Global dynamics put expansion on the agenda for HR
Why supporting international expansion will be a crucial capability for HR leaders at ambitious businesses in 2020
Written by The Economist Intelligence Unit
Seen at a global level, the prospects for international trade in 2020 look rather grim. In October 2019, the World Trade Organisation cut its forecast for growth in trade volumes in the year ahead from 3% down to 2.7%.
Even this downgraded prediction assumes a return to “more normal trade relations,” the WTO said. Growing tensions over international trade, specifically between the US and China, have not only reduced trade volumes, it said, but also increased uncertainty, preventing companies from making investments that might otherwise have kept trade afloat.
However, there is considerable regional variation beneath this downbeat headline figure. Imports to developed countries will grow by just 1.2%, the WTO expects, but in developing countries the figure is 4.3%. In Asia, they are expected to grow by 3.9%; in South and Central America, by 4.5%.”
Furthermore, a number of factors promise to counteract the dampening effect of trade tensions. For one, companies will look to diversify their supply chains as their traditional routes are affected by global trade policy; this has the potential to open up new opportunities in untapped markets. Meanwhile, economic measures, such as interest rate cuts in the US, could boost business activity in spite of policy pressures on trade.
In short, long-established trade routes and supply chains may be disrupted by Brexit and the simmering tensions between the US and China, but the shifting contours of global trade will create opportunities as well as challenges.
This is likely to prompt ambitious companies to look beyond their traditional priority markets in pursuit of growth.
A recent survey of over 9,000 businesses by global bank HSBC found that a little under half are more optimistic about their growth prospects than they were a year ago. Companies who trade internationally are more confident than those who don’t, the study also found.
The most commonly cited reason for this optimism, HSBC found, is the opening up of new markets. This is not just a reaction to short-term expediencies: The EIU’s business environment rankings have tracked a gradual improvement in the ease of doing business around the world since 2010, especially in economies in transition, such as Russia, Hungary and Poland.
Put together, this suggests a fresh wave of international expansion in 2020 and beyond, as companies seek new opportunities for growth. This, in turn, means that human resources executives will need to contend the challenges of expanding an international workforce.
Even the most technology-driven and highly automated company is, at heart, a community of people. Capturing global opportunities means expanding that community in the face of geographic, cultural and linguistic distance, across jurisdictions with varying employment laws and practices, and at risk of growing organisational complexity.
It falls to HR leaders to overcome these challenges to ensure that international businesses attract and retain the best talent, contain headcount costs, and maintain consistent and effective HR practices across a geographically diverse organisation.
A forthcoming study by The EIU, sponsored by ADP, will examine the HR challenges of international expansion and the way in which companies who have expanded successfully have addressed them.
Based on a survey of over 1,000 HR executives in globally expanding companies, the study identifies international recruitment, maintaining compliance across jurisdictions, and understanding cultural differences as among the chief HR challenges of international expansion, and that these challenges lead to increased HR headcount and management costs.
The study also reveals how companies who have expanded most effectively manage their HR processes and deliver services. For HR leaders whose companies see the current shake-up of the global economy as an opportunity to advance, this insight may help them live up to the challenge.