International Human
Resource Management
Ann Rennie and Rita McGee
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Published by the Chartered Institute of Personnel and Development,
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First published 2012
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Contents
Introductionvi
The authors
xiv
Referencesxv
Further reading
xix
Section 1:Setting the strategic context: structure, roles and
culture1
Section 1.1: Making the link between global strategy and an international HR
framework3
Tool 1Some contextual theory for adding support to strategic
business cases around internationalisation
3
Tool 2 PESTLE analysis – worldwide
12
Tool 3 PESTLE analysis – examples of country-specific analyses
19
Tool 4Linking global variables to roles for international HR
professionals34
Tool 5Linking roles to the required competencies for HR
professionals40
Section 1.2: International HR structures and capabilities
47
Tool 6 How international is your HR function?
47
Tool 7 International HR policies and practices: to centralise or
decentralise?56
Tool 8 Structure and locations for HR teams
64
Section 1.3: International employee relations
69
Tool 9Gathering the necessary information for managing
international employee relations
71
Section 1.4: Global HR data provision and international e-HR systems
78
Tool 10What data is required for managing HR on a more
international basis?
79
Tool 11How can transactional e-HR be best enabled on an
international basis?
85
Section 1.5: Dealing with cultural differences internationally
91
Tool 12 Framing the cultural dimensions of IHRM
92
Tool 13 Culture quiz
102
Tool 14 Taking account of different business norms and protocols 111
iii
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Contents
Section 2: International talent management
115
Section 2.1: Planning for global talent management
115
Tool 15Moving towards a global planning model for talent
management115
Tool 16 Different models for staffing an MNC
123
Tool 17A comprehensive guide to managing employees on a
global basis
129
Section 2.2: ‘International’ employees
140
Tool 18 Select for success; prevent failure
141
Section 2.3: Recruiting locally employed staff
149
Tool 19 Gathering the data
149
Tool 20 Attracting local talent
165
Section 3: International compensation and benefits
173
Section 3.1: The psychological contract
175
Tool 21Making the link between the psychological contract and
total reward
175
Section 3.2: Expatriates
183
Tool 22Rewarding expatriate staff – what strategy to
adopt?183
Tool 23 Putting together an expatriate total reward package
189
Section 3.3: Locally employed staff and other categories
196
Tool 24 Total reward structures for locally recruited staff
196
Tool 25A checklist of factors to be aware of for compensating
202
local recruits
Tool 26 Dealing with non-typical groups of employees
208
Section 4: International talent development
Section 4.1: Defining and planning for talent
Tool 27 Defining talent for development purposes
27.1 Defining talent
27.2 Different types of career ladders
Tool 28 Competencies – friend or foe?
Tool 29 The development plan
Tool 30 Roles in development
Section 4.2: Induction/on-boarding
Tool 31 Inducting expatriates
Tool 32 Inducting local recruits
225
226
226
228
231
241
247
257
261
262
274
iv
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Contents
Section 4.3: Learning for locally recruited employees
278
Tool 33 Key elements
278
Section 4.4: Succession planning in an international context
285
Tool 34 International succession planning
286
Section 4.5: International performance management
303
Tool 35Adapting a performance management system to translate
internationally303
Tool 36 The performance management case study
310
Section 4.6: Repatriation
313
Tool 37 Supporting successful repatriation
313
Section 5: Managing for special situations
319
Section 5.1: HR policies and practices for managing mergers and acquisitions 320
Tool 38Harmonising HR and reward systems – values and
fairness321
331
Section 5.2: Risks and crises: how to pre-empt and manage
Tool 39Preparing for risks: terrorism, kidnapping and other
security issues
334
Tool 40 Designing an evacuation plan
343
Tool 41 Relocation of an organisation in a crisis
348
Tool 42Managing corruption: designing policies and practices to
address it at an individual level
355
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Introduction
Introduction
This is the first international HRM (IHRM) toolkit published by the CIPD. This toolkit
focuses on the core aspects of HRM we consider essential for all international
practitioners.
We start by exploring the strategic context in Section 1. We look at structure roles
and culture. In Section 2 we consider international talent management and provide
an array of tools to both drive strategy and overcome the challenges of talent
management on a global basis. Section 3 covers tools and techniques for rewarding
an international workforce. Section 4 continues with the theme of talent management
but here we focus on international talent development. Finally, in Section 5, we cover
the management of special situations including tackling crises and managing a variety of
risky situations.
Picture this scenario:
You are a senior HR business partner in an organisation based in the UK. It has
just completed acquiring companies in Asia and the USA. You have been informed
you are to be promoted to the newly established position of Group HR Director.
Your initial reaction is one of excitement, but also concern that, although you are
studying for the CIPD’s IHRM qualifications, you have had no practical experience
in dealing with IHRM issues. Furthermore, you have travelled abroad extensively
but have never visited the countries where the new subsidiaries are based. You
need to learn fast, but do not know where to start. You know you do not have
time to read much and need to get going quickly in a more practical way so as to
establish your priorities and plans for moving forward. You need some ideas and a
few ‘quick wins’ to get things moving.
This Toolkit is targeted at people who, like the HR manager above, are currently in
HR roles in their own country and moving or contemplating a move into more of an
international role. It is also useful for those already in an IHRM role, as it will help them
increase their capability and range of tools and techniques to use in an international
setting. Finally, it will be useful for HR consultants working in this area. It doesn’t seek to
replace existing textbooks or the CIPD’s course on ‘Introduction to International HRM’,
but rather, it complements these through providing a whole range of practical, downto-earth tools and techniques. Not only will it assist international HR professionals to
vi
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Since IHRM is so complex and vast a subject, this Toolkit could easily run to thousands
of pages. Also, since this is a Toolkit, rather than a textbook, we have tried to use a
variety of different tools, to appeal to different types of audiences and participants.
We could have used many more examples and cases studies, but are conscious that
these can date quickly. So we have restricted ourselves to those examples which illustrate best practice and help you to construct the most relevant, practical and useful
policies and practices. In many cases, we refer you to other sources of information for
greater in-depth reading if you need to gather more data and examples of what ‘best
practice’ organisations are doing.
Introduction
do their jobs well, it will ultimately help them to provide greater impact on the business
than they might otherwise.
Finally, in order for you to understand the background to our conclusions or recommended tools we have included some of the IHRM theory. Not all readers will warm
to the theoretical data but it is there to help explain the rationale for some tools. The
tools do, however, stand alone and can be used without a need to refer to the theory.
In some cases there are multiple theories but we have selected one or two examples
which we feel best help to support particular ways of doing things.
A rapidly globalising world
In these days of increasing globalisation and easier mobility and communications
between countries, workers are as likely to be located in Beijing, or Chennai, as they
are in the UK. Think about making a phone call to enquire about a banking product,
going online to ‘chat’ to an expert about a problem you have with your computer, or
trading on eBay, to name a few common scenarios.
‘International HR management’1 refers to an extension of HR that relates to having
people working overseas. These can be either expatriate staff, those who are recruited
from or work within their own home countries (locally recruited staff), or even thirdcountry nationals (individuals from neither the ‘parent’ nor ‘home’ country, but rather
a third country. The kinds of organisations in which this is the case can range from
those with a small office or subsidiary based abroad, to major multinational corporations, international public-sector organisations, or international NGOs (charities)
with sites all over the world. It can also encompass an organisation working in a joint
partnership with another organisation overseas. Alternatively it could be a homebased organisation with overseas offices or a company with selected departments
which are offshore.
vii
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Introduction
Any of these models makes it more likely that an HR professional is going to have to
consider how he or she can best provide policies, practices and services to a diverse
set of employees located in potentially very different locations and operating environments. What works well in the home country may be a disaster in another for all
kinds of reasons, as will be outlined later on. Without a deep knowledge of what is
appropriate in one environment versus another, it is easy to make some fundamental
errors of judgement and poor decisions around people management.
The differences between IHRM and HRM involve:
• being unpredictable and influenced more by external factors
• requiring more functions
• having continuously changing perspectives
• requiring more intervention in employees’ personal lives
• being more risky.
What do we mean by ‘international’?
Throughout the Toolkit we have used the term ‘international HRM’ to refer to any
HR professional who is working in an organisation which operates in more than one
country. However, when we refer to different types of organisations this definition
does not work so well, and we debated which definitions to use to explain the
different international structures within which an IHRM professional may be working.
We have included below our own definitions and these are used throughout the
Toolkit. We recognise that some organisations will be a hybrid of the types listed
here.
viii
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Explanation
Examples
National with overseas
subsidiaries
Some of you will be working
for companies which have
ambitions to open overseas
subsidiaries.
