The Challenges of Globalization and the Role of Human Resources

THE CHALLENGES OF GLOBALIZATION AND THE ROLE OF HUMAN RESOURCES.

Muhammad Aminu Bawa (1) Dr Juhary Ali (2)

ABSTRACT

The current financial crisis, which has engulfed East Asia since July 1997 and has subsequently spread to Russia and Brazil, is one of the most pressing challenges facing countries and businesses in today's global business environment. Globalization represents the structural making of the world characterized by the free flow of technology and human resources across national boundaries as well as the spread of Information Technology (IT) and mass media presenting an ever-changing and competitive business environment. Two major limitations are observed in the treatment of the twin issues of the responses to the East Asian economic crisis and the coverage of the literature on globalization. While the response to the crisis has focused on macroeconomic aspects, the issue of globalization has been addressed predominantly in and with respect to the developed economies of Western Europe, North America and Japan. This paper is an attempt to address these two limitations. Since the human factor is the key in the new era of globalization (Hassan, 1992; Sims & Sims, 1995), the primary objective of this paper is to present a conceptual framework for effective management of human resources as a response to the growing interaction of globalization and business performance. Three central arguments are made in this paper. (1) That a growing body of evidence converge to suggest that changes taking place in the global business environment often are not accompanied by complementary changes in human resource management practices leading to a situation whereby the failure of some firms is due to the mismanagement of people rather than to problems with technical systems per se. (2) That this is because organizations have achieved relatively low levels effectiveness in implementing Strategic Human Resource Management (SHRM) practices (Huselid, et al., 1997) especially in emerging economies of South East Asia and other developing countries like Nigeria that are exposed to the challenges and opportunities of globalization. (3) That in order to manage employees for competitive edge in a period of globalization, human resource personnel must possess competencies relevant for implementing such strategic HRM policies and practices (Barney & Wright, 1988; Huselid, et al., 1997; Ulrich, 1989, 1996; Ulrich, et al., 1995). Guided by theoretical perspectives such as the firm’s resource-based theory of competitive advantage (Barney, 1988, 1991; Irwin, et al., 1998; Wright & McMahan, 1992) and empirical evidence (Delery & Doty, 1996; Gittleman, et al., 1998; Huselid, et al., 1997; Leonard, 1990; Pfeffer, 1994; Schuler & Jackson, 1987), this paper develop propositions draws implications for the strategic management of human resources to prepare organizations for the challenges of globalization.

(1) Lecturer, Department of Economics, Usmanu Danfodiyo University, PMB 2346 Sokoto, Nigeria. Email: aminu18@hotmail.com

(2) Professor, School of Management, Universiti Utara Malaysia, Sintok, Kedah.

Email: juhary50@hotmail.com

I. INTRODUCTION

The current financial crisis, which has engulfed East Asia since July 1997 and has subsequently spread to Russia and Brazil, is one of the most pressing challenges facing countries and businesses in today's global business environment. Most of the response to the financial crisis has focused on macroeconomic aspects and there is relatively little research on the role of human resources. Secondly, the issue of globalization has been addressed predominantly in, and with respect to, the developed economies of Western Europe, North America and Japan. This paper is an attempt to address these two limitations since the human factor is one of the key issues in the new era of globalization (Hassan, 1992; Sims & Sims, 1995). The primary objective of this paper therefore is to present a conceptual framework for strategic management of human resources as a response to the growing interaction of globalization and business performance.

Three central arguments made in this paper are: (1) That a great deal of evidence has accrued to suggest that changes taking place in the global business environment often are not accompanied by complementary changes in human resource management practices leading to a situation whereby the failure of some firms is due to the mismanagement of people rather than to problems with technical systems per se. (2) That this is because organizations have achieved relatively low levels of effectiveness in implementing Strategic Human Resource Management (SHRM) practices (Huselid, et al., 1997). This is particularly the case in emerging economies of South East Asia like Malaysia and other developing countries like Nigeria that are exposed to the challenges and opportunities of globalization. (3) That in order to manage employees for competitive edge in a period of globalization, human resource personnel must possess competencies relevant for effective implementation of such strategic HRM policies and practices (Barney & Wright, 1988; Cunningham & Debrah, 1995; Huselid, et al., 1997; Ulrich, 1987, 1996; Ulrich, et al., 1995). Following Wright & McMahan’s (1992) comprehensive theoretical framework for SHRM, this paper develops competency-based research framework and draws implications for the strategic management of human resources to prepare organizations for the challenges of globalization.

II. HRM ISSUES AND CHALLENGES IN GLOBAL MARAKETS

The coming of the 21st century globalization poses distinctive HRM challenges to businesses especially those operating across national boundaries as multinational or global enterprises. Global business is characterized by the free flow of human and financial resources especially in the developed economies of European Union (EU), the North American Free Trade Agreement (NAFTA), other regional groupings such as the Association of South East Asian Nations (ASEAN), the Economic Community of West African States (ECOWAS), the Southern African Development Community, etc. These developments are opening up new markets in a way that has never been seen before. This accentuates the need to manage human resources effectively to gain competitive advantage in the global market place. To achieve this, organizations require an understanding of the factors that can determine the effectiveness of various HR practices and approaches. This is because countries