Peter Reilly, Institute for Employment Studies (left)

Tony WUlmS, Royal Bank of Scotland Group

The challenges of glohal HR:

One way to go?

There are many benefits to central
organisational control - the 'one
company' approach - in our globalised
economy. But recent research questions
whether centralisation is always best and
points to a more exible model

e are one company. We have one

set of customers. We have only
one set of competitors. So why
wouldn't we operate HR in
exactly the same way across the
whole firm? Such comments, in this case from the HR director of a UKcentred global organisation, came up frequently during research for our
new book, called Global HR: challenges facing the function.
There are a number of reasons for this "one company" objective. Organisations may want to promote common values, deliver consistent treatment to
staff wherever they work and export good business practice to all parts of the
organisation, especially following mergers or acquisitions. Or it may boil
down to the centre's desire for greater control over dispersed operations so
as to limit corporate exposure to ill-considered actions. Such an approach,
however, has profound consequences for the way HR operates in global
organisations and may need to be reconsidered if it is not to create other
problems in its wake.
Peter Reilly is director of HR research
and consultancy at the Institute for
Employment Studies. Tony Williams
is director of HR for markets and
international banking at the Royal Bank
of Scotland Group

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SEPTEMBER 20U
PEOPLEMANAGEMENT.CO.UK

WHY IS THE DESIRE to pull so strongly together as "one

company" apparent now? One reason may be that bad news
travels so fast these days. The febrile post-crash atmosphere
has heightened tensions. Executive bonuses, personal
embarrassments and petty corruption have all hit media
headlines, and stock markets around the world punish corporate failure or negative publicity severely: just think of the
number of chief executives who have been ousted because
of their or their organisation's failings.
As a result, organisations are trying to protect their reputations against bad publicity and to ensure improved risk
management. There is also the need to comply across the
organisation with external regulation, such as the SarbanesOxley Act 2002, or even voluntary codes such as those on
the use of child labour. Again, poor compliance may have
consequences. Moreover, cash-strapped businesses are trying to rein in costs, and centralising power may be seen as a
good means to do this.
HR has to support this drive or it will be marginalised seen as out of step with the required business thinking. In
fact, in our experience, HR is often in the vanguard of this
move, partly because it is attracted to the argument for a
common value system and so is energetically engaged in the
creation of common leadership values and the selection and
development of those who will hold these leadership roles.
HR also sees much advantage to the management of the
function itself in a centralised approach, especially as the
one company philosophy provides both a logic to, and justification for, the new service delivery model of global/
regional shared service centres, corporate centres of expertise and business partners placed in global business units.
This approach is facilitated by the standardisation of people management principles, policies and practices, to ensure
the whole organisation operates not only consistently, but
also efficiently. It is helped by the optimisation and automation of processes on common IT platforms to improve their
quality and speed. All these actions reduce functional costs
as a contribution to overall expenditure savings and deliver
the aim of common outcomes.

How HR delivers a
common approach
HR HAS A CHOICE OF METHODS for delivering commonality, both within the function and for the organisation.
The first is dirigiste - or centrally driven. The second mode
sees the common approach negotiated openly, but with
power at the centre, while a third form is still negotiated
openly but situates power in the business unit, function or

m\m
i
Promotes common values

Harmonisation can stifle innovation

Delivers consistent treatment to staff

Centre loses touch with sharp end of the business

Exports good business practice

to all parts of the organisation

Ill-conceived policies subverted at a local level

HR is focus for frustration as agent
of the corporate centre

Greater control over

dispersed operations

Does not easily sit with

workforce segmentation

Cost control

" ''

CHART 1

Upsides and downsides of the one company approach

location. Finally, the fourth mode is emergent, exploratory

and implicit.
Our impression is that, more often than not, HR has been
in dirigiste mode where possible, driving through the more
centralist approach because it is convinced that this is the
corporate imperative. This is also founded on a belief that
most of what HR does the world over is the same and that
statements of the unique challenges faced by any particular
location are likely to be exaggerated; it might allow for legal
and possibly employee relations reasons for difference, but
that is all.
So HR is dravsTi to an approach whereby the corporate
centre determines both the nature of the policy or practice
and how it will be implemented. Of course there are exceptions, where operating companies have more scope for
deciding on how things are implemented - but what we saw
much less of in western organisations was the use of enabling frameworks and principles, with operating companies
genuinely free to choose their approach.

