The Important Role of HR In a Global Expansion

Sep 19, 2019

We all know that the world is increasingly interconnected. Advances in technology enable startups to swiftly move into international markets, expanding their opportunities and brands on a global basis. In doing so, HR can play a leading role, the importance of which cannot be understated. In this article, we examine some ways in which a solid HR strategy can greatly enhance the ability of a business to grow globally and retain key employees.

Adjusting to local culture

All organizations have their own intrinsic culture evolving over time. In many companies, the main corporate office often drives the culture across the entire organization with the risk that this can sometimes conflict with local cultures overseas.

For example, a “hire and fire” culture common in many US businesses does not fit well in a country such as Japan where employers and employees develop long term relationships of mutual co-operation and respect. Conversely India is a country where skilled white-collar employees are in short supply. The market is “hire and fire” but by employees to employers, not the reverse. There, as in the US too, having a robust career development and training plan for each employee is key to retention, because if they cannot see how their career will develop, they will often move to another employer offering a better package or a clearer growth path.

Another area to be sensitive to is when an organization sends a trusted employee from the corporate office to start a foreign operation or to reorient a foreign operation having problems. It is very important in this case for the relocated employee to be fully briefed and sensitive to these cultural differences. Doing so will ensure that the mission will be a success.

Adequacy of documentation

Many countries in Europe and parts of Latin America including Brazil operate in an “entitlement culture” mindset. The employment laws and courts in many of these countries generally favor employees. It’s therefore very important to have HR documentation to preserve employer rights. HR needs to be mindful of this and work closely with legal to make sure that all employment benefits and agreements are documented.

In addition, the employment law landscape in these countries often changes, as is currently the case in France where changes have been made to reduce employment risks and costs. It is therefore important for the business to retain responsive and high quality “on the ground” HR and legal support to stay up-to-date. Support of this type can be provided by high quality international expansion services companies or by law firms.

In addition to having the right HR documentation, it is important to have sound internal communications between HR and other departments to ensure mistakes do not happen. For example, I once had a client for whom robust HR documentation was produced for their UK operation. The client hired a new VP of sales who, without checking with HR, called up a UK salesperson and fired him while he was en route to an appointment. The UK employee left the business with a compromise agreement payment of 18 months’ salary which could have been completely avoided if the documented procedures had been followed.

Pay the local rate

Knowing the “going rates” of remuneration and benefits in a foreign market is often the key to recruiting and retaining high caliber employees. For SMEs this can be a challenge as most published remuneration surveys are dominated by the statistics of the large multi-nationals whose benefits and salaries are always on the high side. Recruitment agents are also often of little use given many of them are commission driven.

Getting the right consulting advice is critical in this area to ensure a business attracts the right talent yet does not overpay. A recent example is an employee with a company car moving from a large multi-national to a startup of an established US company in Germany. The car was replaced by a “car allowance” priced appropriately in line with local market norms.

Further complicating matters is that many countries in Europe and in Latin America have in place “Collective Bargaining Agreements” called CBAs. The CBAs define “de minimus” terms/conditions and benefits agreed between the government and the unions. CBAs are often sector specific – for example, in France the SYNTEC CBA governs software companies. Actual terms and conditions in these markets often exceed the CBA levels; however, the applicable CBA can often impact on benefits. Beware also to account for CBA type arrangements in other countries – Australia is a prime example.

Expat issues

A foreign move is often stressful for the expat and his/her family. This is where HR has a key role to play! Many issues arise such as:

  • Tax equalization – If the employee is a US citizen or Green Card holder, he/she will have to pay taxes and file returns in both the US and the host country
  • Cost of Living Adjustment (COLA) – This can depend on the city to which the employee is moving. For example, London will have a higher COLA adjustment than Bucharest.
  • Visas/work permits – The employing entity in the target country will need to be the sponsoring employer. In certain countries (Netherlands is an example), in order to obtain immigration approval, there will be a need to show the skillset cannot be filled by local recruitment.
  • Mobility – The movement of the employee and his/her family’s belongings to the host country along with the identification and renting of appropriate local family accommodations.

All these issues require the use of external resources in the US and abroad which HR needs to carefully and sensitively coordinate.

Use local HR resources

The above are typical areas where HR can lead to ensure global business success. Key to the process is the need to identify and retain a high-quality foreign consulting resource such as those provided by selected international expansion services companies. The alternative is to identify and engage a myriad of individual law firms, benefits consultants and payroll companies and manage them across multiple time zones and geographies, which can certainly be a challenging and time-consuming process.

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