Globalization Cannot Be Ignored in Human Resource Development (HRD): European Union (EU) Case Study Findings Working Paper

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1 Ref 2.10 Globalization Cannot Be Ignored in Human Resource Development (HRD): European Union (EU) Case Study Findings Working Paper Gertrude Ira Hewapathirana (Corresponding author) Department of Work and Human Resource Education, University of Minnesota Mauvalyn M. Bowen Department of Work and Human Resource Education, University of Minnesota Keywords: Globalization, International, HRD, Economic growth, European Union, Education systems. Abstract: Globalization involves all countries around the world and provides both opportunities and challenges. Countries with appropriate policies, infrastructure, and educational systems have improved their standard of living through the global economy. In contrast, countries that do not account for global conditions face severe consequences to their socio-economic prosperity. The importance of understanding globalization in the way countries develop policies and prepare workforce is paramount, if countries are to prosper in a globalized world. Rethinking and reforming socio-economic, education, and labor policies are required in an ever-changing global society. The impact of globalization on HRD is significant in the EU countries. Globalization can provide opportunities to promote better infrastructural development and education system. At the same time, it may cause problems in those countries where there is little or no basic infrastructure and education system. These countries not only loose an opportunity to learn international HRD, but also receive less Foreign Direct Investment (FDI). The key to enhanced HRD and HRD policies in a changing global society is in experience sharing through partnerships among countries, and continuous improvement of education systems from the primary to the higher education levels. This paper discusses the impact of globalization on HRD. The questions addressed are: How does EU respond to Globalization? What issues are important in creating and sustaining HRD components for local businesses? Because of the complexity of the issues involved the authors framed the discussion around two selected case studies: GlaxoSmithKline (GSK) plc and Xerox Limited which are based in the EU. The authors are of the opinion that globalization makes it essential for all countries to improve their HRD processes, if they are to improve their socio-economic conditions and well-being. 1

2 Introduction Globalization, a rapidly growing multifaceted phenomenon provides opportunities and challenges to all countries. Globalization, in this paper, means a continuous process toward socio-economic integration based on a global market of goods, services, capital, ideas, and technologies as well as social and cultural exchanges and activities (Steger 2003). Human resource development (HRD) is defined as organized learning experiences provided by employers within a specified period of time to bring about the possibility of performance improvement and/or personal growth (Rothwell, Sullivan, and Mclean 1995, 31). Human resource education is an important component in HRD that improves human potential which is considered an economic resource (Stewart 1996). To meet the challenges arising from these changing global environments, and to facilitate the HRD practitioners tasks more efficiently, it is important to understand what impact globalization has on HRD in specific countries in order to design innovative programs. Additionally, in this global market environment, multinational companies can play a vital role in initiating innovative HRD practices that can have far reaching effects on these transitioning economies. For this study, the European Union (EU) was selected as the focus geographic region to analyze what impact globalization has on HRD practices in the European Union. The EU is a multi-national institution managing economic and political cooperation among its 27 European member countries which is often referred to as a European version of the United States of America. The approximate population of the EU in 2007 was million people (The European Union 2005). The GDP per capita was $32,900 (World Factbook 2007). Many researchers viewed the EU in many different ways. For example, Europe has become a great laboratory for rethinking humanity s future (Rifkin 2004) and it is remaking the world in its own image (Leonard 2005). The EU is the world s largest market, biggest exporter and the leading foreign investor. It is home to many of the principal multinational companies in the world and is considered one of the fastest-growing economies. The purpose The purpose of this study is to understand what challenges globalization has on the EU in general and how the selected cases: the multinational companies: GlaxoSmithKline (GSK) plc and Xerox Limited respond to these challenges in terms of innovative HRD practices. In the EU, multinational companies are becoming important players that have the potential to shape the economies of many of the EU countries. The selected cases have demonstrated leadership role in facing much of the challenges of the current global markets. By analyzing the HRD practices adopted by these global leaders, this study aims to provide useful knowledge of the practices of HRD. In addition, the authors reflections can possibly be considered by HRD practitioners to further expand the programs for their workforce as well as propel their organizations to benchmark higher. Research Method A case study method was used to analyze how these multinational companies respond to the challenges arising from globalization and what best practices were used to overcome the barriers to achieve success in their organizations. The secondary data was analyzed. To lay the foundation for this paper a brief overview of the EU is provided in the introduction. In the 2

