Settlers, sojourners, travelers, visitors. Whether a company is doing business abroad for the first time, or continually seeking new international markets in which to develop, organizations worldwide are having to carefully plan their personnel strategy in uncharted territory. Personnel strategy has become, by far, one of the toughest challenges in doing business globally.
HR leaders from around the world converged at Personnel Journal's conference to share problems, information, stories and advice on topics ranging from how to deal with global staffing nightmares, to getting international compensation policies right the first time. They talked about how cultural differences influence how you conduct business. They debated global health-care issues. They discussed worldwide employment-taxation problems. They considered expatriate relocation mistakes. They pondered overseas legal minefields. They shared employee repatriation stories. They commiserated over designing global HRMS systems. They sympathized over assessing performance in a worldwide setting. In a word, they brainstormed. It was a three-day think tank for global HR leadership.
Three themes emerged to guide them into the year 2000 and beyond. Business is becoming more global and HR needs to be at the center of making it happen. Companies need to adapt their practices to other parts of the world, rather than just transplanting American ways. And, finally, HR needs to develop a more complete way to recruit and manage global workers so that individual career paths reflect global expertise and responsibility, and meld from the start with long-term global business strategy. It's a tough job. But HR professionals can—and must—do it. The future of business depends on it.
No doubt about it: HR must be a leader in global business.
Allan Halcrow, editor-in-chief and publisher of Personnel Journal, opened the conference with a comprehensive overview of the global business community and HR's role in it. He pointed out that business has become more global, especially for U.S. companies. To date, more than 100,000 U.S. firms are engaged in some type of global venture—with a combined value of more than $1 trillion. And U.S. multinational companies employ almost seven million people outside the United States—people who work in virtually every country in the world.
For example, Colgate-Palmolive operates in 194 countries and receives approximately 70% of its $8 billion in annual revenues from overseas markets. AT&T now has approximately 52,000 employees working overseas in 105 countries. And Bechtel Corp. has more than 30,000 employees working in more than 70 countries.
U.S. multinational companies like these also employ almost 18 million people, representing almost 20% of total U.S. employment. This means one out of every five U.S. workers works for a company with a global presence—and the number is growing by the day.
But globalization isn't just about U.S. companies expanding overseas. Foreign companies also are setting up operations in America. In fact, foreign multinationals employ three million Americans, representing 10% of the U.S. manufacturing work force. Worldwide, at least 37,000 multinational corporations currently are in business. They control more than 200,000 foreign affiliates and employ more than 73 million people. Information published by the United Nations Conference on Trade and Development states that at the end of 1993, these multinational companies had accumulated assets worth $2.1 trillion dollars.
Economies today know no borders. So, it's no surprise that half of the executives responding to a recent survey by the American Management Association based in New York City believe the single greatest effect on their business will come from the globalization of markets.
As more and more companies rush to become global, more human resources professionals are being asked to navigate international waters—often without the necessary background. And even with experience, they're often learning as they go—because one new global business experience rarely resembles another. The rules change by the country, by the company, by the industry and by the day.
Halcrow pointed out that in the next millennium, the caliber of the people in an organization will be the only source of sustainable competitive advantage available to U.S. companies. Every factor of production, other than work force skills, can be duplicated anywhere around the world. It's all fungible—capital, technology, raw materials and information. The only thing that will distinguish one company from another—indeed one nation from another—will be the quality of its work force. The source of tomorrow's power will be the product of mind work. Says Chuck Nielson, VP of HR at Dallas- based Texas Instruments and a speaker at the conference: "Only one thing differentiates us—our people."
How to get that intellectual property—and keep it—becomes an even greater challenge internationally. And it all falls under the responsibility of HR. Even with the change to having more business units—rather than just HR departments—be responsible for staffing and the basics of personnel management, human resources professionals usually must be the first to forge policies and set standards for these practices when they go abroad, or when they bring intellectual capital here from other parts of the world.
