Demystifying the Secrets of Global Human Resources
Globalisation Drives Demand for Global HR solutions
There is little doubt that the economies worldwide are increasingly global. The internet has brought humankind together more quickly and cohesively than any technology that preceded it. News travels around the world instantaneously, culture crosses borders, and brands rise to global levels overnight.
To capitalise on this digital globalisation trend, many companies need a physical presence in the regions they want to do business. But while information travels efficiently globally, organisations often find they need to claim ownership in the countries they want to do business. Activities such as sales operations, order fulfilment, and customer service often require a physical presence.
Watch the video: Global Challenges for HCM Professionals to learn more about how the globalisation trend is driving the demand for global Human Resources (HR).
However, current global HR solutions are often inadequate and unable to address the unique needs of rapidly expanding digital organisations.
Existing HR Solution Approach Fail to Meet Globalisation Test
Current global HR solutions suffers from functional deficiencies and an impossibly complex technical environment. Constellation sees the following issues:
Complexities of HR best practices and legislation are tough for professionals to master.
Global HR professionals understand more than one country from both HR best practices and legislative perspectives. However, there is no single person in the world that understands all HR regulations and best practices. At best, there are professionals who can manage regions such as Europe and Latin America for example.
Today’s global HR solutions is not really global.
It is a challenge to create and maintain a global HR solution. For an HR vendor to be in the global HR systems business, the vendor needs to understand local content, regulations and best practices that govern each country the vendor supports. Despite the number of vendors offering global HR systems, none are truly 100 percent global, as a global HR system requires support for all languages, all local legislation, and all best practices in a single system.
Most HR vendors can’t keep up with varying local requirements.
Building truly global solution is a huge task. Vendors pursue the larger, more popular countries where their customers and prospects want to take them. The vendor needs to recruit local experts who not only know the country from regulatory and best practices perspectives, but also need to keep monitoring their further evolution. Just having local experts and collecting requirements are not enough. The vendor needs to continuously build these evolving requirements into the code of its products and then test, document, release and support the changing product. This ability to stay on top of local requirements is key to winning business from global organisations.
Translation alone doesn’t make software local.
Vendors in the space need to understand the jargon and terminology in each of the supported countries. Few things put off and confuse users more than confusing labels and messages in systems. Consequently, vendors cannot afford to just incorporate translation of systems based on dictionary accuracy but need to pass the test of daily usage and stay on top of the linguistic and cultural nuances each country’s HR practices demand.
Onslaught of legislation compounds existing requirements.
The need for social, tax, and welfare reform is imminent all around the world. While most developed economies struggle with aging workforces and need to change regulations to support a fast-growing population of retired workers, developing countries are driven by a spirit of making their tax systems more competitive and simpler. In some developing economies, the task is to introduce and enforce the very first tax, benefits and welfare systems. So, there is an acceleration and increase in legislative activity that has profound effects on the legal, statutory and regulatory frameworks under which businesses need to operate.
Massive Demand and Complexity Drive the Case for Vendor-Driven Global HR
Scale Favours Vendors
The good news for organisations, though, is that the task of delivering global HR abilities becomes more complex as scale increases and starts to work in favour of global HR vendors. Scale in this context refers to the number of people employed and paid. Enterprise system vendors offering global HR products will have a higher number of employees using their software (as their customers) than even the largest organisations can employ across the world.
Talent Scarcity Requires Better Visibility into Global Workforce
Organisations seek global HR systems in order to achieve a worldwide view of their talent, regardless of location. The developed economies are quickly running out of people, while the developing nations often produce professionals that often are eager to work in developed nations on a short-term or long-term basis. Instead of recruiting from the outside when local staffing needs cannot be met, organisations can search for the capabilities, skills and talent they may have in other countries. With the rise of project-based activities and of business transformations in today’s organisations, there is higher demand for a global view of employees.
Global Leadership Needs Global Data
Organisations in developed economies face cost pressures and talent shortages. Management needs the ability to evaluate the cost of employment and the availability of talent in potential target markets before moving a function to that market. Employee-related expenditures usually comprise the largest portion of a company’s costs, so its executives require fast and efficient access to data on their worldwide workforce and global responsibilities.
Constellation sees that these three trends – scale, visibility and data access – will spur the adoption of global HR solutions. Expect to see a retreat from burdensome, disparate HR systems. Adoption of global HR solutions will continue to quicken as HR leaders recognise the advantages of a truly global process.
External Drivers of Global HR
Many European organisations today are not only challenged by globalisation, but also face a number of external trends that drive the demand for global HR solutions:
Digital disruption creates winners and losers.
The creation, implementation and operation of new best practices and business models, made possible by digital technologies, are top-of-mind for all senior executives.
Constellation’s research reveals that in digitally transformed industries, winners claim 40 percent to 70 percent more revenue and profit than in traditional industries, making it harder for latecomers to digitally change in order to catch up. As a consequence, the whole leadership team must be ready for transformation at a moment’s notice. Senior executives know they need fast, agile systems – including for global HR management – to cope with the changes that lie ahead.
An aging workforce will require more automation.
Almost no country outside of Africa and Asia still has a traditional population pyramid, with large proportions of young people and small proportions of old people. The advanced economies that produce the bulk of the world’s GDP all have shrinking workforces due to retirement and overall aging, according to the United Nations paper “World Population Ageing 1950-2050.” The result is that best practices relating to the hand-to-machine ratio (or automation ratio) of organisations need to substantially change in the next 20 years in order for them to remain or become leaders over the next 10 years.
Organisations will run out of options – but the new business best practices in such an environment are not yet established. Again, senior executives need to prepare for the unknown. This means they need to craft their strategy and be prepared to move and react fast, something that is facilitated by next-generation global HR systems. The result: responsiveness and better agility.