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Peter Reilly Institute for Em ploymen t Studies (left)Tony WUlmS Royal ank of Scotland Group

The challenges o f glohal HR:

One w ay to go?Th ere are many benefits to centralorganisational control - the 'onecom pany ' approach - in our globalisedeconomy. But recen t research questionswheth er centralisation is always best andpoints to a more exible model

e are one company. We have oneset of customers. We have onlyone set of competitors. So whywouldn't we operate HR inexactly the same way across the

whole firm? Such comments, in this case from the HR director of a UK-centred global organisation, came up frequently during research for o urnew book, called Global HR: cha llenges facing the function

There are a number of reasons for this one company objective. Organisa-tions may want to promote common values, deliver consistent treatment tostaff wh erever they work and exp ort good business practice to all parts of theorganisation, especially following mergers or acquisitions. Or it may boildown to the centre's desire for greater control over dispersed operations soas to limit corporate exposure to ill-considered actions. Such an approach,

however, has profound consequences for the way HR operates in globalorganisations and may need to be reconsidered if it is not to create otherproblems in its wake.

Peter Reilly is director of HR researchand consultancy at the Institute forEmployment Studies. Tony Williamsis director of HR for markets andinternational banking at the Royal Bankof Scotland Group

WHY IS THE DESIRE to pull so strongly together as o

company apparent now? One reason may be that bad newtravels so fast these days. The febrile post-crash atmosphhas heightened tensions. Executive bonuses, persembarrassments and petty corruption have all hit medheadlines, and stock markets around the world punish coporate failure o r negative publicity severely: just think of tnumber of chief executives who have been ousted becaof their or their organisation's failings.

As a result, organisations are trying to protect their reptations against bad publicity and to ensure improved rimanagement. There is also the need to comply across torganisation with external regulation, such as the SarbaOxley Act 2002, or even voluntary codes such as those othe use of child labour. Again, poor compliance may haconsequences. Moreover, cash-strapped businesses are tring to rein in costs, and centralising power may be seen agood means to do this.

HR has to support this drive or it will be marginalisedseen as o ut of step with the required business thinking. fact, in our experience, HR is often in the vanguard of tmove, partly because it is attracted to the argument forcommon value system and so is energetically engaged in thcreation of common leadersh ip values and the selection adevelopment of those who will hold these leadership role

HR also sees much advantage to the management of t hfunction itself in a centralised approach, especially as thone company philosophy provides both a logic to, and just

fication for, the new service delivery model of globaregional shared service centres, corporate centres of extise and business partn ers placed in global business unit

This approach is facilitated by the stan dardisation of peple management principles, policies and practices, to ensuthe whole organisation operates not only consistently, balso efficiently. It is helped by the optimisation and automtion of processes on common IT platforms to improve thquality and speed. All these actions reduce functional coas a contribution to overall expenditure savings and delivthe aim of common outcomes.

How HR delivers acommon approach

HR H S CHOICE OF METHODS for delivering commnality, both within the function and for the organisatiThe first is dirigiste - or centrally driven. The second msees the common approach negotiated openly, but wpower at the centre, while a third form is still negotiatopenly but situates power in the business unit, function

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Promotes common values

Delivers consistent treatment to staff

Exports good business practiceto all parts of the organisation

reater control overdispersed operations

Cost control

Harmonisation can stifle innovation

Centre loses touch with sharp end of the business

Ill-conceived policies subverted at local level

HR is focus for frustration as agentof the corporate centre

Does not easily sit withworkforce segmen tation ''

C H A RT 1

Upsides and dow nsides of the o ne company appro ach

location. Finally t he fourth mode is emergent exploratoryand implicit.

