Internationalisation

Whether recruiting overseas-based employees or relocating employees overseas, HR practitioners in international organisations need to effectively deal with the additional challenges of working in a global environment.

By understanding other national cultures’ values, attitudes and behaviours, employees can gain greater insight into how cultural norms manifest in different countries and contexts. Although some methods used to categorise culture have been criticised, they do provide a useful means to understand the likely differences between societies. This is especially important for employees working on an international basis; understanding the culture of the country they’re based in, and the differences from their own culture, will improve working relationships and business success.

While any reward strategy must reflect an organisation’s compensation philosophy, there are many additional factors which apply when considering reward in an international context. Should reward be set centrally or should each region or subsidiary develop its own strategy? How are cultural differences being taken into account? What are the financial and non-financial elements?

International Culture

Employees working internationally need to be able to work effectively in the country and culture where they are placed. This requires any potential assignee to have a high level of self-awareness of their own assumptions and sensitivities. It’s helpful to explore the dimensions and definitions of culture which researchers have identifies. But to operate effectively, individuals must examine their own cultural background to understand how this will impact on their judgements and perceptions of the behaviour of those from different cultural backgrounds. For a successful assignment, these factors should be given as much consideration as the assignee’s technical competence for the posting.

Understanding cultures

Culture is a distinct way of life with common values, attitudes and behaviours that are adopted by a society. It’s the ‘way we do things round here’. In understanding cultures, an important starting point is a high level of self-awareness and one’s own cultural assumptions. Although there are varying definitions of culture, a common theme of these definitions is that it is a way that a society is shaped.

Although it’s generally accepted that the increase in travel and technology has led to a blurring of some distinctions, there are still clearly definable differences between different countries and ethnic groups which national culture is often seen to help to explain. National culture has been defined by Hofstede as the collective programming of the mind that differentiates members of one social group from another. Despite the popularity and accessibility of cultural frameworks, in particular Hofstede’s work and the more recent studies by the GLOBE network, this is a complex area. Cultural differences are typically manifest in areas such as food, customs, language, housing and entertainment. It is important that those working on an international basis also understand that culture impacts on the ways in which people work, and behave when working. Although the outward signs of work (such as dress and technology) might be increasingly similar regardless of the country of operation, there are ways in which people can be offended, and business propositions damaged, if there is no understanding of the national culture of the people involved.

There are many examples of simple actions being interpreted differently in different cultures. For example:

In the USA a firm, short handshake is seen as being confident. In Africa it is appropriate for a handshake to be limp and last several minutes.
In Austria it would not be appropriate to address someone by their first name after several times of meeting. In the UK it would not be uncommon to move to using first names during an initial meeting.
In Japan it’s not usual to say that something is not possible. It’s more likely that an individual will simply be told that something ‘is very difficult’. Those who are not used to Japanese culture might think that this means that it is still possible, albeit difficult, when they are really being told that something is impossible.

Frameworks for understanding national culture

Edgar H Schein suggested that there are three levels at which culture is expressed:

easily observed rituals and behaviours (dress codes, language and customs)
values and beliefs(for example views about the role of leadership in terms of being autocratic or seeking consensus)
basic assumptions – these are less immediately visible but impact organisational life (for example values about the importance and closeness of relationships, hierarchy and responsibility of the individual to the community and family).

Although many of the methods used to measure culture have been criticised, they do provide a useful means to understanding the likely differences between societies.

Hofstede's cultural dimensions

One of the most widely used frameworks for determining the differences was developed by Hofstede who suggested that the differences in culture between countries could be explained by four main factors.

Power distance

This is the extent to which organisations and societies believe that power should be distributed equally or unequally. In work terms this relates to the centralisation of authority within an organisation, and the extent to which leadership is autocratic. Societies with ‘high power distance’ are hierarchical organisations in which it is accepted that the more senior employees have more power. Countries with a high power distance include the Philippines, Singapore, France and Greece. Countries with a low power distance have flatter organisation structures and a less autocratic style of management, examples being the UK, Sweden and New Zealand.