3 subsequent sections, some of the HRD challenges of the EU are summarized; followed by the case analysis, authors reflections, and conclusion. An Overview of the HRD Challenges in the EU HRD issues have become key challenges in the EU. Many labor issues have recently revolved around working hours; transparency on labor moving around the sovereign states of the EU; the role of labor unions in negotiating working hours and benefits paid; European standards in vocational education and training (VET) and how to integrate these standards with national standards throughout the EU; and EU Career and Technical training programs such as the Leonardo da Vinci programme which aims to implement vocational training policy promoting European cooperation in the field of education and training, thus achieving an EU strategic goal of becoming the most competitive and dynamic knowledge-based economy in the world (EU 2004, 2008). A study of seven countries in the EU found that insufficient resources, a traditional culture and enriched attitudes towards training; business pressures; and poor managerial skills are some of the inhibiting factors (Sambrook and Stewart 1999). The conducive factors are sufficient HRD resources facilitation skills, learning expertise and flexible solutions, financial resources, and an increasing motivation to develop learning culture (Sambrook and Stewart 1999). There is an increasing trend of lifelong learning in the EU (Sambrook and Stewart 1999). Because of the demand for organizational learning, employee learning patterns have changed recently and learning is no longer limited to classroom activity. The learning of work-based activities is necessary to cope with the changing environment. This increasing new learning culture in organizations impacted on the role and tasks of HRD professionals. Their traditional role as trainers is transforming to performance consultant and learning specialists (Sambrook and Stewart1999). As a result, many organizations are transforming to learning organizations (Senge 1990). Pedler, Burgoyne, and Boydell (1991) use the learning companies. These changes show that there is an increased focus on HRD in many organizations in the EU. The factors that influenced this type of transitioning learning culture are stakeholders such as managers, employees, HRD professionals; organizational culture, the structure of work, and resources. Case Study Analysis Case Study 1: The GlaxoSmithKline GlaxoSmithKline (GSK) was incorporated in 1999 as a public limited company. In December 2000, the Company acquired Glaxo Wellcome plc and SmithKline Beecham plc. The company, its subsidiary and associated undertakings, constitute a major global healthcare group engaged in the creation, discovery, development, manufacture and marketing of pharmaceutical and consumer health-related products. GSK is headquartered in the UK with operations based in the US. It is considered an industry leader, with an estimated seven per cent of the world's pharmaceutical market and produces one quarter of the world s vaccines. GSK has around 100,000 employees in over 100 countries worldwide. Approximately 35,000 employees work at 82 manufacturing sites in 37 countries and over 16,000 are in R&D. 3

