HR Challenges In Companies International Expansion

Nowadays with the companies increase pace to expand internationally, seeking new markets and chances, HR managers face different problems and challenges in human resources department. Knowing that it is more difficult to manage employees abroad, than if employees were in the home base.

The growth of companies internationally determines new assignment and tasks and there is a need to successfully manage this for the benefit of both the firm and the individuals.

This research study observes the change from domestic to international HR management, which examines issues of culture, contracts, agreements, recruitment process, and remuneration in company’s expansion to other countries. All the same, the paper discusses suggestions for HR managers, which involve cultural research, and the functions of selection, training, performance management and remuneration.

In this new era of globalisation, international human resource management is becoming a vital concept for human resource managers to be able to practice human resources functions, starting to mention, recruitment & selection, performance appraisal, compensation & benefits, training & development and finally employee’s relations. This is important for human resource managers in multinational corporations and also in domestic based human resource managers who import employees from overseas.

To stay updated with the changing world, human resource managers will have to have an international vision of how to manage their individuals successfully both at home and abroad.

Managing international human resources allows companies to participate more effectively in the market place, and is a developing tool for its employees.

Part 1: Introduction

Human Resources Definition

These last decades, humanity is witnessing the growth of globalization. Nowadays Human resources is no longer a traditional personnel, and administration, however Human resources role is more strategic that deals with strategic aspect, to make sure that employees contribute effectively and works in parallel with the company direction to achieve the firm’s goals and objectives. In other words, Human Resources is no longer only involved in paperwork, paying the employees their salaries and providing them with the benefits; yet it plays one of the organization’s important role that is through hiring, training & developing and most importantly retaining employees for the benefits of both parties. (McNamara, 1999)

Gilley define human resources as “The people employed by an organization” (Gilley, Eggland, & Gilley, 2002, p. 5). They define human resource management as “the recruitment, selection, retention, development, and utilization of and accommodation to human resources by organizations” (Gilley, et al., p. 9).

Human Resources refer as well to the policies, systems and employment practices that are common to most firms, which are used first to attract talented people by recruiting and selection, secondly retaining talented people by salary, benefits and employees relations, and finally developing the people by training, development and performance appraisal.

Thus, human resources is considered as an organization function, that focus on recruitment, providing career path for the people who work in the firm, and deals with personnel issues such as hiring, compensation & benefits, performance appraisal, safety, employee’s motivation and finally training & development.

Knowing that Human Resources are no longer a business partner, but a strategic partner more related to the firm strategic goals. I will focus on the challenges that HR managers face while international expansion. How HR manager role differs around the world, and the need of the HR professions to be more familiar with culture awareness, language barriers, social differences and diversity promotion. (Halcrow A, 1998).

Nearly every company say it “People are our most important assets”

Human Resources importance and Need in International Companies

The Human Resources department is important in all multinational and international companies. Recruiting and selecting is one function completed by HR, and their main responsibility is hiring and retaining company’s most important asset that is our “PEOPLE”. Failure to do so, and lack of strong, motivated and satisfied employees, working in the right place in a firm will leads to hiring the wrong people, high turnover, employees will not do their best in their jobs and having some candidates demotivated. Thus, without good employees, the best business plan and ideas will be unsuccessful.

Moreover Human resources take care of all the employees concerns, make sure to solve employee’s issues immediately and to play the fair judge between the employee and the organization, for both sides advantage.

Nevertheless, Human resources guarantee smooth functioning of the operation, good and safe working conditions and ensure that all staff is performing their jobs efficiently and toward the organization goals and objectives. Accordingly, Human Resources Manager evaluates all the employees, reward, takes disciplinary actions or dismissal.

Another important role under the human resources umbrella is training and development, and creating career path for all employees, to retain and develop the existing employees, and attract new talented people, in this way the HR will improve the organization reputation and commitment from staff, thus become an “employer of choice” and reduce turnover.

Why Human Resources are important and needed for international expansion?

In this world of globalization, and company’s expansion to other countries, Human resources are important to be able to adopt new cultures, and take care of all legal requirements as per the new country rules and regulations, as well as managing payroll, and other presented benefits. These new skills create a new role for HR managers, requiring them to be strategic business partner.(Bharti Venkatesh).

What could be the HR Challenges in companies International Expansion?”

Part 2: Analysis of the Organization

Through the research study, I am discussing out the HR challenges that companies face while international expansion, and the study that companies have to accomplish from an HR perspective before opening in new markets. I am also investigating on the importance of HR functions in company’s international expansion.

For this aim to see how HR functions operates in the real life I took the example of Wooden Bakery expansion to KSA. Thanks to my manager, and due to my personal experience in Wooden Bakery human resources department, I had the chance to know in details the challenges the HR department face, while international expansion. Additionally I read lot of articles, books and blogs that I will mention in the end of my research.

I will start by a small presentation of Wooden Bakery and then i will go deeper into the challenges of international expansion to KSA.

