Globalisation and MNCs

ROLE OF MNCS IN GLOBALISATION AND CHANGES IN HUMAN RESOURCE MANAGEMENT Introduction Globalisation has transformed the ways human beings used to live. It has brought peoples around the world in close proximity with each other. Distances have been shortened, ideas been fluid and economies interconnected. The chains of multinational corporations have spread in every state of the world. The process of globalisation has opened up new economic avenues even for the poor inhabitants of the developing world with the help of multinational corporations. In turn, these corporations have also brought cultural changes in the economic systems of the states enmeshed in globalisation. These changes pose new challenges for the human resource management systems in organisations. The current study will certainly focuses on these trends and challenges begotten by globalisation through multinational corporations for human resource management. Globalisation Globalisation has attained rapid pace in recent decades. It is a development that has significant implications for the control and regulation of multinational business and investment portfolios. Globalization is, in common lexicon, signifies improvement in globally trade and deals in an open, incorporated, border-less, international and free economy. There has been amazing development in such businesses and deals. This development is occurring not only in traditional globally business in products or services, but also in deals of currencies, in investment profile, in technological innovation and cultural exchange, in people going through international journey and migration, and in global fluidity of information, knowledge, ideals and lifestyles. There is global liaison in every sphere of public and private life through globalisation. “Globalization has involved greater openness in the international economy, an integration of markets on a worldwide basis, and a movement toward a borderless world, all of which have led to increases in global flows” (Intriligator, 2003). Multinational Corporations Multinational corporation or company indicates no fundamental switch in the actual concepts of dealing with a company’s modus operandi, but it implies more cross-border dealings of the same company. In simpler terms, it includes all commercial dealings – personal and government – between two or more nations. Private organisations perform such deal for profit; authorities may or may not do the same in their dealings. The world has seen some remarkable improvements in the international dealings and movements nowadays. The reason behind this is that now more and more nations are getting involved in dealing with each other in order to improve their income levels or defending them from being evaporated by competition. The primary goals which are impacting the organizations to practice worldwide company are increase in income, obtaining resources, reducing competitive risk and variation of sources for income, growth and resources. Besides these there are other few aspects like financial aspects, social aspects, technical aspects, and cultural aspects which have affected to a great level. “Globalization is a powerful real aspect of the new world system, and it represents one of the most influential forces in determining the future course of the planet. It has manifold dimensions: economic, political, security, environmental, health, social, cultural, and others” (Intriligator, 2003). “Multinational corporations operate at the crossing point between production, international trade and foreign investments. These companies are in the middle of the debates about economic globalization. They are known as transnational corporations or as multinational firms too” (Ionescu and Oprea, n.d.) The appearance and activities of transnational corporations has affected to a gigantic level on the idea of globalization; and these multinational corporations proved to be engines for this whole process of globalisation and economic integration in recent decades. “Multinational corporations (MNCs) represent the center of the new global order organization. In 1999 there were over 60,000 MNCs worldwide with 500,000 foreign subsidiaries, selling $9.5 trillion of goods and services across the globe” (Biljana Rakić, 2006). Owing to this dynamic function of multi-national corporations, more and more states are vying to get MNCs locate their business within their respective territory. “In the last decade of the twentieth century, several parts of the world were making the transition from a closed economy to a free market system, such as China, India, Russia, and Eastern Europe. By 2000, the “global economic world,” the amount of the world’s population participating in global trade, reached six billion people, compared to 2.5 billion in 1985.” (PREDA, n.d) As it is a fact that economic progress, development and diversification hinges on globalisation of a state's economy with global trends, it is also attached to the appearance of multinational corporations (MNCs). With developments in technological innovation and devices, companies are now in a befitting position to offer their products over the globe without any formidable hindrance. These multinational corporations develop plants in places outside of their parent nation and are able to reach new places in the international market. Features of MNCs Multinational corporations have the following two salient features. Firstly, MNCs synchronize financial development amongst different MNCs and accommodate this control problem within the unified structure of corporation. Secondly, the major section of the financial dealings is linked