4 The GSK s mission reflects its HRD practices to provide the best place for the best people to do their best work. Their strategies include: recruiting and developing the best people in the industry, providing a culture of high reward for high performance, ensuring good communication and employee involvement; and maintaining a diverse and healthy workforce. The major strategies include resource based strategy (Hamel and Prahalad 1994) and knowledge based strategy (Nonaka and Takeuchi 1995). According to Markowitsch et al. (2002), GSK took greater effort to maintain its flexibility and responsiveness to the challenges arising from globalization focusing on vocational training for employees. Some of these strategies are : (a) managing new and emerging customer segments (India, China, and South America); (b) managing cultural and intellectual diversity (i.e. developing products and new management style for new market segments); (c) managing market volatility (i.e. the increased costs of research and development and product development) and decreasing product life cycles; and (d) managing the burgeoning impact of the internet (i.e. the shift of power from producers and distributors to the consumer). To meet these challenges, the company has moved towards a flat hierarchy increasing the number of highly skilled workers at all levels throughout the organization. Far more emphasis has been placed on all employees having the capability to take responsibility for adding value, by managing internal work processes and relationships with stakeholders more effectively and efficiently. Some of the challenges faced by the GSK are to cope with the changing environment to find innovative ways of conducting businesses in multiple locations and to recruit and train workers to prepare for the new business environment. This study found that although GSK has common HR/HRD problems across the organization in the EU countries the approaches to dealing with these problems at its locations in the UK, Holland, and Austria have been different. In Austria, training and development has focused on competence development by enhancing core training provided for all staff. In the Netherlands, the company introduced a new competence development program whose aim was to strengthen cognitive and reflective competence of new recruits. The UK division has tried to support competence development by introducing a new performance management relationship based on a closer partnership between HRM and HRD. The aim of the partnership is to support people developing new styles of working and learning both individually and collectively. The important thing to note here is that even though globalization imposes convergence at the international level, country-specific HRD practices that are mutually exclusive with socio-cultural and economic environment bring better results. Summary of the GSK s Approach to HRD in response to global challenges Practicing an organizational philosophy: create the best place for the best people to do their best work; recruiting and developing the best people in the business; promoting organizational culture that reward greatly for high performance. Practicing good communication and employee involvement to maintain a health workforce. Implementing personalized HRD programs based on employee strengths to unleash employee s unique talents through the corporate wide performance and development program Providing many paths for employees to engage in dialogue at all levels to enhance performance, talents, and commitment. Sharing knowledge at all levels and providing learning opportunities for all. 4

5 The Case Study 2: Xerox Corporation Xerox (UK) Limited (formerly Rank Xerox (UK) Limited) was formed in 1972 as the UK sales, marketing & support subsidiary of Xerox Limited. Following its purchase of the remaining shares from The Rank Organization in 1997, Xerox Limited is now a wholly-owned subsidiary of Xerox Corporation. The current European operation (Xerox Limited) employs around 19,500 people, with about 4,000 people being employed by Xerox UK. Xerox s mission is to be the leader in the global market providing solutions to enhance business productivity. Its strategic goals include customer satisfaction and loyalty, employee motivation and satisfaction, increase in market share, and improvement of financial performance. The Xerox views itself as a learning organization and believes that only adequate employee competences can ensure customer satisfaction and high performance. These principles are the same in Austria, UK and the Netherlands. Xerox s strategic approach includes training, performance appraisal, continuous learning, self-assessment, recruiting, knowledge management, performance, and customer satisfaction. The company prefers competencies of individuals rather than formal qualifications such as academic degrees. Xerox s major challenge has been to maintain the highest level of competence across its divisions in the EU countries. The self-imposed obligation of the company to appraise the employee on a regular basis is in line with the principle of continuous learning by the employee himself/herself as an instrument to develop his/her potential. Summary of the Xerox s Approach to HRD in response to global challenges Human resources development was at the heart of its corporate strategy; thus learning and development of employees was given priority. Provided a wide range of opportunities for people to develop using online learning facilities. Currently 800 different online courses and classroom training, management development and technical training are offered to employees. Introduced accreditation programs and structured career pathways for employees in different business areas. Developed standard criteria for measuring performance and offer financial assistance to learners. Provided a variety of continuing educational opportunities for all employees in all locations. Developed a total quality management approach with delegated power and authority to lower level managers. Thus, adopting culture specific learning approaches. Ensured autonomy and deployment of responsibilities to lower level managers in different locations as part of strategic management approach. 5

