The perils of going global

When a company decides to turn into a multinational a huge transformation is required in the way that HR management is organized and the demands made upon it.

A multinational differs fundamentally from companies that operate in a single country – even if the nationally-bound enterprise exports goods and services or uses sales agents or distributors abroad. This is because a multinational employs workers in another country – as well as acquires real estate, forms a parallel range of suppliers, opens distant bank accounts, starts to pay taxes abroad… and so on. This makes them far more complex to control, especially if the other country contains a totally different culture and most of its population has limited capability in the language of the home country.

That is why companies venturing abroad for the first time often take the seemingly least risky step of going to a foreign country that speaks the same language and appears to have a familiar culture. But the history of corporate expansion is littered with the corpses of such venturers. Many British companies going to the USA, for instance, have been lured by the size of its markets and shared language and completely underestimated the cultural divide that exists not only in the nature of competition, but also the legal environment. In the USA litigation – or the threat of it – is far more common than in many European countries and its “hire-and-fire at will” employment laws are alien to those of us that have learnt to live with the checks and balances of high employment protection regimes. The USA is also remarkably insular with only 42% Americans even holding a passport. Strip away cross-border trips to Canada and Mexico and only about 3.5% of Americans travel abroad each year. But look at a map of where head offices exist for multinational companies and the biggest geographical cluster is in the heart of the USA.

If we consider this phenomenon logically we come to the conclusion that becoming a successful multinational is not all about being in a cosmopolitan environment, nor taking “safe” strides into the international arena. American companies have expanded overseas because they simply had the confidence to do so, were used to dealing with large scale management issues and simply dealt with the legal, cultural and linguistic barriers as they found them.

Faint heart never won fair business (or maidens) and it has never been a precondition that executives need to acquire fluency in a particular language before successfully entering a country market any more than going through crash courses in the dos and donts of another culture. It helps, of course, but there is also the fact that as an investor a company can write its own rules to some extent and import its own culture into its own day to day activities. The Chinese may not like breakfast meetings, but if that is a condition of doing business then such preferences can be overcome and the novelty of stepping into the foreigner’s culture can also take root

If we could foresee all the trials of our lives before us from our first consciousness of the world we would never live beyond childhood. Executives are going to make mistakes when their business becomes multinational and it is up to HR to help ensure that such mistakes are predicted and contained. There are huge traps lying in the path of the unwary HR practitioner too and in my next blog I am going to describe a few of them.

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