Topshop is a good example
of an organisation which
is UK-based but which
has successfully opened
an operation in the USA.
It has plans to expand
its international agenda,
which will change its status
to that of a multinational
corporation.
International organisations
This Toolkit is called
‘International HRM’ and
that is the term we use
when referring to HR
professionals working across
borders. However, in our
opinion, technically an
‘international organisation’ is
one which is either owned
by several governments
(intergovernmental
organisations) or
include global non-profit
organisations (international
non-governmental
organisations). The term
‘international organisation’
has now fallen into everyday
management use and
is applied to all kinds of
organisations. However, we
are keeping to its original
definition to distinguish
such organisations from
multinational corporations
and enterprises.
NATO, the International
Olympic Committee and the
World Bank are examples
of truly international
organisations.
Introduction
Type
The World Bank is made up
of 123 countries, which are
represented on its board.
(Some board members
represent more than one
country.)
NATO is an organisation
whose membership consists
of 28 countries.
The UN organisations are
also included in this category.
Charities such as Medicins
Sans Frontiers and Oxfam
are examples of the
subcategory ‘international
non-governmental
organisations’.
ix
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Introduction
Type
Explanation
Examples
Multinational corporations
(MNCs) or enterprises
(MNEs)
An organisation which
operates in multiple countries
and which derives at least
25% of its income from
countries overseas. Normally
the company or organisation
has a home nation and has
developed business overseas
as it has grown, becoming
more dependent on income
from overseas companies.
Most MNCs are either
American, European or
Japanese. Leading MNCs
include Nike, AOL, Toyota,
Coca-Cola, Honda, Toshiba
and WalMart.
MNCs and MNEs do not all look the same and they are often very different in terms
of their underpinning strategy. They have a choice about whether they will operate
as a global entity, which normally means that business strategy and policies are determined globally and are integrated across the worldwide organisation. Alternatively
they could adopt a multi-domestic strategy which allows greater autonomy to
respond to local needs or culture. These are based on Porter’s original definitions
of different types of organisations (see Tool 6 for more detail about these). Finally, a
third kind of organisation is that of a transnational organisation. This is really a hybrid
of Porter’s two types, comprising a set of independent organisations, operating
independently but bound together by a common ideology and/or cross-promotion
and subsidisation.
In this Toolkit we will look at both international organisations and MNCs as defined
above. Case studies have been taken from the World Bank and international organisations as defined by the OECD. There are also examples of MNCs and MNEs which
work to a global or multi-domestic strategy.
Identify which type is dominant in your organisation and use this definition as you
work through the tools, so that you can choose those tools which lend themselves
more directly to your own kind of organisation.
Regardless of the type of organisation, policies, practices and HR systems must
be compatible and effective across the world, and need to balance the needs,
wants and desires of all the various groups of employees, whilst remaining costeffective. Achieving the correct balance between having an integrated set of HR
policies and practices while remaining sufficiently flexible to allow for differences
x
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Initial scenario
To get started, let’s paint a scenario that allows for an initial introduction to the topic
of IHRM. This can be used as a case study if you want to develop some initial thinking
in a team about what IHRM might entail. It will be used later (Tool 18) in more depth
as a case study in how to handle expatriate recruitment and again (Tool 39) as an
example of planning around security issues.
Introduction
in diverse business and cultural settings, is a major challenge for the global HR
practitioner.
Case study to introduce the concepts of IHRM
An employee is being groomed for a future position at an executive level within
a multinational organisation in the petrochemical industry. She has performed a
variety of roles within the company, all of which were located in her home country,
and in non-technical areas. The organisation’s policy is for each individual on its fast
track to occupy at least one position overseas, running a subsidiary or overseas
office.
The individual was offered a position in a predominantly Arabic-speaking and
Muslim North African country. It was a relatively new location for the organisation.
It had opened an office there because oil had recently been discovered offshore
and there was a great opportunity to drill for oil and share in the proceeds with
the government.
The employee had not been briefed in any way about the country, its
concerns or politics, only about the exciting oil partnership deal. She had
that as it was located close to Europe, she could fly back to her home
fairly easily if required. With a husband willing to take a leave of absence,
young children prepared, she was all set.
security
decided
country
and her
A few weeks before starting her new assignment, she travelled to the country
in question. Her first meeting was with the US ambassador (there was no UK
embassy in the country), who warned her that her forthcoming appointment
was already widely known about, and not just in a positive way. She was already
apparently on the radar of Al-Qaeda, which was ‘known to be operating within
xi
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Introduction
the country’. What’s more, her place of residence was right next to the TV station,
which had been taken over recently during a coup d’état.
To make matters worse, on meeting with the newly appointed oil minister, he
announced that the formula for the royalties split was being amended, so that
her organisation would receive less than what had been agreed upon initially, so it
seemed she would face a tough challenge in dealing with the government.
The employee met with a couple of locally recruited staff to get acquainted with
them in advance of her assignment. The ‘employees’ turned out to be contractors,
and all appeared to be relatives of government ministers, their appointments
ratified by the government. None spoke English and no one had any expertise in
the oil industry.
Finally, the employee discovered that there were no schools which provided
schooling in English – or even French. Arabic was the national language. With small
children, she had assumed there would be plenty of English-speaking nannies and
teachers. As for her husband, who had planned to take leave of absence from
his job, it transpired that the government was not granting entry visas for anyone
other than direct employees working for organisations that had contracted with
the government.
What was the employee to do?
What should the employee have done differently? What should HR have done?
What policies, steps, and practices should it have had in place to inform, educate
and assist the employee before accepting the position? In your view, was this right
kind of appointment for her? If not, why not? If yes, what kind of ongoing support
and practices could the parent organisation have put in place to assist the employee
and make the assignment a success?
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1 Consider your organisation’s career development policies. What are the gaps
when it comes to incorporating international assignments? (Section 3)
2 What kinds of data, information and briefing systems are available for such
assignments? How best could they be delivered and by whom? (Sections 1 and 5)
3 Think about your organisation’s family and diversity policies. How relevant are they
for those employees located abroad? Do they need to be adapted? (Section 2)
4 Do you have a mentoring programme in place that could be used to good effect in
this situation? (Section 2)
5 How is knowledge management handled? How can the lessons learned from this
(extremely difficult) assignment be used to inform others in similar situations?
(Section 1)
6 How can you best reward individuals for accepting international assignments?
(Section 3)
7 Does your organisation have a talent management policy? If so, does it extend
to recruitment of local staff? How is such recruitment carried out? What
­development would have helped? (Sections 2 and 4)
8 How are your organisation’s ethics policies set up? How does it deal with issues
of corruption, nepotism with regard to employees, contractors and partners or
clients? (Section 5)
9 Does your organisation have any policies around security and crisis management?
What are the gaps? (Section 5)
10 Does your organisation have any policies on repatriation? (Section 4)
11Does your organisation have any policies around dealing with different
stakeholders, including governments and local contacts? (Section 5)
Introduction
Suggestions for a deeper discussion
Each of these different areas will be covered in detail in the tools contained within the
five sections that follow.
Note
1 Technically speaking, one can differentiate global HRM from international HRM in
the following ways, as defined by Brewster et al (2004):
Global HRM: managing HR activities through the application of global rule sets.
International HRM: managing an international mobile workforce.
For this Toolkit, we are including both concepts to provide a more comprehensive
set of tools and ideas.
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the authors
The authors
Ann Rennie FCIPD, FRSA, MCIB, BSc (Hons)
Ann’s background lies in IHRM in senior line positions within the international organisation, banking and NGO sectors. She has extensive experience in implementing and
advising on international HR and change programmes, as well as in global capacitybuilding and talent management in both developed and developing countries, most
notably for international organisations, UN agencies and public sector organisations in
Asia.
She was most recently the Director for Human Resources Operations for the World
Bank, covering 160 countries, and based in Washington, DC. She also held a number
of non-executive director positions worldwide, including for the Department for
International Development, the Association for Human Resource Management in
International Organizations, The Prince’s Trust, Thamesmead Town, Reed Executive
and a large US-based credit union. Additionally, Ann held senior HR roles for NatWest
Bank and the International Monetary Fund.
Ann is a qualified leadership coach.
Rita McGee FCIPD
Rita McGee specialises in the strategic development of HR functions. Previously HR
Director of the Pepe Group, she has also worked for Kingfisher and BTR (currently
known as Invensys). She works as a consultant, trainer, facilitator and executive coach.
She has designed and delivered training in talent management to major international
organisations. She has consulted in the UK and internationally on the development of
business and HR strategy including talent management and succession planning.
She runs public courses for the CIPD as well as other organisations. She has worked in
Europe, Asia, the USA and Africa.
