FACTORS AFFECTING GLOBAL HR MANAGEMENT- ECONOMIC FACTORS

Managing human resources in different cultures, economies, and legal systems

presents some challenges. However, when well done, HR management pays dividends.

A seven-year study in Britain of over 100 foreign companies showed that good HR management, as well as other factors, accounted for more of the variance

in profitability and productivity than did technology, or research and development.

The most common obstacles to effective HR management are cross-cultural adaptation, different organizational/workforce values, differences in management style, and management turnover. Doing business globally requires that adaptations be made to reflect these factors. It is crucial that such concerns be seen as interrelated by managers and professionals as they do business and establish operations globally. Each of those factors will be examined briefly.

Different countries have different economic systems. Some even still operate with a modified version of communism, which has essentially failed. For example, in China communism is the official economic approach. But as the government attempts to move to a more mixed model, it is using unemployment and layoffs to reduce government enterprises bloated with too many workers.

Many lesser-developed nations are receptive to foreign investment in order to create jobs for their growing populations. Global firms often obtain significantly cheaper labor rates in these countries than they do in Western Europe, Japan, and the United States. However, whether firms can realize significant profits in developing nations may be determined by currency fluctuations and restrictions on transfer of earnings.

Also, political instability can lead to situations in which the assets of foreign firms are seized. In addition, nations with weak economies may not be able to

invest in maintaining and upgrading the necessary elements of their infrastructures, such as roads, electric power, schools, and telecommunications. The absence of good infrastructures may make it more difficult to convince managers from the United States or Japan to take assignments overseas. Economic conditions vary greatly. Cost of living is a major economic consideration for global corporations.

In many developed countries, especially in Europe, unemployment has grown,

but employment restrictions and wage levels remain high. Consequently, many

European firms are transferring jobs to lower-wage countries, as Mercedes-Benz did at its Alabama plant. In addition, both personal and corporate tax rates are quite high. These factors all must be evaluated as part of the process of deciding whether to begin or purchase operations in foreign countries.