This is the first in a series of posts on problems and challenges that I keep hearing from HR professionals as I make the rounds in the course of my work as an analyst and strategic advisor. Let’s kick off this series with Global HR. I'll highlight trends that make Global HR so important, then examine challenges and solutions to the overall domain.
There can be little doubt that we live in a more and more global economy. The internet has brought mankind more together than any other technology invention before. News travels around the globe faster than ever, culture is a cross border phenomena and brands have become global not over night, but over the course of a short decade.
But while information travels efficiently globally, enterprise that find themselves in the midst of the globalization trend need to ‘plant the flag’ in the countries they want to do business. Sales operations, fulfillment, customer service etc. all require customer facing activities and with that need physical presence in the countries where an enterprise wants to do business.
And with that any enterprise quickly enters the challenging area of ‘Global HR’, a term that is more than inadequate, since it doesn’t really exist…
What exists on the people side are HR professionals that understand more than one country from both a HR best practices and legislation perspective. But there is no single person in the world that knows all HR regulations and best practices, at best there are professionals who can straddle regions to a good enough detail such as Western Europe, Latin America to name a few.
On the software side, Global HR software on the contrary though, does exist, but as one can imagine it is a challenge to create and even more to maintain this kind of software. For an HR software vendor to be in the ‘Global HR’ system business, the vendor needs to understand the local content, the legislation and best practices that govern each of the countries the vendors wants to support. And despite there are a number of vendors offering ‘Global HR’ systems, none of them is truly 100% global, meaning that they support all languages, all local legislation and best practices in a single system that are happening on this world. The task itself is too big a task and the vendors look for the larger, more popular countries, where their customers and prospects want to take them. And the job doesn’t get easier for the vendor than for an enterprise, as the vendor needs to hire local experts who not only know the local country from a regulation and best practice perspective, but they need to keep monitoring their further evolution, as nothing ever stands still. But not only does a ‘Global HR’ vendor need to have the local experts, the vendor hasn’t done its job by just collecting the requirements, but needs to continuously build these requirements in the code of its products, test them, document, release and support them. Nothing trivial, but key for enterprise to understand when they look for a global HR product.
Moreover, vendors in the space need to understand the jargon and ‘lingo’ spoken in each of the supported countries. Few things turn off and confuse users more than consuming labels and messages in systems, so vendors cannot afford to look at translation of systems based on dictionary accurateness but need to pass the test of daily usage and stay on top of the lingual and cultural nuances each country’s HR practices demand.
Unfortunately the task doesn’t get easier, as the need for social, tax system and welfare reform is imminent all around the world, indeed a global phenomenon. While most of the first world economies struggle with an aging workforce and need to change legislation to support a fast growing number of retirement workers, the 2nd and 3rd world countries are both driven by a spirit of making their tax systems more competitive and simpler. In a number of 3rd world countries the task is even to introduce (and enforce) the very first tax, benefits and welfare systems. So on a worldwide level we notice an acceleration and increase of lawmaker activity that has profound effects on the legislative, statutory and regulatory frameworks under which enterprises need to operate when working on a global scale.
The good news for enterprises is though, as the task gets harder, scale gets more important, and the reason why enterprises look for Global HR vendors is, that these vendors have more scale than enterprises. And scale in this context comes from the number of people employed and paid. It is obvious that enterprise system vendors offering Global HR products will have a higher number of employees (at their customers) than even the largest enterprises can have employed across the world.
The second most prominent driver resulting in more interest in Global HR systems is the benefit enterprises have, when they achieve a global view on their in-house talent, regardless of employment location. The first world is quickly running out of people, while the 2nd and 3rd world produce more professionals that often are eager to help out in the 1st world on a project or even permanent basis. So before an enterprise cannot staff a function at all or needs to recruit from the outside, it may well look on a global level what capabilities, skills and talent it may have in other countries. With the rise of more project based activities and transformations in today’s enterprises, there is even higher demand for a global view on employees.
And lastly enterprises face cost pressure and talent shortage in the 1st world and before moving a function to another location worldwide, management needs to understand the cost of employment, the availability of talent and more from potential target markets. Nothing frustrates executives charged with global functions more than not having fast and efficient visibility into their global responsibility areas, and HR is one of the key areas. With employee related expenditures usually being the larges spending category in an enterprise it deserves attention.
The consequence of the above 3 major and most prominent trends is that enterprises are looking more and more for global HR solutions, even if they have been running a local vendor’s system, as HR leaders realize they can scale better through a vendor’s system that scales across countries, on a global scale.
And on the flipside it is becoming quickly conventional wisdom that disparate HR systems, across multiple countries are quickly becoming a burden to overall enterprise agility, as enterprises don’t have insight into what in most cases is their largest expense, people.
So no matter if motivated by the above three trends or scared by the above scenario of fragmented systems, we see an increased need and demand for Global HR solutions.
Stay tuned for Global HR Matters - How to get there - Part 2, that will focus on User Empowerment.
