A GLOBAL World of…LOCAL Businesses

Today it is possible to cross borders of different countries and still manage to eat in the same places, shop for the same brands, and stay in the same hotel chains. Plainly speaking, this is the era of globalization. Many new businesses are trying to expand abroad and find a place in the global market; employees search for new jobs using international job sources; and the future workforce is becoming globally mobile already within their student years. However, a recent Forbes article, building on the seminal work of Pankaj Ghemawat, posits that as much global as it sounds, the world actually remains rather ‘local’.

Josh Bersin, the author of the article, argues that in reality there is no ‘global market’, but that instead we have a highly interconnected world of ‘local’ businesses. Naturally, multinational corporations try to internationalize their brands, and many speak about standardization practices. Indeed, standardization in terms of unified organizational mission, vision, values, and strategy in a broad sense makes sense. However, the ways of implementing organizational strategies and putting organizational values to work can hardly be equal. As the recent study of best practices by Bersin by Deloitte found, the highest performing companies don’t standardize everything – they try to localize. Further, referring to the results of Ghemawat and Altman’s DHL global connectedness study, Josh Bersin points out that the world is becoming ‘less connected’ every year because different countries have different economic conditions and pace of economic growth. In other words, every country is unique in regards to its labor market, governmental and regulatory rules, cultural and social environments, all of which justifies the ‘one size does not fit all’ principle here. As such, Bersin advises to operate globally, but in a local way.

Naturally the localization policy impacts HR areas, such as employee recruitment and retention, compensation schemes, career progression, and general leadership strategies.

 

How to localize HR strategies around the world?

HR strongly impacts business performance as it deals with the most valuable organizational resource: people. As such, HR strategies should be tightly connected to business strategies, and in case of a localization approach, provide flexibility to meet the local needs and enable local decision-making.

The Bersin by Deloitte research results imply that the key for business localization in a global environment lies in using global platforms with local implementation. In the case of used software, this would mean that HR functions should take global HR programs and customize them to local needs. Such a requirement already derives from the differences in local legislations, which should be accounted for in HR administrative activities.

When recruiting, global recruitment platforms can be used, especially for fulfilling globally mobile positions. At the same time, organizations are also advised to tailor their recruitment strategies to the local labor market, making the local employer brand appealing to the specific population. As one of my previous posts suggests, hiring from the local workforce in subsidiaries of multinationals is one the rise.

Further, in line with, and beyond, the need to develop global leadership competencies, organizations should train their managers also in a set of locally needed competencies. The much talked about cultural intelligence is definitely a necessary skill in today’s multinational environment, as it signals one’s awareness of his/her own culture, anticipation of differences between cultures, and ability to accept and adjust to different cultural environments. However, apart from such general awareness and flexibility, building a business in different cultures also requires in-depth knowledge of local cultural standards and norms.

Finally, in terms of managing employees’ performance, organizational leaders should be flexible in terms of setting goals and performance indicators. For example, linking variable pay systems either to individual or team results can have differential impacts across cultures. Here, one can refer to Geert Hofstede’s well-known value dimensions in the workplace, which according to his research are influenced by culture and, hence, do differ between countries.

All in all, as Bersin puts it, the world remains local. Hence, to operate successfully at a global scale, one needs to do it in a local way.