Our impression is that more often than not HR has beenin dirigiste mode wh ere possible driving throug h the morecentralist approach because it is convinced that this is thecorporate imperative. This is also founded on a belief thatmost of what HR does the world over is the same and thatstatements of the unique challenges faced by any particularlocation are likely to be exaggerated; it m ight allow for legaland possibly employee relations reasons for difference but

that is all.So HR is dravsTi to an approach whereby the corporatecentre determines both the nature of the policy or practiceand how it will be implemented. Of course there are excep-tions where operating companies have more scope fordeciding on how things are implemented - but what w sawmuch less of in western organisations was the use of ena-bling frameworks and principles with operating companiesgenuinely free to choose their approach.

T H E D A N G E R IS T H AT

T H E C O R P O R AT EE N F O R C E R O F R U L E S

IN T E N D E D T O A V O I DN E G AT I V EH E A D L I N E S , R AT H ERT H A N A T R U S T E DA D V I S E R T O T H EB U S I N E S S

Downside r isks

THE REASONS FOR COMMONALITY are certainly justiable and organisations may not have any real choice escially in protecting corporate r eputation. T he route takenHR to ge t there is also understandab le but there are dowsides that the function wou ld be wise to consider.

First standardisation can stifle innovation. Asserting thathere is one way to do things prevents experimentation a

limits the learning you get from allowing people to mmistakes. Moreover if you have decided that the re will bsingle global approach to learning and development recruitmen t while this might be based on a good choicthe time the risk is that th ere will not be improvemen t if inot challenged by alternatives.

Second it suggests that the corporate centre knows bWe know from other research we have done that this toorisky. There have been complaints that centres of -

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expertise may be too remote and insufficiently in touch withwhat is going on at the sharp end of the business. It alsoassumes that all expertise rests in the centre and has theeffect of disempowering local HR operations. As one HRmanager observed, their role in the new service deliverymodel is to do, not think .

Thir d, if the policies and pra ctices are not well judged orthe mechanism for agreeing exceptions is not effective,then local management resentment may turn into outrightobjection or covert resistance. There may be superficialadherence to th e rules wh en, in reality, they are subverted.

Next, much of this local frustration may be directed at HRas agents of the corporate centre. The function has beendrawn into overseeing these common processes, especiallywhere the business leadership has abdicated responsibilityunder the guise of conforming to corporate governancerules. For instance, HR has been put in the sometimesunwelcome position of not only setting the method fordetermining executive bonuses, but also scrutinising theresults. HR then becomes the corporate enforcer of rulesintended to avoid negative headlines, rather than a trustedadviser to the business. Moreover, this makes it even harde rfor HR to address what it is that employees want out of theiremployment experience.

Finally, while harmonisation has its attractions, it does no tso easily sit with another HR driver workforce segmentation.These days we strive t o recognise the distinct needs of variousemployment groups and, through flexible benefits or tailoredlearning, try to personalise the people managem ent offering.But, while we extol the virtues of diversity, are we d enying itthrough our search for a common culture? Does it signal

that w e value sameness rather than difference?During our rese arch, we came across examples of organi-

sations whose narrow ethnocentric view of the world at thevery least produced foolish statements, but at worst led tolocal workforce dismay or dissatisfaction caused by whatare seen as modern colonial decisions. An example of thiscomes from a US company in a joint venture with a SriLankan firm, which declared it had a policy that no oneemployed in the partnership should be allowed to ride amotorcycle on work-related business, owing to the high costof insurance. It was pointed out, however, that even a basiccar was outside the financial means of most of the employ-ees in Sri Lanka and so, to enforce th is policy, the com pany

would have had to purchase the vehicles.

A different m odel in Asia?

SOME MAY SEE THIS as an exaggerated account of theconsequences of the actions that global companies believeare necessary to survive and prosper. Our argument in replyis that organisations do not always evaluate what they are

G L O B A L S E R V I C E

E C O N O M IE S O F S C A L ET H AT C A N N O T B EI G N O R E D , E S P E C I A L LYN O W - I N T H E S ER E C E S S I O N A R Y T I M E S

doing (certainly from a broader stakeholder perspectno r d o they sufficiently listen to themselves in the mannewhich they justify their decisions.

