FACTORS AFFECTING GLOBAL HR MANAGEMENT- LEGAL AND POLITICAL FACTORS

Managing human resources in different cultures, economies, and legal systems

presents some challenges. However, when well done, HR management pays dividends.

A seven-year study in Britain of over 100 foreign companies showed that good HR management, as well as other factors, accounted for more of the variance

in profitability and productivity than did technology, or research and development.

The most common obstacles to effective HR management are cross-cultural adaptation, different organizational/workforce values, differences in management style, and management turnover. Doing business globally requires that adaptations be made to reflect these factors. It is crucial that such concerns be seen as interrelated by managers and professionals as they do business and establish operations globally.

Each of those factors will be examined briefly. The nature and stability of political systems vary from country to country. U.S. firms are accustomed to a relatively stable political system, and the same is true in many of the other developed countries in Europe. Although presidents, prime ministers, premiers, governors, senators, and representatives may change, the legal systems are well-established, and global firms can depend on continuity and consistency.

However, in many other nations, the legal and political systems are turbulent.

Some governments regularly are overthrown by military coups. Others are ruled

by dictators and despots who use their power to require international firms to buy goods and services from host-country firms owned or controlled by the rulers or the rulers’ families. In some parts of the world, one-party rule has led to pervasive corruption, while in others there are so many parties that governments change constantly. Also, legal systems vary in character and stability, with business contracts sometimes becoming unenforceable because of internal political factors.

International firms may have to decide strategically when to comply with certain laws and regulations and when to ignore them because of operational or political reasons. Another issue involves ethics. Because of restrictions imposed on U.S.-based firms through the Foreign Corrupt Practices Act (FCPA), a fine line exists between paying “agent fees,” which is legal, and bribery, which is illegal.

HR regulations and laws vary among countries in character and detail. In many Western European countries, laws on labor unions and employment make it difficult to reduce the number of workers because required payments to former

employees can be very high, as the HR Perspective on the next page indicates. Equal employment legislation exists to varying degrees. In some countries, laws address issues such as employment discrimination and sexual harassment. In others, because of religious or ethical differences, employment discrimination may be an accepted practice.

All of these factors reveal that it is crucial for HR professionals to conduct a comprehensive review of the political environment and employment-related laws before beginning operations in a country. The role and nature of labor unions should be a part of that review.