1. Recruitment and selection of global human resource managers.

 HR managers are responsible for the hiring, onboarding, training, termination, and legal
compliance of company employees. Global HR managers are responsible for the same important
tasks, but on an international scale. Anytime a company expands internationally, they are faced
with a number of challenges. A strong global human resources team is a vital component of
international expansion.

2. Global compensation practices

For many companies, maintaining a domestic compensation program  that supports

the strategic goals of the organization and meets the needs of  employees is a difficult
challenge. This challenge is intensified when a similar  program must be designed to
operate in multiple countries with different  cultures. For organizations competing in a
global marketplace, managing compensation requires a through understanding of the
taxation of compensation  and benefits, differing state social systems, differences in
living standards and  employee values and expectations.

1. How does a company pay expatriates from difference home countries  brought together
to work on a project?
2. What about compensation packages for same country nationals sent to different
regions of the world?

Traditional compensation systems for expatriates, such as the balance  sheet

approach and going  rate approach, may not be adequate for the company  or expatriate in
facilitating an case of transfer. Global enterprises require global  compensation systems that
allow the organization to maintain the flexibility and  ease of transfer between countries and
regions while providing employees a just  wage. A compensation system must be designed to
work regardless of where the  expatriate is sent on assignment. To some degree, this requires
rethinking the  traditional focus on location and national culture in determining expatriate
compensation.

Traditional Systems of Global

Compensation
Of the traditional global compensation schemes, the balance sheet  method is most
commonly used. More than 85% of US companies  use some variation of this method to
compensate their expatriates. The objective  of the balance sheet method is to keep the
expatriate economically whole or to  ensure that the expatriate doesn’t financially suffer
or come out ahead as a result  of the international assignment. It is intended to maintain
the employees home  standard of living during the international assignment.  The base
salary for parent country nationals and third country  nationals is linked to the salary
structure of the relevant home country.  Additional salary is often given to cover tax
differences, housing costs and the  other basic living expenses. Perquisites may also be
offered such as foreign  service premiums, hardship allowance, relocation assistance and
home leave  allowances to help make the assignment more attractive. There are several
versions of the balance sheet approach, such as the headquarters based system.  They
each essentially are applied in the same manner with the primary  difference being that
the base salary is equated with a different location.

An advantage of the balance sheet method and perhaps the reason why it  is one of
the most widely used international compensation scheme is that it eases  the
repatriation process because it generally maintains comparable compensation  with
home country colleagues. It further provides equity between assignments  and is
relatively easy for employees to understand. Multinationals using the  balance sheet
approach must frequently review compensation package to ensure  that it is keeping up
with any rise in cost of living.

Opposite to the balance sheet method is the host country based or  going rate approach. This
approach uses comparable salary in the host country  as the base in setting compensation. It
perhaps best integrates the expatriate into  the host country and host business unit more
quickly because salary survey  comparisons are closely linked with host country nationals. As an
alternative,  compensation may be bench-marked against expatriates of the same nationality
or of all nationalities within the local market. Advantages afforded by this  approach include
better identification with the host country living standards and  host company compensation
levels. This may be particularly important in  diffusing any resentment that may develop among
local national employees  regarding inequities in expatriate compensation.
These traditional methods of international compensation are based on the  premise that
eventually the expatriate will return to his or her home country.  However, as globalization
requires a constant mobile workforce, these  traditional compensation packages are becoming
less and less adequate.  Challenges develop as the need to transfer employees among
international  business units increases. It becomes an expensive proposition for companies to
continue paying salaries, allowances and perquisites based on a home country  location when
there are no immediate plans to repatriate the employee.

Challenges for the Traditional System

Although the balance sheet approach provides the benefits of equity for  the expatriate
between assignments and better facilitates repatriation, it generally  comes at a high
cost to the company. The longer the foreign assignment lasts,  the challenge to maintain
a life style the expatriate may have been accustomed  to at home becomes greater. The
balances sheet approach infers that the  expatriate should never have to make any
adjustments to his or her host country  and company. This can result in great
compensation disparities between the  expatriate and host company employees as well
as third — country expatriates.  Problems arise when employees are paid different
amounts for performing  essentially the same job, leaving a perception of unfairness
among the lower  paid employees.  Another challenge with the balance sheet approach
is the complexity in  administering the program as more expatriates from different
home countries are  sent abroad. Multiple home countries complicate the
administration of the base  pay and allowances required to keep the expatriates
economically whole.

The going rate approach also has its disadvantages as a global  compensation program.
Assignments to multiple locations likely result in  variation of pay. This is particularly evident
when and employee is transferred  from an economically advanced location to perhaps a
Second or Third World  country. Expatriates facing a possible loss of compensation may be
reluctant to  take the pending assignment. Further more, expatriates from the same home
country performing equivalent work in different locations can have a notable  difference in pay
depending on the host country compensation level. Again, this  can result in expatriates being
reluctant to take the lower compensating  assignments and lead to rivalry among coworkers for
the higher paying  assignments.
Toward a Global Compensation System
A global economy has emerged as companies all over the world are  joining forces
through alliances, mergers, joint ventures, acquisitions and the  like. The mobility of
the workforce is increasing as companies recruit employees  worldwide. Multinational
corporations are looking to foster collaboration among  their foreign business units. The
availability of television, the internet, e-mail,  cell phones and other means of instant
communication have allowed employees  to easily obtain and exchange information
about pay and other working  conditions. To be competitive in this global economy,
companies must identify  those skills and competencies that they require globally and
pay accordingly.

Much has been written on compensating the expatriate from a home  country

perspective. The assumption is that the international assignment is  temporary and
therefore an inducement should be paid to entice the expatriate to  take the
assignment. However, as true globalization of business becomes more  common, the
trend is drifting away from the temporary expatriate with a home  base country toward
true international employees who are expected to remain  abroad throughout their
careers. It is becoming more important to establish a  strategic compensation
system that provides the flexibility to easily relocate  employees to meet company
needs, equability among similar jobs worldwide,  cost savings and ease of manageability
of the compensation program.  To create a global culture where employees located in
different parts of  the world can feel a sense of equality within the organization,
companies must  implement a core compensation program that is essentially similar
everywhere.

3. Factors affecting international compensation strategy

Recently, the dilemma between sector and cultural predictors of compensation policies
has become a public concern, and is extremely important in the background of
internationalization. Even some well-known cultural traditions at working styles of many
countries, examples like the Industry Wide Bargaining of Germany, the Lifetime
Employment of Japan and the Wide-range Social Safety Net of France, now are facing
the threats of being damaged owing to the big pressures from economic globalization.
As a result, multinational employers are facing unprecedented challenges when
choosing a job due to the pressures of economic globalization and market economy.
The growth of global economy plays a major role in general business, especially in the
areas of human resource management. It has been at the agenda of company leaders to
chase the qualification of global mind-sets by which they used to meet the challenges
brought by the trend of globalization of economy and create more opportunities.
Compensation in international human resource management is one of the aspects for
them to come up with to form the global mind-sets, which is more than complex. When
it comes to use some incentives and rewards to motivate employers from different
countries, so-called multinational employers, the multinational cultures are extremely
important to be taken into consideration. In all, the global mind-set talked earlier can be
attained by the proper adoption of compensation and reward systems. Otherwise, the
systems will come to hinder the development of global mind-set if improper.