In a culture where there is a high power distance employees must realise that the hierarchical structure in the organisation should be respected. In such countries it would be inappropriate to expect a more junior employee to make an important decision without deference to more senior management.

Uncertainty avoidance

Uncertainty avoidance is the extent to which organisations and societies feel uncomfortable with ambiguous situations, and the extent to which they will try to avoid uncertain situations. France is an example of a country with a high uncertainty avoidance, and in this country there is a strong bureaucratic structure which helps to avoid risk taking. Countries such as the UK, Sweden and Norway have low uncertainty avoidance and have more flexible structures and accept more diverse views.

In a culture where there is high uncertainty avoidance employees must accept that there is likely to be a certain amount of bureaucracy associated with business activities. Trying to avoid this bureaucracy is likely to be impossible, and also likely to cause difficulties with local employees.

Individualism

Individualism is the extent to which people operate as part of a group, or on an individual basis. In the USA, for example, individualism is high and people look after themselves. This is also increasing true of the UK, with individuals moving towards personal employment contracts and individually negotiated reward packages. In countries with low individualism, such as Japan, being part of a group is a strong need and promotes considerable loyalty to that group.

In a culture where there is low individualism (a collectivist society) there is considerable focus on operating as part of a group. Employees working in such countries on an international placement need to understand that they must fit in as part of a group, and not try to encourage individuals to operate separately to the group to which they belong.

Masculinity

This refers to the extent to which the dominant values in a society are what Hofstede described as ‘male’ – assertiveness, acquisition of money and goods and not caring for others. In more ‘masculine’ societies, like Japan, Austria, Mexico, and Italy the gender roles are more rigidly defined than in more ‘feminine’ societies like Scandinavian countries, with their greater emphasis on work-life balance.

Trompenaars' cultural dimensions

Trompenaars identified seven key differences between country cultures:

Achievement v ascription

In different cultures individuals will use different emphases in answering the question of what they do. In the UK people will tell you their profession if they are asked what they do. In Japan they will say who they work for. This shows a difference in the importance placed on what people achieve themselves, and the emphasis they place on another group.

In a culture where there is strong loyalty to a group employees must be careful not to say or do anything that suggests a negative opinion of that group. That could be more damaging to a business situation, in such cultures, than personally offending an individual.

Sequential v synchronic

This dimension relates to time. Time can be thought of as both the speed at which it passes and the current time. In Western societies there tends to be a lot of focus on the future. In the AsiaPacific region the past is as important as the present, with little emphasis on the future.

In Western societies there is a lot of emphasis on time management, and it would be considered rude to be late for a meeting without good reason being given. In other cultures there is a more relaxed attitude to time, and hurrying someone along or showing anger at a meeting starting late would be seen as inappropriate.

Internal v external control

In cultures with an internal control (such as the USA) people tend to think that they can control, or overcome, any constraints imposed by the environment. However, in cultures with a stronger external control, such as in many European countries, there is not the same view that environmental restrictions can be overcome. In such cultures there will be more emphasis on finding a solution within the restrictions that exist, rather than trying to work out ways to remove or challenge those restrictions.

Universalism v particularism

This is the extent to which people believe that general principles are important compared with unique circumstances and relationships. Trompenaars suggests that there are four key implications of this for international businesses:

Contracts. In a particularist culture, drawing up a lengthy and detailed contract may be seen as a lack of trust or respect. It is presumed that those involved in the contract are trustworthy, and that once their word is given the contract is confirmed.
The timing of business trips. Those who are from a univeralist culture need to take time to build up strong relationships. This might mean that a number of trips and meetings need to take place before a business deal can be agreed.
The role of head office. In universalist cultures, head offices tend to control global functions, whereas they do not do this in particularist cultures. In a universalist culture, therefore, business will need to be agreed and approved by a head office.
Job evaluation and reward. In universalist cultures, there is more likely to be standardised evaluation and measurement, but in particularist cultures there is more likely to be individual determination of evaluation and reward.

