Business leaders today must continually scan the environment and maintain awareness of changing and developing challenges—presented by threats and opportunities—to successfully carrying out business plans and competing in our global marketplace. With its close interface with strategic planning, HR planning personnel should also continuously scan the environment for the array of complex, interrelated challenges that present themselves.5 The major overarching current trends, influences, and de- velopments discussed earlier, including globalization, contingent work arrangements, technological advancements, changing demographics, and national culture, must be monitored regularly in terms of their implications for new work demand and the ability to meet that demand through human labor or automation. Other important external challenges pertinent to global HR planning that should be assessed on an ongoing basis include labor market conditions and characteristics, opportunities and restrictions presented by foreign governments and other organizations concerned with labor interests, global competition, cross-national cooperation and conflict, and the impact of broad economic forces and market changes on labor supply cost- effectiveness.
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HARACTERISTICSOne of the primary engines driving our increasing globalization is the opportunity presented by increased demand for manufactured goods to satisfy an ever-increasing world consumer appetite. The opportunity is especially attractive with the burgeoning growth in the sourcing of the manufacturing operations for these goods to countries such as China, Vietnam, Romania, Malaysia, India, Brazil, Portugal, Mexico, and Thai- land representing attractive labor markets where the labor supply is plentiful, of an adequate skill level, and relatively inexpensive compared with the labor supply in more developed countries. In fact, some countries with a relatively low-cost labor force also hold a comparative advantage in terms of technical skills, such as India and the coun- tries of Central and Eastern Europe, which are attracting considerable high-tech work demand, in addition to back-office administrative services, to be filled by their low-
cost but highly skilled computer programmers and engineers.6 Inevitably, market forces of supply and demand come into play in global HR planning. As more firms source their work to a foreign country with an attractive, heretofore low-cost labor force, there is increasing competition for a limited labor supply, which then eventually drives up the cost of labor for the MNC, as has recently been reported regarding labor character- istics in southern coastal regions of China.7
Within the increasing globalization movement, human resource planning should include a careful and ongoing scanning of various national labor markets to identify particular opportunities or potential problems related to the supply of labor to support ongoing MNC strategic objectives. Scanning of global labor markets might consider current levels of adult literacy and technical skills among the present labor force. As with the earlier example, the United Kingdom is significantly behind France and Ger- many in the number and proportion of the national labor force achieving craft-level qualifications in engineering and technology, suggesting that plans for expanding heavy R&D and high-tech business activities into the European Union might favor Germany or France where the global labor force would be more capable of supporting these more demanding and knowledge-intensive business activities.8 Of course, in cases where MNCs open operations in host countries that have a plentiful labor supply for low- skilled jobs but lack a sufficient supply to meet higher skilled and technical work demand, they should maintain flexibility and mobility to supply the needed higher skilled labor through expatriate assignments from the home country. Or they might seek such higher skilled labor from a third country, as is common in U.S. manufactur- ing plants in Mexico along the U.S.–Mexico border where a large percentage of tech- nical employees and mechanical engineers come from India.
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OVERNMENTS ANDO
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RGANIZATIONSInevitable threats to the rapid expansion of globalization fostered by the low cost of labor in developing countries arise both from home as well as abroad in those host countries where the sourced operations are located. A company in its home country can feel strong social pressure in terms of patriotism and national solidarity to not move jobs (work demand) to other countries, which would result in the immediate loss of jobs and an increase in national unemployment—the latter often more of a fear than reality.9 This protectionist fervor has escalated in the United States in the heat of state and national politics with legislation efforts aimed at curbing U.S. com- pany offshore outsourcing by removing associated tax incentives.10 Governments and influential unions supported by those governments can also impede or com- pletely prohibit certain kinds of work, such as those related to key industries and national security, from being sourced to other countries.
In their negotiations with MNCs for initial or renewed foreign direct investment within their borders, host country governments also can require, for optimal FDI spillover of knowledge and skills, that MNCs staff their local operations with targeted levels of host country supervisors and managers (with appropriate training provided), or place joint venture requirements to encourage sharing of expertise.11 Of course, MNCs that hold a much more inclusive perspective of their global human resources beyond those
located within the headquarters country borders will recognize host country employee leadership development and higher-level staffing as an opportunity to continue to pur- sue the strategic goal of building a truly global workforce.
