Running a global company demands adaptation of every aspect of the business and human resource management is no exception. The functionality of HR management needs to follow such changes and adapt to the global HR model.
Localization of human resource management is viewed positively because it allows greater responsiveness. The challenge of the localization process is that it isn’t discussed enough. There are facts and valuable information that every business owner, HR manager, and recruiter needs to know about global HR. In the following lines, you can find all that you need to know about HR management localization.
The story behind the HR management localization
Localization actually presents a process rather than a purpose. It is a process within the company that consists of certain changes that help the company to adapt to the present environment.
When it comes to human resource management, the localization stands for making necessary changes to the HR aspect of the company in order to fit into the local economy and to become a part of the local culture model. Or, as it was conceptualized by Lu Wei, “localization is a modification of headquarters-transferred practices that foreign subsidiaries undertake to respond to the local environment.”
The localization of HR management is only one organic part of the complete localization strategy.
The extensive comparative research has shown that HRM practices tend to differ across countries and therefore localization needs to be adapted accordingly.
When it comes to the specific purpose of localization, a recent localization study explained it in the following manner: “the purpose of localization is to respect local cultural values, traditions, legislation, and other institutional conditions.”
What you need to know about HR management localization
As every company-related process, HR management localization consists of some basics that every HR manager and recruiter should learn.
Factors that drive localization in human resource management are:
- Cultural environment – Adapting to the targeted culture.
- The institutional environment – Improving relationships within the company.
- Subsidiary roles – Adapting to a new collaboration.
What can also demand localization are multiple cultural as well as legal factors that reside in a changing environment.
Consequently, localization includes modification of HQ practice.
Some previous research suggested that localization is an only adaptation to local firm practices. It was also investigated just by comparing subsidiary practices with those of local companies. However, the new findings show that HQ practices need to be modified.
It is important to grasp that localization is more than maintaining data for employees in a given country. Other localization matters that fall under the HR managers control are:
- knowing how that data is captured,
- understanding how data is stored,
- having knowledge of audit routines are provided by local authorities (for ensuring data quality),
- self-service capabilities corresponding to processes in a specific country,
- language support,
- time zone support,
- payroll tax calculation,
- benefit plans,
- compliance with local laws and regulations,
- Governmental reporting, etc.
There is a mitigating factor for HR management that is preparing for localization and that is having previous experience with internationalizing. Companies who already have experience with global HR, they might already have policies they can utilize again.
When it comes to the assessment, global HR management initiatives have traditionally been assessed on two organizational levels:
- the multinational parent companies
- the foreign subsidiaries of multinational parent companies
Advantages of HR management localization
The global HR management localization is a challenging process. However, the benefits it brings are worth it.
What is certain is that the local management team will be driven by their emotions for the nationality and therefore, thrive to make the localization a success.
Appealing to a local audience is the ultimate goal. For example, LG Electronic adapted to its subsidiary in China by changing the name from LG Electronics (China) Limited Company to China LG Electronics Limited Company. They also appointed local employees as the top managers.
Localization can be much cheaper and less time consuming if the companies enforce already established policies. So, they should look closely into existing policies to see if some of them can be reinforced.
One of the undeniable advantages is innovation in recruitment. A new environment can bring new and fresh ideas that can welcome recruitment innovations. Local managers will have the opportunity to use advanced science and technology from abroad in addition to the management experience from the multinational company.
Localization is also viewed positively since it allows greater responsiveness.
Potential risks of HR management localization
As beneficial as localization can be, there are also some risks and challenges that the HR management team can face.
For example, localizing developing countries with much weaker government regulations might encounter some dangers and obstacles.
Also, some multinational companies are still trying to minimize the distance between the benefits of the local employees in the national companies and multinational enterprises. However, the process still needs some work and local employees can find many discouragements in the subsidiary if the localization isn’t executed in the right way.
Gunnigle and others also emphasize that “the need to implement the methods and techniques successfully applied in an environment may however not be successful in another setting.” While Fern supports it and states that there can be friction when trying to localize.
Lastly, managers of the whole company can find obtaining the requirements that they sent to the subsidiary abroad a challenge which can put the process at risk.
Efficient HR management is critical for major corporations whose business is spread globally. When the time for localization comes, it will be up to HR managers and recruiters to show their ability to adapt their sector to upcoming changes. This insight into HR management localization can provide you with a better understanding of the implementation of the localization strategy.