Rita is a Chartered Fellow of the CIPD.
www.rmgconsulting.com
xiv
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Global Talent Pool: Lessons from the BRICS Countries: http://www.levininstitute.org/pdf/
LevinBRICSFinal.pdf
TORNIKOSKI, C. (2010) Expatriates: Compensation information processing and
affective commitment: A psychological and total reward perspective, Cross Cultural
Management: An International Journal, Vol. 18, No. 2, pp 214–235.
TROMPENAARS, F. and HAMPDEN-TURNER, C. (2001) 21 Leaders for the 21st
Century: How Innovative Leaders Manage in the Digital Age, New York: McGraw-Hill.
TROMPENAARS, F. and HAMPDEN-TURNER, C. (2009) Innovating in a Global Crisis,
Oxford: Innovative Ideas.
TUNG, R.L. (1984) Strategic management of human resource in the multinational
enterprise. HR Management, Vol. 23, No. 2.
UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (2007)
World Investment Report, New York and Geneva: United Nations.
WARD, C. and KENNEDY, A. (1999) Coping with Cross-cultural Transition, Journal of
Cross-cultural Psychology, September, p 32.
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BEGLEY, T. and BOYD, D. (2000) Articulating Corporate Values through Human
Resource Policies, Business Horizons, July–August, 8–12.
BRAITHWAITE, J. and DRAHOS, P. (2000) Global Business Regulation. Cambridge:
Cambridge University Press.
BREWSTER, C., HARRIS, H. and SPARROW, P. (2004) Globalising HR. Executive
briefing. London: Chartered Institute of Personnel and Development.
Further reading
Further reading
FARNDALE, E. and PAAUWE, J. (2005) The Role of Corporate HR Functions in MNCs:
The Interplay Between Corporate, Regional/National and Plant Level. Ithaca, NY: Cornell
University ILR School.
KELLEY, C. and MEYERS, J. (1992) Cross-Cultural Adaptability Inventory (CCAI).
Minneapolis, MN: National Computer Systems.
RALSTON, D.A., HOLT, D.A., TERPSTRA, R.H. and YU, K.C. (2008) The Impact of
National Culture and Economic Ideology on Managerial Work Values: A study of the
United States, Russia, Japan and China, Journal of International Business Studies, Vol. 39,
No. 1, pp 8–26.
RIDLEY, T. (2011) Evacuations: Evacuation Planning for International and Transnational
Crisis [Kindle edition].
UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT. (2007)
World Investment Report. New York and Geneva: United Nations.
WARD, C. and KENNEDY, A. (1999) The Measurement of Sociocultural Adaptation,
International Journal of Intercultural Relations, Vol. 23, No. 4, pp 659–677.
WISMAR, M., PALM, W., FIGUERAS, J., ERNST, K. and VAN GINNEKEN, E. (eds)
(2011) Cross-border Health Care in the European Union, European Observatory
on Health Systems and Policies: http://www.euro.who.int/__data/assets/pdf_
file/0004/135994/e94875.pdf
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Introduction
Consider the following scenario:
You are an HR director of a small niche hotel chain, catering to wealthy tourists,
which is wholly British-owned and located in the UK and Ireland. Despite the recent
economic downturn, the business is still moderately successful. Your boss, the CEO, is
keen to expand on this success, but the UK market is already saturated. He spots an
opportunity to buy a small niche hotel chain in Mexico. It is currently a great opportunity, he says, as it is virtually being given away because of all the criminal activities and
violence there! He has been advised by the Mexican owner that the hotels are located
in sites away from all the troubles, and that tourists, especially from the USA, are still
visiting in quite large numbers.
You immediately have a number of questions and concerns. You are tempted to
respond based on your ‘gut feel’. You start saying, ‘Yes, but...’ and think of all the
immediate issues your organisation is likely to face, such as how to manage and recruit
from within Mexico, language concerns, security, local health and safety issues and
so on. Your boss frowns, explaining what a good move this is and how the timing
is just right. You realise you need to take a more positive approach, and decide you
need to arm yourself with appropriate facts and have some thought-out strategic
options to present to your CEO. You recognise that it is the job of HR to develop
an understanding of relevant factors pertaining to expansion abroad, since a lack of
knowledge can result in inappropriate policies and practices, with consequences for the
organisation ranging from embarrassing to potentially outright disastrous!
Certainly, gut feel is important, but for an international HR manager or director, or
indeed anyone who has been tasked with people management support responsibilities,
there needs to be more than this. You need to be informed and well prepared to a)
help the organisation to make its business strategy and goals a success, and b) have the
necessary people-related tools, procedures and practices to help it happen smoothly,
cost-effectively and efficiently. In addition, and as this case clearly illustrates, you will
want to arm yourself quickly with enough knowledge and data about all aspects of
Setting the strategic context: structure, roles and culture
Section 1
Setting the strategic context:
structure, roles and culture
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Setting the strategic context: structure, roles and culture
the country to be able to add value to the original business decision, rather than just
reacting, ideally before it is actually signed and sealed!
This section comprises tools to help you do just that. Firstly, we start with a basic
exercise which is aimed at the more academically inclined, giving you some frameworks to use when making arguments and proposals that support (or show why they
don’t support) the business strategy.
We then go on to techniques that help make the links between a global business
strategy and an international HR strategy, covering ways to collect and sort data, and
then developing the necessary HR policies and procedures required. This includes
whether they are more likely to be effective as global policies or whether, in certain
cases, it would be better to work on a targeted and more local basis, country by
country.
We then suggest ways of making links between HR policies and practices to required
roles and competencies for HR professionals working in an IHRM environment, before
addressing potential ways of organising and locating such HR teams.
International employee relations form a key component of IHRM and pose all kinds of
issues for a globalising organisation, and we suggest sources of information and likely
issues you need to be on top of. We then consider how data and e-HR systems can
support international operations.
Lastly, we look at the all-important subject of culture. Economists and experienced
HR practitioners working in international domains generally agree that culture and
the management of cultural differences are the most important factors in managing
international operations. Many an organisation has failed on the basis of miscalculations about cultural norms and ways of working and living. We offer some tips and
techniques for exploring – and capitalising – on these differences in a global setting.
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Tool 1
Some contextual theory for
adding support to strategic
business cases around
internationalisation
Facilitator’s notes
Overview
This Toolkit is a practical aid, not a textbook. However, we recognise that we are
catering for all kinds of organisations, big and small, who are moving into, or already
operating in, an international business environment. This Tool is aimed primarily at
some larger organisations. However, even if this is your first venture into international
territory, and you work for a small organisation without a dedicated HR function, you
may still find this useful background reading. It helps to explain the rationale for making
particular strategic choices, and provides a backdrop for a deeper and more informed
IHRM and policy framework. We will refer back to the content in this Tool from time
to time, where it helps to illustrate or back up a point in later Tools.
contextual theory to strategic business cases
Section 1.1
Making the link between global
strategy and an international
HR framework
Aim of the Tool
This Tool will help you to think about your global business strategy. As busy international HR practitioners, it is easy to become almost totally reactive to events as they
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Making the link between global strategy and an international HR framework
unfold. And it is true that tactical decisions are generally going to be more prevalent
than with domestic HRM. However, it helps to step back and think about what you
are doing from a more strategic perspective from time to time – especially when your
organisation is starting up or acquiring a new business abroad for the first time.
We offer a few concepts that can be used to initiate some strategic thinking about
what kind of organisation you work for – and why it’s operating (or considering
operating) more on an international basis. This will help form a platform for d
­ eveloping
your IHRM strategy and plans.
Materials needed
The PowerPoint presentation below.
Procedure
Either on your own, or with groups of HR staff and, preferably, employees from other
parts of the organisation, go through the PowerPoint slides, one by one. Each concept
is followed by a second slide which asks the audience to define where they see your
organisation or where it fits.
Evaluating its use
This exercise was used at a board meeting by one of the authors when her own
organisation was considering expanding abroad. The meeting was attended by the
chairman, CEO, and the finance, operations and legal directors. It led to very lively
debate about the ‘whys’ and ‘raison d’être’ of the organisation – which showed that
these really needed clarification before any potentially false starts in foreign expansion
happened! In particular, it resulted in a sounder strategic decision around the
development of operations abroad, based on logic and strategy, and not simply ‘feel’.
So, if this Tool helps to elicit greater debate – and greater clarity – about the following
then it will have served its purpose!
1 What kind of organisation you are.
2 What your organisation’s motivations are for becoming more international.
This will then allow you, as an international HR director, manager or consultant, to
start to pull together the HR plan which will best help support the business plan.