2.1- Wooden Bakery History

Wooden Bakery was founded in Jal El Dib Lebanon in 1969 by Mr. Edward Bou Habib. It was a simple Bakery providing the market with freshly baked quality Bread.

In the last decade Wooden Bakery literally revolutionized the bakery industry in Lebanon by setting new standards and upgrading its products and services.

Edward’s two sons Assaad and Ghassan Bou Habib planned and designed the new concept on paper in 1996. With immense vision and an innovative spirit, Wooden Bakery developed a unique concept gathering Bread (of all kinds), Pastries, Sweets, Sandwiches, Salads and Deli.

The first Wooden Bakery Outlet opened at Zalka highway in October 1999. Wooden Bakery launched the first franchised operation in 2002 and expanded to 26 franchised outlets in Lebanon by the end of the year 2012.

Wooden Bakery opened the first Master Franchise Operation in Saudi Arabia in July 2009, and currently negotiating the scale of the Master Franchise with a number of companies from the GCC countries. (www.woodenbakery.com)

The Concept of Wooden Bakery Factory

Wooden Bakery system revolves around a state of the art industrial baking facility. It includes the latest and most advanced machinery and equipment in the baking industry.

Human Resources department make sure to hires top Master Bakers, Pastry Chefs, and highly qualified Managers and Quality Controllers to assure the freshest and most consistent products for our markets.

The Wooden Bakery factory produces from 100 to 150 tons of flours per day depending on the market need and factory size.

Wooden Bakery is the leading supplier of high quality Freshly Baked Arabic Bread in the Lebanese market.

The Concept of Wooden Bakery Outlet

Wooden Bakery Outlets are designed to service all classes of people in any market around the globe.

All Wooden Bakery Outlets are located on Main Road Arteries in Strategic Areas, and considered as a One-Stop-Shop where one can buy Fresh & Hot French and Arabic Bread, French, Arabic and American Sweets.

The Wooden Bakery Outlets offers all mentioned products at Competitive Prices and offer a warm ambiance through its Unique Design, Clean & Safe Environment and Excellent Service for its customers.

2.2- Mission and Vision

Mission Statement:

Our mission is to push our presence and create a brand in the Bakery Industry by Offering MORE and Delivering BETTER

Vision Statement

Our vision is to dominate the market by building stores on all main road arteries and major cities and towns in Lebanon and beyond,

Our products would be available at ALL grocery stores, supermarkets, catering companies and therefore in every single home in Lebanon.

2.3- Local and Multinational Expansion

Wooden Bakery first Outlet opened at Zalka highway in October 1999.

The first Wooden Bakery franchised operation launched in 2002 and expanded to 26 franchised outlets in Lebanon by the end of the year 2012.

Baabda-Hazmie

Mansourieh

Bauchrieh

Elyssar

Awkar

Zouk Mikael

Zouk Mosbeh

Jounieh

Jbeil

Kfarhbab

Amioun

Tripoli

Zahleh

Zalka

Jal El Dib

Fanar

Dekwaneh

Chtaura

Roumieh

Burj Hamoud

Sour

Zgharta (Soon)

Achrafieh (Soon)

Chiah (Soon)

Naccach (Soon)

Bayada(Soon)

Wooden Bakery opened the first Master Franchise Operation in Saudi Arabia in July 2009, and currently negotiating the sale of the Master Franchise with a number of companies from the GCC countries.

Wooden Bakery KSA

Wooden Bakery plan was centred on the key concept that customer satisfaction all over the world is the main goal. It has established and developed its first Master Franchise in Riyadh, Kingdom of Saudi Arabia on July 2009.

Its successful set up can be measured by how our products and services that we supply meet however surpass the Saudi customers’ expectations.

“The Bread Factory Outlet” was built on a 10,000 m2 space to house all the production equipment that will supply Bread and Pastry products and Central Kitchen Food Production to a number of outlets along with the wholesale distribution of Wooden Bakery Products.

“The Store” is spread over two levels that house a main showroom with an eating area and a restaurant.

Wooden Bakery has received the award for the “Fastest Growing Lebanese Company” at the prestigious Social Economic Award 2011, instituted by the global communications agency First Protocol to recognize outstanding achievements by organizations in the social and economic sphere.

Today, the name of Wooden Bakery not only spells trust and quality, however, it has become a marked proof that a brand can be born, even in the Lebanese bakery industry. Wooden Bakery’s expansion in the Lebanese territory has facilitated the achievement of the owners’ mission, proving that Wooden Bakery is worthy of the award that comes as a natural translation of its ever-expanding drive to Offer More and Deliver Better.

2.4- Wooden Bakery SWOT Analysis

SWOT Analysis

Strengths

Serves all classes of people

Big Variety of products (produced and non-produced by WB items)

One Stop Shop

Mushrooming Franchise (outlets are located on main roads in strategic areas)

All outlets have the same image

Product differentiation in the PRESTO section sandwiches. Ex. Rustic Bread

Customers loyalty

Quality (Shelf life limited)

Freshness products (core value)

Diversity of products (Arabic, French Pastries – Viennoiserie – charcuterie – Arabic Bread)

Rank among the top 25 companies in Lebanon

Hold high level of market share in Leb.