Factors Affecting International

Compensation Strategy
The understanding of the economic, political and social conditions of the business where
they are is vital to make sound compensation strategy in the competing markets.
Though compensation and reward system is used to motivate employees, but it isn’t just
used to attract and hold talents. It serves as a comparative advantage for companies if
used properly. Thus, the establishment of international compensation and reward system
has been at the top agenda of multinational giants. It becomes a new boom that many
multinational giants try to establish compensation and reward system in a perspective of
global mind-sets rather than local. Global knowledge and information are collected to
overcome the limits of local experience and the result is that the integration of global
mind-sets in the system contributes to the competitive advantage of those brilliant
companies.

The main factors affecting international compensation strategy are; (1) social contract (2)
culture (3) trade union (4) ownership and capital markets, and (5) managers’ autonomy.

1. Social Contract
Considered as part of the social contract, the employment relationship is not just an
interaction between an employee and an employer, and it also includes the government,
all managers and all employees. The relationships and expectations of these groups
form the social contract. When thinking about how people get salaries around the
world, it is apparent that different people have different ideas, so they think variously of
government, employers and employees. The understanding of employee compensation
management requires understanding of the social contract in that country. How to
change employee compensation systems–for example, to make them serve better to
customers, encourage innovative and quality service, or control costs–requires changing
the expectations of groups to the social contract.

2. Culture
Culture is an abstract but collective concept, which is not defined as a certain object but
covers more than one object. It is a collection of Material wealth and Spiritual wealth
including religious, customs, education, regulations, laws, economy and even science.
Culture also plays its part in the international compensation system.

People with different cultural backgrounds will view compensation system differently
under the influence of culture. So does the management of the system. Culture is a
thing deeply rooted in the blood of people. People in the same nation tends hold the
same or similar mental programming way to process ideas and information. In other
countries, the way may differ. So is the case of compensation system, the certain culture
will inclines to match one culture of a nation if global mind-sets are not brought in and
lead people to manage systems in a certain way. A simple and direct way to confirm it is
to see the different meanings compensation in different countries.

Culture which forms a system of knowledge, information and beliefs will affect attitudes
and behaviors associated with the work. Culture affects the variables of the established
compensation system. Though equity customs are shared among the employees from
many countries, America and Japan for example, the force of the customs really works
differently in different countries. In all, having the awareness of focusing the influence of
culture values on employees is extremely important for corporate leaders. When dealing
with compensation system, the controlling for context of culture should be paid
attention.

3. Trade Unions
Europe keeps highly solidaric and Asia is less heavily unionized. In some countries, team
agreement sets how much the workers can earn even though the workers may not be
union members. In France for example a majority of workers are paid by collective
agreements, but only a few are union members. Social legislation differs among
European countries; UK has the fewest requirements, because it has no minimum
salaries, no maximum working hours, and no common methods for employee
participation. Social insurance in Germany and France are the most generous.
 4. Ownership and Capital Markets
Ownership and financing of companies are dramatically different around the world.
These differences are vital to the understanding and managing of international
payment. These patterns of ownership make certain kinds of pay systems have no
significance. Employees in these corporations have various values and expectations. One
research indicated that people who work for local or public corporations like salaries
according to one’s performance more; however, those who work in federal-owned
corporations are on the opposite side. So it is obvious that ownership differences have
great effects on types of payment. It is very misleading to consider that every place is
just like home.

5. Managers Autonomy
Managerial autonomy reflects managers set his employees to make decisions by
themselves. There is a relationship between it and the degree of centralization.
Government, trade unions and corporate police are responsible to restrict managerial
autonomy. Compensation decisions made in the domestic corporate offices and
exported to subsidies all over the world may relate to the corporate strategy but
discount local economics and social conditions.

To sum up, international compensation is affected by economic, institutional,

organizational, and individual conditions, globalization really represents that these
conditions are varying– thus international pay system are altering too.

Other Factors
Besides the factors affecting compensation strategy talked about above, there exist
some other important factors worth consideration. Global national policy is an example.
Global national policy concerns many parts of the society, like tax. Taxation burden for
the citizens vary across different countries. And so does welfare policy like retirement
plan. The two are only two small parts of the national policy. National policy relates to
the relationships among employers, employees, government and companies, which can
exert influence on the compensation and reward systems as well. National policy of
different countries will vary, so it will influence the international compensation and
reward system. Some examples can be listed to support it. In German and Japan and in
America and England, taxation and some regulation policies will show differently in the
use of stock options. And the taxation will in turn decide the variable payment of a
person. Different tax rates will decide different variable pay schemes. Besides, bonuses
and allowances win popularity among employees in Korea or Japan. The increase of
bonuses and allowances are not directly decided by the performance at work. However,
this is not the case in other places. As we all know, only the base pay rather than
bonuses and allowances can be the base point to be calculated in some welfare
schemes like national health insurance rates. And in America, the income tax doesn’t
mean too much to benefit schemes. In this way, the taxation can function more effective
to create employment.

4. Problems faced by global managers

A company’s sphere of influence once extended only to its local community. Today, “business as
usual” for startups and enterprises alike often implies working within a community that stretches
across the entire globe.

There are some amazing benefits to going global. While working at SAP and Oracle, I managed
teams in California, Paris, Shanghai, India and beyond. Suddenly, I wasn’t limited by geography
when it came to talent recruitment and local expertise. Additionally, a “virtual environment”
expanded employee flexibility and general happiness. Yet, at the same time I faced a number of
obstacles that threatened my ability to lead and my team’s ability to succeed.

Here are four major challenges I’ve faced when managing global or virtual teams, along with
some helpful solutions:

1. Challenge: Lack of clarity. When working with team members who have different native
tongues, it’s common for key messages to get lost in translation. Add poor phone connections
and multitasking team members (i.e. checking email) while on conference calls, and you start to
realize why communication doesn’t always sink in the first time around.

Remedy: Put action items and key decisions in writing. Follow up conference calls with clear,
written communication of the outcomes of the meeting. This ensures everyone walked away
from the meeting with the same key takeaways.

2. Challenge: Slow decision making. When there are only a few hours a day of common
“awake” time, it can take weeks to get a meeting scheduled that works for everyone’s calendar.
Add the lack of clarity mentioned above, and decision-making can happen at a snail’s pace.

Remedy: Communicate strategy and direction face-to-face whenever possible. Video

conferencing is a great tool for helping teams feel more“present” in meetings, giving participants
the ability to sense each other’s body language and tone. A regular in-person meeting is also a
must to boost team morale and increase collaboration. When clarity is provided through “face-to-
face” meetings, the speed of business and execution is much faster.

3. Challenge: Disjointed conflict resolution. Working predominantly through email makes it

difficult to deal with tough issues and get everyone on the same page. Tone and body language
play a large role in communication, and without these nuances, delicate situations can be hard to
manage correctly.

Remedy: Pick up the phone. Never communicate “tough messages” via email, as written
messages can easily be misunderstood. By speaking live to the individual in a one-on-one
conversation, you are much more likely to understand one another and communicate effectively.

4. Challenge: Conflicting corporate culture. Great company culture depends on constant

interaction and team bonding among employees. Such camaraderie can be more difficult for
global teams to define, implement and ultimately achieve.

Remedy: Invest in cultural training. I once hired a consultant to spend a day with my

management team for cultural training. The consultant split our group into teams based on
nationality. Each team had to answer the question, “What values would you want to instill in
your children?” The Americans said things like self-confidence, ambition, and intellectual
curiosity; whereas the Germans emphasized respect for authority and work ethic. The exercise
gave each of us a better understanding of how different cultures approach situations. We started
to function better as a team. We had a unifying culture that still held respect for the individual
perspective.