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Strategic business constructs for suppor1ng interna1onalisa1on Adding value to your business strategy Construct 1 What are your drivers for becoming more interna1onal? •  Maximising shareholder value •  Forging strategic partnerships •  Crea1ng core business processes •  Building global presence (from the CIPD’s publica7on ‘Globalising HR: Execu7ve briefing’ (2004)) •  Achieving a global humanitarian mission (added by author) contextual theory to support strategic business cases
The Tool
5
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Making the link between global strategy and an international HR framework
Construct 1 What are your drivers for becoming more interna1onal? •  Which one(s) define your own organisa1on? Construct 2 Divergence versus convergence CONVERGENCE – the coming together of a set of HR management policies and prac1ces around a Western (capitalis1c) model. DIVERGENCE – the separa1on of HR policies and prac1ces according to country or differences in culture. (These come from early economic theory, which describes how, in a globalising world, country economies gain advantage by becoming either more similar to, or more different from, each other. ) 6
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How do you decide whether your organisa1on is more convergent or divergent in its strategy? CONVERGENT more likely if it: •  has strong organisa1onal culture which gives it compe11ve advantage worldwide (eg Apple, Starbucks, BP), and •  wants to build a global presence, and •  is bound by regional regula1ons and restric1ons (eg those organisa1ons opera1ng in the EU) – more likely to need a common set of policies (including HR). More likely to have a set of standard opera1ng and employment policies. Construct 2 Divergence versus convergence How do you decide whether your organisa1on is more convergent or divergent in its strategy? DIVERGENT more likely if there are strong differences in: • labour markets, • cultures, • economic and legal variables. Examples include car manufacturing and appliance businesses which build for different tastes, and different prac1cali1es – eg sizes of houses, price of petrol versus diesel, environmental legisla1on. Even global organisa1ons such as Walmart and McDonald’s have had to adapt somewhat to local markets and bend their own policies to suit. contextual theory to support strategic business cases
Construct 2 Divergence versus convergence 7
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Making the link between global strategy and an international HR framework
Construct 2 Divergence versus convergence Is your organisa1on more likely to follow a convergent or divergent route? This will determine how localised your HR policies and prac1ces are likely to have to be. Construct 3 Hofstede’s power ra1o Hofstede was a Dutch researcher who gathered data from 100,000 IBM employees worldwide. He wanted to see if there were cultural differences worldwide. He found five. 8
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•  Individualist/collec1vist – the extent to which people are expected to look a]er themselves as opposed to being part of a larger group (USA and Australia have a more individualis1c culture, South Africa less so). •  High/low uncertainty – the extent to which people are comfortable with ambiguity and instability. Eg Greece has strong bureaucracies; various Caribbean countries have a more laid-­‐back approach. •  Masculine/feminine – this refers to being ‘tough’ versus caring. Eg Japan is in the first category, where material rewards are important, whereas Sweden, where policies around childcare, family leave and other ‘caring’ factors are seen as important, is in the second. Construct 3 Hofstede’s power ra1o •  Low versus high power distance – this refers to how hierarchical structures are, and more autocra1c leadership. India has high power distance rela1onships amongst business and society; Israel has flader structures and more democra1c management. •  Short-­‐term versus long-­‐term approach – a focus on the past and present, including the preserva1on of ‘face’ and tradi1on, versus a focus on the future through persistence, thri] and investment (added at a later date). (Hofstede 2001) contextual theory to support strategic business cases
Construct 3 Hofstede’s power ra1o 9
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MakIng the lInk between global strategy and an InternatIonal hr fraMework
Construct 3 Hofstede’s power ra1o •  How does your own culture fit in? Construct 4 Culture and ideology (Based on Ralston et al (2008)) 10
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•  Where are you on this grid? (Hint: USA lies in top le]-­‐hand box, China in bodom right-­‐hand box; Russia in the bodom le]-­‐hand box, and Japan in the top right-­‐hand box.) •  What might this mean when doing business in other countries? contextual theory to support strategic business cases
Construct 4 Culture and ideology 11
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Making the link between global strategy and an international HR framework
Tool 2
PESTLE analysis – worldwide
Facilitator’s notes
Overview
PESTLE stands for ‘political’, ‘economic’, ‘social or socio-cultural’, ‘technological’, ‘legal’
and ‘environmental’. Other variations are ‘STEEP’, ‘PEST’ or ‘STEEPLE’, all of which
are acronyms for methods by which to analyse a current and future state of an
organisation.
This is a useful exercise to carry out with a group of individuals who may be new
to an international setting, and it works best with a mixture of employees from
both the home country and other countries in which your organisation operates. In
this way, the locally recruited staff can start immediately to add value with regards
to knowledge management transfer. It is most useful in the situation of a recent
acquisition or takeover of a foreign player.
Aim of the Tool
To provide a model and a checklist to help you explore trends and changes that could
occur in your industry on a global basis and to start to think about the implications
for your overall international HR strategy and framework. The framework is what will
provide initial guidance for defining the appropriate policies and procedures for your
particular organisation.
Materials needed
Have the team members prepare for this exercise by gathering as much background
information and data about changes that may be occurring in your sector or industry
worldwide. This could be gained from industry reports, the CIPD’s change agenda,
government or industry forecasts, websites and news articles – and from your
organisation’s global business plans, objectives and strategy.
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World events and changes happen all the time. It is also wise to consider worstcase scenarios, however unlikely they may seem – many organisations have suffered
setbacks, or even foundered, because they didn’t consider such events (eg the BP oil
disaster in the Gulf of Mexico, the effect of the volcanic ash from the Icelandic volcano
on the airline industry, or the earthquake followed by a tsunami in Japan and its effect
on TEPCO’s nuclear power stations and the country’s nuclear power strategy).
Evaluating its use
After going through this exercise, were you able to foresee changes that could occur
and establish the relevant international HR framework for appropriate policies and
practices for your organisation?
PESTLE analysis – worldwide
Procedure
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Making the link between global strategy and an international HR framework
The Tool
‘PESTLE’ factor
Implications for your organisation’s
international HR strategy and policy
framework
Political (trends, possible changes and
events at global, regional, national,
local and community level):
• Has implications for establishing
organisations or offices or doing business
with organisations in risky countries
(especially for attracting employees,
compensation, security policies)
• Government stability
• Turmoil in Arab nations, and demands for
more democratic rights
• Grants and funding initiatives can assist
in establishment of businesses in some
locations, including incentives for hiring of
nationals. Sometimes these are used to
stimulate an economy during a recession
• Rise of kidnapping and piracy
• Fluctuating level of availability of grants and
funding changes
• Governments – policies and attitudes
• Governments come and go and can have a
direct effect on organisations based abroad
in terms of changing policies, attitudes
towards foreign organisations, etc
• Stability and terms of governments
• Wars, civil wars and other types of strife
• Terrorism
• Lobbying groups
• Relationships and geopolitical tensions
between countries
Economic (trends and economic
factors in global, regional, national and
local economies):
• Turbulence in economies with associated
negative effects on exchange rates or
inflation – can be an issue for compensation
for either expatriate employees and/or
locally recruited employees
• Interest rates (high or low?)
• Currency exchange rates, and uses of
different currencies (which ones are and
might be affected in the future? Eg the euro
is an example of a currency under pressure)
• Recessions have implications for lay-offs
and downsizing, plus drive for more
cost-efficient HR solutions
• Reduced value of company may have
implications for resourcing levels
• Inflation (home and abroad)
• Cost of raw materials (eg crude oil and its
impact on transportation costs)
• Fiscal implications such as tax, exchange
rates and price of goods on cost of living
• Rapid growth and stronger demand in
emerging markets than developed ones
• Recessions and slow recoveries in
developed nations
• Consumer confidence
• Trade tariffs and restrictions
• Unemployment (home and abroad)
14
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Implications for your organisation’s
international HR strategy and policy
framework
• Global stock market issues
• US fiscal deficit and its impact on other
countries
• ‘Failing’ countries within the EU and
sovereign default in weak economies
• Correlations between geographical distance
and sizes of economies with level of trade
(‘gravity theories’ of economists, eg Leamer
and Levinsohn, demonstrating that the
closer the country and larger the economy,
the greater the trade opportunity). An
example might be the USA and Canada
• Available funding or grants for particular
initiatives (eg greener energy)
• Companies headquartered in developing
markets like India, China, Brazil and South
Africa, to name a few, are expanding, along
with multinationals from more established
markets
PESTLE analysis – worldwide
‘PESTLE’ factor
• Taxation issues (home and abroad)
• Immigration/emigration and population shifts
• Rising cost of public services in situations of
growing populations or aging communities
Social/socio-cultural (trends, changes
or developments in demographics,
culture and expectations):
• Implications for pension administration of
changing retirement ages
• Religious differences needs to be factored
in to some policies
• Aging populations and living longer
• Retirement ages rising in OECD countries –
in UK this will rise to 68 by 2044; France is
67 (men) and 62 (women); USA is 66
• Security policies
• Family policies
• Recruitment and remuneration of
employees and contractors in economies
that are becoming wealthier
• Changing balance in demographics make-up
• Generational differences in attitudes and
behaviour, such as Generations X, Y and Z
• Healthcare plans
• Demographic shifts will result in an
increasing number of workers being sought
from developing countries to replace the
aging workforce in North America and
Europe (McKinsey predicts that by the year
2040, the largest working-age population in
the world will reside in Africa.)
