A major economic change involves the shift of jobs from manufacturing to knowledge economy. This can be a competitive challenge for organizations as "information and knowledge are replacing capital and energy as the primary wealth-creating assets" (The Commonwealth Centre for e-Governance, 2001). In today's era of hyper competition and change, one of the main challenges facing organizations is to build sustainable competitive organizations. To reach maximum efficiency has lead American companies to outsource the high tech and high-end service jobs to professionals like engineers, radiologists in China and India. However, there are drawbacks when comes to outsourcing. Organizations would face management and control problems. To effectively control and manage offshore operation can be a big challenge to organizations due to geographical distances, time-zone differences, and lack of face-to-face communication. There is also hidden cost of outsourcing which includes legal costs of putting together a contract between companies and time spent on coordinating the contracts. Outsourcing can also be a threat to the security and confidentiality of issues of a company.
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In order to remain competitive in corporate world, many employers are trying to find innovative ways to manage their companies. Creativity and innovation are currently seen as the most important aspects of a business. In the past, creativity has been limited to the arts like music, painting photography and so on. However nowadays creativity is also applicable to business world. "Creativity is fostered in organizational cultures that value independent thinking, risk taking, and learning"(Naiman, L, 2007).
According to Feldman, J, "the corporate environment fails to foster creative or innovative ideas, which results in lost profits and opportunities every day". The main reason is the work cultures and the structured environment with all the rules and regulations. Organizations do not take the effort to increase creativity and innovation in employees themselves and provide them with nourishment that helps creativity and innovation flourish in the organization.
Company rarely held brainstorming sessions for creative ideas. Even though there are some good ideas brought up but somehow they never get implemented. However, the boring and old ideas seem to be used again and again. This is because top management is unwilling to change at the pace demanded by innovation and most of the organizations do not have a clearly stated policy on innovation. This is due to poor leadership and company structure in the organization.
Even though many companies have invested a lot in creativity and innovation projects, but the executives of those firms are not satisfied with the return on money they invested in innovation. One of the reasons is the lack of innovation plan. Organizations have only short-term goals and lack of vision or strategy for innovation.
To implement an innovation plan, many issues have to be taken into account. First of all, the organizations need more capable and talented persons who are able to work on this plan. Besides that, the organizations need to have enough financial resources to implement a plan. They need financial resources to hire facilitators, rewarding the employees involved in this plan as a motivation for them. Another barrier for company especially small company is that they could not afford a long period of time to capture and develop the ideas.
When there is a shift in economy, a shift in focus, there will be a talent war where organizations will compete to recruit qualified workers for the growing number of "knowledge jobs". The workforce availability and quality concerns have created new pressures on Human Resource professional to recruit and train workers. The increasing use of computers has lead organizations looking for employees who do not only posses experience but technical skills as well. To determine a person's ability and his or her ability to adapt quickly into different environment can be a challenge for Human resource to choose the right person. "A recent national survey of employers found that young people are increasingly ill-prepared for today's workforce, lacking basic skills in communications and critical thinking" (Loten, A, 2008). If the wrong candidate was chosen, organization would experience decreased productivity, training investment that never pays off, and the additional time and expense of replacing an employee that often equals a year of that position's salary.
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Another challenge faced by organization that can influence Human Resource Management is diversity issue. The future success of any organizations relies on the ability to "manage a diverse body of talent that can bring innovative ideas, perspectives and views to their work" (Chan, A, 2008). Diversity refers to any "perceived difference among people: age, race, religion, functional specialty, profession, sexual orientation, geographic origin, and lifestyle, tenure with the organization or position, and other perceived difference". (Mondy, R, 2008). Employees today are more diverse than ever. For example, there are more women joining the workforce. Numerous factors have contributed to the rise in the number of women in the work force. One of the factors is they receive higher education. "Research by the Department of Labor revealed that women now hold half of all management, professional, and related occupations" (Sifma, 2008). The average age of the workforce in United States is considerable older than before as many of them are not ready for retirement age. Many organizations are trying to entice them to remain on the job longer as they wish to retain the skills and embedded knowledge base of their senior employees. However this could be a challenge for Human Resource Management as older workers have different needs compared to younger workers. This is because the older employees would have different job preferences, personal interest and working style. Furthermore, there are more different ethnic and racial people working together. They may encounter misunderstandings, and expectation based on ethnic or cultural differences. This is because people of different ethnic and cultural backgrounds possess different attitudes, values, and norms. This in turn has meant that employees need new relational skills to succeed. All of these issues create new challenge on HR professionals to ensure that diverse groups are managed and treated equitably in organizations.
The rapid technological changes have given advantages to many organizations but also putting extra pressures on them to keep updated of the technology. In order to keep abreast of the technology, organizations have to allocate large amount of financial resources in buying latest technology. Technological change is continually impacting and reshaping the economy which can influence organizations as well. As a consequence of technological change, the economy's demand toward workers with advanced training or education is higher.
Identifying and focusing on consumers' needs and wants can be a challenge for organizations. The reason is consumers' needs and wants is changing rapidly. The product that a customer wants today may not be the same tomorrow. If a discount was given, the customers still want further benefits. In meeting customers' changing demands, companies are struggling to compete with each another. When laptop users said they needed bigger batteries to power large computer screens 3M designers developed a ultra thin plastic light-enhancement films that made a computer screen brighter and consume less energy. Understanding customers' needs will help organization define new market opportunities and experience revenue growth.
The Commonwealth Centre for e-Governance(2001) 'Tools For The Knowledge Economy:An Overview' [Online] (cited 1 October 2008) Available from http://www.electronicgov.net/pubs/research_papers/tke/introduction.shtml
Naiman, L (2007) 'Creativity at Work: Articles and Tips' [Online] (cited 7 October 2008) Available from http://www.creativityatwork.com/articlesContent/whatis.htm
Feldman, J (2008) 'Four keys to instilling innovation and creativity' [Online] (cited 5 October 2008) Available from http://www.mrotoday.com/mro/archives/exclusives/InnovationCreativity.htm
Loten, A(2008) 'Younger Employees Lack Basic Skills' [Online] (cited 10 October 2008) Available from http://www.inc.com/news/articles/200610/workforce.html
Mondy, R (2008). 'Human Resource Managemnet', (10th edn), Pearson Education, Upper Saddle River, New Jersey.
Sifma (2008) 'The women's market' [Online] (cited 4 October 2008) Available from www.sifma.org/services/hrdiversity/pdf/Women.pdf
Chan, A (2008) "The Challenges of Human Resource Management' [Online] (cited 4 October 2008) Available from www.bizfinity.com/new_articles/e-commerce-article-21.html