Specific v diffuse

This dimension addresses the extent to which individuals are comfortable dealing with other people. Those in specific cultures (such as the USA and UK) tend to have a lot of openness, and less private life. They appear more direct, open and extrovert – even to the extent of appearing abrasive at times. They are more likely to separate work and home life. Those with diffuse relationships (such as Germany) are the opposite – appearing more indirect, closed and introvert and are more likely to evade issues.

Affectivity v neutrality

This dimension refers to the ways in which different cultures express relationships. In affective cultures it is natural to express emotions very openly, but in neutral cultures emotions are kept in check. This can be particularly evident in communication. In countries such as the UK it is usual to respond to someone once they have finished talking, and not to interrupt them (indeed, interrupting can be interpreted as being very rude). In Latin countries it is usual for people to talk over each other. In Oriental cultures it is usual to have gaps in conversations.

International resourcing and selection

Recruiting the best person for a job is a key concern of all organisations. The opening up of the labour market gives exciting opportunities for organisations, but needs to be managed carefully. In particular, HR professionals must be mindful of the different cultural issues and the impact that they can have on the resourcing process.

It’s important that careful thought is given to HR planning and the reasons for international resourcing. Organisations need to ensure that they are tapping into the broadest possible pools of talent and that care is taken when selecting employees to ensure that all employees are assessed in an equal way.

It’s also important to manage the recruitment process in a professional and ethical way because it is the right thing to do and failure to do so is likely to impact on how the organisation’s brand is perceived in the marketplace.

HR planning

HR planning is the process of assessing demand for labour against the potential supply. It’s an important tool in putting the business strategy into practice, and in informing organisational capability. When operating on a global basis, the potential pool of supply is much wider, and hence the following questions need to be addressed:

Where in the world is it most appropriate for employees to be located? In answering this question such issues as the cost of labour, relevant experience, infrastructure, quality of service and impact on employment relationships in home country all need to be addressed.
Where in the world is there increasing demand for goods and services? An organisation might identify a new market that it wants to move into. Is this achieved most appropriately by providing the service or goods from existing locations, or is there a need to move into a new location?
Is it most appropriate to employ local people, or to move existing employees from other countries to a new location? Employing local people will usually be cheaper (because of the costs associated with employing expatriates) and will mean that they have local knowledge. However, it might be necessary to move some existing employees so that the knowledge and experience that they have of the organisation can be used.
What are the costs associated with employment in different countries? Costs of recruitment itself need to be considered, as well as the costs of shedding staff (which can be very expensive in many European countries).
What are the restrictions placed by legislation? This could be legislation relating to immigration, or could it be local labour laws that need to be addressed in the recruitment process.

The changing nature of mobility worldwide means that the HR function in international organisations has to meet a series of challenges in resourcing:

It has to work within globally co-ordinated systems whilst recognising and being sensitive to local needs.
Practitioners are looking to source talent from increasingly varied places around the world, so integrating a diverse workforce for maximum organisational and individual performance is crucial.
Increasingly the lines between traditional HR functions are blurred, so resourcing specialists have to focus on management development and reward issues as well as resourcing ones.
Merger and acquisition activity means that HR practitioners are engaged in selection of employees in a changing environment and looking to harmonise HR practices.
HR is looking to maximise the learning opportunities given by global networks to share best practice.
Rapidly changing business situations in volatile global markets means that HR must often recruit, deploy, develop and shed people at great speed.

Recruitment methods

Given the cultural and legal differences between countries it is to be expected that the recruitment and selection practices differ not only by type and level of employee, but also by location. Legal constraints are a key driving factor here, with what may be legal in one country being illegal in another (for example restricting jobs by gender or race). Once it has been determined that international recruitment is needed the most appropriate recruitment method needs to be chosen. In the case of international recruitment this will often be in the form of a global leadership or competency framework.