• Increased expectations of employees on
the types of benefits they wish to have
• Attitudes towards work influence
employment decisions
• Corruption issues – policies for handling
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Making the link between global strategy and an international HR framework
‘PESTLE’ factor
Implications for your organisation’s
international HR strategy and policy
framework
• In the West, because of the withdrawal of
retirement age and diminution of pensions,
several generations are likely to be at the
same workplace at the same time
• Spread of Islam
• Killing of Osama Bin Laden and other
terrorist leaders – repercussions for
religious extremism
• Interest in working remotely is increasing
• Women having children later in developed
economies
• One-parent families and marital breakdown
• Employees working longer – viz increased
or abandoned compulsory age for
retirement
• Increased wealth and disposable incomes
of populations in developing or previously
developing economies – eg India, China,
Brazil – not just developed countries.
Emerging markets will grow more than
developed ones
• Gaps between rich and poor accelerating
(eg in India, there are over 150,000
millionaires, and yet many millions of poor)
• Healthcare costs and expectations
• Increase in viruses and illnesses that are no
longer resistant to drugs; pandemics
• Consumer attitudes, fashions and demands
for types of goods
• Media influences and ethics concerns
• Attitudes towards work, including desire to
work
• Qualifications – eg more university
education in some countries
• Values around corruption, nepotism, etc
16
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Implications for your organisation’s
international HR strategy and policy
framework
Technological (developments in
computer-related hardware, software
and social networking):
• Ability to work remotely is increasing
• Implications for hiring workers remotely
• Implications for managing communications,
data and meetings across international
boundaries
• Technological or scientific breakthroughs
• Rise of social networking
• More extensive spread of Wi-Fi
• Management of stress as technology can
mean being ‘available’ at all times, and also
working across time zones can be an issue
• Increase in data-sharing capabilities and
central files management (the ‘paperless
office’)
• Data security and levels of access; back-up
centres
• Increase in hacking incidents, identification
theft and theft of online information –
implications for IT security
• Software and hardware compatibility issues
across boundaries
• Spread of mobile phones (even faster in
developing countries than in developed
countries)
• Data access restrictions and regulations in
some countries
• Change management due to adoption of
new technology
• Expansion and improvement of software
for meetings management such as Skype
and video conferencing
PESTLE analysis – worldwide
‘PESTLE’ factor
• Acceleration in applications which use
micro-technology
• Innovations
• Research grants
• Data leaks (eg Wikileaks)
Legal (potential changes to legislation
with impacts on resources, taxation,
immigration, etc):
• Tightening of immigration legislation may
have an impact on a company’s ability
to hire workers, or fines from audits of
‘illegals’
• Increased employee protection
• Increasing regulation in the West tempting
more companies to locate work in
developing countries
• Immigration laws – tightening
• Discrimination legislation
• International legal frameworks (eg WTO,
ILO, EU) and regulatory bodies
• Employer and consumer brand implications
• Local discrimination legislation may require
more care in hiring and termination of
particular types of workers
• Industry-specific regulations
• Different laws around work permits and
visas
• Increasingly stringent health and safety
legislation may have an impact on costs
and therefore location of employees, and
training
• Legal aspects around mobility within
countries
17
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Making the link between global strategy and an international HR framework
‘PESTLE’ factor
Implications for your organisation’s
international HR strategy and policy
framework
• Regulations around foreign-owned
organisations abroad
• Local legal systems may have impact on
employees that are sudden, unwelcome or
unexpected – eg visa restrictions, vetoes on
driving, drinking, anti-gay legislation, etc
• Regulations around hiring local workers
• International legislative areas and
agreements may place additional restrictions
on HR-related areas such as employment
restrictions
Environmental (natural disasters
and climatic trends, social and legal
movements):
• Disaster planning policies to include both
data and business continuity and employee
safety and contingency planning
• Climate change
• Travel policies
• Natural disasters such as hurricanes,
earthquakes, tornadoes, tsunamis
• Repatriation and evacuation policies
• Corporate social responsibility policies and
practices
• Fair trade
• Carbon offsetting
• Disposal of waste
• Ethical concerns
• Greater emphasis on resource productivity
and conservation
• More clean technology industries
• More environmental regulation
Note
1 For a more detailed description of PESTLE, see the CIPD’s Factsheet.
18
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Facilitator’s notes
Overview
The international HR professional needs not only to understand the implications for
their work of worldwide trends and changes, but to also have a deep knowledge and
understanding of the particular contexts in which their organisation operates. Those
at senior levels of HR must have a good grasp of the country-level factors that have or
may have an impact on business. Equally, it’s important that your local staff understand
the issues that shape the ‘parent’ organisation, headquarters and the other countries
in which your organisation operates.
Like the previous Tool, this is a useful exercise to carry out with a group of individuals
who may be new to an international setting, though it definitely works best with groups
that specifically include employees from the countries around which this exercise is
based. It’s even better still if the exercise is run in country and not at headquarters,
since the non-locals will get to experience at least some of the factors for themselves
first-hand!
Note that this Tool also works well when used across a product line which may be
dispersed across several different countries.
Aim of the Tool
To provide a model and a checklist to help you explore trends and changes that could
occur in a country or countries in which your organisation operates, so that the implications for your organisation’s international HR strategy can be developed in more
detail. In this way, it can help with the next step in developing a plan around which
to divide up HR policies and practices into ones that are global versus ones that are
more local or specific to individual countries. (See ‘convergence’ versus ‘divergence’ in
Tool 1.)
PESTLE analysis – examples of country-specific analyses
Tool 3
PESTLE analysis – examples of
country-specific analyses
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21/12/2011 13:32
Making the link between global strategy and an international HR framework
This version of the PESTLE analysis goes into more depth in terms of:
1
2
3
4
5
the likelihood of occurrence
the likely impact of the change, trend or factor
the timing of each factor
compatibility with existing HR policies and practices
priority for or emphasis on HR policy or practice amendments and adaptations.
Materials needed
Have the team members prepare for this exercise by gathering background information and data about changes that may be occurring in the country in question. If
this exercise includes employees from the particular countries concerned, brief them
beforehand to think about and gather as much information as they can around the six
components of ‘PESTLE’.
Procedure
Decide on a country to analyse. Complete the appropriate factors under each of the
‘PESTLE’ headings. Score each of them according to the five criteria. Those factors that
score the highest are those which are likely to have the maximum implications for your
HR policies and practices.
Examples from India and from the USA are given below. If analysing either of
these countries, you can use the templates below and add to them. For the sake
of illustration a worked example is given for the ‘Social’ section, for a make-believe
organisation.
Evaluating its use
The usefulness of the Tool lies in the outputs from the last four columns and the
resulting ability to help set the framework for establishing an international HR strategy
or framework. To be really useful, it needs to be revisited often to check that your
organisation’s HR framework is based on solid foundations – it is easy to overlook
changes and to continue to operate ‘as is’, with some likely surprises further down the
line because of mismatches between the realities of today and of the possible future
scenarios (‘what ifs’).