Downside risks

'THE DANGER IS THAT

THE CORPORATE
ENFORCER OF RULES
INTENDED TO AVOID
NEGATIVE
HEADLINES, RATHER
THAN A TRUSTED
ADVISER TO THE
BUSINESS'

THE REASONS FOR COMMONALITY are certainly justifiable and organisations may not have any real choice, especially in protecting corporate reputation. The route taken by
HR to get there is also understandable, but there are downsides that the function would be wise to consider.
First, standardisation can stifle innovation. Asserting that
there is one way to do things prevents experimentation and
limits the learning you get from allowing people to make
mistakes. Moreover, if you have decided that there will be a
single global approach to learning and development or
recruitment, while this might be based on a good choice at
the time, the risk is that there will not be improvement if it is
not challenged by alternatives.
Second, it suggests that the corporate centre knows best.
We know from other research we have done that this too is
risky. There have been complaints that centres of -^

SEPTEMBER2012 / Q Q
PEOPLEMANAGEMENT.CO.UK /
.ZI

expertise may be too remote and insufficiently in touch with

what is going on at the sharp end of the business. It also
assumes that all expertise rests in the centre and has the
effect of disempowering local HR operations. As one HR
manager observed, their role in the new service delivery
model is "to do, not think".
Third, if the policies and practices are not well judged or
the mechanism for agreeing exceptions is not effective,
then local management resentment may turn into outright
objection or covert resistance. There may be superficial
adherence to the rules when, in reality, they are subverted.
Next, much of this local frustration may be directed at HR
as agents of the corporate centre. The function has been
drawn into overseeing these common processes, especially
where the business leadership has abdicated responsibility
under the guise of conforming to corporate governance
rules. For instance, HR has been put in the sometimes
unwelcome position of not only setting the method for
determining executive bonuses, but also scrutinising the
results. HR then becomes the corporate enforcer of rules
intended to avoid negative headlines, rather than a trusted
adviser to the business. Moreover, this makes it even harder
for HR to address what it is that employees want out of their
employment experience.
Finally, while harmonisation has its attractions, it does not
so easily sit with another HR driver: workforce segmentation.
These days we strive to recognise the distinct needs of various
employment groups and, throughflexiblebenefits or tailored
learning, try to personalise the people management offering.
But, while we extol the virtues of diversity, are we denying it
through our search for a common culture? Does it signal
that we value sameness rather than difference?
During our research, we came across examples of organisations whose narrow ethnocentric view of the world at the
very least produced foolish statements, but at worst led to
local workforce dismay or dissatisfaction caused by what
are seen as modern colonial decisions. An example of this
comes from a US company in a joint venture with a Sri
Lankan firm, which declared it had a policy that no one
employed in the partnership should be allowed to ride a
motorcycle on work-related business, owing to the high cost
of insurance. It was pointed out, however, that even a basic
car was outside the financial means of most of the employees in Sri Lanka and so, to enforce this policy, the company
would have had to purchase the vehicles.

A different model in Asia?

SOME MAY SEE THIS as an exaggerated account of the
consequences of the actions that global companies believe
are necessary to survive and prosper. Our argument in reply
is that organisations do not always evaluate what they are

30/

SEPTEMBER 20U
PEOPLEMANAGEMENT.CO.UK

doing (certainly from a broader stakeholder perspective),

nor do they sufficiently listen to themselves in the manner in
which they justify their decisions.
So is there another way that HR can hold the organisation
together and yet allow more diversity, experimentation and
local involvement? One source of thinking may come from
the manner in which many Asian companies - and, it should
be emphasised, some western organisations - do business,
which is to decentralise more and give more control to individual business units against minimum standards.
Tata is a good example in the way it behaves within its
original structure but also with respect to its acquired businesses, which include Jaguar Land Rover and Tetley Tea. In
our own interviews, we found similar philosophies at
Hutchison Port Holdings and JSW Steel, Chinese and
Indian companies respectively. The key word used in conversations with them was "empowerment" - to empower
the local HR teams and to accept the different cultural
norms of the local populations. Japanese companies tend to
approach their HQ/operating company relationships too in
a different way. They take a balanced view of subsidiary performance, with attention given more to future potential for
grovrth rather than past performance, without strict instructions from Japan. We heard, for example, at Canon, that the
Japanese advisers from the corporate centre to be found in
London operated in a low-key manner, and certainly not in a
dictatorial one.
One of the reasons, of course, for a decentralised management style in many Asian companies is that the business
structure is more that of a holding company overseeing subsidiaries engaged in diverse business activities. Yet there is
also the message that the benefits of local fit might outweigh
those of commonality.

