The key challenges of International versus Local Workforce Management

17 August 2021 - Reading time: 5 Minutes

Digitalisation
There are key differences between local and international human resource management (IHRM) that make managing HR from an international position more complex. When the workforce is distributed across different countries and tasks are performed in a different context, requirements for HR have additional considerations. We take a look at what the differences are, and how they can best be managed.

How does IHRM differ from HRM?

The responsibilities of human resource management (HRM) are very broad. They include, but aren’t limited to: recruitment and selection, onboarding, training and development, retention human resource management and payroll administration appraisals, compensation and benefits communication between management and staff and corporate culture. However, there is an essential distinction between local and international HR teams in two main areas: the focus on each individual, and the execution of basic tasks.

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Focus on each individual

While local HRM needs to focus on hiring and retention, negotiating salaries and managing performance, IHRM has an additional wider perspective. Their main focus is on achieving balance between central control and coordination at headquarters, as well as the need to adapt to local environments.

Execution of basic tasks

Three elements differ in implementation of the basic tasks between local and international personnel management:

  • the geographical distribution of employees
  • cultural differences between the different locations where a company operates
  • local legislation and labour laws

For both of these key areas, the challenges for IHRM need to be recognised before they can be successfully addressed.

What are the challenges of IHRM?

Establishing a consistent company culture

When a company has offices in multiple locations, with headquarters in one country and subsidiaries in many others, it’s important to establish and encourage the same company culture in each branch.

Finding the right balance

In trying to build a consistent company culture, there may be local customs, laws and restrictions that need to be either incorporated or removed.

Every employee needs to feel part of the company in the same way, with their needs evaluated and treated equally – this is the global standard. However, there are extra-legal benefits such as mobility allowance, or meal vouchers, that differ from country to country and must be managed at a local level.

Integrating the global with the local needs, requirements and obligations is the biggest challenge within IHRM. Deciding what can be standardised and what must remain local must be clearly defined in order to close any gaps between local needs and centralised HR.

Articulating a clear business structure

In order to run an organisation smoothly it’s essential for everyone to have a clear view of accountability. Whether the company is run as a matrix, or has a defined hierarchy, it must be clear where the reporting lines are.

Without a clear company structure, you risk chaos. A clear business structure facilitates communication within an international group, and within such a structure it’s essential to have an overarching HR manager.

While each subsidiary or country location is managed locally by a local CEO with certain responsibilities, there is still a need to report to a central HR manager, who will also have responsibility for setting overall objectives for personnel policy.

Ensuring transparent recruitment and selection

Often multinationals will place their own top people from headquarters into local positions in the first instance, in the belief that this is the best way to retain control and ensure consistency of approach.

In practice, the performance of these international appointees can be hampered by a foreign language, cultural difference and unfamiliar local customs.

Alternatively, a strategy to attract high-calibre local candidates from the start can bring new and different perspectives to the company without diluting the culture.

Complying with social legislation

Social legislation differs greatly from country to country, with huge diversity at a local level. Payroll processing is one of the most delicate responsibilities for HRM, and its complexity increases exponentially with international expansion.

While all countries have their local complexities, it’s essential when looking to automate some of these processes that any software takes into account, in real detail, the intricacies that payroll provision faces across multiple geographies.

Re-evaluating existing tools

In the report “What Challenges Do Multinational Firms Face In The HR Department” researchers analysed the productivity of multinationals.

They suggested that efficiencies could be made by having HR departments around the world use the same information technology systems, business forms and business processes to handle employee-related issues.

This may sound obvious, but the reality is often different. After all, the global approach implies a need to re-evaluate existing HR tools within head office against, for example, an acquired company abroad, with a view to adopting common systems and introducing uniformity of approach.

What are the benefits of IHRM?

Although the challenges of IHRM are complex and many, the benefits are very clear and can be simply articulated:

Consistent customer experience

A global HRM approach creates a streamlined, efficient and lean HR landscape, helping ensure that every employee feels treated and assessed in the same way regardless of location. Centralised HR management ensures that staff are managed according to the same philosophy everywhere.

Reactive crisis management

The coronavirus pandemic forced companies to retreat to home offices with immediate and unplanned effect. Companies faced extreme continuity issues, and as a result it has become clear how important digitisation and globally deployable cloud solutions are to ensure continuity in a crisis.

Not every company, for example, has a legal regulation for temporary or short-term employment contracts. Having an overarching HR manager to keep a global view and being able to coordinate and adjust everything on a local level is important, and became even more so in the initial days of the coronavirus pandemic.

And as the situation continues to change quickly and irregularly over time, the need for a global approach supported by flexible and adaptable software, has become clearer than ever.

Where to start with an International Workforce Management Solution?

An astonishing 15% of European companies still use paper for time and attendance registration, which as we’ve seen here, makes those International HR challenges even more difficult to surmount.  

However, 40% of European companies recognise that HR efficiency is the opportunity that will give them a significant advantage.

Of the companies already using time and attendance registration software, nearly a third do so to facilitate home and teleworking for their employees. It’s expected that this will rise significantly in the future, driven in part by demand from employees for better solutions.

And with homeworking adding to the complexities of having employees in multiple locations, there has never been a better time to consider exactly what an International Workforce Management Solution could do for your organisation.

Start your IHRM journey with SD Worx. Talk to our team to find out more.

 

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