5. Uncertainty about the Future

Did you know that only 20% of managers said they had full clarity on how business
initiatives rolled out in 2019 impacted against organisational goals. That means that
80% of managers are acting without a comprehensive vision of how and why
changes are being made. The COVID-19 pandemic has only served to accelerate this
trend. According to McKinsey, existing management models no longer address the
challenges that the crisis presents.
There are consequences to all this uncertainty. For instance, it can impact our
mental wellbeing and decision-making. We may find ourselves more prone to
making rash decisions. Likewise, we may find ourselves putting off decisions until
we have more data points to work from.
Top Tip: The best way to deal with uncertainty is to embrace the fact that it’s here
to stay indefinitely (unless AI becomes smart enough to predict the future!).
Managers should consider reevaluating their current operating models, in light of
this uncertainty. If you haven’t yet, scenario planning is a practice you may want to
start incorporating into your strategic approach.
If you start planning for future scenarios now, you’ll be better equipped to deal with
them when they eventually arrive. We can’t predict the future, but we can make
ourselves future-proof.
6. Wellbeing of Employees
COVID-19 has clearly proven to be an ominous threat, impacting the health of both
individuals and businesses. Research shows us that 93% of employees have
struggled with their wellbeing in 2020. That’s almost everybody! 73% of those
affected linked this struggle to the pandemic.
Workers who have shifted from the office to working remotely, have reported
feeling less connected to their colleagues. Job insecurity continues to be another
source of stress, with 23% of the workforce fearing that they may lose their source
of income. Health and safety concerns relating to a possible return to the
workplace, have also fueled anxiety for many employees.
Top Tip: Did these stats stress you out? Well, we’re here to give you hope! Remote
work is likely to continue for around 41% of employees. As such, it’s time to
start redesigning work schemes to promote employee wellbeing and support
programmes in favour of today’s hybrid workforce!
You’ll also need to ensure that your team is equipped with the right tools. This
means helping them to connect with one another, engage with your organisational
mission and aiding their profession development. Keep in mind that the best tools
are the ones that cater to the needs of your employees, not just to your bottom
line.

7. Tracking and Increasing Team Productivity 

Successful organisations all have at least one thing in common: employee
productivity. In fact, a Harvard study confirms that the best companies are 40%
more productive than the rest. This is why tracking and improving team
productivity remains one of the top challenges facing managers today.
Unfortunately, it has become even more challenging due to our continuously
evolving workplace. These changes have been driven by technology, globalisation
and the pandemic.
Tracking productivity gets even trickier for managers looking after a team with
different work setups, work habits and timezones.
So, the question remains. How can managers effectively track and increase team
productivity in this day and age?
Top Tip: 75% of global organisations are projected to increase their usage of
productivity tools this year. But that doesn’t mean you should rush out and
purchase the first productivity tool you can find. You should seek to find tools that
match your company values and your business goals.
Similarly, with learning and development activities (which are often strongly
associated with increased engagement and productivity), there are a number of
online learning solutions to choose from. Some of these (such as The Academy
LMS) have been proven to supercharge team performance and make a genuine
business impact.

8. Shaping Company Culture

43% of HR leaders said that keeping a strong company culture alive will be their
biggest challenge in 2021. Company culture is a key driver of employee
engagement and productivity. Research shows that 77% of employees believe
company culture to be essential. As such, it’s important that we address this
challenge. We must create a workplace culture that marches to the beat of our
organisational goals.
With more companies adapting to hybrid working arrangements, this has resulted
in more dispersed teams. Work at home employees also face increased isolation.
Our (virtual) interactions are often limited to our team or our manager. There are
fewer watercooler moments to enjoy.
As a result, organizations can no longer rely on HR alone to drive culture-building
activities. Today’s managers play a greater role than ever before in shaping
company culture.
Top Tip: Within your teams, encourage a culture of active interaction and unity
among team members. Take time to openly recognize each member’s contributions
and achievements. Having all your managers and employees on the same page and
engaged with your company’s identity is critical! When going through a culture
change, applying social learning and gamification techniques to your retraining
programme may just help the transformation to stick!

9. Recruiting & Onboarding the Right Talent

Recruitment has never been an easy task. 45% of employers struggle to find talent
with the right skills. Today’s hiring managers do not have an easy job ahead of
them. After all, they need to contend with and adapt to trends brought about by the
pandemic. Think virtual recruitment, remote working arrangements and employee
wellbeing.
Talent acquisition strategies should also be reexamined, in view of attracting a
diverse candidate pool. And once you’ve done that, you then need to concoct a
great onboarding experience to deliver to your new recruits.
A study by Gallup reports that 88% of employees were deprived of a proper
onboarding experience. Here’s your chance to not add to that statistic!
Top Tip: Future-proof new hires to ensure they’re in it for the long run and are
aligned with your company’s mission. This will require having a strong recruitment
strategy in place.
You may want to update your hiring pitch so that it is better suited to a remote or
hybrid workforce.
You should also ensure your recruitment strategy helps to support a more diverse
and inclusive environment. If you can complement this approach with a strong
onboarding strategy (facilitated by learning technology), then you’ll build a super
team in no time!

10. Supporting Diversity & Inclusion in the

Workplace
Ensuring diversity and inclusion in the workplace has become one of the biggest
challenges facing today’s modern organizations. Diversity in the workplace focuses
on respecting and appreciating all employees for their differences (e.g. ethnicity,
age, religion, education, gender, disability, etc.). Inclusion, on the other hand,
focuses on ensuring that all employees feel valued and supported as individuals,
irrespective of their physical or cultural differences.
McKinsey has been able to show that companies with a more diverse workforce
perform better than other employers. Similarly, research conducted by
the CIPD reveals how building a more inclusive culture in the workplace can greatly
increase employee engagement and wellbeing.
But with the move to remote working, today’s managers must find new ways to be
inclusive in our ever changing workplace environment.
Top Tip: Driving the L&D agenda within your teams is something that managers
should commit to this year. D&I initiatives also need to be practised and
communicated among all members of the team. Having metrics to measure your
efforts is also a good idea.
Hiring managers may also work on recruitment strategies designed to better attract
a diverse pool of candidates. By doing so, you can set your company up
for increased innovation and success!

11: Managing Communication Between Teams

Do you communicate effectively with your team? A company culture built on
effective communication can differentiate a great team from an average one!
But recent work trends have increased the challenge of communication between
teams. Research shows that 97% of workers consider communication to have a
meaningful impact on their daily tasks.
But did you know that 71% of employees do not read or engage with company
emails or content? This is a surefire way for miscommunication, costing many
companies thousands of dollars. As such, improving team communication is
essential. When this happens, organizations report increased productivity
levels and improved connectivity between employees.
Top Tip: If 2020 has taught us anything, it’s how to drive team collaboration and
communication between remote/virtual teams. Ensure that your communications
content is clear and simplistic. As social beings, we are most productive when we
feel connected to our managers and organisation. Pursue regular catch-ups with
employees where they can air their opinions or concerns.
Engagement is key, so managers should not hesitate to explore
different communication channels. For instance, 75% of employees are more
likely to watch a video than text. That said, managers may also want to consider
adopting gamification and social learning strategies to really level up engagement!

