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Globalisation of Human Resources

Background

The management of human resources is one of the many dimensions in which globalisation has made its mark. The ease in which capital flows between national investment spheres; the impact of communication technology advances, and as a result knowledge fields such as science, education and business; and the migration of millions of people between culturally and politically diverse regions are all drivers that have facilitated global shifts and changes in the way we do business. IBM is an example of a truly global company, one which staffs employees around the world and places them into dynamic teams where skill and job fit principles are applied regardless of physical location, culture or language.

Production Chain

The production chain involves the process of converting inputs into outputs through a chain of value adding activities that take place throughout the organisation. IBM’s core businesses lie in manufacturing hardware such as hard drive and micro processors, software such as their Websphere application and their consulting services for network, security and IT solutions. IBM has created “24 hour knowledge factories” where software is being coded, computers being manufactured and services being rendered at all times around the world never stopping 1). Investment capital, credit and banking are handled in IBM’s financial system which provides for technological capital inputs and human resource services that help in the transformation and distribution of inputs into end user outputs to be consumed. Different processes take place in different locales depending on production costs and logistics possibilities. Design of hard drives typically takes place in the USA where it is then manufactured in China. IBM had a large personal computer business which was the very start of their business decades ago, however it was sold off to Chinese manufacturer Lenovo, for $US1.8 billion including 18% ownership of the company 2).

This shows supplier forward integration taking control of operations where the developing nation can use the world financial markets to their favour to buy their own ownership of production processes and profit off of a historically built US brand name. For telecommunications, services, local managers in India are trained around the world where they then return to India to train and manage call centre staff. Information is shared throughout massive extra nets that connect internal IBM networks through the internet and allow greater control and knowledge of organisational processes. IBM’s resulting management expertise has made their top managers coveted and very valuable for poaching to other global companies trying to streamline their processes. The increased globalisation has meant that recruitment and selection for high level management and professional positions is no longer limited to the city one lives in, nor the state, or even the country 3). These sought after managers and professionals can command even higher remunerations and benefits as large companies are willing to pay for the competitive advantage and reputation that they represent. The global investment market watches IBM very closely and the recruitment of high profile management can mean real gains in the shares market, simply on the speculatory nature of investment itself. This too is a result of globalisation where communication hubs transfer annual reports and third party commentary around the world millions of times a day to investors from Dubai to New York, to all over the world.

Financial Structure

IBM is globally owned through a large reliance on equity financing where shares in the company are sold and traded on a daily basis. It is also globally operated running in dozens of countries around the world at all stages of the production process. IBM is the quintessential global company and was the context of Hofstede’s cultural dimensions framework where different aspects of culture that affect business were surveyed with the common factor being IBM’s organisation linking subjects together 4). The shifting role of the consumer thanks to globalised internet processes of purchasing mean that now more than ever, consumers have a greater say in how their products are made and how they are delivered. In 2006, IBM conducted a company-wide “innovation jam” using Web-based tools to act as a giant suggestion box. In phase one of this plan, more than 150,000 people from 104 countries, including IBM employees, family, business partners and clients, made 46,000 contributions over three days over online networks. IBM then grouped and refined these contributions into a set of 36 ideas using in-house developed text analytical software. These ideas were then posted for another three days and in the end, the top ten ideas emerged, each of which was assigned to a senior executive to develop a business proposal to present to senior management for funding 5).

IT Revolution and Telecommunication

One way that the information technology revolution brought on by globalisation has impacted on management is through the possibility and introduction of the process of “telecommuting”: a flexible work arrangement where employees can work at home or offsite, reducing the need to commute to an office each day. In the past, telecommuting in teams was thought to be much less efficient than face to face or virtual teams between offices because of the lack of computer power and internet bandwidth available to consumer households, but in ten years, technology has improved greatly and home based telecommuters can be equally effective with consumer level set ups 6). Globalisation has seen the proliferation of high end business technologies into the homes of consumers and thus enabled non-physical work structures like this. In the mid-1980’s IBM began experimenting with telecommuting and by 1994, where home offices became much more prevalent, IBM formalised the system and began encouraging employees to take part in it. By 1996, 63,600 workers at IBM in the US alone, which is more than 50% of the entire workforce were telecommuting.

