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10 challenges HR faces in a global company

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This post is adapted from “High-Impact Human Capital Strategy: Addressing the 12 Major Challenges Today’s Organizations Face,” (AMACOM, August 2015) by Jack Phillips and Patti Phillips of the ROI Institute.

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It is one thing to sell products and services to a global market base when the need is there and the consumers want the product, but it is another thing entirely to employ a foreign workforce to make that happen in each country. From the very first time that a company has employees in another country, it faces many issues. There are 10 very important challenges that are faced by most multinational companies:

  1. Compliance with labor laws. Every company finds a challenge in working with laws, regulations, and rules in another country. These vary dramatically from one country to another, and companies often need the help of good advisers to unravel and comply with the different rules and policies.
  2. Talent acquisition. It is critical to acquire the right people at the right time, but finding the right talent for a “foreign company” is sometimes a difficult task. Even simply identifying and recruiting individuals can be a challenge in another country.
  3. Developing agile leaders. An organization needs flexible leaders who can adapt to the changes and challenges of operating in a global environment. They must be able to bring the local context and culture into their decisions and relation- ships within each country.
  4. Balancing local and home issues. Deciding which decisions must be made locally and which must be made at the headquarters is critical. For example, financial accounting may be kept at headquarters, while succession planning may need to be more at the local level.
  5. Building capability. Employees must understand the products and services and how to how to produce or sell them. They must understand how to communicate and integrate with others across borders in the cultural context. Learning and development can be different from one country to another. For sustainability, capability must be enhanced routinely in the organization.
  6. Efficient coordination and collaboration. A global company must be connected and orchestrated in its work. Employees must be synchronized in their projects and efforts, and they must collaborate on a routine basis. This gets more difficult when different languages and long distances are involved.
  7. Retaining critical talent. Some individuals in the organization are considered critical talent, and these are the people who make the most difference. It is not always an executive or a manager. It might be the IT team, the direct sales force, the store managers, or the research and development professionals. The challenge is to retain this critical talent in the organization. High turnover can be disastrous.
  8. Sharing knowledge across borders. Knowledge management and knowledge sharing are important, particularly in a knowledge-based company. Using all the tools for collaboration and sharing is essential. Building databases that easily integrate with each other is also important.
  9. Operating efficiently. The products and services delivered must be produced at a low cost to the organization; otherwise, competition will have an advantage. Efficiency is king, and delays and bottlenecks have to be removed to make a smooth work machine.
  10. Improving productivity. In addition to lowering production costs, there must be more output. The gross productivity of a firm, revenue divided by employees, must be continuously improved as technology is used, capability is enhanced, and engagement and motivation kick in to deliver a very powerful workforce.

These challenges are consistent with those found in many studies. For example, IBM’s most recent “Global Chief Human Resources Officer Study” identified developing agile leaders, retaining critical talent, improving productivity, and sharing knowledge as very important challenges for today’s environment.

The human capital strategy should direct some very important, and sometimes sensitive, issues:

  • Determine the policy and philosophy for outsourcing. It is obvious that too many outsourcing decisions have been made based on short-term cost savings alone. Sometimes a longer-term view is needed, and often a consideration of the human capital aspect needs to be a part of this decision.
  • Focus on employment and job creation. To be a good citizen, the firm should aim to keep jobs as much as possible, redirecting people to other work as efficiencies are gained. But firms also need to look at job-creation efforts, so that higher-paying jobs are created to add value to the country as well as the company.
  • Pursue innovation. Innovation is the best way to make sure that new jobs can be created and that new products and services can be developed. Innovation also helps deliver a lower price with top quality so that a competitive edge can be gained.
  • Address inequality at the firm level. This issue can be addressed in two ways. First, make sure that the firm moves beyond the minimum wage, if employees are at that level. If organizations boost their low-level employees, the increased household income of that group will drive demand for goods and services. At the same time, it is important to be mindful of the differences between executive pay and regular employee wages, perhaps setting a particular ratio that makes sense to the organization and the shareholders.
  • A communication strategy should be developed for globalization issues. When the organization is drastically impacted by events outside the home country, employees must understand why. For example, if the employees’ 401(k) plans have been reduced because of the debt default of Greece or falling oil prices, the organization needs to be proactive in explaining this. This requires very important communication efforts.