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While Global trade itself is not a new concept, Globalization is. Globalization can be defined as "a process of trade and investment transcending political boundaries undertaken by an interaction of people, processes, entities and spurred on by advances in political systems, technology, business ethics and affecting culture, environment & societies leading to cross border prosperity."
International trades have been undertaken historically. Traders have traded goods and services over large distances travelling by land and sea.
Eg, The silk route that connected the Western World with Central Asia & China during the Middle Ages.
Further on, in the last couple of centuries people and people through organizations that they were a part of, have bought and sold goods and services and even invested in other entities far beyond their own political boundaries.
As majority part of the world realised that trade beyond boundaries can be a win-win situation for their own affluence and that of the traders, political policies and technology have been developed to accommodate, allow for or even in a protectionist environment cull the rapid advancement in international trade.
As time progressed further, we see that cross-border trade, investment & immigration boomed.
Eg. Since the middle of the 20th Century to today world trade has exponentially grown by 20 times. Only in the last 5 years of the 20th Century, foreign investment currency flow went to US$ 827 billion from a meagre US$ 468 billion.
This has had an impact on fiscal policies of governments that have opened up its economies in a controlled manner, both domestically as well as beyond their borders.
Eg. The 1991 Financial Budget given by then Finance Minister of India, Dr. Manmohan Singh was figuratively the door to globalization for India. India hasn't looked back since in terms of its growth and prosperity. India adopted a free-market economic system. This greatly increased its own production potential and created a bouquet of opportunities for its own companies and organizations across the world for international trade and investment.
Policy makers of countries also dramatically reduced red tapism and other barriers to trade and have joined leagues to promote their countries' trade and commerce using international agreements. Companies became Multinational companies investing in these countries, setting up factories and supply chains and addressing new markets and new consumer needs, sometimes setting up a joint venture with a local company even. Their own organization required a robust international industrial and finance business construction.
Apart from government policies, information technology as well became a catalyst for a new revolution. Progress made information technology, has drastically changed day to day work. Computers and inventions like the Internet have provided all sorts of economic players-consumers, investors, businesses-new avenues for recognizing and taking advantage of economic opportunities, including becoming more proactive in strategy and reactive in tactical working. There are now more powerful MIS systems that dissect economic trends in every market at the punch of a button. Cash transactions and fund flow was made available even to the common man, not to speak of multinational businesses with the help of Internet Banking. Electronic mail encouraged instant signing of deals and information conducive to collaboration with remotely located partners.
The Increasing Diversity of the Workforce:
As Globalization gains steam and becomes the norm, the employee base of multinationals has become varied and rich with nationals from all over the globe. Human Resources across companies have become homogenized, enriching the organizations with depth of knowledge about variables affective markets both within the countries as well as between them. The most successful organizations are ones which utilize this resource to the maximum. Having an experienced employee from a remote market on the team is a natural consequence towards better understanding new market dynamics and new consumer behaviour.
The Changing Nature of the Workplace:
"A diverse organisation will out-think and out-perform a homogeneous organisation every single time". A. Lafley, CEO - Procter & Gamble
Global competition presents a case for Global co-operation. Today, more than ever before, employees find themselves rubbing shoulders with someone from a different culture, race and society on an everyday basis.
HR departments in these multinationals have to recruit, develop and retain people who have vastly different backgrounds. This has resulted in new skills to succeed such as sensitivity and other relational aspects.
This is termed as "cultural intelligence".
Cultural intelligence is defined as the capability to adapt effectively across different national, organizational and professional cultures (Earley, Ang and Tan, 2005).
Today employees across industries are given job roles globally, taking them around the world. In this new environment employees from home country as well as the expatriate have to learn how to work with each other given that they not only think and communicate differently but also execute differently. The Human Resource Departments need to develop their cultural intelligence to manage this diversity in their companies.
The nature of the workplace will continue to change.
As indicated by the U.S Census Bureau National Population Projections, the Hispanic population will increase by 11.2 percent between 2000 and 2025 to become the largest minority group in the United States. All other minority groups will increase by about 9 percent, while the number of Caucasians will decrease by approximately 19 percent.
From a socio economic perspective, as populations in developing countries increase while that of developed nations decrease, regional inequalities in Human Resource demand and supply will result in more migration and a greater diverse bouquet of Human Resources within companies.
However today though, diversity in the workforce is today by design rather then simply by default due to opening up of immigration borders and regional population opportunity conundrum. Successful Organizations develop diversity as a part of a wholesome methodology aimed at sustaining and even thriving in today's competitive world. Diversity in recruitment, retention of talent and development of this diverse talent are the answers to challenges presented by diverse customers and diverse marketing strategies directed towards them.
According to the 2002-2003 Society for Human Resource Management (SHRM) Workplace Forecast, The employee base of organizations such as Ford, General Motors, and Nestle is far larger outside of their headquartered countries.
Governments have even developed acts and policies to protect this diverse multi-ethnic employee base. Eg. The UK government way back in 1976 established the Race Relations Act which provides for:
During the selection and recruitment process the HR departments must keep in mind that discrimination on racial grounds and racial groups relating to colour, race, nationality, religion or ethnic origins in unlawful and unethical.
HR departments must ensure that no explicit or implicit message is made during the selection process to favor any particular race.
There may not be any direct discrimination: where someone is treated less favourably than someone of the another race.
There may not be any indirect discrimination: where an employer relates a condition to an applicant for a job that does not seem relevant to it, and suggest only a member of a particular race would be acceptable.
