of the increased involvement and commitment that comes from having more control and say in their work. They work smarter because they are encouraged to build skills and competence. They work more responsibly because their em- ployers place more responsibility in the hands of employees farther down in the organization. What’s the bottom line in all of this? HR systems have impor- tant, practical impacts on the survival and financial performance of firms, and on the productivity and quality of work life of the people in them.
Now that we know what HRM is, and why it matters, the next step is to understand some significant features of the competitive business environment in which HRM activities take place. Four such features are globalization, tech- nology, e-commerce, and demographic changes.
FEATURES OF THE COMPETITIVE BUSINESS
Implications of Globalization for HRM. As every advanced economy becomes global, a nation’s most important competitive asset becomes the skills and cumulative learning of its workforce. Globalization, almost by definition, makes this true. Virtually all developed countries can design, produce, and distribute goods and services equally well and equally fast. Every factor of production other than workforce skills can be duplicated anywhere in the world. Capital moves freely across international boundaries, seeking the lowest costs. State-of-the-art factories can be erected anywhere. The latest technolo- gies move from computers in one nation, up to satellites parked in space, and back down to computers in another nation—all at the speed of electronic im- pulses. It is all fungible—capital, technology, raw materials, information—all except for one thing, the most critical part, the one element that is unique about a nation or a company: its workforce. A workforce that is knowledge- able and skilled at doing complex things keeps a company competitive and attracts foreign investment. 11
In fact, the relationship forms a virtuous circle: Well-trained workers at- tract global corporations, which invest and give the workers good jobs; the good jobs, in turn, generate additional training and experience. We must face the fact that, regardless of the shifting political winds in Tokyo, Berlin, Washington, Beijing, or Budapest, the shrunken globe is here to stay. Productivity growth, coupled with world-class educational systems, portable pensions, and health insurance, together with tax credits of loans for education and training, are keys to improving living standards for all. 12
And tomorrow? Our networks of suppliers, producers, distributors, service companies, and customers will be so tightly linked that we literally will not be able to tell one locale from another. No political force can stop, or even slow down for long, the borderless economy. 13 The lesson for managers is clear: be ready or be lost.
Technology
It is no exaggeration to say that modern technology is changing the ways we live and work. By 2009, one quarter of the world’s workforce, or 850 million people, will use remote access and mobile technology to work on the go or at home, according to research firm IDC. 14 The information revolution will transform everything it touches—and it will touch everything. Information and ideas are keys to the new creative economy, because every country, every company, and every individual depends increasingly on knowledge. People are cranking out computer programs and inventions, while lightly staffed fac- tories churn out the sofas, the breakfast cereals, the cell phones. The five fast- est growing occupations in the United States are all computer-related, according to projections by the Bureau of Labor Statistics. Perhaps author Thomas Friedman of The World Is Flat expressed the effects of technology best when he wrote:
“You know the ‘IT revolution’ that the business press has been touting for the last 20 years? Sorry, but that was only the prologue. The last 20 years were just about forging, sharpening, and distributing all the new tools with which to collaborate and connect. Now the real IT revolution is about to begin, as all the complementarities between these tools start to really work together to level the playing field.” 15
In the creative economy, however, the most important intellectual property isn’t software or music. It’s the intellectual capital that resides in people. When assets were physical things like coal mines, shareholders truly owned them. But when the most vital assets are people, there can be no true ownership. The best that corporations can do is to create an environment that makes the best people want to stay. 16 Therein lies the challenge of managing human resources.
Impact of New Technology on HRM. Perhaps the most central use of technol- ogy in HRM is an organization’s human resources information system (HRIS).
Indeed, as technology integrates with traditionally labor-intensive HR activi- ties, HR professionals are seeing improvements in response time and efficiency of the report information available. Dozens of vendors offer HRIS applications ranging from benefits enrollment, to applicant tracking, time and attendance records, training and development, payroll, pension plans, and employee sur- veys. Such systems are moving beyond simply storing and retrieving informa- tion to include broader applications such as report generation, succession planning, strategic planning, career planning, and evaluating HR policies and practices. 17 In that sense, today’s HRIS are tools for management control and decision making.
