Lisa C. Brown
Human Resource Challenges in the Global Environment
In the next decade, international issues will become more important to human resource (hereafter referred to as HR) professionals in the United States as a growing number of businesses participate in the global marketplace. Indeed, nearly 17 percent of U.S. corporate assets are invested overseas. Through early awareness of emerging international trends, HR professionals can help their companies respond to the international environment in the way best suited to their organizations. Compiling a complete laundry list of topics for the HR professional to monitor would in itself encompass an individual’s career. The scope of this paper is limited to three issues that HR professionals should closely monitor in the expanding global market. First, management must be aware of the host country workforce framework and structure. HR professionals must provide these services to the company by developing sound approaches. Second, the growing importance of international labor standards has fueled the need to understand apply these standards overseas. Finally, with a growing reliance on computers in relation to HR programs, HR professional must be aware of HR integration during development of company intranets.
U.S companies must be aware of the host country workforce framework and structure. Russia provides an excellent example as a big country with big needs – millions of potential consumers eager for goods and services denied them under communism. Since the fall of that system, a new market economy has grown quickly. Foreign businesses (an estimated 35,000 registered enterprises, not including joint ventures) now compete with each other and with Russian startups for market share.
Today, most U.S. companies are looking to replace expatriate employees with Russians at all organizational levels. Cost is a big part of the answer, primarily because Russian salaries in U.S. firms average 20 to 30 percent below U.S. employees’ wages, although the gap is narrowing, especially at senior levels. In addition, Russian workers don’t receive the housing, travel, and healthcare allowances that U.S. workers require.
Another reason for hiring Russians is that they, unlike U.S. employees, are more likely to work long-term in a company’s Russian operation. The hope is that these Russians will grow in their jobs, learn the trade inside out, become seasoned managers and spearhead their organizations’ strategic planning. The senior managers in foreign companies that are staffing up are still largely expatriate. The problem is that it’s hard to find Russians who have traveled, studied or worked abroad and have the right skills and experience for senior jobs.
The scarcity of Russian candidates able to fill management slots is due in part to a lack of familiarity with U.S. leadership and management, which calls for initiative and open communication. Most Russians have lived and worked in only one system, and many of these organizations were behemoths, and most jobs were highly specialized. The general director made all the decisions, and everyone else did as they were told. That working environment has left several legacies. One of the most influential might be called a “keep your mouth shut” style of working-a natural result of years spent under a system in which to talk and ask questions was to invite trouble. No wonder, then, that many Russians are hesitant to ask for help, take the initiative, admit to being confused or engage in open styles of communicating.
An unfortunate consequence of this style of working is that often U.S. managers don’t realize their messages aren’t getting across. U.S. managers think if they tell someone to do something, it should get done. In other words, they send a message and consider it received. Russian employees receive the message but rarely give feedback. Such differences in style make it easy for miscommunication to occur, especially when unfamiliar words or different modes of delivery are used. The result is that the Russian does something, usually not exactly what the manager had in mind, and then feels insecure, and the manager starts mumbling about the incompetence of Russian employees.
When talking about training and development for Russian employees, many HR and senior managers in U.S. firms maintain that a mix of hard and soft approaches and styles is necessary. U.S. managers must navigate between pride and ignorance of how things are done in the U.S. setting and
general and no one in particular was responsible for getting things done or for taking the initiative.
To help Russian employees understand and make better use of U.S. business practices, some companies offer special training programs. For example, one firm operating in Russia (Pepsi International Bottlers) identifies potential high-performing leaders, evaluates them across 10 to 15 categories and provides them with customized training based on their evaluations. This training, which is designed to enhance general managerial and personal skills, addresses areas such as negotiation, customer focus and business writing. In addition, the firm assigns a mentor to each Russian trainee and provides further on-the-job training. Sometimes this training involves travel to facilities in other countries. Typically, most Russians have had little experience with situational leadership, a result of communism, even if they’ve worked for some time as managers. Russians have traditionally followed a different model of leadership in which the group conforms to the leader’s style in all situations. The program helps Russians develop leadership skills, which is vital. Now let s explore the impact of international labor laws.