20
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CD30006.indb 21
• poor relationship with some of its
neighbours
• lack of international representation on some
intergovernmental bodies and organisations,
so less clout globally
• image enhanced by holding Commonwealth
Games in 2010
• terrorism – especially from religious
extremist groups
• power is shared between the central
government and 28 states
• government is still bureaucratic and there is
a lot of ‘red tape’ and corruption (including
bribes) – less corruption in the Indian
private sector
Political:
‘PESTLE’ factor for India
The Tool
(high (3), medium
(2), low (1))
Likelihood of
(re)occurence or
increase
Impact
(+ (3),
– (1) or
neutral
(2))
(now (2),
future
(1))
Timing
(high (1), medium (2),
low (3))
Compatibility with
existing international HR
policies and practices
Implications
for your
organisation’s
global HR
strategy
PESTLE analysis – examples of country-specific analyses
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CD30006.indb 22
• increased use of credit cards – India will join
top league for consumer products by 2035
(McKinsey Global Institute report 2007)
• increase in consumer finance resulting in
explosion of consumer buying
• growth of the Indian stock market
• former colonial ties to UK mean some
similarities in civil service administration and
regulation which aids understanding and
communications, especially with the UK
• lack of transparency in business dealings
• lack of investment in infrastructure – not
keeping up with growth of economy
• distance to market an issue for US
organisations
• has had, until recently, a highly regulated
market – this has started to be liberalised
and is moving towards a capitalist and
market-based system (encouraged by the
IMF and World Bank)
Economic:
‘PESTLE’ factor for India
(high (3), medium
(2), low (1))
Likelihood of
(re)occurence or
increase
Impact
(+ (3),
– (1) or
neutral
(2))
(now (2),
future
(1))
Timing
(high (1), medium (2),
low (3))
Compatibility with
existing international HR
policies and practices
Implications
for your
organisation’s
global HR
strategy
Making the link between global strategy and an international HR framework
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CD30006.indb 23
Social:
• a vast and growing population (2nd largest
in the world)
• the largest percentage of young people in the
world (over 50 per cent below 25 as at 2011)
• English spoken widely
• acceleration in the numbers of educated
women
• increase in numbers of unskilled expatriate
Indian workers in the Middle East resulting
in families which are better off
• lifestyles are becoming more Westernised
• 70 per cent of families live and will continue
to live in urban areas, leading to greater
cosmopolitanism
• explosion in the use of cell phones
• Hofstede’s Power Distance ratio is around
77 per cent, which is higher than the
worldwide average – meaning a high level of
inequality of power and wealth in society
• discrimination based on the ‘caste’ system is
now illegal, but continues to exist in reality
• non-beef-eaters (Hindus) and non-porkeaters (Muslims)
• has a large movie industry
‘PESTLE’ factor for India
(high (3), medium
(2), low (1))
Likelihood of
(re)occurence or
increase
Impact
(+ (3),
– (1) or
neutral
(2))
(now (2),
future
(1))
Timing
(high (1), medium (2),
low (3))
Compatibility with
existing international HR
policies and practices
Implications
for your
organisation’s
global HR
strategy
PESTLE analysis – examples of country-specific analyses
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CD30006.indb 24
• old-fashioned legal employment framework
– tends to lead to overstaffing in large
public-sector Indian bureaucracies as jobs
are protected
• much ‘red tape’ for new and existing foreign
organisations
Legal:
• significant receiver of outsourced UK and
US IT jobs
• bandwidth is now increasing
• offer of IT consulting services abroad (eg
Tata Consulting)
• salaries for IT experts rising due to shortage
of talent
• many well-trained Indian IT engineers and IT
experts, especially in software development
and BPO
Technological:
‘PESTLE’ factor for India
(high (3), medium
(2), low (1))
Likelihood of
(re)occurence or
increase
Impact
(+ (3),
– (1) or
neutral
(2))
(now (2),
future
(1))
Timing
(high (1), medium (2),
low (3))
Compatibility with
existing international HR
policies and practices
Implications
for your
organisation’s
global HR
strategy
Making the link between global strategy and an international HR framework
24
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CD30006.indb 25
• air quality poor; slow improvements to
water quality
• growth in population will bring even greater
environmental degradation and pressure for
resources
Environmental:
‘PESTLE’ factor for India
(high (3), medium
(2), low (1))
Likelihood of
(re)occurence or
increase
Impact
(+ (3),
– (1) or
neutral
(2))
(now (2),
future
(1))
Timing
(high (1), medium (2),
low (3))
Compatibility with
existing international HR
policies and practices
Implications
for your
organisation’s
global HR
strategy
PESTLE analysis – examples of country-specific analyses
25
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CD30006.indb 26
3
3
3
English spoken widely
Increase in numbers of unskilled expatriate
Indian workers in the Middle East
3
(high (3),
medium (2),
low (1))
Likelihood of
(re)occurence or
increase
The largest percentage of young people in
the world (over 50 per cent below 25 as at
2011)
A vast and growing population (2nd largest in
the world)
Social:
‘PESTLE’ factor for India – fictitious
fast-food restaurant
2 (might not
wish to work
for the wages
of a low-paid
fast-food
chain)
2
2
3
Impact (+
(3), – (1) or
neutral (2))
2
2
2
2
(now (2),
future
(1))
Timing
2
1
1
1
(high (1), medium (2),
low (3))
Compatibility with
existing international HR
policies and practices
May not be
an attractive
proposition
salary-wise for
some
Language
training for
some and
‘idioms’ training
for others
Large population
from which to
recruit
Implications
for your
organisation’s
global HR
strategy
Below is a worked example for socio-cultural factors for a fast-food organisation which is potentially looking to expand into India.
Many of these factors would have been ones that McDonald’s had to contend with, for instance, when it sought to enter the Indian
market – its first restaurant was opened there in 1996.
Making the link between global strategy and an international HR framework
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CD30006.indb 27
3
3
2
3
Lifestyles are becoming more Westernised
70 per cent of families live and will continue
to live in urban areas, leading to greater
cosmopolitanism
Explosion in the use of cell phones and social
networking
(high (3),
medium (2),
low (1))
Likelihood of
(re)occurence or
increase
Acceleration in the numbers of educated
women
‘PESTLE’ factor for India – fictitious
fast-food restaurant
3
3
2
2 (might
have better
opportunities
elsewhere)
Impact (+
(3), – (1) or
neutral (2))
2
2
2
1
(now (2),
future
(1))
Timing
1
1
1
3
(high (1), medium (2),
low (3))
Compatibility with
existing international HR
policies and practices
Ease of
communication
Good
catchment areas
for potential
recruits
Cache and
brand image
may be a plus
– if we can win
them away from
McDonald’s!
Will likely have
to ‘Westernise’
HR policies
Implications
around working
harder to
attract women
(perhaps
target female
students?)
Implications
for your
organisation’s
global HR
strategy
PESTLE analysis – examples of country-specific analyses
27
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CD30006.indb 28
3
3
(high (3),
medium (2),
low (1))
Likelihood of
(re)occurence or
increase
3
2 (new,
younger
employees
may not want
to conform
to power
hierarchies)
Impact (+
(3), – (1) or
neutral (2))
2
3
(now (2),
future
(1))
Timing
2
3
(high (1), medium (2),
low (3))
Compatibility with
existing international HR
policies and practices
A client
policy, but
would attract
vegetarian
employees
May need
to work on
succession and
management
development
policies to get
around cultural
norms around
seniority based
on age
Good way
to attract
employees
Implications
for your
organisation’s
global HR
strategy
Looking at the example above, it appears that the two highest scores are for the factors around increasing numbers of educated women
and the high Hofstede Power Distance ratio. This has particular implications for your organisation’s recruitment and development
policies under this dimension of ‘PESTLE’.
Non-beef-eaters (Hindus) and non-porkeaters (Muslims)
Hofstede’s Power Distance ratio is around 77
per cent, which is higher than the worldwide
average – meaning a high level of inequality of
power and wealth in society
‘PESTLE’ factor for India – fictitious
fast-food restaurant
Making the link between global strategy and an international HR framework
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CD30006.indb 29
• election in 2012
• resistance to tax increases and fiscal policy
makes it hard to provide other necessities
such as prisons
• foreign policy is often based on ‘ideals’ (eg
democracy, freedom, etc)
• 9/11 attacks on the World Trade Center
have led the USA to pursue major
anti-terrorist measures
Political:
‘PESTLE’ factor for USA
(high (3),
medium (2), low
(1))
Likelihood of
(re)occurence or
increase
Impact (+
(3), – (1)
or neutral
(2))
(now
(2),
future
(1))
Timing
(high (1), medium (2),
low (3))
Compatibility with
existing international
HR policies and
practices
Implications
for your
organisation’s
global HR
strategy
PESTLE analysis – examples of country-specific analyses
29
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CD30006.indb 30
• health care is a big issue in the USA. It
is the only industrialised country not to
provide health care to all its citizens. It
also costs more than anywhere else in the
world to provide
• military spending is the highest in the world
• effects of the 2008 global financial crises
continue to have major impact on the
economy, with knock-on effects
• high levels of economic freedoms
• the US economy is driven by consumption
rather than exports (unlike, say, Germany),
making it difficult to stimulate
• for non-bank multinationals sales from
foreign-earned affiliates jumped from 33
per cent to 62 per cent between 1989 and
2009.