Although text books typically refer to formal and traditionally psychometric approaches to recruitment, the reality in many contexts involves a more informal approach involving word of mouth or just the contacts of existing employees. Such approaches may be seen as unacceptable in the public sector as they risk being discriminatory. However in the business sector in some societies, word of mouth recruitment is common, particularly in societies deemed more collectivist. Informal methods have the advantage of being less expensive than more formal ones.

Four formal methods of recruitment are likely to be particularly relevant to international HRM managers.

Headhunting

There are a number of specialist organisations which operate international search and selection. However, the approach is very expensive making it an approach to recruitment that is only appropriate for the most senior or specialist roles. According to Sparrow¹, the cross-border capability and geographical spread of individual search firms has been critical as executive searches are now increasingly cross border.

Cross-national advertising

As with all resourcing, advertising remains a common way of attracting people to relevant jobs. There are considerable differences in the use of advertising. The trends vary across sector, but there has been a general shift away from newspaper to other more creative or online approaches. One such approach is the use of targeted outdoor posters in suitable key (often commuter) sites, building on international intelligence which helps to focus on the target audience.

Online recruitment

Using the internet has many benefits, particularly in terms of increasing the volume of applicants with the internet becoming THE dominant approach for individuals seeking roles, particularly senior professionals, technical specialists and managers. For firms there are numerous advantages, which as well as volume and geographic spread of applicants also include 24 hour a day access to vacancies and an opportunity to promote the brand of the organisation through its online presence. At the same time the approach has presented a number of challenges around reliability of the technology and the fact that there is no standardized global platform.

International graduate programmes

Graduates provide a source of talent for international roles as they often see such openings as being key to their career development and may be more mobile than other more established employees as they are less likely to have the same family ties. However, attitudes and readiness to be internally mobile are not always positive and this sometimes has implications for reward policy. Organisations might be tempted to query if it is money well-spent as retention for such graduates is not always high and in certain cultures age is associated with status making it difficult for young graduates who may be difficult to place in roles given their lack of experience.

Selection methods

There’s considerable difference in the use and acceptance of different selection methods in different countries. For example, graphology (the analysis of an individual through samples of handwriting) is relatively common in France and some parts of Switzerland, but is hardly used anywhere else in the world (indeed, there is no evidence to prove the validity of this selection method). In Japan, job recruiters set up a mahjong tournament to find prospects.

International aspects of three commonly used selection methods are explored here.

Interviews

Interviews are commonly used, but the approach to them differs. In the UK it is increasingly common to have a structured interview, and panel interviews are not uncommon. In the USA almost all interviews follow a very structured process where all applicants are asked exactly the same questions. In Northern Europe it is common for the HR Manager to be one of the interviewers, but this is less likely in other countries in the world.

There are also cultural differences in the ways in which applicants will react in an interview situation. For example, in Korea it is a cultural norm, when asked a ‘good question’ to keep silent as a mark of respect. However, in cultures such as the USA and the UK to remain silent when asked a question would be seen to be rude or ignorant. In the UK direct eye contact is seen as confident and to indicate honesty. However, in many South Asian countries direct eye contact is seen as being aggressive and rude.

Assessment centres

Assessment centres are increasingly common in the UK, but still relatively unknown in many other countries. In designing activities in an assessment centre it is important to ensure that they are free of cultural bias, and that the results are interpreted appropriately. It is also important that assumptions are not made about the exposure that applicants have had to technology. Asking a UK based applicant to carry out a computer based assessment is unlikely to have a significant reaction. However, an employee from a developing or undeveloped country might be penalised in the task simply due to a lack of familiarity with the computer technology.

Psychological testing

Using psychological tests does attract some controversy. and this is particularly true in international settings. If psychological assessment is to be used the following points need to be considered:

What norms are being used as a comparator? If the norms are based on, for example, a UK population, are they appropriate when assessing people from a different nationality? This is particularly relevant in relation to personality assessment.
Do the questions have any cultural bias? For example, are words used that have one meaning in one country and another in a different country? Could this result in an applicant answering a question wrongly?
Are the assessments available in the applicant’s first language? If the applicant is required to translate questions this will have an inevitable effect on performance.
Are the tests discriminatory in any way?

