Just how global are organizations, really? While the globalization process is clearly continuing, there has been a slowdown. While 2010 was a year of optimism, it seems 2011 was a year of correction and return to caution, according to Jeitosa Group International’s Going Global Survey of 130 global organizations.
The effects of the lingering economic downturn in the United States and Europe are having an impact on HR strategy and technology deployment,
With unemployment hovering at 7.3 per cent in Canada and 8.1 per cent in the U.S., organizations are focusing on administrative efficiency and cost control rather than activities that enhance strategic value.
And in going global, employers are finding success. When comparing 2011 data to 2010, 30 per cent more are citing greater success with talent development and 10 per cent more are seeing success in enhanced business performance.
Global organization model
One trend building momentum is a move towards a more centralized, standardized and global organizational model. The 2011 survey asked respondents to classify their organizational structure according to one of four models:
Multinational: Focused on flexibility and local responsiveness. Highly centralized with multiple, independent locations, united primarily through financial reporting.
Global: Focused on centralization and efficiency. Highly centralized and standardized, with major decisions made at corporate level and then rolled out to local operations.
International: Focused on learning and sharing. Moderately centralized, leveraging competencies and sharing learning from both corporate and local operations.
Transnational: Focused on efficiency, flexibility and learning. Combines leveraging efficiencies, maintaining flexibilities and sharing learning and innovations worldwide.
The last four years have seen a steady rise in the second option, the global organizational model — from 22 per cent in 2008 to 35 per cent in 2011 — with more organizations in search of standards, efficiencies and cost savings. This is likely a direct outcome of the global economic slowdown that began in 2008.
One single system
The Holy Grail of a global HR system is to have 100 per cent of an organization’s global employee population in one single system. While we are seeing a steady increase in organizations moving to one single global database — from 40 per cent in 2009 to 47 per cent in 2010 and 50 per cent in 2011 — one-half of respondents still have not made the move. That does not speak well for employers with diverse cultures and ongoing mergers and divestitures — all issues that do not make this an easy accomplishment.
HR system vendors haven’t helped the situation. Some lack the global data structures and functionality required for managing HR information on a global basis. Others lack the tools and integration approaches to easily migrate and connect disparate systems into a single system of record.
And almost all lack a global compliance framework to meet the demands of international legislation and regulations.
“Emerging academic research suggests that companies that use data and business analytics to guide decision-making are more productive and experience higher returns on equity than competitors that don’t,” said the article “Are you ready for the era of ‘big data’?” in the October 2011 issue of the McKinsey Quarterly.
How is HR to meet this challenge and compete effectively when only 50 per cent of the data on an organization’s greatest asset is accessible for analytics and reporting through a single system of record? There is clearly an opportunity here.
Globalizing HR technology
The globalization of HR technology continues steadily, with an average increase over the last four years of 37 per cent across all global technologies tracked in the survey.
Talent management technologies are globalizing at the fastest rate — 46 per cent over the last four years — whereas core HR and payroll technologies are going global more slowly, at the rate of 23 per cent.
Payroll, of course, is tightly tied to each country in which it is paid, and subject to all of the detailed pay rules of that country. That significantly reduces the benefits that could otherwise be gained through a more global approach.
The fact talent management software is more readily adopted globally can be attributed to the “low-impact” legislative requirements with talent management functionality than are typically found with core HR and payroll processes.
The most globalized technology is core HR management (63 per cent), followed by performance (53 per cent) and compensation management (52 per cent). Globalization of data warehousing (48 per cent) and reporting and metrics (45 per cent) are also growing, each seeing an average increase of 47 per cent over the last four years.
Does global technology facilitate global processes or do global processes enable global technology? Technology and process go hand-in-hand — you can’t be effective unless you have both. So, while 63 per cent of responding organizations have global HR technology in place, and one-half have 100 per cent of their global workforce on one single system of record, only 35 per cent have implemented global HR processes.
This gap between technology capability and process alignment points to a considerable opportunity for improved business performance. As anyone who has worked globally knows, the challenges in globalizing business processes are difficult, particularly for employers that have rigid organizational structures and are highly decentralized, without solid communications strategies or lack global leadership.
Going global with HR and HR technology is challenging, but it can be rewarding too. While the industry is making progress, there is clearly more work to do. The best advice? Be as global as possible, as local as necessary.
Karen Beaman is founder and CEO of San Francisco-based Jeitosa Group International. She can be reached at Karen.firstname.lastname@example.org. Ian Turnbull is vice-president for Canada and the U.S.-Midwest at Jeitosa, based in Toronto. He can be reached at email@example.com. This article is an edited excerpt from 2011-2012 Going Global Report, HCM Trends in Globalization. For more information, visit www.jeitosa.com.