likely to grow considerably faster over the same period. A World Economic Forum study, based on data from 22 countries and 12 industries, projected significant talent gaps between the supply and demand of highly skilled workers by 2020. The demand for skilled individuals is growing not only from developed countries, but also from developing nations themselves as they pursue their own nation-building.
Human resource professionals at multinational companies in emerging markets such as China, Hungary, India, and Malaysia have reported in a recent survey that candidates for engineering and general-management positions display wide variations in suitability. According to the McKinsey Global Institute, only 13 to 19 percent of 33 million university graduates in developing countries are suitable for employment in a multinational company, due to their lack of language skills, poor quality of education, and cultural mismatch. Moreover, only a fraction of these individuals is willing or able to relocate for employment.
The greatest challenge for global organizations’ human resource departments is managing a workforce diverse in culture and language skills, distributed across various countries. It is crucial for companies not only to familiarize themselves with local business practices and understand the needs of local consumers but also to develop a global mindset among their employees. As the central figures in globalization, multinational organizations need to integrate various value systems and uphold shared global work values to create an environment where workers can communicate and coordinate their activities to achieve mutual goals. HR must assume new roles and responsibilities in navigating the organization through the uncharted waters of globalization.
Previously, the capacity of HR was normally viewed as a cost focus and a managerial overhead. The human asset departments focused on short-term gains and savings. They focused on organizational efficiency and consistency activities. They catered to cost interests in intangible abilities rather than capitalizing and tended to increase short-term profit by cutting discretionary expenditure on people’s development. Such tendencies achieved short-term victories but suffered from long-term problems when the objectives were attained at the expense of employee productivity.
The role of modern human resource departments is to focus on the organization’s long-term objectives. Instead of concentrating solely on internal human resource issues, the modern human resource department adopts a balanced and broader approach. They put emphasis on future-oriented solutions and objectives and value-adding initiatives. The roles of the human resource are defined based on the following four functions – Strategic Business Partner, Change Agent, Employee Champion, and Administration Expert. They are also champions of globalization and are technologically savvy.
Key business accomplice and change operator capacities are about driving and aiding in formulating the organization’s overall business strategy, aligning human resource activities and initiatives with this strategy. Unless the human resource strategy is properly devised and skillfully implemented, the achievement of the organization could be at risk. In these roles, the human resource professional contributes to the formulation and success of the organization-wide business plans and objectives and devises the human resource business objectives to support the fulfillment of the overall strategic business plans and targets.
Talent planning should be inseparably linked with strategic planning and, as such, is often addressed by human resource executives. Companies must develop leaders capable of generating growth and effectively managing a multicultural workforce. Leaders themselves need to represent diverse cultures and backgrounds so that the structure of the decision-making bodies within organizations reflects a more diverse piece of the marketplace.
Human resource staff conducts periodic evaluations of the effectiveness of the organization at the corporate level. The workforce anticipates changes and understand what is necessary to implement them. The human resource professional is skilled in acquiring business insight in order to anticipate changes and make informed decisions at operational and strategic levels. They assess current needs and anticipate future skills shortages through strategic skills planning. Business complexity and uncertainty increase the need for companies to rely on cutting-edge analysis, scenario simulations, and other sophisticated workforce-planning levers.
One of the trademark components of human resource writing is the critical role given to frontline managers as delivery points for a variety of business strategies, all aimed at raising the performance of the workforce. The research on people and performance conducted for the CIPD by a team at Bath University found a direct correlation between employees feeling positive about their relationships with their frontline managers, and their likelihood to experience higher levels of job satisfaction, commitment, and loyalty. All of this is associated with increased performance levels. The human resource department’s role is to partner with frontline and middle managers to effectively acquire, develop, and retain human capital for all units within the company. Current technology allows human resource personnel and line managers to hold meetings and communicate virtually, without the need for face-to-face interactions.
