Human Resource Management in the Times of Emerging Digital Economy

Introduction: HRM in the Industrial and the Post-Industrial Eras

The field of HRM or Human Resource Management has evolved from the time HR managers were primarily responsible to settling labour disputes and taking care of payroll during the Industrial Era to the time where they were primarily tasked with enabling performance, empowering employees, and providing overall “soft skills support” to employees in the Post-Industrial Era where services firms predominated the global economy.

Indeed, HRM which started out as an ancillary and auxiliary function in the manufacturing era evolved to a core function and a source of competitive advantage in the services era. This evolution has necessitated several changes in the way the field of HRM operated and continues to operate to this day.

HRM in the Emerging Digital Economy

Having said that, HRM is again at a crossroads and an inflection point with the emergence of the digital economy where sharing economy paradigms and the so-called “gig economy” wherein workers and employees are part time and the model of work is fluid and flexible means that there is yet another evolutionary leap to be taken for the field of HRM.

Indeed, with the emergence of firms such as Uber, AirBnB, Task Rabbit, Amazon, and Upwork that provide freelance jobs and contractual employment and where the pay is based on per task basis rather than a monthly consolidated amount, HR managers have to keep pace with the changes in the broader economy and evolve accordingly.

This calls for some adjustment and even a radical overhaul in the way the field of HRM operates. For instance, HR managers in any of the Digital Economy firms typically are involved in the initial screening and pre-employment interviews and formulation and finalization of the contractual obligations and terms and conditions for the workers. Further, HR managers in the sharing economy are more concerned with the Digital Interface model of engagement rather than face to face model of engagement.

Some Examples of HRM in Digital Economy Firms

Take the example of a sharing economy firm such as Uber. Once the contractual Drivers are on-boarded, the HR managers interact with them through the App based and Virtual Interfaces rather than meeting them in person.

Though some firms in the Digital Economy do make it a point to invite their employees for in-person interactions from time to time, most firms such as UpWork and Task Rabbit rely on “armies of globally dispersed” employees where the possibility of even interaction through Skype or Video is remote let alone face to face and in person interaction.

This means that HR managers in these firms should be conversant with the way the Digital Economy works and understand what it takes for businesses in this paradigm to succeed. Therefore, HRM as a field has to evolve from being physical bound to a new model where Digital and Virtual modes of people management are the norms.

Thus, as mentioned earlier, HRM now faces the prospect of a “paradigm shift” in the way it has to be practiced and in the way HR mangers operate.

Returning to the example of Uber and AirBnB, HR managers in these firms have to typically manage the contractual workforce and address their grievances related to low pay, lack of orders, shift timings and managing workload, and deal with regulatory concerns.

Indeed, if events over the past year are any indication, most sharing economy firms are spending much of their time dealing with these concerns and in particular, the “grey areas” between their business models and the prevailing regulatory frameworks rather than on people management or what were earlier the main concerns of firms in the Industrial and even the Post-Industrial Era.

Fundamental Shift in the Nature of Work and Employment

The point to be noted here is that the Digital Economy and the Sharing Economy represent a significant break with the past wherein the very nature of work has changed and indeed, the concept of what work is and how it is performed has also changed.

Moreover, taken together with globalization, the emergence of the Digital Economy means that the firms are located in one jurisdiction, the freelancers (one should be careful when using the term employees since the sharing economy firms work on the concept of digital labour and not physical labour) are dispersed globally, and the firms themselves operate 24/7 across time zones.

Thus, HR managers now have to learn to deal with challenges such as complying with regulatory requirements across the world and where laws and rules differ from location to location. Meanwhile, the primary concern of HR managers has to be that they have to manage a dispersed workforce wherein the interface and the intersection between globalization and localization mean that Glocal or the merging of Global and Local modes of engagement are the norms rather than the exception.

For instance, HR managers in any of the Digital Economy firms have to contend with freelancers in one location being affected by purely local events and at the same time, the common rules of global engagement have to be tweaked to suit the local conditions.

Conclusion: A New Social Contract

Finally, workers in the Digital Economy who are hired on a freelance basis neither have benefits such as healthcare or pension and social security and hence, HR managers have to deal with this aspect as well wherein the fundamental nature of engagement between the employer and employee has been radically altered to the point where one can no longer rely on past definitions to guide the present terms of engagement. Indeed, it can be said that there is a new “social contract” between the employers and the employees and this is something that the field of HRM and the HR managers in the Digital Economy firms have to contend with.

Authorship/Referencing - About the Author(s)

The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.