Balance menu (variety, quality, and price)

Quality Control Management during process, on final product and in outlets

Franchise Support

Weaknesses

Outlets are rented premises which leads to increase the operating expenses

Franchise operated outlets might not have same level of loyalty as the outlets owned by Wooden Bakery

Increase in raw materials and labour costs

Not every franchised store owner get involved in the P&L statement

No direct authority

High start-up cost

Delivery Service

Advertising plan to increase sales through brand awareness

Family Business

Opportunities

Market trend turning bakeries into a wider shopping outlets

Healthy eating trend

Opening new and international markets

New inventions for competition

Threats

Increase in Labour costs put pressure on button line margins

Increase in raw materials costs put pressure on gross profit margins

Quality of service focus with the presence of competitors in the market

Many competitors (bakery’s, supermarkets, etc…

Recommended Strategies to decrease the weaknesses and threats

Part 3: Methodology and Results

3.1- Describing “Human Resources” at Wooden Bakery

At Wooden Bakery, the human resources department used to work the traditional personnel management tasks, generating payroll and registering employees in NSSF.

With the new era of globalisation, Wooden Bakery had to create a new concept and expand more to be able to compete with the market, with this new idea that exceeds only serving the market with bread, Wooden Bakery needed people to make the concept a reality. With more than 500 employees, the company needed a human resources department implanting all human resources functions to be able to succeed with the plan and become more a strategic partner.

The Main human resources achievement was shifting from personnel management to human resources management, implementing all human resources functions, and be more involved in Wooden Bakery strategic plan.

Human Resources department today mainly concentrates on recruitment, management, and providing directions and guidance for the people who work in Wooden Bakery, and off course hiring the right people in the right places.

Human Resources department deals with employees concerns such as compensation, hiring, performance appraisal, employee motivation, safety, benefits, employee’s relations, and training & development. Knowing that no one can evaluate employees better than the direct managers with the help of the HR department, The HR department main goal was to promote a positive atmosphere to be able to expand internationally with an encouraging environment.

However, Wooden Bakery HR department make sure that all the employees are effectively contributing to the overall company direction and to accomplish the organization goals and objectives.

The administration roles usually played by the Human Resources department are becoming increasingly aligned with the company strategic plan, which in turn is evolving the HR into becoming: Human Resources Management.

3.2- HR Functions in Wooden Bakery

3.2.1- Recruitment and Selection

The ability of Wooden Bakery to achieve its objectives of profitable and sustainable growth and high-quality product and service standards depends on the quality of its “Human Capital”.

The recruiting function, which directly affects the quality of Wooden Bakery’s human resources, will represent a critical function in the company’s development. It is therefore important that a clear recruiting mechanism is established in order to optimize applicant selection, while supporting Wooden Bakery’s strategic orientation and values.

Proper and professional recruiting is necessary in order to avoid undesirable effects, including:

Negative publicity or damage to the company’s image

Wasted time and effort to interview applicants who do not meet Wooden Bakery’s needs

Cost incurred in training recruits who should not have passed the recruiting interviews

High turnover rates

The hiring process in Wooden Bakery includes Recruiting, Processing, Eliminating, Selecting, Rejecting, File Building, Placing, and Orienting.

The recruiting process is divided into three phases: Pre-recruiting, Recruiting, and Post-Recruiting. It involves:

Posting a job advertisement in appropriate places

Evaluating the information provided on each application

Screening candidates to determine which ones to interview

Verifying references and information

Conducting personal interviews

Deciding who will be offered the job

Orienting the new employee about the organization

3.2.2- Performance appraisal

Wooden Bakery faced a problem in its environment, having a negative atmosphere among its employees, almost a good number of its employees have the impact that they are not fairly treated, and based to my research employees have to be motivated to be able to give the best to their job. Wooden Bakery had to promote a positive environment to be able to expand internationally with employees with high morals.

Accordingly, Wooden Bakery created a new assessment concept for evaluating employees, “365 Evaluation”, that is created to monitor and evaluate the productivity of Wooden Bakery administration and management staff throughout the year.

The concept covers three different aspects and tackles employees’ productivity by looking at:

Missions accomplished (Monthly Evaluation)

Key performance indicators (KPI) (Quarterly Evaluation)

Yearly competency evaluation

The purpose of the 365 Evaluation is to:

Monitor the productivity of Wooden Bakery administration and management staff throughout the year.

Compensate and reward exceptional achievements, and where applicable take disciplinary actions against under-achievers.

The benefits to be gained from conducting performance appraisals include:

Recognizing accomplishments and reflecting the results through monetary terms (Salary increase, Promotion, Bonus, etc.)