12. Regulation & Compliance

Dealing with regulations and compliance have become one of the key challenges
facing managers of today. This comes as no surprise, as companies have needed to
respond fast to new guidelines linked to the pandemic and shifts in the political
environment.
Compliance comes in many different shapes and sizes. There’s conduct compliance,
which sees challenges in managing conduct amid today’s hybrid work setup.
Similarly, there’s culture compliance, which deals with employee wellbeing, and
ensuring diversity and inclusion in the workplace. Challenges with data
compliance also continue to saddle managers, as cybersecurity, privacy and fraud
become even larger threats this year.
Top Tip: Managers will need to be more alert and mindful of compliance measures
relevant to their team operations. Managers may also need to consider how to best
communicate this among their employees by using the right tools and channels.
Selecting the right learning management system is a good way of getting teams
onboard and engaged each time you roll out a new policy or procedure! These tools
can also be a great way of tracking compliance and recertifying where necessary.

13. Technology & Digitalisation

Let’s face it. Digitalisation is no longer an option, but a necessary mode of survival.
With the monumental changes we witnessed in 2020, the organisations who have
continued to thrive are those who have embraced a digital business model. And
those who didn’t? Well, let’s not go there…
There is increased pressure for today’s managers to keep up as technology
continues to evolve. They also face the challenge of finding the right software
solutions to invest in on the behalf of their organisations.
Top Tip: Despite the veritable treasure trove of technology solutions out there, you
still need to take the time to consider what you really need. What problem are you
solving? Avoid the lure of buying the most sophisticated or popular technology in
the industry. Oftentimes, the right solution is the simplest one.
Look into tools or platforms that will be the best fit for your employees or
customers. Make sure that they address the 3 Cs’s (collaboration, coordination and
culture). Also, think about what stage of digitalisation your company is currently at
and whether or not it’s time to level up your existing digital infrastructure.

14: Mind the Skills Gap

Alarmingly, 35% of the skills that workforces have, will likely be irrelevant in the
next few years. This shift will necessitate a rapid reskilling drive. In fact, 66% of HR
leaders say that building critical skills and competencies will be a key priority for the
next three years.
So, if you thought the skills shortage was tough now, it’s only set to get worse if you
don’t do something about it. The constant need to ensure our workforce is up to
date on the latest trends, knowledge and skills is a big challenge facing managers
today. No sooner have your teams completed the latest classroom training, than
their shiny new skills are already out of date!
Top Tip: Managers need to offer training solutions that can evolve as quickly as
learners’ needs. This is where learning technology helps! Tools such as an LMS
and mobile learning means you can provide ‘just-in-time’ tailored training wherever
and whenever your teams need it. They can simply log in and upskill immediately
on their learning platform, rather than forcing teams to wait until the next
classroom course is scheduled! This way, you can start to plug the skills gaps and
ensure your teams are ready for whatever change is around the corner.

15: High Staff Turnover

Few jobs, or even careers, are for life. In fact, the average time spent in a job is just
4.2 years (and it’s even less for millennials!). In this job-hopping world, the challenge
is how to retain top talent. If you fail to do so, the costs can be exorbitant! It
takes 33% of an employee’s annual salary to replace them. This figure rises to a
whopping 400% for expert senior staff!
Of course, it’s not all about hard figures and the bottom line. It’s about team spirit!
Each time someone leaves, their ideas, knowledge, expertise, or simple
awesomeness goes with them. So, it’s no surprise that 47% of HR leaders consider
attracting and retaining top talent to be a major priority. So, how is it done?
Top Tip: We say train to retain! It’s easy to assume that retaining staff is all about
offering more money or annual promotions. The good news is, this isn’t always the
case! Your teams  want to learn. Research shows 65% of employees say
development and training opportunities would increase their company loyalty.
Another study shows that employees who are encouraged to grow their skills are
twice as likely to spend their career with that company. You can reduce staff
turnover as such by offering meaningful development opportunities and training
that’s tailored to your team’s personal goals.

16: Creating Innovative Teams

In another blog on ‘innovation at work’, we discussed why nurturing creative teams
matters. Our business success and survival depends on it! Yet, in challenging times
it’s tempting to put great ideas on the back burner. However, if we don’t encourage
innovation within our teams, those great ideas will soon dry up.
Worse still, employees will take their brainwaves and incredible ideas to a more
innovative employer! So, however busy you are, or profit-focused your KPIs happen
to be, it’s always worth prioritising your team’s creativity. After all, innovative
companies lead to happier customers and higher employee loyalty!
Top Tip: Many people want to collaborate at work. So give your teams the tools
they need to share their ideas! If your LMS has social features, encourage everyone
to post on the news feed and message boards. Where necessary, you should
generate conversations to get their creative juices flowing.
Creativity and innovation don’t always have to be about big ideas or brand new
inventions. It’s also about the small tips we share that make day-to-day life run that
little bit smoother. Why not ask people to share their best practices or post an
inspiring TED Talk that motivated them in their post-lunch slump?

17: Breaking Down Silos

As a business grows and the organisational structure evolves, departments are
formed to serve clear functions. However, these departments may lead to business
silos. And these silos are a blight on much of the corporate world. For anybody in
the dark about this (lucky you!), the term describes teams that are inward-looking
and inclined to hold onto information rather than share their knowledge.
In times of change, there’s a higher risk of silos forming. Silos are no place for your
company’s knowledge, ideas and talent! Communication and expertise should flow
freely throughout the organisation to ensure everyone benefits. This way,
innovation and positive organisational change can flourish.
Top Tip: It’s time to break down the barriers and unleash the expertise within your
teams! You can do this through the power of reward. And the best reward of all?
Recognition, of course. And you don’t need to rely solely on extrinsic rewards. You
could, for instance, encourage individuals to share their specialist knowledge by
awarding those who do so with ‘Expert status’ on your LMS. This coveted title
recognises staff strengths, contributions and efforts to help others.
For many people, becoming an official subject matter expert is a strong intrinsic
motivator because it builds a personal sense of purpose. After all, being needed
and valued feels awesome! When your teams feel their expertise is recognised, they
are more likely to want to share it. Soon the defensive barriers will be down for
good and there won’t be a silo in sight!

18: Knowledge Loss & Brain Drain

Managers around the world are having to come to terms with an ever-growing
problem. People leaving. And, even worse, taking their knowledge with them when
they go.
Add all the knowledge of your staff into one giant knowledge-bundle, and that’s
your organisation’s intellectual capital. But every time an employee leaves, they
take some of their knowledge with them. This can cause huge problems, especially
when that important knowledge hasn’t been shared.
Top Tip: It’s essential for managers to encourage a knowledge-sharing culture. It’s
the only real solution to the brain-drain crisis!
In fact, if you want to find out more about how you can build a knowledge-sharing
culture in your organisation and combat the erosion of your business’s intellectual
capital, then you should download this guide.

19: Finding the Holy Grail: Employee Engagement

One of the biggest challenges of our time is employee engagement. Research
shows that engaged employees are more productive, more creative and less likely
to leave. Therefore it’s not surprising that 88% of businesses are seeking to improve
employee engagement.

You’re in for a bigger challenge if you’re handling remote or dispersed teams. Silos

can be formed as remote teams are less likely to know what’s happening with other
departments. This can reduce an employee’s connection with their wider
organization, leading to increased levels of disengagement. Hence, today’s
managers face the need more than ever to keep the team’s spirits up (it’s time to
bring out those virtual pompoms!) and hearts closer to shared company culture
and values.
Top Tip: Epic Meaning is the key to employee engagement. Epic Meaning is a
powerful intrinsic motivator because it’s the ‘why’ that drives our every action. It’s
our sense of purpose and desire to make a difference.
When it comes to your team, Epic Meaning is the ingredient that emotionally
connects employees to your company’s greater purpose. You can engage
employees by ensuring Epic Meaning is at the heart of all you do, from your daily
communications to your weekly meetings and employee training. Make sure each
team member understands how their actions at work benefit both them and the
company’s mission.