When HR isn't there first, organizations can make huge mistakes in trying to coordinate policies between home and host countries. Just like in the United States, employees in other countries can be overpaid, underpaid or go on strike. They can be undermotivated, misunderstood and misinformed. And if HR makes mistakes, their firms may have to pick up the pieces by renegotiating terms, reorganizing teams internationally or even completely relocating to other cities or countries if the personnel issues haven't been thought through ahead of time.
From assessing the potential work force in a new country, to deciphering international labor laws, human resources managers often are among the first delegates to have contact with their new foreign partners. Because of this, globalization requires new and higher standards for the selection, training and motivation of people. Organizations are starting to shop globally for talent. So the practices designed to retain good employees also require great scrutiny. The difference between success and failure will depend on how well American organizations learn to manage their global work force.
HR's role is to find ways to maintain those strengths and capitalize on them. We must realize that although we have experienced tremendous success on our own continent, the global marketplace is a whole new world. It's one that requires continuous learning about the big, worldwide picture, as well as focused attention on the details that make a company work.
The U.S. way usually isn't the only—or the best—way.
Conference attendees were reminded that Americans often use themselves as the focal point for how the world—and particularly business—works. When doing business in other lands, Corporate America has tried to simply transport U.S.-based HR policies and practices overseas.
Now, HR professionals are universally chanting the following mantra: "HR policies from the United States don't always work elsewhere. HR policies from the United States don't always work elsewhere. HR policies from the United States don't always work elsewhere." Global human resources managers have learned, through much trial and error, that their companies need to adapt their practices to other parts of the world rather than just transplant American ways. As business moves into other countries, we realize we can't use our own egocentric way of looking at people, cultures or employment practices. In fact, our experience with a U.S. work force often gives few clues about how to work with employees internationally. HR managers realize they must start with what's typical in the host country and design policy from there—whether it's compensation, benefits, relocation expense reimbursement or any global employment practice. Just as circles ripple outward when a stone is dropped into a pond, HR policies must first take local practices into consideration, then bounce them off what's possible and practical from the host company perspective.
Shirley Gaufin, VP and manager of worldwide human resources for San Francisco-based Bechtel Group Inc., has solid suggestions for what to do when moving business into countries outside the United States. Bechtel, a 100-year-old engineering and construction company with a presence in 70 countries, suggests that it may seem simple, but the first thing you must do is define your global terminology. For example, Bechtel defines an "expatriate (expat)" as any employee relocated from one country to work in another country, rather than defining it as is done traditionally: an American who's sent abroad. Bechtel defines a "local national" as any employee hired in a country to work in that country.
Furthermore, the organization defines a "U.S. expat" as an employee with U.S. income-tax liability. It designates "international staff" as expats without U.S. income-tax liability. It defines "foreign contract employees" as short-term, expat laborers employed in labor-short areas, such as in Kuwait during the oil fires. And Bechtel doesn't use the term "TCNs"—meaning "third-country nationals"—because of its negative connotation. In the past, a U.S.-based company might have hired an employee with a Swiss passport to work in Germany. We would have called him or her a third-country national. Now, it's better to think of ourselves as one global business community employing various people originating in various countries, and moving them globally as needed.
Bechtel has learned a lot on the global frontier. Gaufin's advice for HR professionals is based on lessons Bechtel has learned the hard way. She suggests you start carefully with a lot of planning. Commit adequate resources. Be culturally sensitive. Know the local labor market. Deploy decision making to the greatest extent possible. And finally, think globally.
Thinking globally isn't always easy, especially for HR professionals whose companies have little or no experience in international settings. Speaking at the conference, Richard R. Bahner, global strategy director for AT&T Corp.'s Morristown, New Jersey office, said: "It requires a new mindset." He says human resources managers must go from rulemaker to consultant, from a functional orientation to a business orientation, from a narrow perspective to a broad perspective, from internally focused to customer focused and externally competitive. Overall, HR must go from a reactive stance to a proactive one, and strive to always think outside the box—even though the box in a global business environment is infinitely more complex.