As representatives of support or promoters, the human resource manager plays a crucial role in organizational success through their understanding of and advocacy for people. This advocacy includes expertise in how to create a work environment where people are motivated, contributing, and happy. When employees are motivated, they strive to do their best work – not out of obligation, but because their job matters to them, both professionally and personally. Conversely, discipline involves systems, policies, and practices that increase accountability. When motivation and discipline come together, employees are enthusiastic about, accountable for, and rewarded for their work. Workplace flexibility is predicted to increase in future workplaces; therefore, most of the interaction between human resource personnel and line managers or workers will be virtual, without face-to-face meetings.
The human resource staff champions globalization and helps develop a global mindset among its employees. Having a global mindset implies recognizing the benefits that can flow to the whole organization from encouraging and valuing cultural diversity in people. Globalization is increasingly adding one more element to low-cost labor and high-control technology: free creativity–that is, highly creative and innovative capabilities. The role of human resources is to implement essential organizational strategies with sensitivity to specific cultural influences.
Worldwide associations are using the association’s information to make informed decisions rather than relying on their instincts or premonitions. Moreover, the HR departments of global companies also gather data such as employee attrition and hiring, compensation and benefits, ethnic, gender, cultural, and nationality distributions, and load this into data warehouses and data shops. By analyzing past and current data, a business analyst achieves business insights and makes decisions based on evidence.
The Global Human Resource Information System consists of various related component systems. These components can be broadly classified into the following three main sub-systems: Data Warehousing, Data Analytics, and Information Delivery. These tools and systemic processes are essential to formulating questions or hypotheses, designing data and analytical models, processing and communicating results to appropriate users. These users then gather business intelligence from the results to shape business decisions and ultimately improve performance.
An information distribution centre is a choice-support database that is maintained separately from the organization’s operational databases. Operational databases contain information relating to each transaction, while information warehouses contain summary data, such as totals, counts, maximums, and minimums. The data stored in an information distribution centre is optimized for querying and data analysis. Information warehousing systems handle design, implementation, and operations of an information warehouse, including data extraction, data cleansing, data transformation, and loading of data from various sources. The system also includes meta-data management, security management, backup and restoration, and disaster recovery.
The information warehouse can collect and consolidate data from various sources. Employee data is typically housed in separate human resource systems based on vertical human resource functions, such as benefits, payroll and compensation, leave, training, performance appraisals, and audits, as well as functionally across different areas. Companies need to identify all internal and external data sources, then consolidate the data into a human resource information warehouse, or at least one data shop. A few examples of external data sources are the US Bureau of Statistics, Open Government Directive Datasets (data.gov), collective agreements, job market trends, labour regulations, and industry standards.
The design of an information warehouse depends on identifying facts, dimensions, and granularity. Facts are numerical data stored in a table called a fact table. Dimensions are categories by which summarized data can be viewed. Each dimension has at least one hierarchy. Hierarchies are structured ordering systems used to organize data. Query tools use hierarchies to drill down or move up into retrieved facts to see different levels of granularity. Granularity refers to the level of detail of the data stored in a fact table. The more detailed the fact table, the higher its granularity and vice versa.
We may also store the facts at some intermediate level of granularity for performance and confidentiality reasons. When compared with the information warehouse with the highest granularity, this information warehouse does not contain details that could be very valuable to the company. Generally, as the granularity level decreases, the system contains less detailed information (thus less useful), but gains in performance (in terms of speed and storage) and confidentiality of individual records.
Information Technology professionals are generally responsible for designing an information warehouse system optimal in storage and performance, while the human resource department is charged with ensuring that each user in their group has the information in enough detail to do his or her job. Performance and usefulness oppose each other; therefore, the Information Technology and Human Resources departments must find an optimal overall solution that is best for the organisation over the long term.
Worldwide Human Resource Information frameworks are generally rich in business analysis applications, including Online Analytical Processing (OLAP), data mining, and advanced analysis applications based on statistics, forecasting, and predictive analysis. These applications cannot only offer answers to questions, such as “What happened? Why did it happen?” but also enable the user to predict and influence the future. The advanced analysis can answer further human resource questions, such as, “In what ways will human capital investments contribute to business performance?, How much do human resource activities impact employee performance?, or What skill needs and opportunities lie ahead?”.
