What Challenges do Multinational Firms Face in the HR Department?

Multinational companies operate branches or business units in different countries. Human resources departments have the challenge of setting uniform company policies and uniting culturally diverse people to form one employee community. Also, HR must must learn local laws affecting employment and keep the workplace safe from terrorism, natural disasters and health epidemics.

HR must unite its own colleagues across international business units before it can build a global employee community. Policies and procedures on recruiting, hiring, benefits administration and compensation – all core HR functions – must be consistent across company divisions. In “Global Challenges to Replicating HR: The Role of People, Processes, and Systems,” a team of researchers concludes that a unified HR function helps multinational companies succeed. In the report, published in the November-December 2009 issue of Human Resource Management, the researchers state that multinational companies whose HR global teams use the same information technology systems, business forms and processes for handling employee-related matters are likely to have higher productivity than their competitors.

HR must build a global employee community that’s in step with the parent company's values and identity. To secure this alignment, companies often send their star performers abroad to head up financial divisions or sales teams. But diverse languages, cultures and customs can hinder alignment. Philip Berry, a global management consultant, cautions multinational firms against overlooking nationals when filling key positions. In an article for Global HR News, titled "How Global Megatrends Are Shaping Global Talent Development Strategies," he writes that companies risk losing the chance to develop overseas employees when they traditionally promote from within the home office. He recommends that companies' new hires include nationals, who might bring new and different perspectives on performance to the workplace.

All multinational firms encounter complex legal and ethical issues when conducting business abroad. Don Mayer and Ruth Jebe, University of Denver professors and authors of the 2010 report, "The Legal and Ethical Environment for Multinational Corporations," cite cronyism, bribery and unfair competition as some of the most challenging issues. Multinational firms can also expect to confront human rights, social equity and environmental problems, which often undermine their ability to compete fairly in the global marketplace. HR is responsible for keeping companies compliant with employment-related laws and tax codes, and that includes complicated – and sometimes conflicting – laws and regulations abroad.

Deloitte, the international business consulting firm, cites safety and security as one of the most difficult challenges for HR professionals in multinational companies. Deloitte points out, in a 2010 white paper titled “Global HR Transformation,” that terrorism, disasters such as Katrina and Japan’s tsunami, and epidemic diseases such as the avian flu have made HR’s task of protecting employees and the workplace from harm more critical than ever. Risks are especially high for multinational companies with subsidiaries in politically or physically vulnerable regions of the world.