with this harmonized action take place crossways of the multitude of nationwide boundaries. These two characteristics differentiate these transnational firms from other national or localised companies. While many companies synchronize the operations of several corporations, MNCs are the only companies that synchronize and internalize business activities across nationwide boundaries. “Thus, corporations that were mainly focused on local markets have extended their range in terms of markets and production facilities to a national, multinational, international or even global reach. These changes in industrial structure have led to increases in the power, profits and productivity of those firms that can choose among many nations for their sources of materials, production facilities and markets, quickly adjusting to changing market conditions.” (Intriligator, 2003) As one evaluates of the range of multinational corporations, almost a third of total international trade now moves completely within these multinational corporations. With the introduction of such international companies, global issues and concerns have, to some extent, shifted from countries to these companies. Even the conflict is now occurring not over areas, but over capturing economic markets to gain economic windfall as much as possible. Thus the whole world is moving from geo-political to geo-economic world due to arrival of multinational corporations. These transnational companies are seen by some as a risk to the sovereignty and independence of a state. However, while these companies are highly effective, states still maintain their traditional and major role on the globe economic and legal system. Areas of Investment by MNCs across the World Financial input or investment of MNCs can be put into three groups. First, MNCs take part in practice cross borders financial ventures to gain access to chain natural resources. Second, MNCs tends to access foreign markets as much as possible. Bulk of the transnational investment in development and manufacturing sector, carried within the high capitalist societies of western hemisphere, falls within this categorisation. It results into the broadening the horizon of MNCs at global level and bringing economic and financial markets together. The integration of financial markets, as shown above, is a salient feature of the process of globalisation. Third, besides above mentioned two investment arenas, MNCs also make foreign investments to ameliorate the performance of their functions. It is usually done by rationalising organisational structure and trying to make use of financial systems of expertise and opportunity. How MNCs Connect the World? Foreign investment is a major instrument to integrate the world at economic level under the rubric of globalisation. Foreign direct investment plays a vital part in the working of multinational corporations. It is a procedure with the help of which financial savings are relocated from the rich, industrial economies to the non-industrial economies in the form of investment. Developing economies usually have low economic savings, foreign direct investment channelized through MNCs can further buttress to the economic health of the state. Direct financial investment is substantially less unstable as investor has long term interest in reaping benefits of his investment. Therefore this kind of investment does not create growth bubbles. MNCs not only transfer technology, but also relocate dynamic managerial skills to the developing world. It spreads a global culture of corporate governance on a wider level. The managers employed in MNCs usually enjoy better experience of handling production and coordination with efficiency and expediency than the managers employed in local firms. Human Resource Management and Globalisation Armstrong (2004) describes HRM as the function within a company or an organisation that concentrates on recruitment of managerial staff, and offering multiple routes for them to increase their efficiency, who work in that company or organisation (Armstrong, 2004). Human Resource Management, HRM, is the organisational operation that concerns with matters related to people such as settlement, selection, performance management, company progress, protection, health and fitness, benefits, personnel inspiration, interaction, administration and training. Human Resource Management is also an ideal and comprehensive approach to handling individuals and the office culture and atmosphere. “Almost 300 human resource managers, supervisors or other personnel employed in different organisations in three major cities in Nigeria were surveyed in 2002. The respondents reported that they or their departments perform the following employment management functions: recruitment and selection (67%), training and development (78%), performance appraisal (73%), compensation (50%), termination or firing (57%) and other employment tasks” (Anakwe 2002) Effective HRM strategies allow workers and employees to contribute successfully and proficiently to the development of an organisation and the fulfillment of its stated objectives. HRM is now swiftly shifting its focus away from conventional employees, administration, and transactional tasks, which are now, by and large, contractual. “The multinational companies (MNCs) and other international organizations face the challenge: what kind of a new form of “glue” helps to manage HR worldwide?” (Česynienė 2008) Modern HRM is now predicted to add significance to the optimal usages of employee’s skills. Thus employee programmes affect the company in considerable ways in this era of globalization. Therefore, HR departments are