Various threats generated by the liberalization of an economy can be met only through bringing corresponding changes in management practices including practices related to International HRM. In the newer management practices, more emphasis has been given to International HRM because of the following factors:
1. Emphasis on Core Competency.
Post-liberalization, many organizations have started focusing on their core competence and businesses are being organized around that. Core competence is a unique strength of an organization that may not be shared by others. This may be in the form of unique financial resources (finance available at a much lower cost), manpower resources, marketing capability, or technological capability. If the business is organized on the basis of core competency, it is likely to generate competitive advantages. Because of this reason, many organizations have restructured their businesses-divesting those businesses which do not match core competence such as Tata Group divesting many businesses and acquiring Tetley, a UK tea processing company, divestment of businesses by Voltas, Birla Group, etc. or acquiring those businesses which fit core competence such as Reliance acquiring four yarn/fiber manufacturing companies, Gujarat Ambuja acquiring cement companies, and so on. The organization of business around core competence has changed the mindset and in this change, more emphasis has been given to the human factor.
2. Reorganization.
Along with restructuring, there has been an emphasis on reorganization too. Many companies are restructuring their organizational structure by thinning their management levels and expanding the span of control. Thus, there is an emphasis on flat structure against tall structure as followed earlier. The old concept of “seven layers in the pyramid and seven direct subordinates under each boss” which has been the historic norm for many large companies in the past is becoming extinct. Further, departmentalization based on functional lines is being changed to strategic business unit departmentalization to focus more sharply on products or services. This reorganization has created the need for additional skills on the part of the organizational human resources which can be met by appointing new managerial talents or by developing the existing human resources. The latter course of action is preferable because of the increasing competition for human talents.
3. Competition for Human Resources.
With the entry of foreign firms into the Indian industrial scene, the nature of competition for human resources has changed. Foreign firms, particularly those operating in sectors such as consultancy, merchant banking, investment banking, etc., and computer software companies of Indian origin, have put a lot of competition for acquiring managerial talents.
4. Technological Changes.
With the removal of restrictions on technology import and acquisition, many organizations have opted for newer technologies. Increased use of computers has added another dimension to technological innovation. As a result, old skills are fast becoming obsolete. In their place, the operatives have to acquire newer skills which have increased the training needs in such organizations, and HR departments have to be more active.
5. Need for Workforce Empowerment.
Throughout the world, there has been increasing emphasis on workforce empowerment, that is, giving them authority matching their responsibilities. India cannot lag far behind because of the international impact. For workforce empowerment, there has to be a change in mindset as well as there should be a change in skills of the workforce. The role of HRM is crucial in both these respects. With the increasing role of human resources and their management, organizations have accorded HRM a higher status than what it previously was.