5. Cross cultural management

Hofstede (1994) defines culture as “the collective programming of the mind that distinguishes
the members of one category people from another”(p.5.). A particular “category of people”
may include a nation, an ethnic group, an organization, a family, or some other unit. He
suggests that the cultures of different nations can be compared in terms of five dimensions,
which is power distance, individualism, masculinity, uncertainty avoidance, and long term
orientation.
Cross-cultural management is the management of people and things that involve a
different culture background. Cross-culture management studies teach how to handle
conflicts of the heterogeneity culture and actualize effective management (Li, 2000). Its
aim is to design a feasible organization structure and management mechanism across
the different culture backgrounds. It also plans to use enterprises’ resources, especially
exert potential value of enterprises efficiently and effectively.

Besides, according to Holden (2001), culture is presented as a form of organizational

knowledge that can be converted into a resource for underpinning core competence,
instead of being presented as a source of difference and antagonism. Cross cultural
management is a knowledge management perspective that breaks the concept of
culture that has affect management thinking, education, and research for several
decades.

2.2 The importance of cross cultural management

2.2.1 The importance of cross cultural management to

organization
The ethnic or national contexts has been conversion and open the vision by cross
cultural. It can provide an opportunity for an organization to learn a new way of social
interaction. This helps an organization to become more effective and efficient in
multicultural business environments (Deeks, 2004). Thus, it helps increase the
organization’s global fluency. Global fluency could establish a good business
relationship and creating a competitive advantage in the global marketplace for the
organization.

The improvement in production, delivery service, technologies that fulfill customers

needs has increase the organizations’ competitiveness. Competences are views as a
competitive strategy. Thus, they must improve their organization by running
competence development programs. The purpose of competence development
programs is to prepare for the uncertain future (Weick & Sutcliffe, 2001). For a cross-
cultural organization, it is very important (Govindarajan & Gupta, 2001). The
expectations, behavior, and attitudes of a new employee are affecting by socialization
and desirable by the organization with different manner (Mannen & Schein, 1979).

2.2.2 The importance of cross cultural management to

employees
It is an opportunity when working with people from different country and background
as employees can get a specify knowledge which cannot obtain in home environment
(Deeks, 2004. Furthermore, work in team that across national boundaries will increase
employees’ interpersonal skill and enhance their perspective. Working as part of an
international team can also acquire a valuable experience that may useful in the future
roles.

Heterogeneous groups are tending to generate a boarder range of ideas. This is

because heterogeneous groups are more prefer to solve problem from a wide range of
perspectives than homogenous groups. A research shows that heterogeneous groups
are more creative than homogenous groups (Deeks, 2004). On the other ways,
heterogeneous groups frequent ask about the opinion of each other, and will not fear
about the status quo compared to homogenous groups. It will help the heterogeneous
group to recognize problems and identify opportunities for improvement.

Cross cultural encouraging individuals to collaborate internationally that can ensure the
information is flow up and down among members, obtain ample information from a
wider range. This helps everyone to keep their work up to date and high quality.
Working internationally and let people from different backgrounds work together on
projects, tasks and reviewing each other’s work will helps to minimize bias and maximize
economy of effort (Deeks, 2004). As a result, employees’ productivity will definitely
increased.
2.3. Dimension

2.3 1 Language
Language can be viewed as being done and perform emotional. In this angle, it is
commonly assumed that people at least on occasions, have emotions, and that being
emotional gains its own agency, impacting in a variety of ways on the communicative
situation (Bamberg, 2000). Besides, according to Budwig (2000), language commonly
differentiates between two functions of language. On the other hand, language is used
to socially connect with others, to communicate and to engage in relational practices.
Furthermore, according to Dennett (1994), language is the expression of emotions and
the act of expressing affect in communication. In this view, language and emotion are
concurrent and parallel system in use. So, both of them share functionality in the
communicative process between people.

According to Munter& Mary 1993, body language describe notions of appropriate

posture, gestures, eye contact, facial expression, touching, pitch, volume, and rate differ
across cultures. Furthermore, according to Salacuse (1998), in cultures that rely on
indirect communication, such as the Japanese, reaction to proposals may be gained by
interpreting seemly indefinite comments, gestures, and other signs.

2.3. 2 Individualism vs. collectivism

According to Hofstede (1980), individualism is defined as lies in one’s moral right to
pursue one’s own happiness. This pursuit requires a large amount of independence,
initiative, and self-responsibility that is the degree to which individuals are integrated
into groups. Besides that, individualism carried out not just on the level of goods but on
the level of knowledge and friendship. Trade is essential for life; it provides one with
many of the goods and values one needs. Creating an environment where trade
flourishes is of great importance and great interest for the individualist. According to
Klein (2001), individualism means recognize that one has right to his or her own life and
happiness. It also means uniting with other people to preserve and defend that right.
According to Zapletalová (2003), individualism dimension show more confidence in
status purchases, individual motivation, and success.

According to Hofstede (1980), collectivism is defined as the theory and practice that
makes some sort of group rather than the individual the fundamental unit of political,
social, and economic concern. Besides, collectivists insist that the claims of groups,
associations, or the state must normally supersede the claims of individuals. According
to Zapletalová (2003), collectivism culture dimension is recognized value mutual
cooperation, stimulation and group-orientated motivation, whose complex progress
takes priority over an individual. Furthermore, collectivism is the principle that the social
collective is called society, the people, the state and other has rights, needs, or moral
authority above and apart from the individuals who comprise it (Hofstede, 1980).
According to Wollstein (2001), people are take precedence over the rights of individual,
production for people, and the common good to fulfil their group needs.

2.3.3 Cooperation
According to Ahearn (2009), cooperation is the core of element of preferential treatment
and building on partnerships. Furthermore, cooperation is now being seen as a priority
in many business round tables and dialogues Allio¼ˆ2008¼‰.Besides that, cooperation
is an umbrella concept that incorporates a broad range of activities. Furthermore,
according to Brown, Rugman and Verbeke (1989) cooperation is an information
exchanges and dialogues among people that are designed to build trust and
confidence. At the other end of the activities designed to harmonize regulatory
approaches through acceptance of common principles and standards.

2.3.4 Uncertainty Avoidance

According to Hofstede (1980), uncertainty avoidance refers to the society’s preference
for risk-free, unambiguous situations and implies a number of things, from
aggressiveness to a need for absolute truth that people do not usually consider as
belonging together. Besides that, it measures how much members of a society are
anxious about the unknown, and as a consequence, attempt to cope with anxiety by
minimizing uncertainty. According to Kogut and Singh (1988), in cultures with strong
uncertainty avoidance, people prefer explicit rules (e.g. about religion and food) and
formally structured activities, and employees tend to remain longer with their present
employer. In cultures with weak uncertainty avoidance, people prefer implicit or flexible
rules or guidelines and informal activities. Employees tend to change employers more
frequently. According to Zapletalová (2003), this dimension describes society’s attitude
to and the treatment of the uncertainties and ambiguities of everyday life.

2.3.5 Power Distance

According to Hofstede (1980), power distance as a cultural characteristic defines the
extent to which inequality in power is accepted and considered as normal by less
powerful people in a society. Power distance describes also the extent to which
employees accept that superiors have more power than they have. Furthermore,
according to Zapletalová (2003), this dimension expresses the extent to which less
powerful members of a society accept and agree that power is not distributed equally.