Identifying newly acquired competencies

Preparing employee development plans

Planning improvement where deficiencies are found

Goal-setting

Communication between supervisors and employees

Monthly Evaluation “Mission Based”

Mission

based evaluation is a tracking system that records and rates the mission undertaken by Wooden Bakery administration and management staff on Monthly Basis.

Title

Subtitle

Illustration

1-Mission Details

Title

Mission’s name

Date &Duration

Date of registering the idea and expected mission duration

Owner

The employee who created the idea and who is the custodian for its implementation

Department

Self-explanatory

Mission Scope &Objectives

Scopeis the sum total of all products, services and outcomes needed to make sure that the mission is successfully done.

Objectivesare the benefits, outcomes, or performance improvements that are expected to be accomplished by the mission.

Authority Structure

List of personnel involved and needed for the completion of the mission and the designed authority distribution

2-Mission Program

Task Breakdown

Breakdown of tasks and assigning a start and a duration for each task

Start &Duration

3-Mission Kick-off &Registration

Owner Signature

The mission owner has to register the mission with the HR department after it has been noted by the direct supervisor and approved by the concerned VP

Direct Supervisor

VP (Concerned)

Human Resources Manager

4-Mission Evaluation

Score for Innovative

At the completion of the mission, the owner has to get the formal evaluation of the concerned VP. 3 criteria will be used to evaluate the mission (Innovative, Importance, Impact)

Score for Importance

Score for Impact

5- Approvals

3 parties and the checking of the Internal Audit department

Once rated by the concerned VP, the mission score is registered by the HR in the Mission Tracking System.

The internal Audit team is entitled to monitor the proper implementation of the system.

Quarterly Evaluation (Productivity Based)

The Quarterly Evaluation is a system that measures the productivity of Wooden Bakery administration and management staff by looking at five (5) aspects:

Attendance

Mission Accomplishment

Policy and Procedure Development (creation and implementation of new procedure)

Introduction of Improving Ideas (Cost saving ideas – Process improving ideas)

Productivity Measurement (Vary from one department to another – each department will be evaluated by using five indicators)

Yearly Evaluation (Competency Based)

The Yearly Evaluation is a systematic way of measuring, reviewing and analysing employee performance on a yearly basis and using the information gathered to plan for the employee’s future with Wooden Bakery. The feedback is used to judge employee effectiveness as well as provide necessary Training and development to improve the employee’s contributions to the Wooden Bakery’s goals.

The purpose of the Yearly Evaluation at Wooden Bakery is for the manager or the direct supervisor and the concerned employee to have an open discussion about performance expectations and actual performance.

The employee’s actual level of performance is compared to the estimated level of performance using standards that were developed by the supervisor.

This expected level of performance is to be derived from competencies needed to perform the job in the highest level of professionalism.

The comparison of actual performance with expectations and standards serves as a basis for recognizing accomplishments and planning for improvement where insufficiencies are found. Performance appraisals may also be utilized in a progressive disciplinary process to resolve continuing poor performance.

3.2.3- Training and development

Wooden Bakery encourage growth and career development of its employees by coaching, and helping them to achieve their personal goals, through providing adequate training, encouragement of staff development, and chances for growth.

Wooden Bakery training methods include:

Orientation training, Orientation training is the process Wooden Bakery use for welcoming a new employee into Wooden Bakery family. New employee orientation, often organized by a meeting with the Human Resources department, that generally contains information about the new job description, the work environment, company culture, company history, the organization chart, tour of department, introduction to colleagues, Wooden Bakery rules and regulations, etc…

On-the-job-training, on the job training is used in both our branches and factory to teach new employees how to perform job duties.

Sometimes training sessions take place in the headquarters and some other times on site. For example, customer service, food safety and hygiene, menu implementation.

Conferences and Seminars, Wooden Bakery works on developing its employee’s skills by sending them to international conferences, Seminars and Workshops.

Some of the trainings attended by Wooden Bakery administration employees:

R&D Technician and R&D Manager were sent in 2010 to Las Vegas to attend “Baking Industry Trade Fair”

Production Manager and R&D Manager were sent in 2012 to Bulguim to attend “Professional training session held by PURATOS”

Quality Controller Supervisor and R&D Supervisor were sent in 2012 to Paris to attend training with “Chopin Technologies”

Maintenance Manager was sent in 2012 to Vienna to attend a conference in “ROSENDAHL Company”.

3.2.4- Compensation and benefits

The term compensation in Wooden Bakery refers to the wages used to reward employees. As for benefits, Wooden Bakery offers paid vacations to its employees.

Wooden Bakery wishes to maintain a sense of fairness and equity within the pay structure – Grading System.

For each position at Wooden Bakery the following will be defined:

The Minimum, the Middle, and the Maximum fixed salary range

The minimum and maximum of each fixed salary range is selected in line with market realities, and based on external salary surveys of comparable organizations.

