Don't Do It: US-Centric Global Operations

Sounds like a contradiction in terms, doesn't it?  How can a company profess to have global operations while clinging to a US-centric mode of dealing with its overseas employees?

Sad to say though, it's easy; happens all the time.  And causes problems across the border with an alarming frequency.

One example of many

For example: Recently one of my US-based clients faced a challenge in a particular country regarding high employee separations coupled with difficulty in recruiting qualified staff.   The company was at a loss to understand the root cause of their problems, as they felt that they were providing a more generous reward package for employees then was their normal practice in the US.  The trouble is, they were looking at the problem from a US-centric perspective.

A quick study revealed that the clients’ international employees were indeed receiving a great deal more than their American counterparts.  However, in many areas they were in fact being given no more than the minimum benefit provisions that were mandated by statutory requirement.  They were receiving only what the company was compelled to grant.  How do you attract, motivate and retain quality staff when the message of your actions is that you are only willing to offer what government regulations say you must?

This client bemoaned having to grant four weeks of vacation upon hire, because it was the law, when their US employees received only two weeks after completing a full year of employment.  They thought they were being generous, and quite the global employer.

But then they discovered that common practice indicated that five or more weeks were the norm.   To their employees and prospective candidates they offered no more than what they were required to offer by law.  By ignoring competitive practice they were now paying a steep price in struggling to build and retain a quality staff.  They had earned a reputation in the local market as a “minimalist employer.”

And it's hard to dig yourself out of that hole.

Establishing the employee footprint

When American companies first establish operations overseas Human Resources faces a number of challenges that they are unaccustomed to dealing with at home.  Every country is a separate and unique entity, with differences in HR policies, practices, taxation, local competitiveness and statutory requirements, each of which must be acknowledged and addressed in order to develop and maintain a successful operation.  On top of that are the vagaries of the competitive marketplace, where the same job is paid differently from Rome to Oslo to Buenos Aires – and typically coupled with differing social charges and benefit coverage.

Choosing to operate under the guidance of U.S employment law and US-based corporate practices ("what we do at home") is a failed strategy.  Maintaining such a US focus (usually for ease of administration) will bring you grief; grief from your employees, from those you hope to hire, and most worrisome of all from local governments whose laws you may have ignored or bypassed.

Think how you would feel if elements of your own reward package, policies or procedures were based on European or Asian common practice.   That wouldn’t go over well with you, now would it?

If your organization has decided that your business strategy requires you to maintain a staff presence in a particular country, then I would advise you to treat that operation the way you would its U.S. counterpart; provide competitive terms and conditions that will attract and retain the right caliber of employee in that country – and ignore how their packages might compare with the US or other country counterparts.  If you are not willing to make that commitment, from an HR perspective you would be better off not to engage employees in that country.

Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations.  He is also associated with several HR Consulting firms as a contributing consultant.  Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation.  He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a brood of cats.

Creative Commons image courtesy of Oskay

Comments

[Jacque Vilet]

Great advice Chuck! I worked with a CEO once that couldn't understand why employees in Europe had so many holidays. He didn't see the value in having any more than 10-12 days when many countries in Europe have 20 or more.

Companies must, must, must look at not only what is mandatory in a given country but what is competitive.

[E. James (Jim) Brennan]

Thanks for the reminder, Chuck. All rewards are valued relative to the local expectation level. Every country and every culture has its own standard of comparison. "Identical" may be easy to administer, but it is rarely appropriate, often illegal and typically shortsighted.

Anyone whose HQ suffers from the delusion that everyplace is the same needs a copy of your article to show top management.

[John Nichols]

This is an age old problem and will continue as such so long as the drive is the head office country and everything is measured against, in this case the $.
It will need a mindset change from being a business with operations abroad to a truely international company.
Sadly, also, it would appear that fewer HQ staff, inlcuding HR, get to travel and get to know what it's like in eachlocation.

[Iola]

I've been hearing this for close to twenty years. I even heard of one instance where the local office lied to the US Head Office in order to get the right candidate: they gave the employee four weeks, but told the US they'd given three.

US policy was a maximum of three weeks leave. Local law was a minimum of three weeks leave, plus statutory holidays, sick leave plus bereavement leave, jury duty etc. Custom was for management employees to get four weeks' leave.

[Chris]

Great point Chuck!! I would just add that the greatest violation of this principle in US multinationals is in the variable compensation space.

How many readers of your article shook their heads and thought "silly neophytes"...and yet have variable compensation programs that assume that, for example, their Director in France should have the same bonus opportunity as their Director in the US!! Really?? Different vacation entitlements, but the same bonus opportunity??

Why can US multinationals have good global (i.e., local) discipline on fixed remuneration, and go completely flaccid on variable comp??

[Judy]

Great article! We are struggling with this very issue since acquiring a location in a rural part of Alberta, Canada. Any advice on gathering reliable compensation data too?