Starting a business abroad: what it means for HR

Written by
Changeboard Team

29 Jun 2011

29 Jun 2011 • by Changeboard Team

Is your company expanding?

If your company is expanding abroad, it’s your job as an HR professional to make sure that all bases are covered.

There are several considerations that are absolutely vital to the success of starting up in a completely new culture, language and market.

Getting the right person

It’s essential to hire the right person to head up the new operation and not to compromise. They have to have a solid understanding of the local market combined with an in-depth knowledge of the company, so that they can consolidate their knowledge to improve their chances of success.

For example, in our own sector, the recruitment industry, we’ve found that the fundamentals don’t change from country to country, but the ways in which they’re implemented do, and the person responsible for the success of the new office has to understand the different sourcing and networking methods used locally.

Getting your hires right

Once you have the ideal person in place to start things up, you can start to build up your workforce. Try to make sure your new hires reflect the local community – an office full of expats with little regional knowledge or language skills can set the whole operation up for failure. There have been changes lately in local expectations.

For example, in the Netherlands and in Germany, which are pretty friendly towards English recruiters, we’ve found that local language skills have become vital. In the last couple of years, the recession has made people more aware of protecting their own national interests, and now a Brit setting up an office does need to speak Dutch or German in order to work well locally.

Offices in the Netherlands, for example, are now predominantly Dutch with some British people, whereas it used to be the other way around. If there’s a sudden shift in the market, it can prove disastrous for workforces that aren’t designed with locals in mind.

Get legal

It’s stating the obvious, but there are many legal considerations for HR when a company goes international, particularly in emerging markets. In many cases, companies in Asian markets are becoming a lot more employee-friendly. The HR function then has to do an 'HSBC' and be global but local when setting up abroad.

In an employment contract, all the terms and conditions have to reflect the marketplace anywhere you go. It goes without saying that going abroad with an English contract simply doesn’t work.

You therefore have to have a good local or international legal team when you’re starting up. Before you hire your first person, make sure you tick all the boxes in terms of local laws and regulations. Even if you’re clued up on your international employment law, it’s best to cover yourself legally by getting lawyers to standardise everything or you could face problems later on.

Establishing local priorities

When designing remuneration packages, don’t fall into the trap of thinking that everyone is money motivated. Salary is, of course, one of the important factors that drives people to join your business, but is not always number one - and every country has its own trends. Potential career advancement, employer brand and learning opportunities can rank much higher than salary expectation in the list of priorities for new recruits. You also have to tailor remuneration packages to the local market.

Take the sales industry as an example: in some areas of Western Europe, people are happier with a larger basic salary and lower commission, whereas people in the UK are often accepting of a lower base salary and higher commission. Be sure to meet the benchmark standards of what’s an acceptable level of pay locally, particularly given that in some fast-developing markets, many companies are experiencing upward pressure on pay, and it’s important to stay informed about the local climate.

Talent management

When it comes to choosing your talent, you do have the option to promote or recruit internally. However, there is not always a suitable candidate within the company, and there is rarely enough internal talent that can be spared to fill a whole new office abroad, which means that you will have to take a risk on somebody external. This is a risk that has to be factored into your budget. It can sometimes prove more costly to set somebody up abroad and you don’t know whether they are going to perform well in a business once they’re on the ground.

Even if you do manage to recruit internally, it’s also worth noting that professional standards differ from market to market – for example, the Asian and Indian subcontinent has an extremely high-service culture. Somebody who seems completely suitable to run an office by UK standards may not be an ideal cultural fit in another market.

A good HR policy will therefore include a flexible recruitment budget in case of a bad hire or promotion, a have a strong talent pipeline and, of course, to have a robust and consistent training and talent management programme in place. In this situation, taking the 'HSBC' approach mentioned earlier works well. Ensure that everybody goes through the same basic training that’s applied across the board so that there’s a standard framework for every new hire. With that strong foundation of training within your company behind them, new recruits can then go on to adapt their skills to the local market.

It may seem like a lot to take in, but chances are if you have the right people on the ground, the right understanding of the local market and how they fit into a global picture, a good legal team and a flexible budget, you’re set for success.