Critical Success Factors & Recommendations:
The Impact of Diversity and the Changing Nature of the Workplace on Human Resource Functions in Work Organizations:
Given the era of Globalization, managing diversity at the workplace has become a business issue for the HR Department and no longer simply a moral, social, or legal concern. The challenge is no more creating a diverse employee demographic, but empowering one that already exists due the natural global nature of the business.
Despite all the hype around Diversity and the pros of having a multicultural workplace, organizations still tend to reflect:
Soft implementation of highly expensive Diversity Management Programs
A poor gender ratio when it comes to higher managerial
Poor integration of disabled people into the employee base.
Senior management teams not reflecting ethnic diversity.
Some critical success factors to ensuring that diversity is leveraged well by organizations include:
A) Clear organization wide understanding of the business case for Diversity.
The HR department along with the senior management and the line managers need to be clear about the need to be diverse and embrace new cultures and ethnic backgrounds into their folds. Going beyond corporate trainings and having blurred notions of how multi-cultural employee base would help the organization to gain competitive edge over local competition in remote markets, all levels of the organization need to clearly articulate how a diverse human resource base would help reach the organization goal and hence their own individual goals. Further they understand that a multi-cultural workforce can improve their organization's adaptiveness and change readiness. This would clearly improve the culture within the organization to recruit, develop and retain the best staff.
B) Assessment of Current Situation.
HR departments that are particularly successful at managing diversity routinely spend time, money and effort in gauging the ever changing composition of the workforce given geographical expansions, attrition and new recruits. They routinely assess not just numbers associated with the above dynamics but also behaviours, and culture associated with these changes.
Eg. Eastman Kodak created a specialist external diversity panel to conduct an outsider review of the current situation. The Management of Eastman Kodak assessed recruitment policies to address cultural imbalances and even cultural blocks to retaining and developing a multi-demographic employee base.
Without the above HR Departments would only end up paying lip service to managing diversity or spending huge amounts on expensive specialist corporate trainings on managing diversity without actually creating a basic inclusive work culture. Ergo, wasting time and effort on initiatives that are unsustainable in an environment where self assessment itself is not done.
C) Managing Diversity is a top-down approach.
Successful diversity management initiatives are ones that have high visibility of the senior management team.
Eg. Back in mid 90ies, Lou Gerstner identified diversity as a key strategic initiative for IBM globally. He was a strong proponent of leveraging differences to address new markets. He established eight task forces representing various ethnic groups, allocating executive sponsors from his direct reporting team and insisting on specific measurable results within specified timelines personally reviewing progress on the results.
Many HR departments have gone beyond simply including diversity management in their employee handbook and actually championed setting up panels and councils that include senior executives. Diversity management may require fundamental changes to the very culture of the organization and hence require stewardship by the senior executives.
D) HR initiatives need to promote cultural harmony rather than address cultural imbalances.
Initiatives from HR need to promote creating a multi-cultural environment. Simply having reservation seats and quotas and fancy cultural training and diversity training is not enough. HR Departments need to ensure that minorities have the same opportunities and such initiatives are an integral part of their day to day working rather than simply an extra curricular task!
Ensuring objective appraisal systems, rewards and recognition and universal training and development opportunities is key to promoting an all encompassing holistic HR approach.
E) Objective assessment of the Diversity management initiative and scientific assessment of programs are key.
Many HR Departments have succeeded in developing measurable diversity management programs.
E.g. the Hyatt Hotel Group the world over ties approximately 15% of the bonus potential to diversity goals.
HR Departments that have been successful in managing diversity have translated it into a core competency used to assess the performance of management.
F) Diversity Management principles are all encompassing and wholesome enough for everyone to participate.
If the Diversity Management programs are only a bastion of the senior management, the entire exercise would be superficial and unsustainable. In order to result in successful recruitment, retention and development of employees in a globalized world, it is important that it is an inclusive program cascading throughout the organization.
E.g. IBM created specific task forces but more importantly invited participation in the form of inputs to help these task forces in creating an inclusive culture.
Managing diversity and the every changing workplace in the face of globalization is not the prerogative of the senior management alone but is to be implemented at the grass root level where managing diversity to retain and recruit top talent is a challenge in itself.
These critical to success factors for managing diversity are not complicated models however they are tough to actually execute and require a motivated effort on the part of the Human Resources team and buy-in from the entire organization.
Clearly Globalization has brought about a paradigm shift to International Trade providing it with a great boost.
However, what it also means for organizations is that they are more exposed to competition from across the borders and need to leverage their core competencies with the help of effective utilization of scarce resources. Employees form perhaps the most critical resource base since they are the ones to deploy other resources and hence, in today's Globalized world, competitive advantage can be gained only by effective Human Resource management.
A natural caveat to be issued in such a varied workplace is greater requirement from organizations to focus on differences between ethnic and cultural groups in attitude and performance at the workplace. Diversity requires Human Resources Department to find similarities and recognize differences as workplaces get more and more diversified.
There is no doubt that companies with a more diverse employee pool thrive in remote wider consumer base. Since these organizations already have a diverse employee base internally, they are more prone to succeeding in managing the ever volatile and diverse customer.
Diversity is also encourage by companies since a diverse workforce tend to be more creative and innovating in their problem solving approach as against homogenized groups who tend to conform and resort to groupthink.
The test for Human Resource Departments therefore is to manage and appreciate the diverse workforce.