2.3.6 Masculinity vs. femininity

According to Hofstede (1980), femininity stands for a society where gender roles
overlap: both men and women are supposed to be modest, tender and concerned with
the quality of life and helping others to be very important. Besides, according to
Zapletalová (2003), femininity dimension describe caring, softness, relationship and
emphasis on people rather than money count a lot.

According to Zapletalová (2003), the masculinity dimension describes how cultures

differentiate on not between gender roles and value. According to Hofstede (1980),
masculine dimension tend to be ambitious and need to excel. Furthermore, masculinity
is the dimensions of national cultures and stands for a society which social gender roles
are dearly distinct: men are supposed to be more modest, tender, and concerned with
the quality of life. Members of these cultures have a leaning to polarize and consider big
and fast to be beautiful.

2.3.7 Conflict resolution

According to (Burton, 1991), conflict resolution is identity disputes are explored and
getting to the source of the problem and the proposition that aggressions and conflicts
are the direct result of some institutions and social norms being incompatible with
inherent human needs. According to Bush and Folger (1994), conflict resolution
dimension is a term associated with the manipulative search for an agreement that is
satisfactory not merely to the adversaries, but also to the third party and the latent
interests they represent. Furthermore, according to Mitchell¼ˆ2002¼‰, conflict
resolution is likely to argue that resolving a particular conflict will remove all differences
or potential differences between parties, whether the differences take the form of
possessing contrasting goals or aspirations or simply being different from one another,
perhaps as regards language, appearance, religious beliefs, social organization or
culture.

2.3.8 High and low context culture

According to Hall (1966), high context cultures rely on an internalized social context and
physical environment such as body language and face-to-face communication for all or
a large part of the message. On the other hand, low context cultures rely on direct
culture such as clear and stated in word, with emphasis on the time management,
punctuality and deadlines.

2.3.9 Long and short-orientation

According to Hofstede (1980), long term orientation indicates that culture values are
future- looking, including thrift, perseverance, humility/shame, and observe hierarchical
relationships, whereas short-term orientation values look to the past, such as respecting
tradition. Furthermore, according to Zapletalová (2003), long and short-term orientation
represented measures the value systems from the point of time. So, a short-term
orientated society pays attention to present and past activities and long-term orientated
society values activities in long term perspective.

2.3.10 Universalism Vs. particularism

According to Trompenaars and Hampden-Turner (1993), universalism defined as people
believe objective rules can be developed that apply to all people and goods regardless
of circumstances. Therefore, people are faced with a judgment task such as, evaluation
of an unknown brand. Beside, universalism is inclined to develop general rules that can
be applied across situations. Rule generation involves consideration of conditions
associated with prior judgments, and this consideration fuels proclivity to contrast
current judgments with prior experience. According to Zapletalová (2003), universalism
represented people who are prefers rule-orientated behavior that has to be respected; it
rather neglects individuals and specific circumstance

According to Trompenaars and Hampden-Turner (1993), particularism defined as people

believe objective rules cannot be applied to decisions but rather situational and
personal circumstances must be taken into account when making judgments.
Furthermore, particularism is a place greater emphasis on obligations and relationships
that encompass the unique situations in which one makes decision sand they see the
world as unique, exceptional and mysterious. Besides, according to Zapletalová (2003),
particularism stresses attitudes and approaches based on specific individually orientated
social relations taking into account circumstances.

.
2.3.11 Neutral of emotional
According to Trompenaars and Hampden-Turner (1997) ¼Œneutral of emotional
dimension describe the extent to which feelings are openly expressed. According to
Zapletalová (2003), this dimension orientated cultures prefer matter-of-fact approach
and cool-headed deliberation. Therefore, emotionally orientated cultures acknowledge
emotions and make use of their symptom.

2.3.12 Specific and Diffuse

According to Trompenaars and Hampden-Turner (1997), specific and diffuse is
describing the range of involvement. According to Zapletalová (2003), different cultures
mix together working and private worlds, whereas in specific cultures these two areas
are clearly and distinctly separated.

2.3.13 Achievement vs. Ascription

According to Trompenaars and Hampden-Turner (1997), Achievement means you are
judged on your track record and ascription places emphasis on the status that is
attributed. According to Nielsen (2004), achievement is typically associated with strong
effects of variables reflecting inherent individual qualities and effort such as cognitive
ability, education), whereas the ascription is associated with strong effects of family
background characteristics such as parental education, family. According to Zapletalová
(2003), this dimension specifies the way of achieving social status. Besides, some
cultures ascribe an individual’s status according to people social activity and success
that is achieved apart from its origin, source, social, or personal associations.
Furthermore, this dimension recognized status perceives an individual only in
connection to people age, social status, education, job, or social group.

2.3.14 Value type and dimension

According to Schwartz (1994), a value type is generally a set of values that are located at
the opposite, or in the opposing value type. This is including power, achievement,
hedonism, stimulation, self-direction, universalism, benevolence, tradition, conformity
and security.

According to Schwartz (1994), power value type represent are likely to indicate an
individual that value social status and prestige or control and dominance over people
and resources. Furthermore, ‘achievement’ value type would indicate a high priority
given to personal success and admiration.

Besides, ‘Hedonism’ represents a value type where preference is given to pleasure and
self-gratification. ‘Stimulation’ value type represents a group of value that express a
preference for an exciting life and ‘self-direction’ value type represents distinct group of
value that value independence, creativity, and freedom.

On the other hand, ‘universalism’ value type on the other side represents a preference
for social justice and tolerance, whereas the ‘benevolence’ value domain contains values
promoting the welfare of other. Besides, the ‘conformity’ value type contain value that
represents obedience and the ‘traditions’ value type is made up out of values
representing a respect for tradition and custom.

Lastly, the ‘security’ value type is a value orientation containing values relating to the
safety, harmony and welfare of society and of one self.

According to Schwartz (1994), these ten types of values can be ordered into four higher
order value types: ‘openness to change’ combines stimulation, self-direction and a part
of hedonism, ‘self- enhancement’, combines achievement and power as well as the
remainder of hedonism. On the opposite side of the circle, ‘conservation’ combines the
value orientations of security, tradition and conformity – and self- transcendence, which
combines universalism and benevolence.

These four higher order value types form two bipolar conceptual dimensions. This type
of order is derived from the location of values depending on their (negative) correlation
within the circle – hence values situated on one side of the circle will be strongly
negatively correlated with values on the opposing side of the circle.

2.3.14 hierarchy versus egalitarianism

According to Schwartz (2002), the hierarchy value type emphasizes an unequal
distribution of power, whereas the egalitarian value type gives greater emphasis on
equality and the promotion of the welfare of others. According to Brett, Shapiro& Lytle
(1998), found that hierarchical cultures in comparison to egalitarian cultures were more
likely to espouse norms for distributive tactics. Distributive tactics (i.e. making threats or
using arguments) are power strategies that are focused on individual, not joint, gains
(Pruitt 1981 and 1983). Distributive tactics are normative in hierarchical cultures because
negotiators use positional and persuasive arguments to make status and power
differences clear.
2.3.15 Relationship to the environment (Inner versus
outer orientation)
According to Zapletalová (2003), inner orientation values strong individuals who are
willing to influence, subject and utilize all available resources and make capital out of
the environment. Outer orientated cultures stress harmony, connectivity, integration and
adaptability to surrounding environment in order to not to violate and avoid mutual
balance.