6 Analysis Findings of the two case studies revealed that both organizations emphasized HRD practices. Such practices seem different from traditional vocational education. Employee education, autonomy, and opportunities to develop leadership at all levels are common to both organizations. Thus, HRD is a key factor in the development and expansion of these organizations. The typical western definition of HRD consists of short-term training for performance improvement of a company. The basis for HRD is company performance improvement. However, in the international and global economies of the EU, HRD now has a broader focus. Sanchez (2000) points out that HRD practices must include cultural elements of the countries in which the organizations exist. This is especially true in the countries that are part of the EU. Focusing on the EU the case studies submitted that HRD practices are mostly companydriven and depend very much on the country in which the company is located. For example, comparing the HRD practices of the two EU companies it can be seen that many of their practices and concerns are the same. In GSK and Xerox, the overall company structures are flatter, which allows more employees to make decisions and take responsibility for the work they do. Moreover, these two companies depend on highly skilled employees who are technically competent. This can be reflected in the training that GSK provides for its employees in the Netherlands. In the case of Xerox, it strives to be a global leader and views itself as a learning organization. It believes that only adequate employee competencies can ensure customer satisfaction and high performance. These two companies, however, are in a technologically advanced field, so employees must stay current with technology in addition to general education. Reflections In considering the issues surrounding the impact of globalization on HRD, the authors have made their reflections. We view the following key concepts as central in summarizing the topic of globalization and HRD issues in the EU. EU Leader in Establishing a Regional Structure for HRD Standards The EU system serves as a model for HRD standards in a regional setting. The EU is the worldwide leader in socio-economic integration and international governance based on the Human Development and Global Index. The goal of the EU system is extreme portability of labor with clear standards, and maximum mobility across all 27 member countries. Continued development of a mobile workforce with transferable skills is a key element in HRD practices in the EU. Best Management Practices for HRD We believe that globalization creates pressure for countries to adopt best practices for HRD policies prevalent in powerful and influential countries. While HRD can be enhanced through experience sharing among countries and regions, in many cases these best management practices are capable of overriding existing culture as well as socio-economic, and political systems. These best practices penetrate countries through direct importation. However these best practices should not overlook the culture and history of the people who are employed in local 6

7 organizations. Because HRD practices often originate from unique environment, these convergences of best practices do not always create positive change in local environment. Globalization Cannot Be Ignored Finally, we believe that globalization is a force in the world today that nations ignore at their own peril. In a global marketplace not only of products, but also of ideas and services, the competition and the opportunities are great. Globalization can therefore be a threat to any status quo. It can be a threat to the developed countries, and an advancement opportunity for developing countries, as well as vice versa. HRD systems must take into account, that in a global labor force, a national industry or an individual s job could easily be relocated a world away through the wonders of technology and/or multi-national firms. Global HRD practices should, therefore, be embedded in primary and secondary schooling to ensure a literate and adaptable workforce. The continuous improvement of education systems from the primary to higher education and life long learning are the keys to sustaining healthy socio-economic conditions in a global society. Conclusions It can be concluded that globalization has been a catalyst for companies to re-examine the way they generate, acquire, and disseminate knowledge and the way they conduct businesses. Organizational structures and strategies that have worked for most domestic companies and multinational corporations are being brought to question, and the ever-changing nature of human interaction is forcing companies to re-evaluate their HRD practices. A comparative study of the two cases discussed above shows that companies try to align business strategies, the structure of work and HRD systems with other factors such as national cultures and national education and training systems in order to enhance organizational performance outcomes. In addition, the emerging challenge of developing organizational cultures does not only support the acquisition, sharing and management of the knowledge that currently resides in organizational knowledge base. But it also supports the creation and application of new knowledge for improving business practices and processes and facilitating innovation. The case study findings further revealed that both multinational corporations emphasized the usefulness of HRD in creating a learning culture within these multinational corporations in response to global challenges. They have innovated new learning culture through classrooms as well as online approach, thus providing multiple opportunities for their employees. Performance appraisals and reward systems act as motivational strategies for employees. Autonomy and distribution of leadership to lower level employees and encouraging dialogue with all levels of employees seemingly is a new concept. Hence, these organizations can be examples for other organizations to improve performance through enhanced HRD practices in this changing global society. The flexibility and adaptability to cultures and situations are useful strategic dimensions in HRD practices. 7

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9 World Factbook Xerox