E-Commerce
Consider this forecast: “The Internet will change the relationship between con- sumers and producers in ways more profound than you can yet imagine. The Internet is not just another marketing channel; it’s not just another advertising medium; it’s not just a way to speed up transactions. The Internet is the foun- dation for a new industrial order. The Internet will empower consumers like nothing else ever has. . . . The Web will fundamentally change customers’ ex- pectations about convenience, speed, comparability, price, and service.” 18 Today, electronic commerce (e-commerce) encompasses a very wide range of business activities and processes, from e-banking to offshore manufacturing to e-logistics. In fact, the ever-growing dependence of modern industries on electronically enabled business processes gave impetus to the growth and development of supporting systems, for example, broadband and fiber-optic networks, supply-chain management software, customer- relationship manage- ment software, inventory-control systems, and financial-accounting software. 19 Whether it’s business-to-business (B2B) or business-to-consumer (B2C), e-commerce is taking off, with annual sales now exceeding $200 billion, up more than $100 billion in the last three years! 20 E-commerce companies that under- stand what consumers want and can deliver it are growing at a rate that few other consumer businesses their size have ever attained. As an example, consider search engine Google. Google makes hundreds of millions of dollars selling advertising that is keyed to the words that people search for. Advertisers only pay if people click. Advertisers like that model because they know exactly who looked at their ads, and they only pay if their ads are seen. As a result, major advertisers like Ford and McDonald’s are increasing their spending on online advertising. 21 The Internet is now a major factor in pricing. Retail e-commerce sites cut consumer prices by pitting a multitude of sellers against one another, allowing Web-surfing buyers to identify quickly the lowest possible price for any good.
Web-based search engines provide buyers with more information—and bargaining
power—about products than ever before. Industries like books, music, and travel led the way. Jewelry, online bill payments, telecom, hotels, real estate, and soft- ware are following close behind. 22
As you read this, however, and as you ponder the future of e-commerce, consider one inescapable fact—all of the people who make e-commerce possi- ble are knowledge workers. The organizations they work for still have to ad- dress the human resource challenges of attracting, retaining, and motivating them to perform well.
Demographic Changes and Increasing Cultural Diversity
The number as well as the mix of people available to work is changing rapidly, as Figures 1–1 and 1–2 illustrate. As Figure 1–1 shows, there will be a precipitous drop in the growth of the labor force among prime-age employees between 2000 and 2020, especially college-educated ones. Over the next four decades, non- Hispanic whites will be a slim majority of the U. S. population. Hispanics will
Figure 1–1 The shrinking workforce.
Prime-age
employees will be scarce, especially college-educated ones.
Source: Too many workers? Not for long.
(2002, May 20).
BusinessWeek, p. 127.
Native-Born Whites
All*
1980–2000 2000–2020 19
⫺8
35
3
Growth of 25- to 54-Year-Old Labor Force
*Including minorities and immigrants
22%
30% 32%
1980 2000 2020*
Percent of Labor Force with a College Degree, Age 25 and Over
*Assumes college graduation rate remains at 2000 level of 29% of all 30-year-olds
(in millions)
make up nearly a quarter of the population, with Asians, African Americans, and, to a much lesser extent, Native Americans, comprising the rest (see Figure 1–2 ).
Currently, female participation has jumped to 60 percent from 50 percent two decades ago, and the long-term trend toward earlier retirement has recently been reversed. The average retirement age is now 64. Seventy-five percent of retirees want to launch new careers after that, and 42 percent of those want to cycle between periods of work and leisure. 23
Implications for HRM. These trends have two key implications for managers:
(1) the reduced supply of workers (at least in some fields) will make finding and keeping employees a top priority. (2) The task of managing a culturally di- verse workforce, of harnessing the motivation and efforts of a wide variety of workers, will present a continuing challenge to management.
The organizations that thrive will be the ones that embrace the new demo- graphic trends instead of fighting them. That will mean even more women and minorities in the workforce—and in the boardrooms as well. Workforce diver- sity is not just a competitive advantage. Today it’s a competitive necessity.