Pre-employment checks

There are different processes in place for pre-employment checks internationally and an HR professional will need to do thorough research on local requirements and constraints.

If individuals are being employed from overseas there are potential issues relating to immigration. Similarly if an organisation is considering relocating an employee, or recruiting an individual to work overseas, that country’s immigration laws must be followed and employers should check with the authorities in the relevant country.

International reward

When managing international reward, it’s important to strike a balance between making the assignment attractive and getting an appropriate return on the cost of sending an employee to work overseas. It’s important, therefore, for employers to appraise the cost of an international assignment before any selection process and to ensure that the benefits outweigh the costs.

If it’s decided that an expatriate placement is best for the organisation, then the reward of an employee should be carefully considered so that they don’t lose out as a result of the placement, and they also receive some compensation for the disruption associated with the move. However, employees should also be reminded of the considerable benefits of an international assignment in terms of their personal development, career prospects and development of their knowledge and expertise.

International reward strategy

Although the extent to which money is a motivator is a matter of debate, reward is a key issue in people management. A lot of reward theory focuses on motivation, incentivisation and engagement. This is particularly complicated when looking at the international context of reward within different cultures and institutions. Although there is some similarity in how senior managers and expats are rewarded, this is less true for non-managerial workers.

Cultural differences may, for example, affect the way employees view the effort-reward relationship and also the perceived attractiveness of various perks or benefits. Researchers have considered the relationship between Hofstede’s dimensions of national culture and the likely preferences found within employees for different aspects of reward, particularly that which is contingent upon individual performance. Institutional factors such as political and legal structures are more influential given the introduction of pay minimums in number of countries and role (or absence) of unions and collective bargaining.

When considering reward, it’s important to note that this includes both financial and non-financial elements. Financial rewards might include pay, ‘perks’, paid holiday, etc. Non-financial rewards might include opportunities for learning and development, as well as ‘voice’ and quality of working life.

3 main approaches

An organisation can adopt one of three main approaches:

To set reward centrally – This has the advantage of ensuring consistency, and ensuring there is some control over reward expenditure. However, approaches to pay or benefits in one country might not fit the culture and laws of another, and so this approach might cause difficulties.
To have a central reward approach that is adapted for each subsidiary – this allows adaption when the culture or local practice makes this necessary. However, varying the reward approach does mean that there will be less consistency across the organisation, and does reduce some of the cost control.
To allow each subsidiary to set its own approach to reward – this allows each subsidiary to use local knowledge about culture and the legal and regulatory environment to develop a reward approach that is attractive and compliant. However, the lack of control can lead to escalating costs, and can lead to inconsistency of approach across the organisation with some subsidiaries being seen as less attractive to work for due to the rewards on offer.

Whatever approach is taken, reference must be made to the over-arching reward philosophy and strategy in line with business strategy. Reward strategy should then be reflected in reward policy and practice.

Reward for expatriates

Employees might be needed to work on an international basis (known as working as an expatriate). This might be on a short term basis, or could be as part of a placement lasting several years.

Whether long term assignment or shorter, but frequent business trips, working internationally brings both development opportunities and home-life disruptions to employees. Remuneration for those working internationally has to reward the individual for the job that they are doing, and also compensate them to some extent for the disruption they may experience.

It might be necessary to design pay and benefits in such a way to make international placements more attractive, however overseas assignments are expensive and organisations need to assess the likely costs and benefits.

Approaches to expatriation compensation

There are a number of approaches to expatriation compensation: home-based pay, host country-based pay (that is, locally-based pay), and headquarters-based balance sheet are the most common.

