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Devising a HR Strategy for Global Expansion

Some entrepreneurs believe employee empowerment is not just a buzzword but also a business strategy. Founder and CEO of ecommerce giant Rakuten, Hiroshi Mikitani, is a big believer that business must consciously develop a global worldview and culture before attempting international expansion. Rakuten, which also owns Canadian e-book creator Kobo and, is giving its first serious competition in years. In his recent book, “Marketplace 3.0, Rewriting the Rules of Borderless Business” he sets forth a path for doing this.

Our company needed a global HR strategy. At the time, we were operating on a bit of a patchwork system. We had an overarching human resources department at our headquarters in Japan, but we also had within our system the HR departments of all the companies we had acquired – and this was getting to be a long list. We had legacy offices in the U.S., the U.K., Germany, France, Taiwan,dThailand, ust to name a few. Every time we absorbed a new company, its HR department came right along with it.

We did not want to disrupt the functioning of these acquired companies by simply shutting down the system that had managed the needs and requirements of the human workforce. After all, their HR departments provided vital functions in delivering benefits, maintaining a recruiting and training schedule, and dealing with everyday work issues of promotions, raises, and handling problem employees. At the same time, we could not simply let each acquired company continue to operate an HR system outside the broader Rakuten chain of command. Becoming part of the Rakuten universe involves more than just acquiring a financial status. We needed to leverage HR to deliver not just Rakuten policies, but also Rakuten vision. This was crucial to our becoming a unified company and not just a collection of individual offices all over the world. Designing a functional global HR system was critical. We were big and diverse and planning to become more so.

When we reviewed the landscape we considered the paths carved by multinationals before us. Three primary system were evident in the marketplace:

Centralized. This is the system of human resources used by Amazon, Apple, and eBay. It retains a tight hold within the company’s nation of origin and relies on high-level headquarters staff to supervise local managers. The headquarters managers are responsible for the HQ staff and local managers supervise local staff. Both local and HQ teams report to the global executive. The benefit of this system is that maintains strict brand control. The strategy in one of export. When you think of a company like Apple or Amazon, it’s not hard to see how this system of global organization works. Employees all over the world wear the same uniform and receive the same training. Indeed, Apple strictly polices any attempt by resellers to break away from the Apple way. Amazon does not yet have stores, yet also adheres to this one-company, one- system method of global operations. No matter where in the world you open an Amazon page . it will have the look and organization that Amazon has made its trademark.

Localized. This global operating system goes to the opposite extreme. In a localized system, the product strategy varies by location. Decisions are made at the local country level and designed to deal with local issues directly. In fact, the only issues controlled by headquarters in the country of origin are financial. This pyramid type of global operation has very little room for integration. McDonald’s, for example, follows this system of operations. In the U.S., there are executives charged with managing the efforts of McDonald’s operations around the world. Everything below that one executive is entirely local: In China, for example, McDonald’s employs a local executive, local managers, and local staff. It stocks products based both on the familiar U.S. menu and on local tastes (for example, it offers red bean sundaes). While the localization strategy appeals to us in its support of local empowerment, its lack of integration throughout the management hierarchy remains a problem.

Hybrid. The answer, therefore, was to adopt a hybrid of these systems—a combination of centralized authority and local empowerment. In the hybrid system, the global executive ranks and global manager ranks are fully integrated—drawing upon all locations. We would need a strong system of training and promotion to ensure that managers from all out locations would have the opportunity to rise through their local ranks to move into the integrated manager and executive ranks.

The hybrid system is one that we see in action across many multinationals. IBM and Panasonic have made it famous in technology. Procter & Gamble and Nestle have adopted it to develop and market consumer products around the world. However, we are operating in a new interconnected world. Companies like Panasonic and P&G grew without having to contend with digital communications, borderless commerce, globalized markets. It was clear to us that we would still need to develop a system that would take the best of this hybrid arrangement and layer on top of it the processes and systems that would allow us to thrive in a fast-moving Internet marketplace.




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