Global expansion is a common and, on its surface, logical way for many companies to grow market share. Unfortunately, not all companies succeed with global expansion. HR professionals can play a very critical role here both strategically and tactically. Their efforts can lead to real bottom-line impact in an environment where far too many global expansions achieve desired results.
In fact, according to a Harvard Business Review article by Christian Stadler, Michael Mayer and Julia Hautz: “In an analysis of 20,000 companies in 30 countries, we found that companies selling abroad had an average Return on Assets (ROA) of minus 1% as long as five years after their move. It takes 10 years to reach a modest +1% and only 40% of companies turn in more than 3%.” Those are scary statistics.
And yet, many companies do manage to expand globally with success, providing benefits for the company, its domestic employees and the expats or foreign nationals chosen to work in various international settings. HR can help make this happen.
Why Global Expansion Fails
Another Harvard Business Review article by Nataly Kelly looks at some of the most common mistakes companies make when expanding through international markets. They include:
- Not being specific about the countries targeted for expansion. “We’re going to expand into Europe” is far too general an approach, Kelly suggests.
- Failing to consider internal data related to the expansion. For instance, what the estimated opportunity in the market may be and how easy/or challenging the expansion could be.
- Not adapting sales and marketing channels to the new locations and/or not adapting product offerings to meet new market needs/preferences.
- Failing to rely on local teams to lead the way.
- Not thinking through global logistics.
Across each of these categories there is one constant: people. Having a solid people strategy when expanding into any new market—and especially when expanding internationally is a must. That strategy should be based on the consideration of a myriad of questions that range from the general to the very specific.
Understanding the Overall Strategy
At a high level it’s very important for HR professionals to understand the organization’s overall strategy for expansion. For instance:
- What is the overall corporate goal?
- Which countries will be part of the expansion? If multiple countries, will expansion be staggered or simultaneous? What is the order of expansion?
- What type of staffing will be required? Foreign nationals? Contractors? Expats? Staffing through a professional employer organization or a firm? Some combination of the above? How does this staffing plan support the overall goal?
- What local employment laws issues will impact this expansion for both foreign nationals and expats? How do they align with/differ from existing laws and regulations followed domestically? These questions can be exceedingly complex.
Ensuring involvement in these discussions at an early point in the process can provide HR with the opportunity to add their expertise to the mix to guide these strategic decisions.
Considerations When Assigning an Employee Abroad
In some cases, global expansion will involve assigning existing employees to overseas locations. Considerations here will include:
- The length and terms of the assignment and whether/how the employees will return to their prior, or some other, position;
- Visas or work permits that may be required;
- Whether assistance will also be provided to the employee’s spouse/family;
- How foreign payroll and benefits will be handled;
- How currency rates might affect compensation;
- Whether any medical exams or clearances will be required; and
- Whether a point person will be assigned to the employee as a liaison back to the home office.
These considerations represent the broad strokes required when assigning an employee to an overseas role. Here we provide a deeper dive into the common issues companies and their HR advisors should be prepared to address.
At an even more granular level, global HR expansion considerations will vary depending on whether the expansion is a greenfield expansion (starting, and staffing, a company from scratch) or an expansion through acquisition.
When establishing an entirely new entity in another country, HR leaders need to consider how that entity will be staffed: Through expat assignments? Recruiting of foreign nationals? Staffing firms? Contractors? In addition, they will need to determine:
- Whether staff will be full- or part-time;
- What immigration requirements might impact their staffing plans; and
- How these staffing decisions will align with domestic staffing plans and policies.
And, of course, HR leaders will need to ensure that all of their employment practices are compliant with both local and domestic labor regulations.
Expansion Through Acquisition
When acquiring a global company, HR leaders will need to initially determine whether current staffing levels and strategies will be appropriate based on their organization’s plans for expansion and growth goals. That will require an assessment of the current structure, skills and capabilities of employees; identification of gaps and strategies to fill those gaps based on the considerations discussed above.
International expansions can be complex. But HR professionals can minimize the challenges they face by developing checklists to ensure that they’ve covered all of the bases to address the needs of the organization as well as of staff working domestically and in global settings. For instance, use our HR Global Expansion Checklist to help you keep track of considerations such as staffing needs, international assignments and more.
It’s also important to keep in mind that global expansion is not a “one and done” activity. It requires ongoing management and support in consideration of changing local laws, regulations and social norms. Staying up to date on these trends and shifts can be challenging. XpertHR International can help. With employment law guidance and coverage for over 45 countries worldwide, it is a valuable resource to help your company’s expansion efforts. See all of our employment law country guide listings here.