Manage-Wise

How to implement a global HR system

Given cross-cultural differences like these in HR practices around the world, one could reasonably ask, “Is it realistic for a company to try to institute a standardised HR system in all or most of its facilities around the world?” A recent study suggests that the answer is “Yes”. It shows that the employer may have to defer to local managers on some specific issues. However, in general, the fact that there are currently global differences in HR practices doesn’t mean that these differences are necessary or even advisable. The important thing is knowing how to create and implement the global HR system.

In this study, the researchers interviewed HR personnel from six global companies—Agilent, Dow, IBM, Motorola, Procter and Gamble, and Shell Oil Co—as well as international HR consultants. Their overall conclusion was that employers who successfully implement global HR systems apply various international HR best practices in doing so. This enables them to create global HR systems that are globally acceptable, that they can develop more effectively, and that their HR staffs can then implement more effectively. Let’s look at each.

Making the system more acceptable

First, employers engage in three best practices so that the global HR systems they eventually develop will be acceptable to their local managers around the world.

Remember that global systems are more accepted in truly global organisations. These companies and all their managers think of themselves as global in scope and perspective, and all or most functions and business units operate on a truly global basis. They are not simply aggregates of numerous more or less independent local entities. For example, truly global organisations require their managers to work on global teams, and identify and recruit and place the employees they hire globally. As one Shell manager put it, “If you are truly global, then you are hiring here (the United States) people who are going to immediately go and work in the Hague, and vice versa.” This makes it easier for managers everywhere to accept the global imperative for having a more standardised HR system.

Investigate pressures to differentiate and determine their legitmacy. HR managers seeking to standardise selection, training, appraisal, compensation, or other HR practices worldwide will always meet resistance from local managers who insist, “you can’t do that here, because we are different culturally and in other ways”. Based on their research, these investigators found that these “differences” are usually not persuasive. For example, when Dow wanted to implement an online employee recruitment and selection tool in a particular region abroad, the hiring managers there told Dow that there was no way their managers would use it. After investigating the supposed cultural roadblocks and then implementing the new system, what we found is that the number of applicants went through the roof when we went online, and the quality of the applicants also increased.

However, the operative word here is “investigate”—it does not mean racing through a change without ascertaining whether there may in fact be some reason for using a more locally appropriate system. Carefully assess whether the local cultural or other differences might in fact undermine the new system. Be knowledgeable about local legal issues, and be willing to differentiate where necessary. Then, market-test the new HR tool.

Try to work within the context of a strong corporate culture. A strong corporate culture helps override geographical differences. Companies that create a strong corporate culture find it easier to obtain agreement among far-flung employees when it comes time to implement standardised practices worldwide. For example, Procter and Gamble has a strong corporate culture. Because of how P&G recruits, selects, trains, and rewards them, its managers have a strong sense of shared values. For instance, Procter & Gamble emphasises orderly growth, and its culture therefore encourages a relatively high degree of conformity among managers. New recruits quickly learn to think in terms of “we” instead of “I”. They learn to value thoroughness, consistency, self-discipline and a methodical approach. Because all P&G managers worldwide tend to share these values, they are in a sense more similar to each other than they are geographically different. Having such global unanimity makes it easier to develop and implement standardised HR practices worldwide.

Developing a more effective system

Similarly, researchers found that these companies engaged in several best practices in developing effective worldwide HR systems.

Form global HR networks. The firm’s HR managers around the world should feel that they are not merely local HR managers, but are part of a greater whole, namely, the firm’s global HR network. These six firms did this in various ways. For instance, they formed global HR development teams, and involved them in developing the new HR systems. In fact, these researchers found that in developing global HR systems, the most critical factor for success is creating an infrastructure of partners around the world that you use for support, for buy-in, for organisation of local activities, and to help you better understand their own systems and their own challenges. Treat the local HR managers as equal partners, not just implementers.

Remember that it’s more important to standardise ends and competencies than specific methods. For example, (with regard to screening applicants) the researchers conclude that “while companies may strive to standardise tools globally, the critical point is (actually) to standardise what is assessed but to be flexible in how it is assessed. Thus, IBM uses a more a less standardised recruitment and selection process worldwide, but details such as who conducts the interview (hiring manager vs. recruiter) or whether the prescreen is by phone or in person, differ by country.

Implementing the global HR system

Finally, in actually implementing the global HR systems, several best practices can help ensure a more effective implementation.

Remember, “You can’t communicate enough.” For example, there’s a need for constant contact with the decision-makers in each country, as well as the people who will be implementing and using the system.

Dedicate adequate resources for the global HR effort. For example, do not expect local HR offices to suddenly start implementing the new job analysis procedures unless the head office provides adequate resources for these additional activities.

International staffing: Home or local?

Multinational companies (MNCs) employ several types of international managers. Locals are citizens of the countries where they are working. Expatriates (expats) are non-citizens of the countries in which they are working. Home-country nationals are citizens of the country in which the multinational company has its headquarters. Third-country nationals are citizens of a country other than the parent or the host country—for example, a British executive working in the Tokyo branch of a US multinational bank. Expatriates still represent a minority of multinationals managers.

Thus, most managerial positions are filled by locals rather than expatriates in both headquarters or foreign subsidiary operations.

There are several reasons to rely on local managers to fill your foreign subsidiary’s management ranks.

Excerpt from Human Resource Management by Gary Dessler. Published by Pearson Education.