What is the scope of global HR?
The scope of the global human resources deals with all aspects of HR within the worldwide context, including U.S.-based entities doing business internationally or non-U.S.-based entities operating in their own locale or worldwide. It includes matters such as management of global workforces, expatriation and repatriation, HR practices and laws around the world, and issues arising in specific countries and regions. It also includes matters that focus on careers, communications, legal and regulatory issues, technology, metrics, outsourcing and effective practices in the global HR arena. It does not include matters involving U.S. immigration policies and visas or the requirements for verifying eligibility to work in the United States, which are encompassed in the staffing management functional area.
HR professionals in organizations ranging from Fortune 100 multinational corporations to smaller firms that import raw materials from abroad need information on how to practice human resources in a global economy.
A multitude of international trade agreements allows for the ease and cost-efficiency of products moving across borders, and according to the U.S. Department of Commerce, nearly 96 percent of the world’s customers lie outside the United States. This represents a phenomenal market opportunity for companies worldwide.
Even HR professionals working in organizations with a primarily local or domestic focus recognize that global issues have an increasing influence on markets, supply chains and business practices. HR practitioners must develop new competencies, mainly through developing cross-cultural understanding and substantial knowledge in international employment legislation, labor law and economic trends.
Companies are lured into developing countries not only by cheap labor but also by increasingly skilled or trainable labor and proximity to growth markets. No longer are other countries entirely dependent on the health of the U.S. economy. Developing countries—particularly China and India—are driving a wave of global growth, and emerging markets such as Indonesia, Malaysia, the Philippines, South Africa, Thailand, Turkey and Vietnam are rising sources of talent.
What are the functional areas of global HR?
The practice of global human resources is a functional area in itself, as well as a facet of all other HR functional areas.
The subject of global business leadership is the focus of much research, and increasingly, organizations are looking at what it takes to be an effective global leader. While there is no quick answer, research points to common themes to help HR professionals build a global leadership development program. Part of the challenge of global leadership is adjusting leadership styles to the particular culture(s) where the organization does business.
An effective global leader is one who has the ability to master international business issues, set direction, effectively lead people from different cultures and nations, and align global resources. A global leader should have a global mindset (i.e., the ability to take an international perspective and be inclusive of other cultures and views), sensitivity toward global diversity (i.e., the various ethnic, cultural, religious and class groups that exist within a global enterprise), and respect for human dignity and the welfare of all employees—wherever they may live and work.
The global leader must be concerned with global integration, that is, a strategy that emphasizes a consistency of approach, standardization of processes and a common corporate culture across global operations despite differences among cultures and laws.
Benefits and compensation
The cost of talent is a key factor in employment considerations and particularly so for companies operating in multiple global markets or thinking about expanding across borders. As companies aim to streamline their benefits and compensation plans, many attempt to globalize their offerings. What often emerges from this effort is a global philosophy about how employees are remunerated that is flexible enough to be adapted locally.
More countries that were slow to adapt individual incentive plans are warming up to the practice. While a global incentive plan helps create a more cohesive culture, implementing it can be challenging.
Knowledge of local payroll laws and wage and hour requirements is needed to ensure compliance in other countries. As in the U.S., these requirements may include issues such as minimum wage and overtime pay, income tax withholding and reporting, unemployment contributions, retirement and social services withholding and filing, and record retention requirements.
Different types of incentive pay often come into play in a world market. Decades ago, for example, oil companies lured employees into taking dangerous jobs overseas by offering extra compensation, coined “danger pay.” Today, incentive allowances (sometimes referred to as location allowances), such as mobility, foreign service, hardship and danger pay, are premiums offered by companies to encourage employees to accept different types of expatriate assignments. To determine the right amount, organizations need to take into consideration several factors, such as housing, crime and remoteness.
Ethics and social responsibility
Business ethics and sustainability are important elements of operating in another country. An organization’s practices in this area can be effective in communicating the employment brand to all potential and existing employees as well as to governments in other countries. Corporate social responsibility (CSR) is a burgeoning global trend that HR can influence.
CSR is defined as the commitment by organizations to balance financial performance with contributions to the quality of life of their employees, the local community and society at large. HR has an opportunity to use CSR to brand its employment message globally. Workers actively seek out employers that promote social and environmental responsibility. CSR initiatives help bring together disparate multinational company cultures.
Cultural differences, language barriers, religious practices and sexual orientation all factor into the modern workplace. Take this concept global, and even more complicated issues emerge. Transplanting an organization’s diversity programs in another country requires researching the issues, which may be vastly different from the ones encountered in the home country.
Living and working internationally bring forth challenging issues in employee relations, performance, absenteeism and motivation. One way of dealing with these is through a global employee assistance program (EAP)—often referred to as an international EAP, or IEAP. IEAPs provide solutions in diverse cultural situations to support or maintain maximum on-the-job performance. Consequently, multinational organizations have begun to offer their international employees—including their non-U.S.-based workforce—the benefits of an IEAP.