transforming themselves into dynamic skill-attracting departments as the contemporary organisation encounters numerous and complex difficulties in the face globalisation. The transformation of human resource management practices is an immediate call of the fast changes within a company due to these globalising trends in the economic structure. In the international competition within this well-knitted and globalised new world, selection processes in companies have become significantly complex and intricate. The new internationalized economic system has opened new avenues of opportunity and talent for excellent and minor employees, and for lasting and temporary employees. A corporation's skill and expertise can be a source of a great competitive edge over other companies and they can affect important business results such as earnings, personnel performance and customer support level. “Other areas of HRM affected by globalization are compensation, benefits, and labor relations (i.e., unions). Expatriate compensation and benefits are complex and typically much higher than comparable pay in the employee’s home country” (Friedman, 2007) Human resource management needs to take benefits of technological innovation and information flow to build an international HR information programme that can garner information from multiple sources. This programme can substantially assist to evaluate the information to provide novel business ideas, estimate upcoming needs and create techniques to complete them. Companies having coveted endowments to anticipate and self-sufficiently handle their employees’ desires - particularly for enriched talent - will obtain the comparative edge (Aina 2005). The international provision of human capital and expertise is short of its long-term need. This shortage in long term demand is a risk for business employers everywhere. The difference between the lack of talent and need for expertise is likely to continue in foreseeable future, especially for extremely trained employees and for the next phase of multi-national companies. Most company with big pool workforce of employees may not be able to maintain a net excess of employees possessing opportune abilities for longer time. Now companies urgently need to focus on gaining investment in human resource in an organisation to develop dynamic human capital. “Expanding the international workforce to include non-parent country’s employees has brought increased capabilities and decreased costs—along with a new set of compensation problems” (Compensation Problems with a Global Workforce). This gap poses a major challenge for human resource development in the era of globalisation. Capital can be availed from traders and loan companies including banks and enhancements can be replicated relatively quickly. However, cost-effective, vibrant and efficient HRM is the only feasible technique to distinguish a firm from another firm in a global market. Worldwide employment and management development are elements of worldwide HR practices. Only the MNCs those would be willing to effectively tap their human resource potential to the modifying world markets can be capable to entice, create and maintain the proper abilities and skills, and will likely to be successful in the world competitors. Human Resource and Global HR Information System With the application of a continuous mechanism of attaining and keeping specific information of employees like age, area of specialization, job description, portfolio and qualifications, human resource information system can be put into use to train an employee for specific assignment. As talent is becoming a scarce source to be captured, multinational organisations with human resource information system can easily locate right person for right king of assignment. It certainly provides a necessary leverage to an organisation over that organisation, which lack this system of employee location and identification. Through this system, employee’s demand becomes also global in scope. “International and domestic organizations both indicated that retaining employees will be a top concern in the coming years. The high demand for talent has created a buyer’s market around the world” (Rioux, Bernthal, and Wellins 2000) Globalised Markets and Human Resource Management There is an explosion of growth in the world market. It has resulted in increased international competitors in regional market places. This competition forces the small-and-medium-sized organisations to update their operations and even consider growing at global level. There has also been increment in demand, which facilitates the development of global production-base and market places when the markets are global. The task of the manager in planning portfolio becomes quite challenging on one hand and allows more effective usage of available options on the other hand. Cost Effectiveness, Human Resource and Globalisation New competitive goals in developing sectors, that is, production and process quality, transport stability and delivery speed, personalization and responsiveness to clients, have forced organisations to reprioritise the cost-effectiveness that drive their global functions techniques. The Total Quality Control (TQM) revolution has introduced with it a concentration on total quality expenditures. Labour cost organisations have noticed that early actions such as product style and design and personnel training considerably impact production expenditures to a great extent. They started to assert preventive measure rather than inspection. In addition, they quantified the price of inadequate designs, poor input quality and inadequate craftsmanship by