This paper examines the impact of the Converging Economy on the function of human resource management (HRM) practice and research and the underlying forces of the Converging Economy. The forces discussed are information technology, globalization and human assets in relation to HRM practice.
Implications of the Converging Economy for Human Resource Management
In the current business world, most organizations have incorporated New Economy methods of commerce, particularly e-commerce. This has enabled organizations to build numerous networks that have linked them directly to their shareholders. Furthermore, the flexibility and speed of e-commerce has also transformed the way organizations are being managed, organized and the way they compete. E-commerce has become one of the most visible demonstrations of the New Economy. As a result of this transformation, many customary business practitioners have changed their old ways of conducting business in order to fit into the current environment. HRM is part of the e-business environment, which is also undergoing numerous transformations. For instance, the traditional roles of HRM are currently being undertaken in a totally different way. This discussion analyzes the impacts of convergence between the old and new economies on HRM.
Drivers of the Converging Economy
There are three main underlying forces that are redesigning the global business landscape. These are the following:
- Information technology;
- Intangible assets, especially human assets.
Information Technology and HRM Practices
Information technology is important in disseminating information, enabling work arrangements as well as decentralizing physical organization structures. There are many ways in which information technology is effective with challenges that are being met in organizations through HRM. Since many organizations’ HRM practices are open, employees compare the best undertaken practices, thus forcing HRM practitioners to ensure attractive HRM practices that will retain employees and overcome the challenges. This process is attained through the following ways:
Creativity and Innovation
Through technological advancement and innovation, organizations are well positioned to enhance their employees’ capacity to be creative and innovative. This ensures that they stay ahead of the transformation curve that harnesses a sustained competitive advantage. For instance, with the technological advancement such as the Internet, organizations are impacted in their way of doing business through online platforms, which help them to meet the demands of the current environment.
Incubators. These are entities established to assist in the operation of the Internet activities for organizations, for instance, idea lab. They are significant in the creation of value in the Converging Economy through offering structuring and HR support for new businesses. This allows for an effective innovative corporate hybrid culture that ensures good performance of employees in an organization.
Knowledge Markets. Knowledge markets entail small entrepreneurial teams that function within the structure of large organizations, which drive innovation forward in individual firms. Many organizations are utilizing these units to respond to the need of innovation through HR departments. This strategy has been applied by Nortel Networks Inc., where employees have been encouraged to be creative and be part of the organization’s direction. The HR department is involved in order to encourage employees to submit formal proposals that are rewarded later.
This involves the second HR challenge driven by technology, mainly intended to make the work environment attractive to employees. Technology has made economies mobile, thus pushing organizations to incorporate technology that allows their employees to blend their work and home life in modern designs.
Blending of Work and Home. This enables organizations to employ technologies that make employees’ work easier, more flexible and more portable, for instance, a technology that allows employees to work from home.
Globalization and HRM Practices
Globalization is another major factor that is driving HR practices in the Converging Economy. As organizations compete globally, they tend to expand out of the national boundaries; as a consequence, their client and employee base also grows. This necessitates management of a diverse workforce in HRM.
Managing a Diverse Workforce
As organizations grow and expand, there is a need for an effective way of managing its workforce since employees and stakeholders represent large environmental diversity. This also enables organizations to conduct their business across national borders. The two main HR practices that address the challenge of a wide diversity are the following:
- Kiddie cam;
- Feminine Managerial Styles, which integrate more women in the workplace.
Conducting Business Internationally
Expanding business across national borders requires opening international offices, whereby the work of HRM departments becomes crucial. This also calls for virtual expatriates, i.e. employees need to relocate and work in different organizations. Globalization necessitates HRM to put in place policies that support a wide variety of employees from different corners of the world so that to meet the diversity challenge.
Intangible Assets and HRM Practices
As many firms appreciate the value of soft resources, they are forced to search and compete for the best employees in the market. The organizations will rely on the HRM practices to attract and manage the employees, which is also a challenge to the HRM practitioners. Currently, HR practitioners assist organizations in managing the complete process of identifying and recruiting the best employees, which enhances a business entity’s competitive advantage.
Competing for the Best Employees
Many organizations have discovered that despite all other forms of physical assets, employees are critical for the success of an organization. This has boosted an increased competition for effective employees. Therefore, the HR managers have come up with three main ways of attracting and retaining the best employees:
- Boomerang effect, which involves getting the ex-employees back;
- Unconventional labor markets, which entails hiring from the unexplored labor markets;
- Providing professional services and community services to the employees.
Implication for Future Research
The forces entailed in the Converging Economy present several challenges to the HR practitioners. Therefore, the manner in which organizations respond to the challenges, for instance, as seen in the innovative HRM practices, offers several opportunities for the HRM practitioners. Future research will have two main directions:
- Employees seen as an asset within organizations;
- Change in the management of the HR function.