Global labor relations, in particular the flexibility of the labor market, is one of the first factors to take into consideration when deciding where to operate abroad. How pervasive are the unions? How powerful are they? What industries do they cover? What are the restrictions?
Safety and security
An organization’s safety and security policies, procedures and practices may need to be developed, revised and implemented as a consequence of its presence in a foreign country. Understanding and following a host country’s relevant laws and regulations and establishing the organization’s own safety and security measures are essential.
Compliance with the U.S. Occupational Safety and Health Act will not be adequate or even appropriate when operating in other countries, which have their own labor and safety regulations. In some aspects there is a need for global consistency; for example, the United Nations Globally Harmonized System of Classification and Labelling of Chemicals has addressed chemical labeling and classification.
Understanding various global risks is necessary to formulate appropriate safety and security policies. For example, threats of terrorism against certain country nationals doing business in particular countries are a fact of life. In some areas, expatriates, particularly executives, may need security protection.
Geographic, cultural and technological factors pose challenges in developing safety and security plans that integrate a variety of jurisdictional imperatives and cultural norms.
Globalization poses challenges in global staffing management for multinational corporations. What works well in one country might not work nearly as well in another country—and might even be illegal.
Some particular staffing management challenges associated with global HR include global recruiting, global relocation, international assignment management and global outsourcing.
Global recruiting. Thanks to the accelerating globalization trend, companies have more options to find the best people for the right jobs. Global HR professionals are being asked to source candidates for numerous positions—not just IT and support, but management, research and development (R&D), sales and marketing—from around the world. HR will need to identify, screen, test, interview and move talent into jobs more quickly and seamlessly than ever before, challenging HR professionals to figure out which recruitment strategies work best in which cultures. When recruiting in Asia, for example, HR should focus on attracting candidates with diversity, work/life balance, recognition and project responsibility. When recruiting in Europe, the focus may be on empowerment, job fit, work challenge and opportunities for movement.
Global relocation. Concerns about family and trailing-spouse issues continue to dominate the reasons why employees turn down expatriate assignments. Careful selection, preparation and communication can help ease the transition. As for logistics and support, each destination, be it China or the U.K., comes with its own special challenges.
International assignment management. International assignment management is a complex function but one that offers the HR professional many opportunities for growth as well as the chance to contribute positively to the expatriate employee’s experience and the organization’s bottom line.
A failed assignment can be quite expensive: The cost of a three-year international assignment can easily exceed $3 million. The increasing importance of global business to a company’s bottom line means that international assignment management will only grow in value as a critical skill for HR practitioners.
Due to family concerns and the lack of robust repatriation programs, many employees are reluctant to take international assignments. HR professionals are responding by getting creative with shorter-term assignments or commuter options for employees, depending on the scope of the project.
HR professionals can take a number of steps to ensure that expatriates enjoy a smooth return home and that the company can maximize the expatriates’ valuable international experiences. To improve retention and satisfaction of returning expatriates, HR professionals should consider the following suggestions:
- Conduct post-assignment career planning before the individual leaves the foreign post.
- Facilitate mentor relationships among senior executives and expatriates.
- Assign a home-country mentor and an overseas mentor to expatriates.
- Maintain strong, regular communication during global assignments.
- Require home visits, and encourage expatriates to use them to network professionally.
- Keep expatriates in the forefront of succession planning.
- Provide repatriation assistance to address assimilation and reverse culture shock when returning home.
- Tap repatriates to serve as trainers for future expatriates.
- Provide forums for repatriates to share their experiences.
- Develop a tracking system to determine if repatriation turnover is a problem.
Offshoring is the relocation of business processes and services from one country to another. As technology allowed for more white-collar jobs to be offshored to India, China and Eastern Europe, many U.S. companies rushed into the practice, lured by promises of major savings in payroll.
But reality quickly set in as cultural challenges emerged, quality of service and products declined, and a consumer backlash set in. Offshoring of HR, IT and R&D will continue, but companies will need to consider the pros and cons, the training and knowledge transfer, and the cultural understanding needed to make the practice successful.
Between a growing global economy and the shift from production orientation to a knowledge and service orientation, organizations increasingly seek avenues that offer greater flexibility to remain competitive. Recruiting and retaining the best talent—wherever that talent may be—is one of the best ways to compete. Accordingly, HR needs to leverage technology solutions to enable employees in dispersed locations to work together in global virtual teams. By using virtual teams, companies can take advantage of competitive synergies that teamwork offers along with the advancements in information and communication technologies.
When addressing the multiple facets of global HR management, employers must ensure compliance by understanding and managing international employment law and cultural differences that affect legal and ethical business practices.
How can Audax HR assist with global human resources with my company?
The Audax HR team has globally certified HR professionals that can assist with special needs created by companies operating on a global or multinational scale. We work with companies operating in time zones all over the world to find the best solutions for your global business. Learn more about our Global & Multinational HR Consulting.