Home-based

The home-based approach aims to ensure that the value of the package for the expatriate is the same as in the home country. This approach takes the package that the employee receives in the home country as the foundation for the reward on the international assignment. A number of items are then added to this ‘foundation’:

Cost of Living Adjustment (COLA) – If the cost of living in the country where the employee will be working is high an adjustment is made to reflect this (see section on taxation and cost of living)
Cost of housing – if the employee is expected to find their own accommodation then an amount to reflect this cost will be added (some employers provide accommodation and so this is not included in the reward package calculation)
Adjustment for taxation (see below)
Allowances relevant to the assignment (see below).

This approach of starting with a foundation and adding elements to the reward package is known as the ‘build up’ or ‘balance sheet’ approach.

The reward package can be paid in local currency or in home-based currency. It’s usual for an organisation to split the payment, paying a certain amount in home-based currency that the employee can use for ongoing financial commitments (such as a mortgage) with the remainder being paid in host country-based currency so that it can be used for day to day expenses.

Careful thought needs to be given to the use of home-based pay as it can cause inequalities between the expatriate and the local employees and between expatriates of different nationalities. The host country-based pay approach provides a reward package to expatriates in line with employees doing a similar job in the country where the expatriate will be working. This approach is simple and ensures parity between the expatriate and local employees, but might not give employees an incentive to accept overseas placements if the rate of pay is considerably lower than in the home country. It is usual for an expatriate to receive allowances for things such as school fees, accommodation and travel in addition to the host country-based pay.

The headquarter-based balance sheet approach is a more ‘global’ approach in which the employee’s home country has no impact and they are simply paid in line with what they would be paid if working in headquarters. Although simple to administer, this can be very expensive and as a result home-based and host country-based pay are the most common approaches to determining expatriate reward.

Other approaches

Budget system – where the costs incurred by the expatriate in both the home and host country are assessed. The combined costs are then expressed in the currency of the host currency, and grossed up to take account of tax. However, this is time consuming, due to the listing of all the costs and their changing nature, and hence it is not often used.
Lump sum – where the employee moves to an expatriate role with no adjustment to the existing reward package, and accepts a lump sum in return. This is most commonly used for short term placements.
‘Cafeteria’ system – which works in a similar way to the flexible benefits (sometimes called ‘cafeteria’ benefits) used in many UK organisations. A number of benefits are offered to the expatriate (for example. housing, school fees) and the employee chooses those that s/he wants, up to an agreed limit. This approach does address the fact that employees have varying needs, but can be costly and time consuming to administrate.
Negotiation of personal agreements – where the organisation and employee agree a personalised package, negotiated between the employee and head-office management. Although this approach does mean that any personal issues can be addressed it can be problematic as consistency between expatriates might not be maintained. This approach is only likely to be successful if the organisation has few expatriates on placement.

Allowance and benefits

When determining expatriate allowances it is important to be mindful of the needs of the employee, the location and nature of the assignment and the costs involved, but might include relocation, housing, language support and school fees.

Taxation and cost of living

If an employee is working overseas it is likely that s/he will be required to pay taxes locally. There are two main approaches used to addressing this issue:

Tax equalisation – the employee’s pay is kept in line with the level of pay that they would have received at home. So, if the taxes are lower in the host country pay is reduced accordingly, and if the taxes are higher the pay is increased to reflect this.
Tax protection – whereby the organisation makes up the difference if the expatriate pays more tax abroad, but if the employee pays less s/he keeps the difference. This approach is less common.

Costs of living vary considerably country to country. If the cost of living is higher in the host country, an appropriate multiplier is applied to bring the overall value of the reward package to a level at which the employee will be able to maintain the same standard of living as they enjoyed in the home country. Logically, if the cost of living is lower in the host country, the reward package should be similarly reduced – however, organisations may be reluctant to do this. The fluctuation exchange rate between currencies also needs to be considered. One approach to dealing with this is to pay part of the salary in home country currency, and part in host country currency.

International talent management

Talent management is crucial to an organisation, to maintain competitive edge and to increase the talent and potential within an organisation. When operating on an international basis an organisation faces additional challenges and needs to determine the best way to develop and maintain the talent base. It is important that the needs of both the employee and the organisation are considered, and that the full potential of all employees is realised.