The advantages for companies who use this method have shown to be numerous with many large companies such as IBM and Merrill-Lynch adopting telecommuting for increased organisational performance. One of the first, and most important advantages that an organisation can enjoy by shifting some of its employees to telecommuting is the productivity gains in those individuals who work away from the worksite. When taking into account the individual benefits enjoyed by the employees, this productivity benefit to the organisation is clear and accounted for. In a similar vein, there is reduced absenteeism at work when telecommuting is employed on a moderate scale, as telecommuters who are sick or have an appointment can recuperate and perform their errands on their own time and make up for the lost work as they see fit. By allowing employees to telecommute, organisations using this method enjoy reduced employee turnover with less staff quitting because they are more satisfied with their jobs 7). In support of this, compared to compressed workweeks, flextime and job sharing, telecommuting was the only benefit to actively reduce employee turnover. These are all important benefits which directly impact an organisation’s outputs and expenses.

The benefits also affect more specific elements of an organisation as well. When more than 10% of employees in an organisation were telecommuting there was a direct and positive effect on return on assets and return on equity for the organisaion. Firms like IBM who use telecommuting extensively would be realising these benefits while firms with only a handful of telecommuters would most likely not. In terms of new product development, virtual telecommuting teams were found to be more effective in decision making than face to face teams were, with time savings between 10 to 50 percent in the product introduction process 8).

This represents an interesting prospect for organisations who may wish to involve telecommuting teamwork to their product development divisions. Finally, another benefit for the organisation is that telecommuting helps to initiate more teamwork opportunities by reducing the necessity for geographical location to impact on the process. With these numerous benefits to the organisation, telecommuting can make a great impact on an organisation’s performance and the health of their human resources.

Benefits

With both employees and organisations benefiting from this radical new work structure that has been facilitated by globalisation, there are several issues with this method that IBM uses extensively. In Australia and the US, attractive options such as telecommuting are very limited and typically only available to management and professionals, and even then only at the employer’s discretion. This is largely attributed to weak unions in these two countries. This fact reduces many of the benefits of telecommuting where the disabled and those with large personal life demands are most likely to be excluded from telecommuting when they are the ones who would benefit the most from it. Telecommuting also brings with it the possible risk of jeopardising promotion prospects as the telecommuting employee is out of the office and the politics which maintain the organisational culture.

By being out of the loop, full time telecommuting employees under managers who are not trained or accustomed to performance management or evaluation of telecommuters can be overlooked for promotions. The perceived employment stability thus lowers for telecommuters who many believe have less chance of promotion and are easier to be replaced as their work becomes primarily evaluated as a measure of their direct output 9). This lowers the number of employees who are willing to try telecommuting or to look at it as a benefit. Isolation form other staff; burnout and overworking for employees who have a tendency to be a “workaholic”; household distractions; and reduced access to high end physical resources such as main frame computers are all negative repercussions that can affect employees who telecommute. IBM however has truly embraced this method and integrated it into their organisational culture.

Impacts

From telecommuting and the globalisation of labour and capital, global companies like IBM are now able to provide branded outsourcing solutions based on this telecommuting management strategy. IBM has come to dominate in local markets using its unique organisational structure and management of human resources to deliver the most effective synergy of demand versus supply that would not be possible using only local suppliers 10). The recent surge in information technology innovation has presented the ability for distancing the labour market and de-personalising them as mere units of production. The individual employees then became more disposable with less connections and ties to the physical headquarters. This gave rise to one of the most popular new methods of production in the information technology industry: outsourcing. By having local agencies and points of sale in a developed home country market place such as Australia, or the USA, firms like IBM can lead sales, marketing and administration teams which cater directly to the core consumers who can afford the product. However, employing staff who are part of the production process in these countries means that the firm has to compete for employees in the labour market who are quite often used to a high salary with benefits. Globalisation has provided a way to circumvent this issue for global companies where the prime consumer markets who have high disposable incomes come together with a labour market in those countries that support a high salary. Instead, by using telecommuting, capable employees in other areas of the world can be employed and do work for significantly less than their counterparts in more developed countries. IBM describes this as a “globalisation initiative” which is one of the key factors to success for a global company competing in today’s world market 11).

