Access Exclusive, Trusted HR News & Resources >>> New Professional Members Save $20 Today
We asked HR professionals to tell us about their time in HR. Here are their stories.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Set yourself up for success with virtual SHRM-CP/SHRM-SCP Certification Prep Seminars.
#SHRM18 will expand your perspective – on your organization, on your career, and on the way you approach HR. Join us in Chicago June 17-20, 2018
Global human resources becomes a top priority—fast—when foreign companies buy U.S. operations.
It’s not every day that companies such as General Motors (GM)—once the largest private employer in the world—go bankrupt. Sichuan Tengzhong Heavy Industrial Machinery Co.’s purchase of the Hummer brand as part of GM’s bankruptcy plan, announced June 2, may not be just the end of an era for GM. It may signal the purchase of other U.S. businesses by companies based abroad, a trend that shouldn’t be too surprising in light of the global economy.
Of the four most populous countries—China, India, the United States and Indonesia—only the United States was predicted to have a shrinking gross domestic product (GDP) in 2009. Last June, the Organisation for Economic Co-operation and Development, based in Paris, projected that the GDP in China would grow by 7.7 percent in 2009, India’s would rise 5.9 percent and Indonesia’s 3.5 percent.
Would you be ready if your corporate headquarters suddenly went offshore? Any merger can be challenging for HR professionals, but that’s especially true when the C-suite suddenly flies across the globe.
Fortunately, HR leaders can learn lessons from those who have been through this. When Doosan, based in Seoul, South Korea, bought the Bobcat unit from Ingersoll Rand Co. in 2007, the acquired company launched a familiarization program for employees on both sides of the Pacific, even sending U.S. employees to Seoul to immerse themselves in Korean culture, says Bonnie Guttormson, SPHR, director of compensation and benefits at Doosan in West Fargo, N.D.
Bridging cultural differences is not the only challenge, according to Jay Warren, an attorney with Bryan Cave LLP in New York. During foreign takeovers, HR leaders must run on "a compliance track and business-culture track." One challenge on the compliance track: the need to "manage upward," which means not simply telling executives what they may want to hear but instead informing them if standard business operating procedures in their countries would lead to legal challenges in the United States.
After hearing bits and pieces about the at-will rule, owners of foreign companies may overestimate how much leeway U.S. employers have in dismissing employees, cautions Laurence Stuart, an attorney with Stuart & Associates PC in Houston and a member of the Society for Human Resource Management (SHRM) Labor Relations Special Expertise Panel. Stuart has come across a "cowboy mentality" among some new foreign owners of U.S. businesses—purchasers who assume that when an employee must be terminated, "anything goes."
"There will be a huge difference" among foreign buyers that have U.S. operations and foreign buyers purchasing their first U.S. ventures, according to Donald Dowling Jr., an attorney with White & Case LLP in New York.
For HR professionals who already have been through mergers, much about foreign takeovers may seem the same as with new U.S. owners. Dowling says many urgent issues remain largely the same: post-merger integration, layoffs, internal restructuring, new reporting relationships, alignment of HR offerings and policies, and so forth.
That said, HR employees will face additional layers of complexity when purchasers are based abroad, Dowling says, noting that his wife works at a French-owned company. "When the foreign-based buyer has other existing U.S. operations, it will likely aim toward integrating this new operation with its other U.S. business lines," he says. "When the foreign-based buyer is taking its first steps into the U.S. via this acquisition, that is where the cultural and HR problems are likely to be most acute."
Stuart "has seen activity among foreign buyers looking for U.S. companies." He suspects this trend will intensify "if other economies get strong before us." In Texas, he sees the most activity among owners of international private equity firms based in Europe who are eyeing energy-related businesses.
Many foreign professionals have the "misconception that the U.S. employment market is not heavily regulated. That obviously is not correct," Stuart notes.
While the United States does not have the kinds of national and local severance and termination protection common in the European Union (EU), he says many U.S. laws protect classes of individuals from discrimination. That "makes the U.S. market more heavily regulated than Europe, but the risks aren’t as obvious."
Foreign executives may be used to more-unionized settings but unfamiliar with laws such as the Americans with Disabilities Act and the Family and Medical Leave Act. Consequently, he cautions, sometimes "they don’t understand the role documentation procedures and policies have in reducing risks."
Stuart recommends employment law training to familiarize new owners with U.S. laws and their applications.
Dowling notes that "EU executives come from a culture that has complex and intrusive employment regulations—far more so than under U.S.-style employment at will." But, he says misunderstandings arise because the at-will rule has given rise to a highly evolved—to a European, a disproportionate—series of equal employment opportunity, discrimination and harassment regulations.
As a result, European executives purchasing U.S. businesses "need to reorient their thinking" about employment law compliance, according to Dowling. From the European perspective, "the good news is that the U.S. state and federal systems impose far fewer employment laws and rules than they are used to. The bad news is that Americans look at employment relationships through the lens of discrimination." And, he says, "To a European executive, Americans appear over-concerned with what the European might see as political correctness."
However, Dowling doesn’t think foreign executives necessarily are surprised by the compliance risks in the United States: "European executives hear horror stories about U.S. court judgments—multimillion-dollar verdicts, runaway juries, class actions and unpredictable results," he notes. But they still "will need to be shown where the land mines lie."
Dowling adds that U.S. unionization laws constitute a separate issue, and he advises incoming businesses to develop a U.S. union strategy.
