Worldwide firms face worldwide challenges

Silicon Valley Business Journal – by Becky Bergman

It really isn’t a one HR-policy-fits-all kind of world
Silicon Valley Business Journal – by Becky Bergman

For James Holland, helping local companies establish a global presence in India requires a keen understanding of the cultural norms, legal issues and financial responsibilities. And a phone number for a good Hindu religious official.

Hosting a ceremonial event and blessing a new site is part of doing business in the country and a fast way to helping workers start the new venture off on the right foot, according to Mr. Holland, a partner with Menlo Park-based human resource executive search and consulting firm Valerie Frederickson & Co. “This is important because it shows respect for the workers,” he says.

But the custom of cracking coconuts and parading an elephant around the premise for good luck is one small, albeit significant, detail U.S. executives could easily overlook without the guidance of a human resource expert. Mr. Holland’s experience serves as a cautionary tale for local companies and their human resources executives looking to expand elsewhere in the world.

Setting up a foreign presence is no easy task, warns Valerie Frederickson, CEO and company founder. And if going abroad is part of a cost-cutting measure, forget about it.

“If your strategy around offshoring or going global is to save money, Kansas may be cheaper in the long run than Asia,” says Ms. Frederickson. “The major reason for going into other countries is not to save money, but to increase your presence in the local market.”

There isn’t a company in Silicon Valley that would turn up its nose at the savings from paying a foreign worker $2,500 a month rather than a Silicon Valley worker $15,000 a month, when wages, benefits and overhead are included. But with those savings come headaches — in collaboration, in quality control, in public relations and in clashing cultures.

Instead of pure economics, access to new markets made up of a growing population of middle class people in countries like China and India is enough to entice American corporations to go globetrotting. From hiring to firing, human resource executives face a myriad of issues, says Bruce McKern, director for the Stanford Sloan Masters Program and a senior lecturer in international business at the Stanford Graduate School of Business.

For starters, Mr. McKern suggests that U.S. companies partner with local business leaders familiar with the economy, customers and government. “A joint venture gives human resources an insight into the region and how things work,” he says. “Having this information is valuable. It helps them identify the right people for the jobs, develop proper training and correctly match salary conditions with other competitors.”

A partnership can also help companies understand and navigate strong labor boards, adds Mr. McKern. In many European countries, employee contracts make it difficult to fire workers. While lean business often translates to mass layoffs in the U.S., European regulators prohibit companies from reducing their work force or shuttering offices overseas.

In Asia, where many U.S.-based companies operate shifts around the clock, it is critical to understand that many countries still frown upon women working at night. “The only women that are out after dark are prostitutes,” says Ms. Frederickson, who has worked with more than 200 corporations since she opened her consultancy firm in 1995.

“So if company management schedules a woman to work at night, they are literally forcing her to choose between putting food on the table and being scorned by her family or not working and struggling.”

Common mistakes include:

• Failing to understand the local culture — Say, building a manufacturing plant in rural Korea where most of the employees quit so they can work in the fields for six months a year.

• Motivation — Using the same compensation methods for bonuses around the world instead of customizing it per country. “In the Philippines, you often pay bonuses in bags of rice, not bags of cash,” says Ms. Frederickson.

•Global clocks — Assuming the staff can be heroes and work 24/7 via cell phones, Blackberries and laptops and not risk health and family.

Companies risk offending local citizens and breaking local laws, resulting in stiff penalties, when they fail to understand all the human resources issues that come with setting up overseas operations. Wal-Mart faced just that issue earlier this year when the U.S. retail giant shuttered 85 stores in Germany and another 16 in South Korea, leaving a trail of 12,000-plus unemployed workers in its wake.