2.4 Advantages and disadvantages of cross cultural

management

2.4.1 Advantages of cross cultural management to

organization
First of all, the advantage of the cross cultural management in the organization is can
optimize the business relationships in global business environment (Tosti, 2002). This is
due to when the employees are become knowledgeable about cross-cultural
communication in term of their own cultural values and behaviors with those other
cultures can promote people to work effectively in the multicultural business
environment (Martin & Chaney, 2006). As for example, in Asian countries, silence
indicates thoughtfulness in decision making but for Western countries, they are
uncomfortable with silence. Hence, employees or even executives will be aware of this
culture and can avoid it in order to build good relationship with Western or Asian
business partners.

Secondly, cross-cultural management can improve the decision making process because
the decision are influence by cultural viewpoints, belief and values which provide
valuable insight for HR to improve the communication skills in the workplace (Alder,
2008). When people aware of the cultural differences of others, they can adapt to
various ways that the decision are made, the reason why the decisions are made and
party involve in decision making process should be based in the form of group,
individual or team in order to increase efficiency and avoid misunderstanding of the
decision making process.
2.4.2 Advantages of cross cultural management to
employees
Besides, cross-cultural management brings advantages for employees in the
organisation for instance they can develop their interpersonal skills. Through the cross
cultural training, employees can develop great ‘people skills’ that can be applied in all
walks of life by learning about the influence of culture, belief, and values (Cardon &
Bartlett, 2006). For the employee who undertake cross cultural training begin to deal
with people with a sensitivity and understanding that may have previously been lacking.
The contribution of the employees in this area can improves the organization overall
performance.

2.4.3 Disadvantages of cross cultural management to

organization
Oppositely, the cross-cultural management comes with some disadvantages also. As for
organization, there is hardly to recruit good cross-cultural training program mentors.
When the organization implements cross-cultural training program for their employees
and this program doesn’t going to be effective if there are no good mentors. (Tyler,
2007) Besides that, there is shortage of mentors that make the program doesn’t go
smoothly.

Moreover, although the entire executives’ line of the organization team participates in
this program, they may not enough to meet the demand for the program.

2.4.4 Disadvantages of cross cultural management to

employees
Another disadvantage faced by employees in cross-cultural management is there are
many companies have diversity cross-cultural program. When talk about cultural
differences, people are afraid of stereotyping (Tyler, 2007). For example, white male
mentor with an Asian participant, the mentor may give the advice of “you just going to
have to toot your own horn”. This advice may work for the white male but this against
the cultural norm for many Asian. This may brings confuse for the employees in
participate the cross-cultural program, because the difference in race and gender of the
mentors can results in difference perceptions which can affect the goal of cross cultural
training.
2.5. The effect of the cross culture management

2.5.1 The effect of the cross culture management to

organization
The organization has increased their effort to gain higher profits by expanding their
operation internationally when the world is globalized (Young, 2001). Global
marketplace is more attractive compared to domestic market as it cannot fulfill their
needs. However, this creates challenges to the organization as it has to face new
environmental differences such as political, economic and cultural.

We are living in the world that involved a simultaneous events and overall awareness
(McLuhan, 1962). The organization has encountered a problem, which is to face with
myriad cultural differences and search for profound human similarities (Young, 2001)..
When the organization is working their business as usual, they will fast losing their
relevance. When the world is integrated the global culture, it will create a need for an
organization to learn new things and find out solutions in order to response to a
problem. Hence, these force the organization to stretch the limits of their customary
imagination and creativity in which will lead to higher customers’ satisfaction.

2.5.2 The effect of cross cultural management to

employees
There is a problem when co-workers who are working in the same team or area in a
cross cultural organization have geographical distances (Misook, 2006). They will face
communication problems as they cannot discuss face-to-face directly. In addition,
meetings via video-conferences, memos and telephone are often ambiguities. There are
barriers and problems in geographically dispersed organizations as many managers
prefer to face-to-face contact.

It will become a barrier when co-workers have a bias and negative assumptions about
certain values, attitude and behavior in different cultural (Schermerhorn, 1996). It will
definitely affect the organizations’ productivity while their employees having a conflict
and working together. However, the conflict caused by cultural differences can be
solving through workshops or training sessions.
 3. CROSS BORDER MERGER AND ACQUISITION

Cross-border mergers and acquisitions involve assets and operations of firms belonging to two

different countries. Acquisition refer to the purchasing of assets or stocks of part or all of
another firm (or other firms) that result in operational control of the whole or part of the other
firm. Mergers describe the case where two separate firms are combined or amalgamated into a
single business

here is a large scale increase in cross border merger and acquisition as an

impact of globalization. In 1990’s there were nearly around 200 % jump in the
volume of deals in matters relating to cross border merger and acquisitions (M
&A) in the Asia-Pacific Region. Cross-border M & A is a combination with
other trends such as increased deregulation, privatization, corporate
restructuring. Globalisation brought a boost in cross border M &A activity. The
cross border M&A’s are taking place in all the sectors such as services,
manufacturing, chemical, pharmaceuticals, telecommunications and financial
industries. A cross border M & A occurs between two companies existing in
different nations by way of purchasing or amalgamating two companies.

What are Merger and Acquisition?

Mergers and Acquisitions are explained as companies’ consolidation. The

terms mergers and acquisition are defined below:

Merger

A merger combines two companies in one. Such transactions take place

between two businesses/ companies of the same size. Additionally, the terms
of the merger are amicable and also mutually agreed by the two companies to
become equal partners in the new venture.
Acquisition

Acquisition occurs when a company buys another company. Sometimes, the

purchase is friendly whereas sometimes it is hostile. Thus, a large company
acquires a small company to diversify its business.

What is Cross Border Merger and Acquisition?

In simple words, mergers and acquisitions are defined as a combination of

businesses of two or more companies which are incorporated in two or more
than two countries. Companies incorporated in different jurisdictions go
through this process in order to enhance their growth and increase their
standard in the international market.

According to section 234 of the Companies Act, 2013 read with Rule 25A
of Companies (Compromises, Arrangements and Amalgamations)
Amendment Rules, 2017– defines it as a merger and amalgamation between
companies’ registered under the Companies Act, 2013 or under the previous
Act i.e. Companies Act, 1956 and also the company incorporated outside
India in the notified foreign jurisdictions or vice versa.

Concept of Cross Border Merger and Acquisition

A local company can be acquired by another company located in other

countries. The company can be a private company, public company or a
state-owned company. The merger and acquisition by foreign investors also
referred to as cross border merger and acquisition, results in the transfer of
authority and control in operating the merged or acquired company.

Assets and liabilities of two companies incorporated in two different countries

are combined as a new legal entity in terms of the merger.
While a transformation process of assets and liabilities of the local company to
a foreign company and automatically, the local company will be affiliated in
the acquisition process.

As per legal terminology:

The country where the company to be acquired or where the target

company is situated is referred to as Host country.

What are the Factors to be Considered in Cross Border Mergers and

Acquisitions?

Various factors affecting firms for getting in cross border merger and
acquisition are as follows:

 The globalisation of financial markets.

 Due to market pressure and the decreasing demand because of competition in the
international market.
 To seek new market opportunities because of fast-growing technology.
 Due to geographical diversification which would provide opportunities in exploring the
assets in other countries.
 Increase the efficiency of companies’ in producing goods and services.
 Fulfilling the objective to increase profitability.
 To increase productivity or scale of production.
 Sharing technology or any innovation which can help in reducing the costs.

What is the Procedure for Cross Border Merger and Acquisition in India?