OLAP applications can retrieve summary statistics (measures, such as totals, averages, percentages, standard deviations, maximum, minimum of data measurements (facts) from multidimensional views. These applications are capable of performing several data retrieval operations, including Drill Down, Roll Up, and Slice and Dice, and enable users to view measures based on different detail levels.
Major BI vendors have incorporated comprehensive statistics packages within their BI software systems. For example, IBM has incorporated SPSS with their BI Congo’s system, and SAS Inc. has developed their BI software with a core consisting of their celebrated statistical packaged software. Microsoft has developed XLSTAT, an add-on to Excel for statistics and multivariate data analysis. Along with the inclusion of statistical functions, BI vendors have also incorporated data mining capabilities into their software. Data mining is an extension of statistical techniques, for example, classical and artificial intelligence. Statistical techniques are generally applied to relatively small sample size data selected randomly and particularly to validate hypotheses. These techniques conform to a set of assumptions about the population and are called ‘Verification-driven techniques’. Data mining includes techniques called ‘Discovery-driven techniques’ that perform the analysis and examination by automatic methods for large amounts of data in order to discover significant hidden patterns so as to find relationships, associations, and trends among the data measurements. This knowledge is then applied to achieving specific business objectives. By contrast, predictive analysis includes statistical, mathematical, and data mining analyst-guided (not automatic) techniques that perform the analysis and examination of large amounts of data in order to make decisions by predicting outcomes. Whereas OLAP and data mining focus on past performance, predictive analysis forecasts behaviour and outcomes to guide specific decisions. If OLAP and data mining can explain what has happened and why, predictive analysis can advise the appropriate response action.
The data conveyance framework provides business users with the ability to access reports and continuously monitor the performance of a project or an entire organization at enterprise and lower levels. End users are also able to monitor key activities such as trends, metrics, and Key Performance Indicators (KPIs) in simple charts like configurable information portals, scorecards, and dashboards. Depending on an individual’s role and responsibility, they are presented with the trends, metrics, and KPIs at appropriate aggregate levels. Some users can access the most minute detail that exists in the warehouse.
The expanding predominance of globalization is driven by various elements, including a scarcity of skills in developed nations, access to low-cost labor and growing consumers in developing countries, and technological advancement. Despite the recent economic downturn and unemployment, most developed and developing countries – including India, the United States, Germany, and Japan – will face long-term skills shortages due largely to the aging and retirement of individuals born after World War II. More workers are retiring than entering the workforce in these countries. By 2020, for every five retiring workers, only four new workers will join the workforce in most developed nations. The shrinkage of available skills will be more than compensated by the growing number of professional talent produced in emerging nations. However, the global supply of skilled labor falls short of its long-term demand and the resulting gap poses a challenge for employers everywhere. The discrepancy between the demand and supply of talent is likely to continue to increase, particularly for highly skilled professionals. The demand for skilled individuals is increasing from both developed and developing countries.
Only multinational enterprises that adapt their human resource practices to the changing global labor market conditions will be able to attract, develop, and retain high-performing employees, increasing their chances of surviving and thriving in global competition. Management of a culturally diverse and geographically dispersed workforce is a key objective of global HR. It’s also crucial for companies to not only adhere to local business practices and understand the needs of local consumers, but also foster a global mindset among their employees. HR must play roles and responsibilities in steering the organization towards embracing cultural diversity.
HR needs to focus on the organization’s long-term objectives and future-oriented strategies. Instead of focusing solely on internal human resource issues, human resource departments need to adopt a balanced and broader approach. HR departments of global companies must gather data on factors such as employee turnover and hiring, compensation and benefits, ethnic, gender, cultural, and nationality distributions, and load it into data warehouses and data marts. By applying advanced analytical techniques to the data, HR professionals can gain business insights, anticipate changes, and make informed decisions at both operational and strategic levels. The HR professional identifies current and anticipates future skills shortages through strategic skills planning. Global organizations not only need to be receptive, collaborative, and open to a culturally diverse workforce, but also consist of high talent.
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