I think that global challenges that influence HR Strategy can be grouped under 4 critical headings;
- Globalization
- Technological Innovation
- Talent Management
- Demographics Management
Since 1950s globalization triggered by trade, direct investments and communication revolution, has grown up by 20 folds. The world has become one marketplace and any company can invade practically any market. Countries got connected to each other. Globalization has changed the way we live, the way we do business.
Look at the current financial crisis... It has had a massive impact on economies, industries and companies around the world. Imports into the advanced economies in 2009 slumped 14.4% from 2008 levels according to Goldman Sach’s Global Economic Analyst, while consumer expenditures will fall 0.9%. According to PWC analysis, the crisis rapidly spread to all the major emerging economies, in different ways. Declining consumer demand in U.S and in Europe, stalled export-led growth in Asia and Latin America (sharp declines in exports from China by 13% and from Brazil by 12.7%). India was hit by the drop in demand for outsourcing services and the decrease in overseas lending.
A problem that started in the U.S has now infected all the major economies in the world, emerging and advanced alike. The Economist summed up the situation as follows: “The idea that emerging economies had decoupled, and would continue to boom even as the economies of America and other rich countries grapple with recession, has been exposed as fanciful”.
As a result, the IMF expressed fears that this period might be the worst for the industrialized economies since World War II.
The issue of globalization adds particularly to the challenge of organizational management. CEOs are now working hard to maintain sources of credit, preserve revenue, use working capital more efficiently and manage costs carefully in order to survive in the short-term. Productivity, efficiency and developing product and services with the lowest possible cost is vital.
On the other hand, as businesses try to survive immediate market conditions, they are also trying to make certain that they endure and succeed over the long term. Agility, customer service, talent and reputation remain at the top of the list of critical sources of competitive advantage.
As more companies move aggressively beyond their borders into world markets, the importance of collaborative business networks increases. Strategic alliances and joint ventures stick out for short-term survival and long-term success. This will bring up the necessity of cross cultural awareness and the ability to cooperate, interact with different cultures. Change in corporate culture is inevitable.
Although the global economy was hit by serious economic crisis, globalization will continue. The economy will continue to be driven by cross-border flow of information, people and capital. Organizations will re-shape their business strategies. HR departments will be a key partner and contributor during this period.
Technological Innovation
Technological innovations are allowing and forcing organization to restructure their operations, processes and even cultures. Once employees grasp the capabilities that electronics brings to communications and data manipulation, they find themselves empowered as never before.
Developments in information technologies and in communication technology affected the impact of the globalization and has become one of the key drivers of sustainable competitive advantage.
That’s why 83% of the CEOs stated technology as the critical source of the long-term sustainable growth in PWC Survey. Technology usage means increase in productivity and in effectiveness of the operations and of the services provided.
Same as globalization, technological innovation has changed the way we do business. Communication technology, driven by the internet madness and mobile technologies, push Organizations to be more web based rather than paper based. Workflows are changing accordingly and jobs are redesigning.
Let’s look at the internet usage around the world. Today, there are around 1.8 billion internet users online. This is almost 26% of the word population.
People are better connected and mobile more than ever. It has been estimated that today there are 4.6 billion cell phones and 1 billion personal computers.
Information is easily reachable from anywere around the world. Network groups such as Facebook, Twitter has developed information sharing platforms. Any mistake, or a defect in a product or any dissatisfaction from a service or any gossip about an Organization, can spread from one to another in a second causing a huge damage in brand reputation.
Every single part of the Organization, should adapt themselves according to the technological advancements. There is an increasing necessity for planning, designing processes, work flows and applications according to technological ability of the Organization.
Once again, HR is no exception on that... What can be done?
“As companies continue to operate in more and more complex environments, it is the quality of talent that they have that makes the difference” says Bimal Rath, the regional head of HR for Nokia for Asia-Pacific region.
In today’s globalized economy, talent is key driver that can help company reach its strategic objectives and realizes business strategies. According to PWC Survey, 97% of CEOs believe that the access to and retention of key talent is critical or important to sustaining growth over the long-term. Most (72%) rated critical and a similar number say that a limited supply of candidates with the right skills is a key challenge.
Organizations need to actively manage how they attract, nurture talent and they need to do it both globally and locally. Consider the followings;
• IBM expects to more than double its Indian operations by 2010, adding more
than 50.000 employees
• L.G Phillips is investing $1.1 billion in Poland and filling 12.000 jobs there
• Deloitte Touche Tohmatsu plans to double its staff and triple revenue in
China by 2009
• Cisco Systems plans to move 20% of its leaders to India by 2010.
These moves highlight the need for Organizations to understand the dramatically different environment in which they now operate. So; the new order dictates;
• Global demand for talent is growing more intense
• Supply of Western talent is shrinking
• Although rapidly developing economies have supplies of talent,
the challenges of operating in those markets are numerous and complex.
Remember, best results and best performance is achieved via talented, qualified people. And Organizations need to align their talent strategies with business strategies. But, alignment itself is not the only solution. The ability of designing processes, applications which will support this alignment is critical to the success of the talent strategy. HR has the key role and responsibility. What can be done?
Aging workforce is a global issue, especially for the Western world. It creates two major risks for companies: the loss of capacity and the loss of knowledge. The ability of integrating younger employees into the Organization culture in a fast and effective way and to create a balanced working environment with older ones, is vital for the success of the company. Managing workforce flexibility is essential.
This brings an obligatory agenda into the CEOs desk: Managing workforce effectively and strategically planning the workforce needs.
As I said the integration of young employees is key. The better they integrate the lower the capacity decline and experience loss. CEOs are particulary concerned about managing younger employees. 61% of them experience difficulty recruiting and integrating younger employees.
However, demographics management is not only constituted of integration of youth. Also, having a clear understanding of employee expectations, needs and views critical for the success of a CEO. Most of the CEOs believe that information about the employees is critical to competitive advantage, but only 30% believe that they have a comprehensive understanding on that matter.
HR is the bridge between employees and senior management. It is the only function that can bring up the needs of the workforce into the table and create a platform where to discuss.
On the other hand, it should also bring the action plan propositions on how to deal with the demographics management and to strategically plan the workforce not only for one year but for the forthcoming 5 years. The question is: What can be done in order to fulfill this role?
Conclusion
The aim of this article was to identify and analyze the global forces or challenges which I believe significant impact on HR Strategy.
In a global business environment, these forces are interdependent to each other. Most of the Organizations are dealing with similar problems.
What will bring the competitive advantage is finding unique ways to deal with these and adding value to the overall business success. HR has this potential and HR systems are critical solutions of these challenges.
The important thing is to set HR Strategies by taking into consideration these four global challenges. My next article, “Aligning HR Strategy With Four Global Challenges” will be profoundly analyzing the issue.
Sources Used:
1. Human Value Management, Jac Fitz-Enz, 1990
2. PWC. 12th CEO Survey, December 2008
3. BCG, Creating People Advantage Through 2015
4. BCG, Align Talent for Global Advantage