This is exactly the direction the HR department at Levi Strauss & Co. based in San Francisco is taking so that the company is more globally minded in terms of its human resources strategy. Donna Goya, senior vice president, global HR for Levi Strauss, spoke during the conference on how the company's growing global business has affected its human resources operations. Levi Strauss, which had $6.1 billion in sales in 1994, employs 36,000 workers worldwide, dispersed throughout 53 production facilities and 30 customer-service centers in 46 countries.
Levi Strauss's HR strategy was reformed recently to further align itself with the company's aspirations and values, and to help HR become more of a business partner with the firm's worldwide operations. In fact, says Goya, HR at Levi Strauss has become its own business unit. All staffing and training has moved into its many business units. And HR now is focused on such areas as HR consulting, communications and information services, leadership development, global remuneration and corporate services, such as employee relations.
Although realigning HR is important to being more of a global partner with a company's businesses, perhaps the most important consideration on the road to going global is to never underestimate the power of culture. Allied-Signal Inc.'s Sally Griffith Egan gave her suggestions at the conference on how to adapt to different cultures when going global. Egan, vice president HR services, Allied-Signal Business Services, says that in operating a business overseas, you must respect the nuances of local business culture, yet strive for commonality within your overall corporate culture. While you may start business operations in other countries, don't think of the practices you find there as "foreign." Think of them as simply different from how the United States and other countries do business.
Morristown, New Jersey-based Allied- Signal employs 87,500 workers (26,000 are non-U.S.-based) and has 400 facilities in 40 countries. It operates on the assumption that its worldwide facilities are more similar than different, that intense competition is a global reality, and employees everywhere want dignity, respect and fair treatment. With $12.8 billion in 1994 sales, 38% of which was harvested in foreign markets, it knows whereof it speaks.
U.S. companies impose a huge presence when they go into other countries. In fact, a common theme throughout the conference was that local employees in other countries often have a higher expectation of U.S. corporations than of their own local companies. That means U.S.-based organizations must be careful to educate employees about the company and its policies and practices, and manage expectations. And if HR isn't at the center of this education process, it should be.
Egan advises that to avoid arrogance and achieve total quality in a global culture you must not simply impose a monolithic U.S. business culture upon a local division in another country. You must blend their culture and morés with yours. And you must acknowledge that learning curves exist—both in the United States and abroad. Just as you wouldn't expect employees in the United States to simply get it the first time you explain any HR policy to them, don't expect local nationals to understand it on the first try either.
In the performance-management arena, companies need to develop local systems that make sense for the culture and people involved. Using a U.S. grading system doesn't automatically work in another country. For example, Laura M. Simeone, international human resources manager at Cisco Systems Inc. based in San Jose, California, says: "The design of performance management systems needs to be flexible enough to be adaptable for the different needs that countries and cultures have of the system." She adds: "No one size fits all. Flexibility in program design and operation are critical to success."
For example, Gordon R. Finch, international compensation, benefits and corporate relocation director with Burbank, California-based The Walt Disney Company, says in designing job descriptions for workers in countries outside the United States, you must consider (among other things) whether job descriptions are common and culturally acceptable, if they create special issues (such as literally becoming a type of employment contract), if language is an issue (make sure terminology successfully will translate) and if job descriptions are broader than typically described in the home country. (For more information on Disney's international compensation strategy, see the end of this article.)
Again, one home-country policy rarely fits all host countries. And that is doubly true, for example, in teaching managers in local operations abroad how to conduct reviews. "Since culture is such a significant variable in managing and appraising employees, global companies need to provide their managers with training in how culture affects the management process, including the performance-management process," says Simeone. It must make sense for them, and for you.
Allied-Signal's Egan echoes this advice. "Develop training that's tailored. Adopt local educational methods and adapt materials—translation alone never is enough."
Come full circle: Develop HR systems based on long-term business goals.
When jumping into global business territory, it isn't the time to be short-sighted. Experts in globalization agree that while it's excruciatingly difficult to know where the business is going to be five years, one year or even six months down the road, you must plan for future personnel needs as early in the process as possible. And you must also plan careers around those business needs as well.
U.S. companies used to think only in terms of moving U.S. expatriates to other countries for short- or long-term assignments to get new businesses off the ground and on their feet. Now, a new strategy has emerged. Don't send U.S. expats—or any other expatriates for that matter—into new business ventures abroad on long-term assignments if you can help it. Albert Siu, human resources director, education and development for Hong Kong-based AT&T (China) Co. Ltd., said at the conference: "It's an issue deep in the heart—having local people running companies."
The long-term goal is to have local managers and employees working to make new businesses in other countries flourish. It's the least-expensive way, and overall, perhaps the most productive. Although you'll probably never be completely free from moving employees from one global operation to another (because it helps spread business knowledge around the organization and it helps boost careers), you'll probably want to think in terms of developing managers in the countries in which your business is located. Don't just transplant them. Grow them. General Electric calls it "glocalization"—thinking globally and acting locally.
As AT&T's Bahner said at the conference, "The key to creating a global work force is having the right person, in the right position—regardless of nationality—at the right time." So, how do you do that? He says the business mission, the human development system, the business infrastructure and the compensation strategies must be inextricably intertwined.
Global experts say when you do need to move people from one country to another, make sure they're managed in a "circular" way. That means, develop policies and practices that ensure inpatriates and expatriates are an integral part of the globalization process. Prepare individuals ahead of time for global moves. Pay them fairly while they're on assignment. Make sure their health-care and benefits needs are adequately covered. Prepare them and their families for their new cultural experience. Keep in touch while they're abroad. Make sure you—and they—know where their next assignment is. Help them when it's time to repatriate. Learn from their experience abroad. Don't waste the human resources your company has invested in by losing them to inattention or misplanning.
GE Medical Systems (GEMS), based in Milwaukee, has a comprehensive international career-development and career-management program. More than 50% of GEMS' sales are outside the United States, and it employs 14,000 people worldwide; 51% of them are non-American. Janet A. Nelson, manager HR for GEMS, describes her organization's approach to managing global business and global careers: In keeping with its parent company's strategy of the boundaryless organization, GEMS either runs or has access to (through GE) a global new employee orientation program, an entry-level GE leadership program, a GEMS leadership forum, a global leadership program and GE executive education program. These programs and processes help employees throughout the organization's operations, which span from Milwaukee to Asia, learn how to think globally in business and manage their careers around it.
In addition, GEMS uses the following HR techniques to give expatriates and repatriates a complete exit and re-entry experience as they move about GEMS' worldwide operations: a peer mentor program, pre-departure and cross-cultural workshops, ongoing roundtables for expat support, and an expat peer mentor program. GEMS stays in touch with workers coming and going.
It has to. There's no question—its business depends on it. As GEMS 1993 annual report stated: "You're either the best at what you do, or you won't do it for very long." Companies that don't address HR issues in a complete way will pay for their mistakes at best, in missed opportunities. At worst, they'll pay in closed operations. There's no time, in a 24-hours business-is-open world, for anything less.
If globalization, and your role as an HR professional within it, makes you feel like you're a sojourner in a new land, you aren't alone. It means you're on the right track. If it were easy, it probably wouldn't be worth the effort. But there's money to be made in them 'thar hills, and your company's going to need the right people and HR strategies to move you into peak profitability. While HR road maps may be hard to come by, finding other trailblazers won't be difficult. Personnel Journal is committed to bringing them to you in future global HR leadership conferences and in its ongoing coverage of these issues in the pages of Personnel Journal. It may very well be a small world after all. n
Personnel Journal, February 1996, Vol. 75, No. 2, pp. 70-78.