In the past several years a movement toward minimum international labor standards continues to gain strength. HR professionals with international responsibilities may be asked to assume responsibility for communicating and administering these standards in their organizations. Four forces are driving the trend toward international labor standards: pressure from social advocacy groups, labor union activities, resentment of multinational corporations (MNCs) in developing countries, and U.S. and European proposals for linkages between trade policy and human rights.
Social advocacy organizations committed to the establishment of international labor standards are growing more vocal in their efforts to encourage organizations to adopt codes of conduct. While apparel manufacturers remain the traditional targets of advocacy organizations, companies operating in other industries are no longer immune. In 1995, for example, the US-Guatemala Labor Project (USGLP) initiated a campaign to persuade Starbucks Coffee Company to adopt a code of conduct outlining its labor standards and those of its suppliers operating in Latin America.
At first, Starbucks management rejected the USGLP. Known for its progressive treatment of workers in the United States, the Seattle-based company believed its donations to international relief and development
agencies were generous enough to insulate it from charges of labor exploitation. The USGLP disagreed and continued to exert pressure on the company. After more than 70 USGLP-led demonstrations were held at Starbucks coffee bars around the country, the company agreed to draft a code of conduct. The code was released in October 1995.
Labor unions in the United States are also attempting to influence the international labor practices of U.S.-based corporations, arguing that U.S.-based employees are unable to compete with overseas workers who are paid below-market wages and benefits. As an example, in 1995 the National Labor Committee (NLC) and the Union of Needletrades, Industrial and Textile Employees (UNITE) approached The Gap, a major U.S. clothing retailer, about working conditions at its Mandarin factory in El Salvador. Finding the NLC and UNITE allegations valid, Gap management announced it would cancel its contract with the Mandarin facility. Contending the company had missed the point, the NLC and UNITE accused Gap management of abdicating its responsibility to the Mandarin workers by pulling out rather than using its influence to secure better working conditions. As a result, the company agreed to work with its contractor and the El Salvadoran government to bring the facility into compliance with acceptable labor standards and to resume operations once the standards were met.
In addition to social advocacy groups and unions in the United States, some developing countries are beginning to hold Western-based multinational corporations responsible for their foreign labor practices. In 1996, representatives from several Asian labor groups publicly chastised multinational corporations for failing to apply the same labor standards they use in Western countries to their Asian operations. The groups alleged the workplace environment in Asia is deteriorating as a result of MNC actions. As a result, some countries have announced they will become more vigilant in policing the labor conditions of workplaces operated by foreign multinationals. Vietnam, for example, has promised to strictly enforce safety rules at foreign-backed joint venture companies, including regulations addressing work hours, noise levels and pollution. In addition, the government recently passed a measure requiring Vietnamese managers
working for a foreign owned company to be paid at the same rate as any expatriate managers residing in Vietnam. To avoid safety mishaps, another proposal is circulating that would forbid foreign companies from importing used equipment.
Several U.S. and European initiatives for linkages between trade policy and human rights have also been proposed. In 1994, the Clinton administration proposed adding a “social clause” to the World Trade Organization (WTO) that would delineate acceptable international labor standards and create a mechanism for enforcement. Under the Clinton plan, countries permitting unfair labor practices would be subject to punitive trade sanctions. The governments of most developing countries strenuously object to consideration of any type of social clause. Accusing the United States and Europe of protectionist intent, the developing countries have refused to discuss the establishment of a working group within the WTO to explore the issue of labor standards. Next, recognizing a growing reliance on computers, let s look at why the HR professional must plan to expand HR programs through company Intranets.
Many companies are exploring or in the process of implementing an employee self-service (hereafter referred to as ESS) across international borders. Suppose a British employee of an international company logs onto an ESS system to enroll in a benefits program. If he sees a long list of health care benefits and choices related to a 401(k), he’s going to wonder what’s going on. In Great Britain, the government provides health care, so the health options are a non-issue. And if the program asks for a Social Security number, the employee is bound to be confused. To make that ESS useful and workable for British employees, the employer would need to replace the health care choices with something specific to Great Britain’s employment rules and use a different system for employee numbers.