The procedure for cross border merger and acquisition in India are as follows:

 An application regarding cross border M & A must be made to the tribunal by either
party as prescribed in Section 230 to Section 232 of the Companies Act, 2013.
 The tribunal, after receiving the application, may call the meeting of members or
creditors or both, to obtain approval of the proposed scheme by the members and
creditors. The tribunal will also look into the objections (if any) raised by the members
and creditors.
 Certain important information relating to the company and its business must be
attached along with the application. Certificate of companies’ auditor regarding the
 accounting treatment of the company must be filed before the tribunal to ascertain the
nature of the proposed scheme.
 The notice of the meeting to be conducted must be sent to Central Government of
India, Reserve Bank of India (RBI), Security and Exchange Board of India (SEBI),
Competition Commission of India(CCI), the Registrar of Companies (ROC), respective
stock exchanges and the official liquidator; and if any of them has any objection they
have to raise it within thirty days of receiving the notice.
  The merger will come into force if three-fourth of the creditors in debt value or
members in their share values, votes in favour of the cross border merger and
acquisition.
 The requirement of ‘meeting of creditors’ is not needed if the creditors holding at least
90% value of total outstanding debt, approves the scheme of cross border M&A by way
of an affidavit.

Rule 25 A of Companies (Compromises, Arrangements and

Amalgamations) Amendment Rules, 2017 also specifies some
procedures as follows:

 A foreign company which is incorporated outside India may merge with an Indian
Company only after receiving prior approval from RBI.
 The merging company needs to comply with the provisions specified in section 230 to
section 232 of Companies Act, 2013.
 The valuation must be conducted by the transferee company in their respective
jurisdiction.
 The concerned company must apply to the tribunal as per provisions under section 230
to section 232 of the Act.

What are the Jurisdictions Specified for Cross Border Merger and
Acquisition?

Jurisdictions for the purpose of cross border merger and acquisition are
specified in clause (a) of sub-rule (2) of 25A:

 Jurisdiction Where the securities market regulator is a signatory to an International

organization of securities commission Multilateral memorandum of understanding or
MOU or a signatory to the bilateral memorandum of understanding with SEBI.
 Jurisdiction not identified in the public statement of Financial Action Task Force (FATF).
 Jurisdiction where Central Bank is a member of Bank for International Settlements (BIS).
 Jurisdiction with strategic Anti-money laundering or combating the financing of
terrorism deficiencies to which counter measures apply.
  Jurisdiction which has not made sufficient progress in addressing the deficiencies or has
not committed to an action plan developed with the financial action task force.

Compliance to be followed by Companies During 

Cross Border Mergers and Acquisitions

As per Section 6 of the Competition Act, 2002 requires the merging

companies to meet the threshold limit qualifying under section 5 to give notice
to the Competition Commission of India (CCI) within thirty days of approval of
the proposed scheme of merger and acquisition by the Board of Directors of
the companies involved or execution of any agreement pr document in
furtherance of acquisition proceedings.

A waiting period of 210 days from the day of giving notice for the purpose of
investigating section 29 and section 30 must be provided to check the
existence of any possibility of its adverse effect on the competition.

If the Competition Commission of India (CCI) under Section 31 of the Act, is

satisfied regarding the negative affect after the approval of M&A, it shall
approve it. Whereas, if it concludes after thorough analysis that the merger is
likely to bring an adverse effect in the market, it will disapprove the scheme or
send it for modification as to make it fit for the approval.

What are the Effects of Cross Border Merger and

Acquisition?
 Cross border merger and acquisitions are a reformation of industrial assets and
production structures on a worldwide basis.
 It empowers global transferring of technology, goods and services and integrates it for
overall networking.
 Cross border M&A’s leads to economies of scale and also scope, which helps in gaining
expertise. It benefits the economy, such as increased productivity of the host country,
an increase in economic growth and development, mainly if the policies used by the
government are favourable.
The following are the benefits of cross border merger and acquisition:

Capital build-up

Cross border M & A supports an increase in the capital on a long term basis.
To expand their businesses, it not only undertakes investment in plants or
buildings and equipment’s but also in the incorporeal assets such as technical
skills rather than just the capital.

Employment creation

Mergers and acquisition that are undertaken to drive restructuring may lead to
downscaling but would lead to employment gains in the long term. This
downsize sometimes is essential for the continued existence of operations. In
case the businesses expand and become successful, it would create new
employment opportunities.
Technology handover

When businesses across countries join together, it brings transfer of

technology, sharing of best management skills and practices in the host
country. This results in innovations and has a better influence on the
operations of the company.

Issues and Challenges on Cross Border Merger and

Acquisition

The issues and challenges are discussed below:

Political concerns

The political scenario plays a crucial role in cross border merger and
acquisitions. Basically, for industries which are politically sensitive such as
defence, security etc.
Cultural Challenges

A cultural challenge can be a considerable threat to cross border M&A. To

deal with this challenge, businesses need to spend the right amount of time to
get knowledge of the local culture and also of the employees.

Legal considerations

The merging companies must look into the various legal and regulatory issues
that they are likely to face. While going through the process of reviewing these
concerns, it could indicate that the potential merger or acquisition would be
incompatible. Hence, it is recommended to not go ahead with the deal.

Tax and Accounting Considerations

Tax-related matters are critical, particularly when it comes to structuring the

transactions. Many countries are yet to implement International Financial
Reporting Standards (IFRS). The parties in the merger should be aware of the
financial and accounting terms in the deal.

Due Diligence

Due diligence affects the terms and conditions under which the M&A
transaction would take place, influence the deal structure affects the price of
the deal. There are various other issues as every agreement has its favour
and differences.

Why Enterslice?
Conclusion

The corporate sector in India is moving towards the stage where globalisation
and its principles are intended to be accepted by the state through favourable
legislation but, due to existence of multiple technical legislation governing the
concerned subject, it is almost impossible to attain the most desirable stage
with one attempt. Though there is very little progress in the research literature
to explore the role of culture in the success of these ventures of M&A. Cross-
border M&A has added challenges of dealing with both national and
organizational culture difference

4. International recruitment

While recruiting people for international operations, the international HR managers must
identify the global competitiveness of the potential applicants at the time of the recruiting
process. It is essential that the workforce of an international organization is aware of the
nuances of international business. Understandably, the company must keep international
knowledge and experience as criteria in the recruitment and selection process.
Besides, the international HR department must have a fairly good idea about the skills and
availability of human resources in different labour markets in the world. The HR department
must have the capacity to foresee the changes in these markets and exploit those changes
productively. A truly international HR department would insist on hiring people from all over
the world and place them throughout the international business operations of the organization.
Approaches to Recruitment in IHRM Though the general aim of any recruitment policy is to
select the right people for the right task at the right time, the HR department of international
companies may adopt one of the following three specific approaches available for recruiting
employees for global operations.
The Immigration Reform and Control Act of 1986 (IRCA) bars employers from hiring individuals
who are not legally entitled to work in the U.S. Employers must verify work eligibility by
completing Form I-9 along with required supporting documents. IRCA also prohibits employers
from discriminating in hiring, firing, recruiting, or referring on the basis of national origin or
citizenship status.
H-1B workers may be employed temporarily in a specialty occupation or as a fashion model of
distinguished ability. A specialty occupation requires theoretical and practical application of a
body of specialized knowledge along with at least a bachelor’s degree or its equivalent. An H-1B
alien may work for any petitioning U.S. employer for a maximum period of six years.

International recruitment methods

1. Ethnocentric approach
Countries with branches in foreign countries have to decide how to select management level
employees. Ethnocentric staffing means to hire management that is of same nationality of
parent company.
International Recruitment
 Ethnocentric approach
 Polycentric approach
 Regio centric approach
 Geocentric approach

When a company follows the strategy of choosing only from the citizens of the parent country
to work in host nations, it is called an ethnocentric approach. