Global HR

Challenges Facing the Function

Peter Reilly, Tony Williams

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9781032838472
• eBook ISBN: 9781317127772
• Topic: Business
• Subtopic: Business General
• Index: Business

The HR function is having to adjust itself to the implications of the globalisation of business activity. This has meant adjusting its philosophy, policies and practices to fit new organisational imperatives, as well as creating its own refashioned service delivery model. Peter Reilly and Tony Williams's Global HR explores the key issues of building an international brand, culture and talent pool, whilst contributing to business and functional transformation, drawing on examples from multinationals in telecoms, fast-moving consumer goods, manufacturing, software, services and commodities. In doing so, they offer insights into managing people and businesses that no organization can ignore.

CHAPTER 1
Introduction

Why the Book?

We wrote our previous book because we were concerned that HR transformation, i.e. the modernizing of the HR function so that it could become a strategic player in the organization, was too fixated on structural and process change. In particular, we believed that the leadership of HR was giving insufficient attention to the capability of HR to meet the requirements of being a strategic player. This book takes this debate a stage further by looking at the challenges of delivering quality HR in a global setting.

It has been written primarily for HR practitioners of organizations that have multinational operations and those that are moving in this direction. Our purpose is to assist organizations to become more effective in their HR management in cross-national settings through better understanding of the challenges facing them and be better able to confront them. Some of these may be familiar problems that appear in a different (global) guise. Others are issues that are new to those operating outside their base country.

What is Global HR?

This leads to the obvious question of what is a global organization. There have been a number of classifications of firms operating outside their national home (e.g. Bartlett and Ghosal, 1989, Trompenaars, 1993 and Hewitt, 2009). The degree of central direction as opposed to collaboration, the way knowledge is transmitted and the extent to which resources are shared seem to be the key determinants in labelling companies as multinational, international, trans-national or global. These commentators can be quite precise in defining types of organization, with a strong sense that organizations pass through a number of stages on their way to a global nirvana. This terminological specificity is not widely adopted or understood by practitioners and we are doubtful of its benefit for our audience.

Moreover, both the Bartlett and Ghosal and Hewitt definitions of ‘global’ seem to have what to us is an unhelpful slant. They both characterize ‘global’ as a company where the HQ has worldwide strategies and policies (Hewitt) or heavily regulates/controls subsidiaries (Bartlett and Ghosal). This seems to offer a particular model of what global might mean. In fact, as we argue in Chapter 7, this may well be the method of choice for many organizations growing in international scope, but it does seem to deny alternative approaches to organizations that seek to become global enterprises in a different way.

Despite these reservations some companies, including Rolls Royce and RBS, would not regard themselves as global, using a similar kind of definition. They are UK organizations with international operations. The same is said of many US headquartered firms. Similarly, ANZ told us that they saw themselves as a super-regional not a global company, even though they are represented in North America, the Middle East and Europe, besides Asia Pacific. Their centre of gravity is still in the latter region. There is a sense in some organizations that there is, indeed, a maturity curve, of a corporate progression to being global; whilst within others there is an acknowledgement that they are not (and may never be) truly global. Another third group are secure in their belief that they are global organizations.

So whilst the academics are seeking precision, HR managers are more intuitive in their judgements. In the perceptual mix there is:

• the number/density of expatriates

• the extent of racial/national diversity

• the way the corporate centre sees the world (i.e. by not being ethnocentric)

• how geographically dispersed the operations are, including the relative importance of these operations

• the extent to which there is a global brand

• the way in which the company organizes itself and goes to market on a global rather than regional or national basis.

The question of whether the structure of the organization is a loose federation and loosely managed, or a tightly run and integrated company does not seem to be a particular preoccupation of practitioners in determining the global nature of their organization.

In the end, for readers of this book many of the challenges arise simply through operating outside of the home base, however dispersed their operations, global the business strategy or international their outlook or resourcing strategy.

Is it Becoming More Important?

Not surprisingly given their definition, Hewitt (2009) has found that there are relatively few truly global companies – only 15 per cent of the companies it surveyed had made it as global, but they do see 40 per cent ‘transitioning’ to this state by adding worldwide strategies and policies.

If one uses a broader notion of global HR, it seems the number of organizations touched by these global questions is surprisingly high. Within HR transformation, for example, adding locations to the scope of change is a noteworthy feature of the change. This is evident in the ADP/HROA (2008) research on HR transformation, where some 40 per cent of organizations expected to extend their geographical scope. Seventy per cent of UK respondents in a CIPD survey (Reilly et al., 2007) felt that globalization was an important or very important driver of change in people management policies and practices in their organization in the next three years. More recent CIPD research (2010c) discovered that 90 per cent of respondents believe that global issues impact their role. Impact of course can have various forms, from being a truly global enterprise to being a national organization that interfaces with global companies, whose business activity has international competitors or simply draws its labour from abroad.

This sense of a progressive move towards greater and greater international contact is consistent with a widely held view of growing globalization through economic, social and cultural integration. It is outside the scope of this book to consider patterns of international trade or supply chain as indicators of this globalization trend, but we believe that it would be wrong to see globalization as something only discovered in the last 20 years. Thomas Friedman (2000) might be right that the ‘flattening’ of the world is speeding up, but global trade and resource transfers have a long history.

Looking from the Scottish perspective, appropriate given the RBS co-authorship, there is evidence of trade between the Alps and Scotland from 6,000 years ago (a jadeite axe head); there was naturally much trade with the Mediterranean and continental Europe during Roman times and at least temporary transfer of resources (Roman soldiers at the Mumrills Fort on Hadrian’s Wall included soldiers from North Africa); and during the ninth and tenth centuries the Vikings moved goods to and from the west – between Newfoundland and Scotland – and to and from the east – including between Baghdad, Tashkent and Samarkand.

Similarly, further afield, from the Bronze Age there were trade routes like the Silk Road that linked the Indian subcontinent and China with the Middle East, East Africa, Java and the Roman and Greek civilizations. A wide variety of goods (food, artefacts and luxuries) and people (including slaves) were transported over a wide geographical area. As much as 7,300 years ago there was a continental trade in Aegean Sea shells centred on Varna on the Black Sea coast. This has suggested to historians that there existed a long-standing ‘Afro-Eurasian’ economic system.

Alasdair Keith (2010) might be right that there are peaks and troughs in globalization: it has not been a linear movement from local to global. ‘Progress’ has been affected by war and environmental crises. The current economic ‘blip’ has slowed global integration with world trade levels not yet back to their 2008 peak, and, if the effects of the downturn are longer lasting than we expect, it may lead towards greater isolationism, restricting the free flow of capital, goods and services. However, in Keith’s view globalization will resume, albeit in an altered form.

This suggests that global HR will remain important, but in the areas of knowledge and people (the subjects closest to the hearts of the function) the environment may become more complex, with growing government attempts to control information flows (already true across parts of Asia and the Middle East) and limit the movement of people (especially into western countries concerned about unemployment and national identity).

What is in the Book?

The fundamental question that runs through the heart of global HR management, and is reflected in this book, is how does one manage the global organization, not just in the acceleration phase but now when the socio-economic environment is more complex. We explore this through a number of themes.

We start with business transformation. We are particularly interested in the contribution that HR makes to how global organizations deal with aspects of change, with special reference to mergers and acquisitions. Does HR have an important role to play early in the process; or is it largely a bystander? And does its role depend on whether the acquiring organization imposes its own culture on the acquired organization as opposed to building a new culture together as partners? This issue is particularly important to global companies, not least because the track record in successful mergers and acquisitions is poor even without the added complexity of cross-national attempts. Whilst these questions are most pertinent to mergers and acquisitions the underlying philosophy applies equally to any form of organizational change.

Another theme of the book is the extent to which there is a convergence in ideas and in cultures that might lead to a universal, global mindset. This is interesting from the HR function’s perspective because it bears upon the extent to which it is possible to develop a single organizational culture, employer brand or employee value proposition (EVP). The more people (or at least those employed in multinational companies) are the same the world over, the easier it is to construct that global culture, employer brand or EVP.

There are those who argue against this notion of cultural ‘convergence’ rather emphasizing the durability of national cultures. There is also the concern expressed that the wish for workforce diversity, to reflect the population of customers and residents in the places of operation, is compromised by this desire for universality. Can you really respect difference if you are trying to meld employees into a common global culture and recruit into the organization those who are attracted by a brand or EVP that represents this culture?

With respect to the brand, how is this created? Is it fair to say that the more it is driven top down, the more it is likely to be part of this enculturization process? What room is there for co-design with employees that offers the chance of a more pluralist vision? The answer to this question also relates to whether there is a single, corporate monolithic brand or multiple brands to underscore the variety of organizational faces to the world.

This leads us to consider the logic of having a global approach to talent management. This can be used to support the common culture, brand or EVP, not least because it should concern the questions of selection and development into this global community. But first, there is a need to define what is a rather slippery concept and then see whether there is anything distinctive about global talent management. The conceptual differences start with deciding who are the talented, but, as we will see, the practical implications of this choice are not as far reaching as one would expect. A definition of talent management such as that by Stahl et al. (2007) as ‘an organization’s efforts to attract, select, develop and retain key talented employees on a global scale’ illustrates the point. It suggests that we are merely scaling up from national to global the activities that form part of the same process. The question remains whether the changing context affects these activities at all. It is obvious that they are different with respect to moving staff across international boundaries, but in what other ways does HR need to make adjustments? Part of the answer lies in who is controlling the resources and whether the staff form a permanent international cadre.