Whilst acknowledging that it is important to have a consistent brand and approach within an organisation it is important that the skills and abilities of local employees in countries where the organisation is operating are not ignored. A good talent management programme will draw on the skills and abilities of all employees, wherever they are based.

The need for effective talent management

Identifying, recruiting, deploying and developing talent globally is a key role of the HR practitioner working in a global environment. Talent management is therefore a key element in a successful people strategy, focusing on improving employee engagement and commitment and encouraging high performance and retention rates. Global talent management strategies focus on ensuring global consistency among various managerial pools and the foreign subsidiaries, including advanced development for key roles and high potentials, whilst putting in place learning interventions for employees at all levels to develop an international mindset.

Issues to consider when looking at international talent management

Managing the talent pipeline – employers are trying to recruit ‘ahead of the curve’ to engage individuals with particular skills and aptitudes, bearing future business needs in mind.
Understanding the economic, social, legal and political infrastructures which impact on different talent flows.
Developing relationships with universities and business schools to secure future talent from a known resource.
Using global IT systems to create databases of internal talent pools.
Creating skilled and competent teams of recruiters in different geographies.
Managing recruitment suppliers on a global basis, introducing speed, cost and quality controls, the use of preferred partners, branding messages and ensuring audit trails to protect against legal issues associated with global diversity.

Complexities to consider

Organisations working internationally need to develop employees to be effective in their roles, taking into account the added complexities an international role involves. Issues to consider are:

The organisation’s business needs for developing employees with skills to work on an international basis.
The particular demands of an international assignment, and the need to be able to adapt to the culture of the country where the employee is placed.
The balance between developing generic skills, and specific skills required in the specific placement or country where the employee will be working.
The need for employability, developing skills that will be transferrable to future placements.

The type of development opportunities available to employees will depend on the business context, individual learning needs and the organisational resources available.

Creating a talent management strategy

There are a number of strategic approaches to the development of talent. The most commonly used are:

Headquarters based

Organisations with strong control systems, centralised business strategy and strong leadership from headquarters often adopt a centralised approach to their talent management strategy and make a decision to develop talent pipelines from their home country.

However, this approach doesn’t benefit from the diversity of ideas and approaches that can be gained by recruiting talent from outside the organisation, or by recruiting local nationals. If a headquarters-based strategy is used it is important that employees are made aware of the need to adapt their approach to fit with the nature of the location, and are taught the skills necessary to adapt in this way.

Business unit level

Organisations adopting this strategic approach rarely have global policies and prefer to manage potential within individual country operations. This strategy focuses on the ‘home grown’ approach, identifying talent in individual operating units and developing this so that local employees have the skills and abilities to take senior management positions in the unit in their country.

The benefits of this approach are that the local employees have knowledge of the culture and situation in which they are operating, and can apply their skills and knowledge to this. However, taking this approach does mean that there is the danger that the way in which the organisation operates in different locations is more likely to differ and there is a need to keep some level of synergy to maintain a clear organisation mission and brand.

Regionally-oriented

In this approach senior regional managers will work with country-level management teams to identify high-potential employees who can be moved around the region. This strategy addresses some of the difficulties of separate operating units, whilst still focusing on the need to develop talent in locally-based employees. Rather than just focusing on the individual countries this strategy looks at talent management on a regional basis. This does allow for consistency of approach across a region in which the organisation operates. Although there is still the danger that the organisation mission and brand could vary across regions, there is likely to be less variation than when a business unit level strategy is adopted.

Globally-oriented

In a truly integrated global operation, responsibility for identifying and nurturing high potential employees is usually a joint task for senior managers from all parts of the organisation’s global operations. One organisational goal will be to use the international assignment process to foster an international mindset in the employees being developed and also by developing employees from different countries to bring diversity to the future senior teams.