The parameters used to determine the weight of each job and thus giving an accurate grade based on numerical study:

Know How

Technical Knowledge

Management Extent

Human Relations

Highest Education Level

Problem Solving

Reasoning

Decision Making

Communication

Influence on Others

Accountability

Freedom to Act

Magnitude of Action

Impact of Decisions

Working Conditions

Long Working Hours

Working during Holidays

Extensive Traveling

Hazardous Environment and Critical Encounters

The grading system at Wooden Bakery offers a clear career path for employees who show potentials to advance within the company hierarchy.

Moving horizontally within the same grade is governed by different factors including:

Seniority (1.5 years spent in each level)

Performance Appraisal Recommendations

Acquiring Additional Skills (Experience and Education)

Top Management Discression

Moving vertically is governed by different factors including:

Performance Appraisal Recommendations

Acquiring Additional Skills (Experience and Education)

Availability of the vacancy

3.2.5- Employees Relations

Wooden Bakery promotes a positive atmosphere, and encourages positive relations between employees, to be able to reach the organization goals and objectives.

Employees Relations is concerned to prevent and resolve problems involved by employees which arise out of or might affect Wooden Bakery work atmosphere.

Wooden Bakery employee’s relation involves the relation between the employees with each other or their relation with their supervisors.

Wooden Bakery concerned supervisors provide advises on how to correct poor performance and employee misconduct.

The Company Disciplinary Action is to help and encourage employees to improve, achieve and maintain standards of conduct, attendance and job performance. It also enables management to deal effectively with those employees who do not comply with Wooden Bakery standards of conduct, attendance and performance in the workplace.

Employee relations are designed in a manner which is non-discriminatory and which is “Fair” consistent and effective. It must also be applied in a timely manner and without undue delay.

3.3- What are the differences between Local HR functions and Global HR functions?

The below mentioned HR functions will be the same for the HR management operating locally and globally;

Recruiting and staffing

Training and development

Compensation and benefits

Employees relations

Performance appraisal

But when the company operates globally it has to take into consideration additional aspects. (Jayant R Row, 2010)

Globalizing the HR functions:

After taking into consideration all the above HR functions and the additional global aspects, the HR department have to make sure that the HR policies fit with the new organization country, the HR department have to modify the policies to fit local requirements.

3.4- Human Resources Planning for Global expansion

Global expansion is a growth strategy for the future. It is at the heart of Wooden Bakery’s development strategy. The owners are constantly striving to raise market share through expansion primarily in the Middle east and subsequently worldwide, in order to win over increasing numbers of customers.

Wooden Bakery began seeking out growth and expansion, looking to reach out into new markets through Master Franchising and/or Partnership/Joint Venture.

Wooden Bakery planned to expand worldwide after going through a number of challenges and risks that need to be taken into consideration along with is the Human Resources. The human recourse factor refers to the hiring of employees in the foreign markets, and the challenges and risks that come with doing so.

Wooden Bakery will always take into consideration the foreign country laws, rules and regulations, which might be far different from our country of origin and which may seem difficult to manage with.

One of the differences is the employee’s contracts in other foreign countries, which define the parameters of an employee’s job benefits, including vacation time, working hours, salaries, compensation, severance pay, etc.

The differences stated earlier will mandate that the total packages offered abroad are tangibly higher than those offered within the Lebanese region.

Thus, the existence of all the above variances means that any organization looking to expand internationally will need to do unlimited researches in regards to the foreign markets, since it might affect its operation.

Implementing a global business strategy requires having the right people in the right places; it requires specialized leadership skills-managing the work of people with different backgrounds and customs.

3.5- How to prepare from an HR perspective, for international expansion

When a company seeks new opportunities and decide to target new markets, and expand internationally, the organization has to be prepared from many aspects to be ready for this expansion.

From an HR perspective, there are few criteria that have to be considered and studied to be ready for the development, and to have a good start,

The table below lists the criteria that need to be considered, by answering these questions the company can have a clear view and good start for international expansion. (Warren Heaps – Birches Group LLC, 2011)

Type of company

What is the type of company that will be established?

Branch? Joint venture? Franchise?

Recruiting and Selection

Will the hiring process be from the local market? Direct hires? Contractors? Or third parties?

Can you find the talent you need in the local labour market?

Can you compete with the main employers?

What is the recruitment process to be implemented?

What are the best universities for hiring?

Rules and Regulations

Can you advertise for specific requirements, as gender and age?

Is it difficult to obtain visas and work permits?

Are there per the country regulations a percentage of local hires?

What is the culture like?

Compensation and benefits

What are the country minimum wages?

What are the payroll arrangements that have to be made?

What is the country currency?

How is the compensation planned?

Have you obtained a grading system of employers with whom you compete?

What are the other benefits the company offers beside the basic salary?

Is there any other required allowances and benefits that should be paid as per the local labour law?

What are the social taxes that should be paid?

Payroll

What is the currency that the payroll should be paid in?

Can you outsource payroll? Or the company have to run it itself?