Towards the 'connected company'

'GLOBAL SERVICE
ECONOMIES OF SCALE
THAT CANNOT BE
IGNORED, ESPECIALLY
NOW-IN THESE
RECESSIONARY TIMES'

OF COURSE, STANDARDISATION and a global service

delivery model lead to economies of scale that cannot be
ignored, especially in these recessionary times, so those
operating the so-called Anglo-Saxon model should avoid
throwing the baby out with the bathwater. But what HR
might need to do is more carefully decide what is common
and global, versus what is different and local, against some
well thought through criteria. This might mean, for instance,
a common HR information system, but local resourcing, or
one method of executive reward, yet multiple ways of aligning local pay with the market (see chart 2, above).
One example of an organisation that has learnt some of the
lessons of a one company approach comes from the ANZ
banking group. Historically, the company was a federated
entity where something in the order of 30 P&L units were free
to operate as they chose, so long as they delivered the finan-

i ^. i

i 1

1 i - ' i 1 "^
1

Executive
pay

j,

^ .

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-1--1 ,
[

\ ' \ \

single
HRIS

W\ !

-I

- 1o

o
u

--t

'

1 _

LOW

,.4
j

k'i
^ ^f

Local
resourcing

,---4

One executive !
development
programme

1
;
r f

!i >!

t--tf-t
;

'

fi-

'

'

'

COSTS OF COMMONALITY

'

Local pay/
1.

HIGH

CHART 2

O Global versus local: An example of a flexible approach

cial results. There seemed to be no requirement for central

oversight. Then the business model changed to "one ANZ":
the aim being to use the power of the whole firm and benefit
from cross-selling. Since 2008/9, however, there has been a
move awayfi-omthe resultant, tight, corporate control and a
"shift in the dial" towards giving people in the business units
more responsibility, so long as it is not abused.
At each stage of this journey, HR followed suit. What it
learnt was not to try to standardise everything. It became
clear that two criteria should guide standardisation decisions: replicability and scale. Processes that could safely be
copied and used to operate cross-nationally would be subject to standardisation. Compensation, resourcing and
learning and development policies and practices are more
likely to fulfil these criteria than others where local/business unit customisation is more necessary.
Individual organisations will have their own answers to
what should be global and what should be local. The point
to emphasise is that it is the essential processes, populations
and tools that are the ones to control from the centre, not a
crude imposition of one size fits all across the piece. Working out what are the real drivers of each HR activity should
lead to working out the best governance model. While

Global HR - challenges
facing the HR function
is published by Gower
bit.ly/gowerHR

engaging local HR managers in the process of settling these

questions may be time consuming, it should help to make
the outcome stick over the longer term, as should setting out
clearly where decision-making responsibility lies. How HQ
manages exceptions to standard policies gives a clue to
whether it is listening to operating company needs. The corporate centre should be open to and welcome ideas from
anywhere in the organisation that might modify existing
practice or build new areas of working together.
Our research conclusion is that the globalising process
requires a thoughtful approach. HR should harmonise policies and practices, including how the function runs itself,
where there is a real gain for the organisation. At the same
time, local cultures need to be respected and their management cadre encouraged to offer ideas where benefit to the
business far exceeds the savings that standardisation might
offer. This means more frameworks and fewer directives. It
may mean that the "one company" mantra is replaced by "the
connected company", where the goal of integration is
retained, along with common tools, platforms and policy
principles, but within a model of more devolved accountability to operating units to share/learn/reuse the common offerings in the light of their oviTi particular needs.

SEPTEMBER 2012
PEOPLEMANAGEMENT.CO.UK

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