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BUSINESS IN INTERNATIONAL MARKETS
When your company sets
sail for new markets, strategic human resource planning can be instrumental in
safeguarding ventures to dry land and into working condition. Too often
though, when companies expand they leave human resources stranded at the dock,
and it isnâ€™t just the niceties that have been left behind.
Studies indicate that active management of human resources directly impacts
the bottom line by significantly increasing shareholder value and sales per
employee and lowering employee turnover. A strategic view of human
resources, especially in planning and executing new ventures, can help seize
new opportunities and minimize liabilities by identifying the specific tasks
and skills needed for success early on and then deploying the best qualified
staff efficiently. All companies with employees have a human resource
strategy but few have taken the time to articulate, examine and fine-tune
their approach to managing their most important asset.
Human Resource Planning
In order to establish
global criteria and standards for identifying, motivating and managing talent,
strategic thinking demands human resource professionals understand their
companyâ€™s products, market, structure, culture and goals. A global
view is important because managing across borders and cultures is complex and
decisions made can have a worldwide impact on practices and costs.
Consequently, the objective is not to dictate but rather guide managers and
human resource professionals wherever they are located thus ensuring decisions
are not only consistent with corporate policy but also reflective of the local
markets. The strategy becomes the companyâ€™s benchmark for staffing,
designing and implementing compensation and benefit programs.
An effective strategy
should touch on the elements we call the Four Cs:
Competencies for professionals to help select
the best candidates, measure performance and promote from within as much as
˛ Compensation of employees, to effectively recruit and retain staff in each market while maintaining consistency in designing and implementing pay structures and benefits.
Culture of the company which can be
disseminated a variety of ways including standardized company logos, training
programs and global business practices, standards and ethics.
Costs including the liabilities of human
resource programs budgeted and managed through guidelines on salary increases,
renewals of employee benefit plans and preferred financing systems for all
Resources in New Markets
Regardless of the form your business ultimately takes, in a new market it is important that human resources contribute to the decision making process as early as possible with rough projections of the skills likely to be required, how the jobs will be filled and the approximate costs. Whether or not the company anticipates having its own staff on the ground, at some point it will become necessary to deploy talent to the new location from a variety of sources.
companies utilize expatriate staff in the initial stages of expansion, to seed
the new operation with knowledge of the company, its products and to hire and
train local staff. Assignments can be for short periods—up to a year,
or long-term—usually three to four years. Depending on the objective
of the assignment and the companyâ€™s expatriate philosophy, staffing may
include junior as well as senior staff. Truly global companies place
high value on international experience and cultural diversity; from this
seasoned cadre of managers the future leadership is drawn.
As your company
identifies potential locations, you must be proactive and examine the pros and
cons of doing business in various countries by researching tax, labor, social
security and typical employee benefit environments relevant to expatriate and
local national employees, as well as evaluating the availability of local
candidates. You may, for example, consider how your potential
competitors are staffed and the cost associated with government mandated
programs as well as those necessary to remain competitive.
Your understanding of
hiring laws, recruiting, provisions for employment contracts, mandated
benefits and dismissal is critical in helping the company identify new markets
and decide how best to enter them. For example, visa requirements may
make it difficult or require long lead times before transfer of staff into a
country is feasible. Labor laws differ in important respects from the
United States; the concept of “employment at will” is uniquely American
because many countries protection of “acquired rights” could make reducing
pay or benefits in economic downturns nearly impossible. Additionally,
you may need to prepare to negotiate with unions or collective bargaining
units. Finally, tax and social charges must be considered, as these
costs are often higher in some countries and considerably less in others.
For the novice, chartering through these mystifying international waters can
be challenging, frustrating and often disastrous undertakings; however, for
the experienced international professional these same international waters are
seen as exciting and successful business ventures.
The next chart shows a company with little or no business strategy. The HR department has not considered that Third Country Nationalâ€™s could be a valuable resource. Further, expatriates were selected poorly and without any sense of competencies critical to the success of the organization. The structures in place are outdated and as a result, retaining valuable employees will be difficult. Additionally, local nationals have defined their own benefits packages leaving the organization vulnerable to potential liabilities relative to employment contracts, legal entities, substandard facilities and payroll.
your own presence
company entails a large investment of capital and people. The terms
Purchase and Sale Agreements usually require a due diligence be undertaken to
uncover potential liabilities which could affect the terms of the agreement,
for example unfunded pension liabilities, unwritten employment promises and
pending lawsuits. Most experience human resource managers will also
conduct a post sales audit to identify operating costs, compensation and
benefit practices through:
tread lightly when it comes to amending compensation and benefit packages of
staff at acquired companies until the dust has settled and insecurities have
abated. It is imperative you retain critical staff and not have them abandon
ship before the ink is dry.
Starting your own
foreign-owned enterprise involves a number of separate yet intertwined
processes that will involve not only your Human Resources department, but also
your Legal and Finance departments as well.
It is critical to identify pay
practices and benefit programs for expatriates and local hires, in order
to facilitate recruiting candidates and negotiating employment contracts.
Depending on the country, creating a
legal entity may be a pre-requisite for hiring staff, establishing benefit
programs and payrolls. Remember to recruit as much as possible
during the legal entity phase.
In later start-up phases when a
physical office is required or necessary, companies often begin with
leasing space for their operations in a commercial building that provides
amenities such as furnished office space and a shared receptionist.
the International HR Puzzle
Defining your International Human Resource strategy will allow you to clearly identify areas where improvements are needed, in order to maintain your current business as well as posturing for future growth. Sustaining your business success requires continuous reviews and revisions to company policies, plans and programs based on market trends, competitors and legislative changes. With the critical pieces of the HR puzzle identified, you can develop a blueprint to formulate your International Human Resource strategy and chart a plan for sailing successfully into international markets.
Polak International Consultants, Inc. specializes in international human resources consulting. The entire staff has experience in HR issues that multinationals must address outside of the US - benefits, compensation, legal, actuarial, intercultural, etc. This "process" as described above is the result of decades of experience, drawn from a multi-discipline team actually in the field gaining hands-on experience.
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