• GDP is ¼ of the world’s total – private
sector represents half of the size of the
economy
• largest importer of goods and third largest
exporter of goods
Economic:
‘PESTLE’ factor for USA
(high (3),
medium (2), low
(1))
Likelihood of
(re)occurence or
increase
Impact (+
(3), – (1)
or neutral
(2))
(now
(2),
future
(1))
Timing
(high (1), medium (2),
low (3))
Compatibility with
existing international
HR policies and
practices
Implications
for your
organisation’s
global HR
strategy
Making the link between global strategy and an international HR framework
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CD30006.indb 31
• rise of grassroots movements such as the
Tea Party
• population is growing and the average age
is rising – making it difficult to know how
the social security gap will be funded
• education is available to all but expensive
for good universities, although scholarships
are available
• gun policies and link to high crime rates
• race is still an issue (despite civil rights
legislation from 1964 onwards)
• highly skilled temporary and permanent
immigrants in the USA now outnumber
lower-skilled ones – 30 per cent have at
least one degree
• freedom of expression is one of the
constitutional ‘rights’
• individualism rather than collectivism
(scores very high) on Hofstede’s
individualism scale (91))
• third largest population in the world
Social:
‘PESTLE’ factor for USA
(high (3),
medium (2), low
(1))
Likelihood of
(re)occurence or
increase
Impact (+
(3), – (1)
or neutral
(2))
(now
(2),
future
(1))
Timing
(high (1), medium (2),
low (3))
Compatibility with
existing international
HR policies and
practices
Implications
for your
organisation’s
global HR
strategy
PESTLE analysis – examples of country-specific analyses
31
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CD30006.indb 32
• employment law is less regulated than
some other countries, with the result of
being a ‘hire and fire’ workplace culture
(however: highly litigious in certain areas)
• capitalistic economy with a few federal
regulations which govern ethical and fair
practice
Legal:
• GPS system is operated by the US Air
Force
• Microsoft, Apple, Facebook, Google: all US
technology companies that dominate the
computing and social networking arena –
but is Silicone Valley running out of new
ideas?
• by 2008, 73 per cent of Americans had an
Internet connection
Technological:
‘PESTLE’ factor for USA
(high (3),
medium (2), low
(1))
Likelihood of
(re)occurence or
increase
Impact (+
(3), – (1)
or neutral
(2))
(now
(2),
future
(1))
Timing
(high (1), medium (2),
low (3))
Compatibility with
existing international
HR policies and
practices
Implications
for your
organisation’s
global HR
strategy
Making the link between global strategy and an international HR framework
32
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CD30006.indb 33
• tornadoes and inclement weather generally
causing destruction
• environmental issues with BP oil spill in
Gulf of Mexico
• it is the largest user of oil. Oil stocks are
decreasing and there is stronger support
of alternative energy sources such as wind
power and geothermal energy
• the Environmental Protection Agency has
some teeth in regulating the environment
• there are many national and locally based
environmental NGOs which lobby hard to
improve environmental issues
• the USA is the only country that did not
sign up to the Kyoto Agreement, limiting
carbon emissions, etc, which means it
feels less pressured to enact laws to curb
greenhouse gases
Environmental:
‘PESTLE’ factor for USA
(high (3),
medium (2), low
(1))
Likelihood of
(re)occurence or
increase
Impact (+
(3), – (1)
or neutral
(2))
(now
(2),
future
(1))
Timing
(high (1), medium (2),
low (3))
Compatibility with
existing international
HR policies and
practices
Implications
for your
organisation’s
global HR
strategy
PESTLE analysis – examples of country-specific analyses
33
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Making the link between global strategy and an international HR framework
Tool 4
Linking global variables to
roles for international HR
professionals
Facilitator’s notes
Overview
The PESTLE analyses from Tools 2 and 3 provide rich data for starting to think about
the kinds of functions required for an international HR team. It also encourages
some thinking around the best location for those individuals. In addition, it may assist
with thinking about other kinds of issues that are related to HR, and for which there
needs to be an expert or specialist to provide support (eg local legal specialists,
people with corporate social responsibility backgrounds, security, and language and
culture trainers, etc).
Aim of the Tool
This Tool assists HR directors in thinking through the roles required in an international
HR team. It aims to go beyond identifying the functions of an HR team based solely
in a home country by focusing on the additional or more specific functions that an
­international HR team requires.
Materials needed
The PESTLE analyses table, completed for your organisation on a worldwide basis and
individually for each country your organisation operates in. See the worked example
below, which can be adapted for your own organisation.
Procedure
With the table or tables for the PESTLE analyses, add the relevant HR function. To
make it easier to complete, a suggested list of HR functions that might exist is included
below.
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• ‘many opportunities for hiring local employees’ (need a recruitment specialist on the
ground – local HR hire)
• ‘language/culture training’ (need language trainers potentially in country – eg for
offshored customer-service-centre employees)
• ‘implications around working harder to attract women (perhaps target female
students?)’ (need diversity expert to devise suitable policies to attract women)
• ‘may not be an attractive proposition salary-wise for some’ (need compensation
experts on the ground for local hires and an HQ-based expert for expatriate hires)
• ‘cache and brand image may be a plus’ (can capitalise on these for hiring strategy –
internal/external communications expert may be needed)
• ‘good catchment areas for potential recruits’ (as above – local recruitment specialist,
or could outsource locally)
• ‘social networking a good way to attract employees’ (recruitment specialist with IT
and social networking skills)
• ‘may need to work on succession and management development policies to get
around cultural norms around seniority based on age’ (career development specialist,
diversity expert).
In addition, it will be clear from having worked through the entire PESTLE analyses for
India that there will be a need for security experts (because of terrorism in particular),
people who have knowledge of and contacts with government (not necessarily HR
experts, except in areas which concern them, such as immigration and visa authorities,
employment organisations, etc). In addition, business partners locally will be important
in this example.
Having worked through this exercise, you will have derived a list of ‘ideal’ job functions.
The final step is then to:
1 Cost out the salaries and hiring costs.
2 Decide on whether, instead of hiring, such roles can be outsourced or could be
combined with existing roles within the organisation (eg mainline company legal
experts could include local employment legislation as an area of expertise they
need to add on).
Linking global variables to roles for international HR professionals
For example, using the worked part of Tool 3 for a hypothetical fast-food organisation
setting up India for the ‘social’ factor of the PESTLE analysis, you might come to the
following conclusions:
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21/12/2011 13:32
Making the link between global strategy and an international HR framework
3 Begin to decide whether the roles can be managed from HQ or need to be located
on the ground (this largely depends on your business strategy, ie are you intending
to be a global or a multi-domestic organisation? (see Tool 7)). It also depends on
cost and resource availability factors. If you have more than one location abroad,
you may want to establish regional HR presence. Tool 5 goes into more detail
about how to do this.
Evaluating its use
This Tool will encourage a more strategic approach to be adopted towards the
types of roles that your HR function is likely to require, and enable you to be more
economical with regards to the hiring of such individuals, since you will have a good
idea of the roles required up front.
Notes
Typical types of mid-level or senior-level roles for an international HR function for
a mid- to large-size MNC might include some of the following:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
head of HR; HR director; group HR director; group people director
HR manager – country, region or product line (eg HR manager – Asia)
business partner; senior business partner (at HQ or local)
global mobility expert
compensation and benefits director; global reward director; reward director;
international compensation and benefits manager
head of shared services centre
head of leadership capability
international recruitment manager; regional recruitment manager
group policy manager
international OD and performance manager
worldwide HR systems development co-ordinator
global healthcare manager
expatriate adviser
group pensions benefits manager
country employee engagement manager
global talent management director
employment law advisers – group and local
international communications expert
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21/12/2011 13:32
diversity specialists
security advisers
global skills and management trainers
IT or social networking gurus
international workforce planning leader.
Linking global variables to roles for international HR professionals
•
•
•
•
•
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Making the link between global strategy and an international HR framework
The Tool – example
‘PESTLE’
factor for India
– fictitious
fast-food
restaurant
Implications
for your
organisation’s
global HR
strategy
Roles
required
Location
COST –
examples
for
illustration
A vast and
growing
population (2nd
largest in the
world)
Large population
from which to
recruit
Recruitment
specialist
In country
Eg £20,000
The largest
percentage of
young people in
the world (over
50 per cent below
25 as at 2011)
Large potential
population from
which to recruit
As above
In country, and
HQ for graduate
management
trainees for
grooming for
supervisory and
international
roles
£20,000
in country,
£40,000 at
HQ
English spoken
widely
Language training
for some and
‘idioms’ training
for others
Language
trainers
In country
initially, then
from HQ as
and when large
batches of new
recruits arrive in
future
£30,000
Increase in
numbers
of unskilled
expatriate Indian
workers in the
Middle East
May not be
an attractive
proposition
salary-wise for
some
Compensation
specialist
under
direction of
global reward
director
In country for
local hires. Add
to role of HQ
compensation
specialist for
expatriate hires
£50,000
Acceleration in
the numbers of
educated women
Implications
around working
harder to attract
women (perhaps
target female
students?)