Employees Relations

Are employee’s contracts mandatory?

Are new offer letters and contracts required? Probably usual contracts aren’t valid in new countries.

3.6- Global Expansion Requires New HR and Training Strategies

Recently the role of HR shifted from being a normal cost center and support service into becoming a strategic partner.

Most organizations simply understand that their people are their competitive advantage, and view human resources as an investment, not an expense. Companies invest in their employees, because the future of the company belongs to the people who are continually involved in educating themselves and developing their skills and knowledge.

As companies grow internationally, it is so crucial for global regular employees training. It is human resources challenge to train employees to be able to meet the organization mission as well as the requirements needed and the new region customs.

Unfortunately, the majority of companies have the passion and commitment, to invest in their employees and provide them the necessary training for international exposure, but the budget necessary to achieve these goals may not.

However, Wooden Bakery focuses on training and has enlarged its training department with highly qualified people who provide all the employees with necessary trainings and skill development opportunities to make sure that organizational goals are achieved. Top Master Bakers, Pastry Chefs, and highly qualified Managers and Quality Controllers are being sent to Wooden Bakery – KSA to provide necessary training that ensures standardization and product consistency are being implemented.

Companies that have a clear training and development strategy will note growth in the following areas,

Reduced turnover: well trained employees are more likely to stay with your organization and it decreases the expenses of employing and training costs.

Better productivity: well trained employees are more productive.

Workforce: employees will have a deeper understanding of organization goals and mission, and will know their role in reaching those aims.

3.7- The HR Challenges of International Expansion

One of the very important skills for domestic companies to grow global is the international HR management. As much as it is important for multinational and international companies, it is essential for HR department in domestic companies that recruit people from abroad.

Nowadays there are many challenges that international human resources department has to take into consideration, starting to mention the cultural impacts, the local rules and regulations and finally working conditions and salary packages.

HR policies and leadership development should grow since almost every business in all sectors risk a big share of their growth strategies on global expansion. There are many activities and skills that have become crucial to success. These activities include attracting and retaining skilled employees, increasing productivity, improving the workforce in the market, organizing the company by placing the competent and credible leadership in the right positions and moulding the beliefs and differences between personnel.

Ethnical preferences and expectations can weaken a company’s human resource strategy in globalization and can affect its effectiveness due to the influence of the economy.

In order to implement global business strategy, a company is required to have the right people in the right places. It necessitates special qualifications skills and the ability to manage people with different backgrounds and customs. Globalization entails a company to run with different kinds of people and urge them to operate as a global company rather than just one company that have different locations around the world.

An international Environment requires acquiring talented people and managerial skills which is a very complex thing to do. Consider Wooden Bakery, a Lebanese-based company operating in KSA. The needed staff to operate in such a business covering and industrial bread factory and retail stores would require to recruit nationals from the parent country in this case Saudis, host-country nationals such as Indian and Filipinos and third-country nationals who might come from anywhere such as Lebanese, Syrians and Egyptians. In this case, standardizing grade scale and terms of employment is very difficult; for instance, expatriates may need to be provided more benefits than nationals to attract them and retain them which would cause some problems among staff.

In many countries, labour, even the skilled workers can be found in big numbers and can be available at low cost; but performance management would be an issue in such a case. This may cause devaluations for some remarked performances leading them to dismissal instead of motivating them to stay and perform better.

It is only normal that a manager encounters barriers while hiring in the global environment however when they are added up, those very barriers become obstacles. This is a challenge that is repeated over and over through the entire employee’s lifecycle; therefore the management challenges increase radically and the company eventually can fail in performing its entire global strategy.

3.8- Wooden Bakery Expansion to KSA

Wooden Bakery decided to expand through Franchise and/or Partnership/Joint Venture models in order to be able to quickly adapt and meet the market requirements in addition to providing better services worldwide. The Wooden Bakery strategy was highlighted on the main perception that customer satisfaction all over the world is the main goal.

Indeed, The Company opened the first Master Franchise Operation in Saudi Arabia in July 2009 and currently negotiating the sale of the Master Franchise or Partnership with a number of companies in the GCC and the Middle East countries.

The structure of a Wooden Bakery operation requires the setup of a bread factory and opening of several retail outlets which will be decided according to the approved upon territory.

Its successful setup can be measured by how the products and services that it supplies meet however surpass the Saudi customers’ satisfaction.

In only seven months, Wooden Bakery had opened a 10,000 sq. m. bread factory in Riyadh, KSA and One Stand Alone Store of 1,000 sq. m in size spread over 2 levels that house a main showroom with an eating area and a restaurant.

From the Franchisor center located at Headquarters in Lebanon, HR services were able to provide faster and more consistently to the Master Franchise located in KSA or wherever they are. The distinguished knowledge of its HR department helps standardize functions and materials, and helps process relations reliably and in compliance with local laws.