Stuart recalls several foreign-based clients that have unions in Europe and have been "pushed into signing global codes of conduct" that simply weren’t practical for U.S. operations. For example, in global codes of conduct, foreign businesses may have provisions prohibiting mandatory overtime, even though mandatory overtime may be an industry norm in the United States and a feature many workers want. Or, global codes of conduct may specify the intervals for employees to have days off, even though seven-day workweeks while employees are offshore are common in the energy sector, he adds.
Stuart recommends that U.S. HR professionals and attorneys conduct due diligence and look into overseas policies that would be unlawful if applied in the United States. For example, mandatory retirement is common overseas.
HR professionals shouldn’t be surprised if colleagues at acquiring companies do not understand the exempt/nonexempt distinctions under federal and state wage and hour laws, as well as other state-specific requirements, according to Baker & McKenzie attorneys Susan Eandi, Ute Krudewagen, John Raudabaugh and Carole Spink.
In addition, foreign employers often do not understand that employee benefits are provided at the employer’s discretion in most circumstances, or that the amount and quality of benefits a company provides affects its ability to attract and retain employees, the Baker & McKenzie attorneys add.
Face to Face
There’s much for U.S. employees to learn about the prevailing culture of an overseas purchasing company’s C-suite.
At Bobcat, employees were used to having the C-suite overseas even before Doosan purchased it, since Bobcat was owned by Ingersoll Rand, a global construction equipment business based in Ireland. But, to help get employees on the right cultural track, some Bobcat employees were paid to travel to Seoul following Doosan’s acquisition. Guttormson says the company started flying over top-level executives and is working its way down the organization. She is slated to be in the next group to visit.
Guttormson recommends familiarization training for employees in the United States as well as for those in the purchasing company, even if the purchaser seems to be a good match, as was the case with Doosan. Familiarization training might include an introduction to cultural differences. For example, Guttormson notes that Korean culture is "very hierarchical, so where here in the United States we’re very free to talk with higher officials about differences, there the process is to go through the hierarchy."
To smooth the way for foreign travelers in the United States, Dowling recommends that employers start getting visas early.
Cultural differences intimidate some, according to Thomas Belker, SPHR, GPHR, managing director of HR for OBI—one of the world’s largest home improvement companies, located in 15 countries—based near Cologne, Germany. "We say it is a global world, but nonetheless many line managers have never been exposed to dealing with cultural differences," he notes. "Nor do they necessarily understand anything about foreign laws and their impact on HR processes. There is quite normally a huge gap caused by resentment or a lack of understanding of foreign HR issues."
Belker, a member of the SHRM Global Special Expertise Panel, recommends starting with minor changes and paying close attention to employees’ initial reactions.
Michelle Haste, an attorney with Crowell & Moring in London, recommends that HR leaders stay in "close contact with U.S. employees who may be fearful of acquisition by a foreign entity." She says HR executives from the purchaser and the seller should cultivate relationships that enable "full and frank communication on the differences."
One point of discussion should be the cultural work expectations, such as whether employees can speak freely or are expected to be subordinate to managers, advises Brenda Cossette, SPHR, HR director for the City of Fergus Falls, Minn., and a member of the SHRM Labor Relations Special Expertise Panel.
The foreign company can have very different values, and it may put a premium on running extremely efficient operations compared to some of our U.S. companies, Cossette says. "Employee loyalty to the new brand name or new company is a real difficult issue since many smaller companies are often bought up by foreign companies," she explains. "These small companies are proud of being a local company, and now a foreign company only sees them in terms of sales or diversification of their product lines."
According to Cossette, many Asian companies don’t have big bonuses and stock plans for leaders, raising concerns among U.S. executives who depend on those plans—assuming these executives aren’t laid off following the purchase.
Stuart notes that in some jurisdictions, the HR function may even "be purely administrative as opposed to being strategic business partners."
HR leaders should be sure they understand what the decision-making process will be following the acquisition. Will all decisions flow through headquarters abroad, or will the new C-suite choose not to get involved in day-to-day activities?
The answer affects liability in lawsuits, says Warren, explaining that if a foreign company acquires a publicly traded U.S. company through stock acquisition but does not get involved in decision-making, the parent company would have no legal liability.
However, if the foreign purchaser doesn’t trust U.S. officers to make decisions and starts calling the shots, it would be treated as liable, he cautions. So, the acquiring company "may want to keep itself separate."
Managing upward always is a challenge, but particularly with officers based abroad—and when there are cultural and linguistic divides.
"Most of us try to listen to get to what the boss wants," Warren notes. But HR leaders should be quick to recognize when bosses overseas are inadvertently asking them to implement changes that would fly in the face of domestic law. Warren says that takes "active and patient listening."
The challenge, he notes, is to respond "in a way that does not lead to friction, not to say, ‘That’s not the way we do things here.’ " He recommends that HR professionals make sure they understand what bosses are asking—and then, make sure it’s legal stateside.
The author is manager of workplace law content for SHRM.
Online sidebar: Catch a Falling Knife (HR Magazine)
SHRM toolkit: Mergers & Acquisitions
SHRM article: A Fitting Role (HR Magazine)
SHRM article: M&As Make a Move (HR Magazine)
SHRM article: Mergers & Acquisitions: Making a Merger Work (HR Magazine)
SHRM case study: Culture Management and Mergers and Acquisitions
SHRM article: Foreign Firms Can Avoid Cultural Conflicts During Mergers (SHRM Online Global HR Discipline)
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
CA Resources at Your Fingertips
SHRM’s HR Vendor Directory contains over 3,200 companies