Diversity
expert
Add on to
existing role for
diversity director
or global talent
management
director at home
base
No
additional
cost
38
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Implications
for your
organisation’s
global HR
strategy
Roles
required
Location
COST –
examples
for
illustration
Lifestyles are
becoming more
Westernised
Cache and brand
image may be
a plus – if we
can win them
away from
McDonald’s! Will
likely have to
‘Westernise’ HR
policies
Compensation
and benefits
expert
In country
– combine
with role
above. At HQ,
compensation
policy role
addition to
existing role for
department of
global reward
director
As above
70 per cent of
families live and
will continue to
live in urban areas,
leading to greater
cosmopolitanism
Good catchment
areas for
potential recruits
May need
service of
recruitment
agency in big
cities
In country –
outsourced to
agency
£200,000
for 20
recruits
Explosion in
the use of cell
phones and social
networking
Ease of
communication
Recruitment
expert
In country –
same one as
above – ensure
they have IT skills
As above
Hofstede’s Power
Distance ratio
is around 77
per cent, which
is higher than
the worldwide
average – meaning
a high level of
inequality of
power and wealth
in society
Good way
to attract
employees. May
need to work
on succession
and management
development
policies to get
around cultural
norms around
seniority based
on age
Career
development
specialist
HQ-based policy,
but may need
in-country HR
business partner
to help make it a
reality
£30,000
Non-beef-eaters
(Hindus) and
non-pork-eaters
(Muslims)
A client policy,
but would attract
vegetarian
employees
Linking global variables to roles for international HR professionals
‘PESTLE’
factor for India
– fictitious
fast-food
restaurant
39
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Making the link between global strategy and an international HR framework
Tool 5
Linking roles to the required
competencies for HR
professionals
Facilitator’s notes
Overview
This Tool follows on from Tool 4.
Having derived a list of required functions for the HR team, it is time to move to the
next step – that of assigning competencies to each of the roles.
In some cases, there are likely to be competencies that cover all roles. But in the case
of specialist HR roles, there is likely to be a subset.
Aim of the Tool
To establish a concrete set of competencies based on the functions of your international HR team. These, in turn, will have been derived from your organisation’s
strategy.
Materials needed
Start with your list of HR roles.
Print off the table with the three columns below. Blank out column 3, which has been
completed with examples just for illustration.
Procedure
Use the table of international HR competencies (which have been derived from a
number of both private and public sector MNCs and organisations with international
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After you have completed the table, list the competencies you have come up with
under each role. Decide on the most relevant or important. Some can be combined
under one overall competency, where they fit logically. As there are many ways of
grouping these competencies, there is no definitive example given here, but it could
include the following.
Business partner competencies (at HQ):
• able to link the organisation’s international strategy and objectives with HR
practices
• able to manage and communicate with different cultures and across boundaries
• cross-cultural team facilitation skills
• forecasting and planning skills to cover worldwide presence
• organisational design and restructuring skills across national boundaries.
Business partner competencies (in local or ‘host’ country):
• local business knowledge and networks
• understanding of the local recruitment market
• comprehension of the overall business strategy for an organisation and of the HR
objectives for that organisation; plus links with key individuals at HQ and across the
organisation
• ability to communicate across a wide range of media with HR functions at HQ and
in other countries
• local language skills
• initiative – not just waiting for HQ to lead – especially if there is an issue that needs
resolution fast
• good information-seeking skills
• knowledge of local customs and norms
• ability to intervene in local conflicts between locally based employees
• negotiating skills with an understanding of cultural differences and their impact on
the negotiations
Linking roles to the required competencies for HR professionals
HR functions). In column 3, add in the function that you believe requires this skill or
competency. It could be ‘All’ or just a single function, across multiple functions, or one
that is required for a local HR hire only. Bear in mind, though, that not every role
requires every competency. Decide on the most important.
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Making the link between global strategy and an international HR framework
• local coaching and mentoring
• contribution to the wider international strategic agenda through ideas and
suggestions for change
• ability to synthesise changes to the international HR agenda and policies, and
disseminate, communicate and explain them in own country.
Similar groupings with other competencies could be made, for example, for roles such
as:
• strategic leadership roles (for HR director and senior HR team members)
• specialist positions requiring in-depth knowledge (eg recruitment, compensation,
ethics management, security management, etc)
• training and knowledge management roles
• change management consultants
• shared service centre and helpdesk roles.
Another way of grouping competency sets is to determine those which are ‘core’
and then add on the ones that relate to particular roles, according to each specialist
position. These core skills might include:
• global mindset
• an open mind
• ability to multi-task
• ability to deal with ambiguities
• able to link the organisation’s international strategy and objectives with HR
practices
• able to demonstrate and uphold organisational values across international borders
• stamina and ability to manage stress.
Evaluating its use
To assess the validity of the competencies agreed upon, you can test whether they are
the most appropriate by later on interviewing your best performers in HR, and then a
group of weaker performers. Use an external facilitator so that it’s not apparent who
is a high performer and who is not. Assess each individual against the competencies
chosen. This will provide a guide as to which are likely to be most positively associated
with success on the job.
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Competency
Exemplified by:
Examples
A ‘global’ mindset
Taking an interest in
international affairs generally;
interest in travel; a curiosity
about different cultures
generally
All
An open mind
All
Ability to deal with ambiguities
All
Ability to work across time zones
Business partners
Ability to multi-task
All
Interest in and ability to learn foreign
languages
Local regional HR
business partners
Able to manage and communicate
with different cultures and across
boundaries
All, especially HR
director and business
partners
Able to see the wider picture
HR director
Able to link the organisation’s
international strategy and objectives
with HR practices
All
Can negotiate across cultures,
including ability to deal with
governments and other organisations
HR director,
employee relations
employees
Can deal with cross-cultural ethical
issues
Employee relations
officer
Cross-cultural team facilitation skills
HQ and local training
and development staff
Forecasting and planning skills to
cover worldwide presence
HQ planning and
specialist (could be
part of the role of the
HR budget officer)
Organisational design and
restructuring skills across national
boundaries
HQ OD expert
Linking roles to the required competencies for HR professionals
The Tool
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Making the link between global strategy and an international HR framework
Competency
Exemplified by:
Examples
Understanding of local country
employment issues
Local business partner
and local recruitment
employees
Able to demonstrate and uphold
organisational values across
international borders
All
Able to build trusting relationships
with others in different cultures and
countries
This is an extension of the
business partner role
Business partner
Coaching and mentoring skills across
different cultures
Learning and
development experts,
business partners
Knowledgeable about compensation
and benefits on an international basis
Compensation
specialists
Able to establish and manage
international performance
management systems and standards
This requires an
understanding of the way
different cultures behave
and respond to performance
management in general; not
having a blanket approach
to all cultures, but flexibility
to take into account cultural
norms and differences within
the wider organisational
framework
Performance
management experts,
business partners
Stamina and ability to manage stress
Given the increased
likelihood of unexpected
events, greater complexity,
and working across different
time zones, international HR
professionals have to be able
to manage their time – and
their sanity!
All
Understands how to recruit
internationally
Understands the differences
across employment
markets; understands
cultural differences so does
not discriminate; able to
interview and assess remotely
HQ recruitment
specialists
44
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Exemplified by:
Examples
Understands the safety and security
implications for employees based
abroad
Keeps abreast of security
issues in countries of
relevance; involved in
contingency planning
team (eg for emergency
evacuations, terrorist attacks,
etc)
Security experts
Able to design and run learning
events for employees dispersed in
different countries
Learning specialists
Able to manage consultants and
outsourced employees
HR director
Strong networking skills on an
international basis
HR director, business
partners
Knowledge and understanding of the
organisational and HR competencies
in other similar organisations
Being on top of what other
organisations do through
their HR functions to bring
the organisation success
is key, as well as knowing
what the competencies are
for HR functions in similar
organisations
HR director, OD
experts
Knowledge of how to develop and
use relevant supporting HR systems
Requires an understanding
of different hardware and
software, and broadband
constraints in each country
HR IT systems expert
Ability to capture and use relevant
knowledge to enhance knowledge
management systems internationally
Knowledge
management expert
Ability in solving complex peoplerelated problems
Business partners
Linking roles to the required competencies for HR professionals
Competency
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Making the link between global strategy and an international HR framework
HR role
Competencies
1.
2.
3.
4.
5.
6.
46
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