determining inner and outer failure expenditures. All these understandings placed access to skilled workers high on the concern list for firms competing for excellence in economic markets. In the same way, Just-in-Time (JIT) manufacturing methods, which organisations commonly implemented for the management of huge development systems highlights the significance of quick disposal for proximate supply. Emergence of Technology and HRM An unusual pattern which was frequent in the last several years, besides globalisation, was a small variety of producers which emerged due to variety among items and consistency across national markets. Product’s variety and quality have improved as products have grown more complicated and separated and product lifestyle periods have shortened. These have been diffusion of technical knowledge and international low-cost developing destinations have surfaced. In response to this diffusion of technical functionality, multinational firms need to increase their capability to tap several resources of technology situated in various nations. They also must be able to absorb easily and commercialize successfully new and diverse technologies. It is also contingent on high level management of an organisation to synchronise human resource management system of the organisation with technological advancement. Challenges in Global Human Resource Management Market Human resource management is confronting businesses operating worldwide. As multinational or global firms are working in competitive economic markets, they incorporate multiple issues and tasks within a unitary organisation. Thus the centralization and compactness of human resource practices become exigent to ameliorate economic and competitive milieu and entrust employees major assignments. In order to withstand the forces of globalisation, what major organisations must realise is their investment in human resource development and management. Investment in human resource development can make an organisation effective to deal with variety of new issues. These new issues include selection of talented team of managerial staff, recruitment policies for staff, encouraging employees to be innovative, imaginative and creative. Multi-task performance training must be imparted to the staff to further inculcate diversification of performance functions within them. This process of learning new methods also hinges on the cultural aspects prevalent in an organisation. In Japanese organisational setup collectivism, interpersonal trust, value experience and integration within an organisation are major stimulants for employees to learn human resource enhancement methods. (Cultural Learning at Toyota in the USA) Responsibilities of Human Resource Management The office of human resource management leads the progress and uplift of the business climate and corporate culture. The corporate culture is crucial for the multinational corporation. The corporation cannot act the same way around the planet when the corporate culture is different. The role of HR is to set up the international team, which develops the specific business styles and business principles to produce a coherent corporate culture. The role of HRM is to arrange specialised training programmes for employees to develop corporate culture. The employees and supervisors have to connect worldwide with co-workers around the World. The specific way of interaction, the strategy to troubleshooting and recognition with the company make global choices easier. “Companies must recognize that each region will have its own culture that they should not stifle, while also recognizing the need to establish a corporate “way of doing things” to provide a common bond among the regions” (Rioux, Bernthal, and Wellins 2000). Human Resource Management procedures should focus on the progress of the international abilities and try to bring the specific HR strategy in line with global assembly-line production system. The efficiency, the capability and the ability are usually the first worldwide handled human resource procedures. The human resource professionals have to be trained on international benchmarks set by global trends. They have to handle different facilities of quality around the world. The globalisation requires new skills and capabilities. Managers have to think worldwide and they have to find new arenas of advantages for the company globally. Human Resource Management has to look at its procedures, processes, guidelines and exercises to ease the life of its managers in the international world of the company. Thus the role human resource has to play is to upgrade an organisation at global level. Conclusion The above discussion concludes that financial and economic globalisation of modern age is driven by multinational corporations (MNCs). MNCs create transnational economic linkages across the whole world. Cross border financial projects, securing of natural resources and rapid access to global economic markets entice MNCs to operate at transnational level. Transfer of investment, technology and managerial practices also formulates a global corporate system necessitating a dynamic human resource management system to optimise human resource all over the world. As the world has become an open space for talent to be tapped, human resource management has become crucial for transformation of a company into globally acknowledged corporation. As efficiency, diversity and capacity building have become new trademarks in global economy; human resource management is rapidly enveloping these trends into its fold to synchronise with global trends. 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