Freedom to Operate: How Global Labor Strategy is Determining Business Success

Today’s post comes to us from Workforce Institute board member, John Frehsesenior managing director at Ankura Consulting Group, LLC.

One measure of who you are as a company is where your labor is located. United States-based companies operating globally have a challenge: if your labor is primarily in the U. S., why should you have freedom to operate in India, where you earn profits but employ few people? On the other hand, if you are U.S.-based but “ship” jobs overseas, you risk regulation/taxation at home. Politicians from all parties have aggressively resurrected this issue in recent years, forcing global companies to act now or face repercussions later.

“Freedom to operate” is not a new concept for executives managing complex operations. It is what keeps leaders of global companies up at night. Why? Managing regulations on U.S. soil is complex. Apply those complexities across dozens or even one hundred countries all with differing rules, cultural norms, and employment laws, and there’s an exponential increase in difficulty to effectively manage them.

Will their brand show up in the press tomorrow over a climate change issue? Will there be labor violations tied back to one of their facilities? Have they broken with social norms in a far-off locale? Are their employees or customers trending on social media about unfair practices? Essentially, are they exploiting or enriching the communities where they operate?

Leaders today are less concerned with pending legislation and more concerned with how their culture and governance strategies will be received among the wide range of nations where they do business. Social media has given people the power to bring employers that don’t operate ethically and treat their workforces fairly into the public eye. With that, global companies no longer have the luxury of just “getting by,” as how they are perceived heavily influences how much freedom they have to operate.

The Bottom Line

Of all the variables that can obstruct global operations, labor may be the most complex and volatile. Smart companies understand that they need to factor in today’s political and social considerations when building their global labor strategies. It’s not just a matter of cost, labor is the factor that can determine success and longevity. 

One of Many Requirements – The Right Governance Tools

To manage multiple, diverse environments effectively, tools must be deployed to avoid compliance issues. Governance is critical to avoid breaking laws of the region, but also to avoid deviating from cultural norms. What passes as a great shift schedule in Texas would likely cause a strike in Germany. Overtime levels at a company in Missouri would be against the law if done in France, where time off is highly protected. In the Philippines, working 48 hours in a week yields only a regular rate of pay compared to the United States, where federal law dictates overtime starts after 40 hours of work. These are very basic examples of different global labor laws and customs which continue to grow in complexity. Workforce management technology can accurately track and manage complex schedules, time off requests, pay requirements, and policy adjustments.

Global Success Requires an Empowered and Informed Workforce

People are every organization’s most controllable cost while also being the highest creators of value. This two-sided challenge means that for businesses to be effective on the global stage, they must be good at governing within the social and cultural norms while empowering their workforce to perform at the highest levels. What happens when companies break with local accepted norms and offend the population? They lose the freedom to operate in that locale and potentially damage their brand globally.

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