The Human Resources Challenge In Latin America

The Human Resources Challenge In Latin America

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The Companies in Latin America that have expanded throughout the region and into the global scene have been analyzed and celebrated in regional press for long time by now. Think of Telmex, the Mexican giant of communications, Falabella the Chilean retailer, Cemex the massive cement producer of Mexico or even Embraer, the world known Brazilian aircraft manufacturer.
Behind the expansion of this so called “multilatin” corporations there is more than a solid cash flow, a healthy bottom line and a good eye for business. There is also a vision on how to manage their employee’s skills and talents through their expansion momentum.
So understandably the management of human resources has become of vital importance in this process. Unfortunately, not all corporations understand this fact. And this could prove to be a fatal mistake. For example, 15% to 30% of the executives sent abroad by Latin-American corporations do not achieve their goals. And also 30% of the managers that return to their original countries leave the company within two years.
There is ferocious competition today in the Latin-American continent. This is why the corporations cannot afford the luxury of relegating their human resources management to a second place. Talent is quickly identified by rival corporations and they will not hesitate in dragging it to their camp.
The study on Management of Human Resources by Latin-American corporations performed by Mercer Human Resource Consulting, showed that companies has shredded their old practices and that what was believed of the regions methods is not longer applicable. There are three main aspects where the change in method is most noticeable: Recruiting, Compensation and Benefits and repatriation policies.

According to the study , close to 80% of the “multilatin” corporations sustain a workforce abroad and 45% anticipate their foreign workforce will be growing in the near future. This new form of making business has forced changes in the profile of their recruits and of the people they promote. The profile of a successful executive in 2008 is much different from the one in the 90s.
Traditional recruiting was based on technical knowledge of the candidate and his post graduate studies. Also the fame and prestige of the candidate’s university was also considered.
Today this is not enough. For a successful career, most candidates need a post graduate degree in Business, they also must have excellent handling of the English language and wishfully they must have had experience abroad.

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In today’s fight for talent, many firms such as Cemex participate regularly in Job Fairs of Post Graduate American Universities.
Today there is a need for a different type of Higher Management. The candidate must have the skill that will allow him to meet the requirements of today’s tendencies and to face tomorrow’s challenges. That is why they prioritize on international experience as a necessity.
The Result of the study is that the future employees must have International Experience. Also 93% of the companies studied agreed that a global and strategic perspective is crucial. 86% say that cultural sensitivity is a plus in their executives. Many agree this area is becoming of increasingly importance because of the high degree of off shoring taking place in bigger corporations.

Compensation and Benefits
Many firms take the area of Compensation and Benefits for granted. This is why it is a subject that is not usually discussed as long as everyone is receiving his paycheck on time. This is another mistake that could weaken the firm’s efforts to enter a foreign market.
A Brazilian company recently entered the American Market. Following their usual Brazilian practices, they would pay 14 checks per year, one check monthly plus two bonuses. Unfortunately this was disastrous for their American employees. Americans where used to a system that paid them every two weeks, meaning 24 checks per year and bonuses did not form part of their regular compensations. Little time went by before the low satisfaction with this method forced the company to readjust its ways into the American standards.
Establishing a working system of compensation that reflexes each country individual needs in a fair and decent way has become important in the process of internationalization of Latin American corporations. People with similar positions in different countries could have very dissimilar wages. This shows the level of productivity of countries, their different costs of life, taxes and skilled worker pool.
In spite of the reality of the situation, this is one of the remaining subjects yet to be resolved by corporate management. According to the study, this has become a headache for larger companies, especially in the huge differences in living costs from one country to another.
90% of executives believe that compensation packets are not well aligned throughout the company’s international operations. And 70% of the people interviewed consider there is lack of consideration of the cost of living between the different offices. Also a small amount stated that there should be a special “hardship” incentive for each country they send them.

Corporations with offices in so many countries face many challenges, one of the challenges is to successfully send people from their HQ to head or support operations in their foreign offices. These so called expatriates are a cornerstone component of any multinational. They man key positions where the subsidiaries are located, the help increase the global awareness inside the company and also they contribute to transfer corporate culture and values from HQ to all offices.
“Nearly 80 percent of FTSE 100 chief executives in 2005 had had overseas assignments, compared with only 42 percent in 1996” Heidrick & Struggles,2006 .
According to the study the main objective in transferring employees abroad is the transfer of values and organizational culture with 93% of the executives interviewed agreeing. Also transference of knowledge comes in a strong second place with 83% agreeing.
But the main issue with expatriates is the repatriation. “Multilatin” corporations have showed a high degree of failure in their expatriate assignments and also there is high rotation with these employees. As it was stated in the opening words, 15% to 30% do not accomplish their mission. And of the people that return, 10% abandon the company within one year of their return and 30% within two years.
“Managers returning from expatriate assignments are two to three times more likely to leave the company within a year because attention has not been paid to their careers and the way they fit back into the corporate structure back home”
This can be related strictly to the lack of clear policies on repatriate employees. Most corporations do not have a position, salary or career path for executes that are returning to the HQ after spending time abroad. This produces discouragement among professionals, who return seeking big improvements after they have shown what they are worth in another country. Most of the time these employees leave for the competitor who values more the experience acquired and know how to reward it with more responsibility and higher salary.
Also one of the tendencies that have been revealed is that to be sent abroad is becoming less and less attractive for executives. Among many reasons there is the enormous stress that is put on their families and the well funded fright of not finding a good position upon their return. This is one of the reasons more and more companies are hiring more local personnel in the countries they move into. For example, Telmex has decided to manage most of its South American operations from Santiago, Chile and not from their HQ in Mexico.
Nevertheless, Latin American corporations understand that there is a specific set of skills and conditions required for an executive to be sent to another country. To begin with the person has to be willing to be sent abroad. And the executive must accelerate in being flexible and adaptable. A strong sense of global perspective is a must and finally he should hopefully have international experience.
Curiously these skills are similar to the description of the prospective employees that are being searched for by these corporations in their hiring processes. And this is a clear indication that corporations have begin to align their strategic recruiting with the prospect global careers of their executives.

Harvard Business Review Latin American Edition, July 2008
International Management: Management Across Borders and Cultures 6th Edition. Helen Deresky.
Human Resources. National American University Instructional Material
International Management 5th Edition. Beamish. Morrison. Inkpen. Rozenweig
International Business: The challenge of global competition, 9th Edition. Ball. McCulloch
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