This brings us to the final cluster of questions: how does HR govern itself in a global setting and how feasible is it to have common HR policies, processes and systems across the world.

As we observed earlier, there is a centralized model offered by Bartlett and Ghosal (1989) where the corporate centre directs the business in an integrated manner. Here the emphasis is on corporate control for the benefits of cost and consistency. There is a unitary frame of reference where standardization of policies and practices is the norm. Moreover, a single HR service delivery model, based upon a common technological platform, is seen to best serve the interests of the global corporation. In some cases the form of service delivery and nature of standardized policies and practices is simply the ‘home’ model exported round the world. In others, there is a wider contribution to the corporate approach that comes from business units or locations.

An alternative approach is that the corporate centre coordinates and facilitates, often with an important role for regional bodies, but with national organizations dealing directly with each other. The corporate centre may provide a set of values, principles and even frameworks to guide the locations, subsidiary or operating companies, but they are free to implement them in a way that fits their domestic business needs.

An even more pluralist model is where power is distributed in a ‘polycentric’ manner (Trompenaars, 1993) and where there is even more independence of policymaking by local companies. This is more likely to be found in organizations with a holding company type structure loosely bound together with probably quite different people management approaches to reflect different geographies and markets.

To complicate matters, there is not just a simple distinction to be made between global and local, HQ and subsidiary or operating company (or whatever the term might be in any particular organization); there is also the balance between corporate centre and business unit or function. So in some organizations the power rests with the CEO and corporate office. In others, the power sits in the business units or with the functions, which themselves may operate in a more or less directive manner towards other parts of the company outside the business unit or functional HQ. Naturally, in many organizations there is a sharing of power to varying degrees between the various players.

It would be wrong to assume that that even where design intentions are clear that the delivery is straightforward. Many global organizations have real tensions between on the one hand getting the benefits of commonality and of scale, and on the other the benefits of flexibility, empowerment and innovation.

Moreover, there are other challenges with HR governance: how to ensure that staff, especially executives, live by the values of the organization and manage risk in a sensible way. How does HR encourage colleagues to be mindful of the corporate reputation and of the regulatory frameworks under which the firm operates, being aware particularly of media interest in any hint of scandal?

As part of the conclusions, we look at the implications of globalization for the capability of the HR function. What new skills and competencies will be required to succeed in this environment?

Structure of the Book

The book will look at the broad themes of global HR management described above:

• business transformation in a global setting with specific reference to transnational mergers and acquisitions

• organizational culture in relation to national cultures

• diversity issues in a global organization

• employer brand and the employee value proposition and the extent to which it is common across the world

• international talent management: how different is it from national?

• how the function is run via an explicit (or implicit) HR governance model

• the service delivery model in a global setting.

The conclusion tries to summarize our findings and views on the key issues that have emerged in writing the book. It also considers the implications for HR of operating in a global environment.

CHAPTER 2
Adding Value to Global Business Change – the Holy Grail for HR?

When businesses combine in an international merger or acquisition, the only safe assumption may be that there will be misunderstandings and knowledge gaps between the managers of the combining businesses. (IPD, 1999)

Introduction

Whilst it has become a cliché to say it, change really is a constant in most organizations, and the frequency of structural change to drive for further performance improvement or react to new business conditions is such that the sort of comment heard in one organization that management ‘should resolve the organizational structure once and for all’ is risible. Given that change is too big a subject to tackle within the space of this book, we are concentrating on change in the context of organizations becoming more global. Some of this growth is organic, but much of it is via mergers, acquisitions, strategic joint ventures or significant product launches that change the geographical footprint strategically.

The latter is the focus of this chapter: how the globalization objective is met by non-organic means. In the context of global organizations, this is a particularly difficult process to get right. We know from research that many mergers and acquisitions do not meet their business objectives. Three quarters of mergers and acquisitions fail, according to Schuler and Jackson’s research (2001) and ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• List of Figures
• List of Tables
• Acknowledgements
• Chapter 1 Introduction
• Chapter 2 Adding Value to Global Business Change – the Holy Grail for HR?
• Chapter 3 Organizational Culture
• Chapter 4 Diversity
• Chapter 5 Employer Brand and Employee Value Proposition
• Chapter 6 International Talent Management
• Chapter 7 HR Governance
• Chapter 8 A Global Service Delivery Model
• Chapter 9 Conclusion
• References
• Index