The first problem companies face when crossing boundaries is, of course, getting the right equipment in place. Many Internet/intranet ESS applications can be described as three-tiered. The first tier is the desktop PC, where the employee uses a Web browser. The second tier is the Web server or application server, where the benefits application or other ESS application resides. The third tier is the back-end system-payroll, HR or other databases that provide data to the Web server. For the first tier,
the user’s workstation, the universality of the Internet has made the solution quite simple. Most likely, when using self-service internationally, employees will see the familiar Internet interfaces using Windows software and point-and-click techniques. An Intranet, which is available only to those in the company, is more secure than the Internet and more likely to be the interface for the ESS.
Although the user workstation seems to pose few problems for international ESS, distance can cause some problems for the middle tier – the Web servers and application servers. Usually the middle-tier application server is in corporate headquarters, perhaps in New York or Chicago. The server with back-end data is usually close to the application server as well, but now can be located in another country. When you extend a system internationally, a lot depends on where the back-end data sources are. If the benefits system is in Germany and the application server is in the United States, there may be issues related to speed of access. If the bandwidth is not large enough, the application server may not be able to access the information fast enough to present it to the employee through the application. Response time may be too slow, and users may find the system impractical.
The solutions to the response-time problem can create other problems. You can solve the problem of distance from the data by putting data on servers in the same country as the user. For example, a U.S. company with a benefits server and application server in Chicago could duplicate both servers in Germany, thereby eliminating the problem of response time. This solution, however, forces you to duplicate databases in Germany and the United States – a problem that magnifies if you duplicate data in more and more countries.
Even after you solve the problems of transmission speed and the availability of data, you may run into problems with user log-on and authentication. Some of those issues are concerned with privacy requirements. You can’t give just anyone access to the information. But log-on issues also are related to the way companies write their Web applications. For example, while you might use a Social Security number to authenticate an employee in the United States, you must use some other, more universal number for all employees in a company. Using an employee number often solves the problem.
Although companies are well on the way to resolving questions related to equipment and access to databases, the most challenging problems probably arise because HR programs, policies and benefits vary among countries. Some countries have national health insurance, others don’t. Retirement plans, investment options and, of course, tax laws vary widely. One of the toughest issues in managing large databases with disparate HR applications is that you don’t want to tell everybody everything. The HR manager must identify what applies to whom. The real issue is deciding what really applies to the employees of a given country, and that must be done on a case-by-case basis.
Several applications recently developed identify the user’s business unit, the location and the benefits plan to which the person is eligible. It then presents a personalized screen containing only the information applicable to that user. That shifts the burden of having the user choose from a dizzying array of choices to the approach in which the developer of the ESS system ensures that the system displays only the choices that apply. Simply put, you can’t teach all the employees how to apply the rules, you have to have all your business rules built into the interface screens.
Most transactions are practical in theory, but this poses another possible problem. Not only must you filter in just the right information, you must send the information you get to the right places. The reality is that ESS has the potential for impact on many systems. Take even a simple address change. How many systems must this update be cascaded to? Do these systems have open or well-documented interfaces to facilitate the transaction? Does the transaction require electronic signatures? Trying to integrate an ESS with many non-HR business applications is still difficult, and even more so when working across borders.
In conclusion, U.S. HR professionals must embrace and work around such workforce structure and framework differences such as those in the Russian workplace. You must first recognize the different frameworks that Russians bring to their jobs. Sometimes this means learning how to distinguish between I can’t and I don’t know how. It’s uncommon for Russians to say they don’t know how to do something and more common for them to simply say they can’t do it or that doing it is not possible. This tendency to focus on identifying obstacles instead of inventing solutions is another legacy of the old Soviet system. Adding and training Russian staff
members to the HR department could complement employee discussions of professional development topics.
International labor standards are likely to remain a contentious issue over the next several years. The unique combination of forces such as pressure from social advocacy groups, labor union activities, resentment of MNCs operating in developing countries, and proposed linkages between trade policy and labor standards is creating an environment conducive to adoption of international labor standards. To prepare for those standards, human resource professionals with international responsibilities should monitor developments closely and begin to consider an appropriate strategic response. Finally, If the goal of HR is to find every possible way to improve service to employees without increasing its own burden, an international Intranet can offer a major advantage. The real role of HR is to develop and counsel employees and that s just as true whether the employees are in New York, London or Tokyo. Intranets can cross national boundaries and allow U.S. HR professionals to extend to international employees the same opportunities that may now be in place at the U.S. home office.
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