CFOs are becoming more bullish on both the U.S. and the global economies. And a key part of the growth CFOs expect in the coming years will be coming from global customers and operations. This continued global expansion has serious implications for human resources.
According to the latest Bank of America Merrill Lynch CFO Outlook survey of 250 CFOs and other senior finance executives, 76% of CFOs report that their companies have some type of activity going on in other countries, up from 67% a year ago. That activity generally revolves around buying from, selling to and establishing operations in non-U.S. markets. The CFOs surveyed report that their companies have operations in Canada or Mexico (84%), Asia and the Pacific (72%), Europe, the Middle East or Africa (66%), and Latin America (25%). They report plans to expand in Asia and the Pacific (37%), Canada or Mexico (27%), Europe, the Middle East or Africa (15%) and Latin America (9%).
Global growth is complex for any company. The CFOs surveyed noted that the most common challenges are gaining access to local, on-the-ground expertise (19%) and dealing with questions about risk management, a country’s economic stability and local/international laws (18% for each).
Clearly, global growth also brings its own unique HR challenges that CFOs may not even be considering. Managing expatriates, determining how to manage global operations, setting local compensation and benefits levels, and dealing with sometimes significant cultural differences among the employee population are just a few of the HR challenges global organizations face.
Another challenge facing HR executives in these companies is reinforcing their value and capabilities in increasingly global organizations. A 2012 study conducted by KPMG identified three core challenges for global human resources executives:
1. Balancing global and local needs and capabilities, for example, by managing, hiring and identifying talent globally while retaining important local insights;
2. managing a flexible and virtual workforce without damaging employee loyalty and career development;
3. retaining the best talent and maintaining employee engagement in the face of a less committed, more flexible workforce.
While there is not much on that list that CFOs are likely to contradict, there is something of greater concern lurking in the background that should concern CFOs. The KPMG study found that 59% of the surveyed executives believe that HR will become more strategically important in the coming years, but only 17% believe that HR does a good job of demonstrating its value to the business. That is a significant and important disconnect between the job HR needs to do in an increasingly global economy and enterprise and the perception of HR’s ability to do that job.
As we have emphasized over and over, CFOs can help HR become a more effective business partner. If HR executives are not doing a good enough job convincing their colleagues and peers of their value and contributions, perhaps this is an area where CFOs can lend a hand.
Interestingly, the area where HR’s capability scores the highest is in its ability to manage costs effectively. Who says CFOs and HR have nothing in common?