Wooden Bakery recruiters know what an employee is looking for and how to fit CVs to job descriptions; they can identify which candidates truly hold the skills and abilities that Wooden Bakery requires for its business. The initial step is very crucial as it reduces the number of candidates without taking the time of the HR staff by interviewing all the people who applied for a vacant position.

Wooden Bakery HR team is knowledgeable about job descriptions and securing performance opportunities. They also have a superior perception on how and where to advertise for job candidates, like they did when recruiting for the KSA franchised operation. Advertisements were placed in qualified recruitment agencies in different countries such as Syria, Philippines, India, KSA and Lebanon as the positions require. The process of identifying and then selecting employees became a much simpler task when high calibre recruitment agencies assist in such a task. In addition, the amount of time, energy and money consumed in the search for a quality job candidate becomes a definable resource expense.

For Wooden Bakery creating a high-performing operation in KSA or in any other country depended first on finding and hiring the right people, then training and developing, and rewarding those people to deliver high performance hence the success of the Franchise in the set territory. This is what the Human Resources department worked on while recruiting for KSA.

In general, the setup of the Wooden Bakery requires hiring a certain number of labor forces to cover all the positions starting from the General Manager to cleaners. Recruiting in such circumstances requires the data collection on salary scales and benefits in the set territory; it also requires the work visa requirements and availability for foreign staff.

The operation at Wooden Bakery is very complicated and diverse; for this reason, the HR department’s main concern is to hold its employees. Among the top reasons people left a company were higher salaries and better career development opportunities; hence the HR department included in its retention strategies ample internal and external training and development opportunities as well as career planning for both local and international centers.

The Wooden Bakery operation requires hiring different people with different skills from different countries; therefore the social, political, and economic differences affected the HR department’s ability to implement consistent HR practices in KSA. They had to consider factors such as government regulations, local employment laws, cultural differences, and employee expectations. Practices that work in Lebanon might not be acceptable in another country such as Syria, Philippines, India, KSA and others for any number of reasons. For instance, a selection practice that includes asking personal questions about age and marital status might be perfectly acceptable in one country but illegal in another..

The Wooden Bakery Company’s HR department has taken many effective actions to ensure that the HR practices are more dependable across all locations generally and in KSA particularly:

Developed a long-term HR plan to ensure alignment of HR objectives with corporate objectives.

Standardized appraisal, development, and compensation practices.

Introduced systems to the HR department at the KSA Franchised Operation and allowed its independence to do its job.

Created global policies and procedures for data management, performance management, compensation, education, and development.

Fixed regional accountability to performance management.

Decentralized HR to be more responsive to local needs.

Built a solid team willing to train and develop managers to interpret corporate policy in their own environment.

Introduced common programs (e.g., online evaluation, 365-degree evaluations).

Enhanced communications and rolled out standard programs that are customized by country.

The Wooden Bakery HR department had to follow the following task sheet in order to be able to open the operation on time:

Planned the screening and hiring process according to the projected opening date.

Advertised for Jobs in Syria, India, Philippines and Lebanon

Prepared Job Contracts for all positions

Approved on key people hiring period and pay scale

Prepared a Franchised List support staff from Lebanon headquarters and submitted their passports for visa application

Submitted a training schedule for all trainees in Lebanon for both the factory and the outlets staff

Submitted an evaluation report on each trainee in Lebanon for both factory and the outlets staff

Scheduled training of key positions holders according to the WB KSA staffing sheet

Provided accommodation for foreign staff trainees in Lebanon

Inquired about the legal documents to be prepared in order to be able to apply for a visa to train in KSA premises

Prepared a clear offer for accommodation, transportation, insurance for all grade levels

Provided accommodation and Transportation for support staff as per schedule departure date

3.9- Culture Comparison

Business managers consider that Culture is a very important factor for moral approaches.

Culture, Values and Beliefs have a great influence on the HR phases and its procedures, from selecting and recruiting any employee for any position, to evaluating, training and developing, until the exit interviews when an employee resigns.

Having the right people with the right skills doing the right jobs is very critical and delicate and should not be done randomly or by accident or even without giving it the needed time. It requires planning to ensure that all the people working in the company are doing and are capable of doing their assigned tasks or even innovative tasks that come as supplements on their job requirements and allow a fair evaluation for both parties.

Wooden Bakery Company has worked on a model of Culture Fit to the Saudi Arabia socio-cultural atmosphere in relation to the work of the human resource management practices. The HR department at Wooden Bakery has performed a distinguished job in adapting the HR practices to the Saudi customs and laws and regulations by:

Having job descriptions for all positions

Having a process for recruiting and interviewing staff

Conducting performance appraisals to support training and development and human resource planning

Taking action to support teamwork

Complying with labor legislation

Having a process to review and determine compensation and benefits policies

Others ….

Wooden Bakery had faced many and major HR concerns such the differing in rules and regulations that countries have with regard to workforce labor. In some countries, standards are different than in Lebanon, and employees may require certain equipment and training that is different from what the company has in place.