This approach doesn’t presume that talent should primarily be developed from headquarters, but does acknowledge that there is a richness of innovation and creativity resulting from the movement of talent between locations. By having a global talent management programme, consistency of approach and ensuring a consistent understanding and application of the organisation’s mission and brand is more likely. However, the cost and time involved in operating such an approach can be prohibitive.

Identifying talent

There are a number of perspectives here. The first adopts an inclusive approach under which everyone is seen as having talents. Another approach is to focuses on key positions within the organisation, which although identified as a having a key impact on the organisation’s success, are not necessarily confined to the higher level of employees. Finally some organisations still prefer to focus on what they see to be their top performers or those heading for most senior roles, and this group might constitute a global talent pool. All of these approaches are important to succession planning within an organisation.

Methods of identifying talent can include:

submission of names of high-potential employees to the corporate centre
centralised monitoring of performance review data
360-degree feedback
assessment and development centres
evaluation from development programmes.

However, for international working these methods do require some sort of common framework to effectively identify talent internationally. At the same time there is a requirement that these tools are culturally sensitive in order to be acceptable and robust within a range of contexts. Most organisations see the talent management strategy as a critical component of succession planning in providing people who will be ready to take on key roles in global organisations when they are needed. Often management review boards meet to look at development decisions and performance ratings and to ensure against bias in the context of the people dimensions of strategic corporate reviews.

Different types of developmental opportunities

Most international organisations have formalised development planning systems and look at how individuals need to be developed as well as looking at the formal requirements for the post. The approach will usually be an integrated one, with a range of programmes linking into broader organisational and career objectives for employees at all levels. This is part of the shift from training to learning, with a move away from traditional, instructor-led, content-based interventions to learning as a self-directed, work-based process leading to increasing the capability of people to deliver high performance. Increasingly it is common for employees who are identified as having a high level of potential to be assigned mentors and coaches and take part in learning sets and project-based learning as part of their development.

There are a wide range of potential approaches to talent development. Some suggestions are:

International assignments

One way in which organisations develop the talent of employees is to send them on an international assignment. This builds individual employability, and also gives employees an opportunity to put into practice some of what they have learnt on an international talent development programme.

Even though the number of people on international assignments overall is increasing, long term assignments which involve an employee relocating to a new location are decreasing for a number of reasons, including:

the high cost of assignments
availability and desirability of posts being held by highly educated and skilled locals
limited mobility of managers due to dual career and family issues.

There has been a shift towards other types of international working for business reasons and also to provide developmental opportunities for individuals. Some of these are:

Short-term assignments – assignments with a specified duration, usually less than one year. Families might go too.
International commuting – the manager commutes from home country to place of work in another country, mostly weekly or bi weekly, not accompanied by families.
Frequent flying – where an employee goes on frequent business trips overseas but doesn’t relocate.

These types of assignments are often seen as a key way to develop employees with high potential for senior roles, indeed international experience is increasingly becoming a prerequisite for a senior management role. Even though international costs are high, organisations perceive that the benefits to the individual and organisation outweigh these. When the assignment is predominantly for development purposes, HR will be looking to assess the development of competencies and the level of knowledge transfer, amongst other value indicators, to determine the success of the development. Possible outcomes will include increased adaptability, cultural empathy and the ability to deal with complex international business issues.

Specific development programmes

Along with strategic workforce planning, talent management is one of most important strands of international HRM in terms of ensuring the success of global organisations. Organisations are likely invest considerably in developing (and retaining) these important human resources.

There is a wide range of different types of programmes and it is the role of the HRD team, in consultation with line managers, to select an appropriate course for international staff. Organisations are very involved in decisions around the design and delivery of executive programmes and usually opt for a modular and multi-site approach, with inter-modular projects and designated facilitator to integrate learning into the organisation. Effective development approaches are likely to include, a range of formal programmes, action learning, international assignments, coaching and mentoring and knowledge sharing all linking into broader organisational and career objectives for employees.

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International HRM – A Case Study Approach

SHRM International HRM Study Notes