Sharing of Knowledge

IBM not only partakes in this practice for its own organisation, but it also facilitates other companies adopting this method by training and managing employees in developing countries, especially India, and then on-selling their services to other companies through telecommuting. Australia’s largest telecommunication company, Telstra, which started out as a publicly owned state company employed by Australian nationals, now uses IBM services where IBM manages and screens for quality control for their Indian staff who provide a range of services for Telstra. Sales calls, call centres, tech support and a whole host of other services are paid for in bulk to IBM by Telstra. Telstra is able to get the services it needs at a price cheaper than having to manage, train and recruit their own staff at a labour cost which is significantly lower than employing Australian staff for the same job.

At the same time, QANTAS, Australia’s first national air carrier has signed deals with Telstra and IBM for outsourcing of their data handling and call centres as well. IBM thus has created a new service that is only available thanks to globalisation. The proliferation of English as a business language around the world; the importance of western based education maxims in management and IT; and financial capital investment flows have created labour markets in many developing nations such as India that are able to be used and expressed upon other nation’s markets using the global technology innovation of telecommuting. With trust being such a huge factor in business relationships and consumer sales, established brand names like IBM, who have cultivated an image that has transcended cultural and political borders, are able to continually change and develop using globalisation forces to drive their growth 12). The quality control and reputation are what keep consumers going back to a brand, and providing increased control processes of staff helps to reduce costs and increase innovation for IBM.

Conclusion

Globalisation has made an enormous impact on the ways that people work, how companies are managed and the way that consumers and investors interact with organisations. IBM is a truly global company that uses globalisation to its advantage and continually evolves around new technology and opportunities that are created each day. The company has come a long way from a personal computer and microchip manufacturer and transformed into a global information technology services provider and consultant, reducing its manufacturing facilities and providing end user consumers and businesses alike with high quality products produced in the most efficient way using telecommuting and global outsourcing. Global companies like IBM will become more and more prevalent, adapting and changing to supply local markets with high end, world class products.

Economics

1) Gupta, A, Seshasai, S, Mukherji, S, Ganguly,A, 2007, 'Offshoring: The Transition from Economic Drivers Toward Strategic Global Partnership and 24-Hour Knowledge Factory', Journal of Electronic Commerce in Organizations, vol.5, no. 2, pp.1-23
2) Fan, Y, 2006, 'The Globalisation of Chinese Brands', Marketing Intelligence & Planning, vol.24, no.4, pp.365-379
3) Fernández-Aráoz, C, 2007, 'Making People Decisions in the New Global Environment', MIT Sloan Management Review, vol.49, no.1, pp.17-20
4) Hofstede, G, 1994, 'Business Cultures', The Unesco Courier, vol. 1, no.4, p.12
5) Collins, L, 2007, 'Embedding Innovation Into the Firm', Research Technology Management, vol.50, no.2, pp.5-6
6) , 7) Sands, J, Harper, T, 2007, 'Family-Friendly Benefits and Organizational Performance', Business Renaissance Quarterly, vol.2, no.1, pp.107-126
8) Martínez-Sánchez, A, Pérez-Pérez, M, de-Luis-Carnicer, P, Vela-Jiménez, M, 2006, 'Teleworking and New Product Development', European Journal of Innovation Management, vol.9, no.2, pp.202-216
9) Cole, G, 2006, 'Flexibility and the Workplace: The Battle to Control Working Time', Managerial Law, vol.48, no.6, p.536
10) Rangan, S, Drummond, A, 2004, 'Explaining Outcomes in Competition Among Foreign Multinationals in a Focal Host Market', Strategic Management Journal, vol.25, no.3, pp.285-293
11) Kapur, V, Ferris, J, Juliano, J, Berman, S J, 2006, 'The Winning Formula for Growth, Course, Capability and Conviction', Strategy & Leadership, vol.34, no.1, pp.11-23
12) Huang, H, Keser, C, Leland, J W, Shachat, J, 2003, 'Trust, The Internet, and the Digital Divide', IBM Systems Journal, vol.42, no.3, p.507

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