The Role of HR in International Business Expansion
Expanding a business into a new country can be hard work. Not only do you have to think about localising your products to suit a new audience, but you have to register to become a legal entity and get to grips with local laws and regulations - and that’s without recruiting new members of staff to manage your business development. Another area of your expansion plans that cannot be overlooked is human resources. Below, here I explain why:
Expanding into a new territory
Globalisation and the rising dominance of giants such as Amazon, eBay, Google and Apple have made it harder than ever for small and medium-sized businesses to compete. Whether you have ten employees or ten thousand, there is only so much growth that you can achieve in one country, especially if you’re in a developed Western country like the United Kingdom or the United States, where competition is rife and consumers can choose between 100 companies.
One way that you can combat this is to form a company in a new territory, allowing you to sell your products and services in a new country to a whole new audience. In an ideal world, such a move would be relatively straightforward, but the truth is that it’s often more complex. If you decide to expand into a country in Latin America, as an example, then you’ll have to worry about things such as language and cultural barriers, and local competition. Heading East and growing a business in China using services like WeChat and Weibo, on the other hand, brings with it the threat of government intervention and control, so no overseas expansion is going to be simple.
The good news, though, is that you can limit the risks and barriers to entry by working with people who know their stuff. Whether you choose to work with a business that offers back-end services, or you find a professional within your chosen country to manage your marketing and business development, you should remember that getting help and utilising people’s talents is key to success. Indeed, you may even consider the benefits of using a PEO as part of your business expansion, removing the need to establish a physical presence whilst still growing.
Multiple departments increase costs
When you establish a presence in a new country, you may be tempted to replicate your native business model to maximise efficiency. But having a human resources department in the UK and in Mexico, for example, is counterproductive, requires double the labour and infrastructure costs, and makes it harder for employees to feel like they’re receiving the same treatment from their employer if one human resources department is better than the other. With a single unified department, in whatever country around the world, you’ll be able to offer a more transparent approach, and ensure that international and local employees are treated in the same manner.
There’s also the administrative burden of managing multiple departments and teams to contend with - consolidating your human resources can streamline costs and reduce waste, so consider putting all of your employees on the same payroll and ensure they’re given the same benefits.
A flexible approach is important
By standardising your human resources department across countries, you can offer a fairer and more reliable approach to your business operations. But the truth is that you need to be flexible, especially if you’re employing talent in new countries where business regulations differ. Staff in one country, for example, may be legally entitled to 30 days of annual leave, whilst others may only be entitled to 10 and bank holidays. Being able to manage this to suit individual needs, your company profits and local laws and regulations is important, and your HR department can help.
Alternatively, you may decide to outsource your payroll, so that you can free your business from the regulations and policies associated with different countries. By consolidating all of your processes and regulations from each and every country, you’ll be able to streamline payrolls, ensuring employees from new starters to senior managers are all treated in the same manner.
Maintaining control, wherever you are
Another reason why your human resources department is so important in international business expansion is for your control. Even if you’re the world’s most dedicated boss, you won’t be able to constantly maintain a presence in each country you operate in, and so having an HR department that can give you real-time updates on your business, both in terms of individual employees and as your company as a whole, will allow you to make better business decisions.
Say for example you run a clothing company, and you have a headquarters in the United States and the second office in Chile. A switched-on human resources department will be able to help you iron out issues with absenteeism of lack of staff to deliver customer service as you grow, and you can then invest in recruitment to further grow your business and increase profitability.
Without a centralised human resources department, you’d have to liaise with each of your HR managers, and compare their notes to discover issues and find solutions. By bringing together all of your talent, as well as your leaders, managers and employees, you’ll be able to manage and see real-time reports, particularly if you hold a company database where you can monitor employee engagement, sales figures, KPIs, and more. Bringing all of your staff data into one department ensures you maintain control, whatever side of the world you’re on right now.
Expanding a business into new territories can be hard work, especially if you have teams on opposite sides of the world. But with the right strategy, and a bulletproof human resources department that can be expanded at a moment’s notice to handle new recruits, you’ll no doubt go on to make a success of your new venture. Whether you’re still in the early days of business or you’re already making millions, I wish you the very best of luck with your expansion ventures.
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Seasoned Business and Investment Professional in Latin America. Craig Dempsey is the CEO and Co-Founder of a leading multi-national group, that specializes in the provision market entry and back office services in the Latin America. Craig holds a degree in Mechanical Engineering and a Masters in Project Management. Craig is also a veteran,...