For example, Wooden Bakery in Lebanon has some of its trucks refrigerated for pastries and meats and poultry items distribution, some others not refrigerated for the bread distribution.

However, in Saudi Arabia, Wooden Bakery had to have all its trucks refrigerated due to weather issues. This problem has troubled the HR department since they had to train the drivers on how to caliber the temperature and ensure the effectiveness of the refrigerated trucks in order to fall into other discrepancies such as products damage which may lead to poisoning for pastry items for instance and/or rotten bread for any type of bread.

Another main concern that Wooden Bakery HR department faced is the language barrier between the local workforce and overseas employees. Most of the time, the usual mistake that companies make is to simply translate materials written in the English language into Arabic for the countries that have troubles in understanding the English language.

For instance, the HR department had to translate the orientation manual and employees’ manual into Arabic for workers coming from Syria and Lebanon if they were illiterate workers. Some positions in the Wooden Bakery concept do not require a high level of education therefore no English language knowledge or understanding.

In addition to language barriers, the Wooden Bakery international HR team considered cultural alterations and how to report them. In certain countries, such as those in KSA, it is still not allowed to assign certain positions to non-Saudis.

It was also and primarily important to discuss openly with employees the fact that in the Wooden Bakery operation of KSA, chatting about the Islamic religion will lead to banning form the country forever as per the Country’s laws. Therefore, the HR department had to inform all recruits about that fact which is also mentioned in the employees’ manual and signed and approved by each of the staff.

The HR department had to adapt the job descriptions, the employment agreement, the stores’ opening hours and operation according to the country’s laws. Some positions require the recruitment of women; but since in KSA women are not allowed to work, therefore the HR department had to find men to fill in these positions. The culture has a strong influence on employees’ adaptation.

The service staff position for the Wooden Bakery retail outlets needs prompt and courteous greeting of customers upon serving. Such qualifications are usually found in women by nature; but due to the country’s regulations, Wooden Bakery had to fill these positions with men who enjoy such credentials. It was hard on the HR department to find as such in men; therefore they have recruited from the Philippines, the country which has the most dedicated and smiley faces people.

The Saudi’s law requires closing the store from 4:00 PM till 8:00 PM for prayers and resting. Therefore Wooden Bakery had to abide by this rule and set its opening schedules accordingly. Wooden Bakery cannot open more than midnight unless prior approval from the government.

The variety of cultural diversity offers a major challenge; Wooden Bakery was able to adapt all its documentation, but, in the same time, to keep the note of originality, so that the global image of brand gains consistency.

3.10- How can we minimize the HR challenges the company face when international expansion?

Based on my research, the HR department plays a crucial role in the company long term strategic goals. Especially when the company decides to expand internationally, the HR department faces many challenges “mentioned in my paper above”, the company should know how to plan the expansion, and from an HR perspective, it should take few criteria into consideration to minimize the challenges the company may face.

Some of the points to minimize the HR challenges and risks the company may face are:

Part 4: “Global HR” added Value

The benefits of “Global HR functions” differ at different levels; it helps Wooden Bakery itself, the managers, the employees, in a way:

For Wooden Bakery, the

First the HR will have clear goals and objectives that will support Wooden Bakery management in reaching the business goals and be able to compete in the market with competitors.

The new Human capital management, support both managers and employees, increase their performance, and sustain development from the bottom line employees to the top management, promotes positive atmosphere for international expansion

The modern HR organization runs the fundamental processes for the future of the organization. It develops the managers, identifies the key staff and runs the processes to enhance the know how of the organization.

The modern HR approaches and why modern HR is important

The modern HR is about simplicity and focus on the future. HR should not focus on the processes, which are administrative and do not make the value added. HR should design the strong policies encouraging managers and employees to focus on the growth of know how and enhancing the responsibility of the lower levels of the organization.

The importance of HR is in its cross functional alignment of goals. Human Resources can identify and compare the nominations to the talent programs from all the functions, and it can provide managers with the honest feedback. The managers tend to believe their employees are the best ones, HR can make the additional comparison of nominations. HR can guard the internal equity.

The modern HR approaches are realized in areas, where HR can guard the internal equity and can run the processes important for the entire organization. The main process areas are:

Recruitment and Selection

Compensation and Benefits

Career Development

Talent Management

Leadership Development

Strategic HR Reporting

The above mentioned HR processes are not administrative, and they are focused on the management of the financials and future of the organization. The processes have to be aligned, and they have to use the outputs of different HR Processes. The HR initiatives have to be aligned, and they have to be global, they cannot be focused on isolated HR issues of the organization.

The importance of HR is in the global impact on the human capital of the organization. The top management has a single point of contact in solving the difficult challenges connected with the performance and motivation of human capital. HR knows the employees. HR knows the managers. HR understands the limits of the organization. HR knows how to fill the gaps in the job with the human capital. That is the importance of HR, and that is the reason, why HR exists in the organization.