So i s there ano ther way that HR can hold the organisa

together and yet allow more diversity, experimentation local involvement? One source of thinking may come fthe manner in which m any Asian companies - and, it shobe emphasised, some western organisations - do businwhich is to decentralise more and give more control to ividual business units against minimum standards.

Tata is a good example in the way it behaves withinoriginal structure but also with respect to its acquired bnesses, which include Jaguar Land Rover and Tetley Te a . our own interviews, we found similar philosophiesHutchison Port Holdings and JSW Steel, Chinese Indian companies respectively. The key word used in cversations with them was empowerment - to empothe local HR teams and to accept the different cultnorm s of the local populations. Japanese compan ies tenapproach their HQ/operating company relationships toa different w a y. They take a b alanced view of subsidiary pformance, with attention given more to future potentialgrovrth rather than past performance, without stric t insttions from Japan . We heard, for example, at Canon, thatJapanese advisers from the corporate centre to be founLondon operated in a low-key manner, and certainly not dictatorial one.

One of the reasons, of course, for a decentralised managment style in many Asian companies is that the businstructu re is more that of a holding company overseeing sidiaries engaged in diverse business activities. Yet ther so the m essage that th e benefits of local fit might outwthose of comm onality.

Towards the connected company

OF COURSE, STANDARDISATION and a global servidelivery model lead to economies of scale that cannotignored, especially in these recessionary times, so thoperating th e so-called Anglo-Saxon model should avothrowing the baby out with the bathwater. But what Hmight need to do is more carefully decide what is command global, versus what is different and local, against som

well thought through criteria. This might mean, for instanca common HR information system, but local resourcing,one method of executive reward, ye t multiple ways of aliging local pay with the market (see chart 2 above .

One example of an organisation that h a s learnt some of thlessons of a one company approach comes from the ANbanking group. Historically, the company was a federatentity where something in the order of 30 P L units were frto operate as they chose, so long as they delivered the fina

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LOW COSTS OF COMMONALITY HIGH

CHART 2

O Global versu s local: An example of a flexible approach

cial results. There seemed to be no requirement for central

oversight. Then the business m odel changed to "one ANZ":the aim being to use the power of the whole firm and benefitfrom cross-selling. Since 2008/9, however, there has been amove away fi-om h e resultant, tight, corporate control and a"shift in the dial" towards giving people in the business u nitsmore responsibility, so long as it is not abused.

At each stage of this journey, HR followed suit. What itlearnt was not to try to standardise everything. It becameclear that two criteria should guide standardisation deci-sions: replicability and scale. Processes that could safely becopied and used to operate cross-nationally would be sub-ject to standardisation. Compensation, resourcing andlearning and development policies and practices are morelikely to fulfil these criteria than others where local/busi-ness unit customisation is more necessary.

Individual organisations will have their own answers towhat should be global and what should be local. The pointto emphasise is that it is the essential processes, populationsand tools that are the ones to control from the centre, not acrude imposition of one size fits all across the piece. Work-ing out what are th e real drivers of each HR activity shouldlead to working out the best governance model. While

Global R challengesfacing the HR functionis published by owerbit ly/gowerHR

engaging local HR managers in the process of settling the

questions may be time consuming, it should help to mathe outcom e stick over the longer term, as should setting ouclearly where decision-making responsibility lies. How HQmanages exceptions to standard policies gives a clue whether it is listening to operating company needs. The coporate centre should be open to and welcome ideas froanywhere in the organisation that might modify existipractice or build new areas of working together.

Our research conclusion is that the globalising procerequires a thoughtful approach. HR should harmonise pocies and practices, including how the function runs itselfwhere there is a real gain for the organisation. At the satime, local cultures need to be respected and their managment cadre encouraged to offer ideas where benefit to business far exceeds the savings that standardisation mioffer. This means more frameworks and fewer directivesmay mean that the "one company" mantra is replaced by "thconnected company", where the goal of integration retained, along with common tools, platforms and polprinciples, but within a model of m ore devolved accountabity to operating units to share/learn/r euse th e common ofings in the light of their ovi i particular needs.

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