Governments in host country low-cost labor markets are becoming very competi- tive in providing MNCs with attractive incentives in the form of tax breaks and exemp- tions from certain costly labor regulations in exchange for foreign direct investment.12 Yet they also can begin to exact increasing costs for the access to and use of its labor supply in the form of higher taxes and the passage and enforcement of more costly and restrictive labor laws. These foreign governments also can require significant com- pany payments to address the social costs of employee job displacement when the MNC determines to close operations in that country and move to another country with more favorable labor and other operational costs.13 In addition, local labor unions— and, increasingly, international and local NGOs and other international bodies that monitor labor concerns (for example, the United Nation’s International Labour Orga- nization)—can place great pressure on MNCs to improve HR policies and practices related to labor standards, job security, equal opportunity, compensation and benefits, and skill development.14 Of course, many MNCs will readily bear the costs of develop- ing host country workers to build internal talent and increase efficiencies as well as gain a favorable reputation within the host country as a job provider and contributor to the local economy. And in the longer term these developing host economies, with a positive history with the MNC, represent a growing and amiable consumer market.15
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OMPETITIONCompanies compete both at home and abroad to attract and retain customers by at- tempting to consistently deliver high-quality products and services at lower costs. Or- ganizations also compete for the human talent itself that drives competitive advantage. Essential to an organization’s ability to succeed in the increasingly competitive global arena—whether or not an organization even ventures abroad—is its ability to attract and deploy a motivated, innovative, team-oriented, cooperative, responsive, flexible, and competent workforce at all levels. This ability has been central to Toyota’s growth and success in building a reputation for high quality and reliability, and for Southwest Airline’s ongoing profitability (despite pre- and post-9/11 industry distress) and lead- ing performance in important customer service measures.16 Therefore, a critical func- tion of HR planning is to continuously watch the competition and scan the environment for best practices in employee recruitment, selection, placement, work design, training and development, compensation, change and performance management, and other HR management practices that contribute to a world-class, high-performing workforce.
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ONFLICTSeveral different regional and multinational trade treaties and agreements among vari- ous countries have important HR planning implications related to business conducted with and within participating countries. Such treaties and agreements include the Or- ganization for Economic Cooperation and Development most of the countries of West-
ern Europe plus North America, South Korea, Japan, and Australia), the North Ameri- can Free Trade Agreement (Canada, the United States, and Mexico), and the Associa- tion of South East Asian Nations (Indonesia, the Philippines, Thailand, Singapore, Maylasia, Vietnam, Laos, Cambodia, Brunei, and Burma or Myanmar). The most for- malized and integrated of these treaties is the European Union (with twenty-five mem- bers as of March 21, 2006, and four candidate members), which has adopted a common constitution and, at least for most of its members, a common currency (the euro).17
Important HR planning implications of these agreements include joint venture formation and appropriate staffing to promote treaty country partnerships, standard- ization and harmonization of acceptable HR practices, formation and staffing of regional headquarters and HR functions corresponding to treaty member geographic arrangements, movement of workforce operations across participating national bor- ders to take advantage of operational efficiencies, and appropriate cross-cultural awareness skill development for those involved with treaty country interactions.18 In addition, managers and decision makers must be aware of important current and changing guidelines and even detailed requirements that these multiple-country agree- ments can have related to professional licensing, union representation, benefits, train- ing, work standards, and worker rights.19
Economic studies on new market development as a result of the formation of the regional trade blocs of the European Union and NAFTA have demonstrated impressive increases in work demand and associated labor supply utilization for participating coun- tries. In fact, some U.S. manufacturing companies have been able to survive and become even more competitive because of NAFTA, which provided a cheaper supply of labor for lower-end manufacturing requirements, while they retained and even expanded their higher-end manufacturing and design operations in the United States. However, at times treaty arrangements may also provide a threat and lead to particular cost advantages favoring companies headquartered in treaty member countries, where the overall cost of business can become increasingly expensive so as to outweigh the low cost of labor. Such has been the case for several Japanese and Korean MNCs along the U.S. border in Mexico that have pulled out and relocated their increasingly expensive Mexican maquiladora operations due to their new less-favorable status and now costly tariffs and other requirements as companies representing non-member countries of NAFTA.
Aside from various forms of global cooperation, serious forms of conflict within and between countries, including localized and global terrorism, can have important implications for the human side of business and must be attended to as part of HR planning. Ongoing trade wars and skirmishes between countries can present obstacles for foreign business development in those countries, including those associated with human resource staffing and utilization. More serious cross-country conflicts, such as that between Pakistan and India, can also thwart regional business stability and busi- ness development efforts affecting HR planning. Internal country instability and vio- lence, such as guerrilla and civil warfare or a coup d’état, can have a debilitating impact on company plans. For example, Fidel Castro’s overthrow of the Batista regime in 1959 and the Ayatollah Khomeini’s takeover of Iran in 1978 had a crippling effect on their respective countries’ foreign direct investment and associated international labor activity. In fact, both situations featured a significant emigration of labor to safer and
more viable political havens, such as the United States and Western Europe. And so- cial and political unrest in such countries as Colombia, Ecuador, China, and Russia has created a demand for extra surveillance, security, and protective services, such as in the oil industry where foreign executive bodyguard services are in great demand.20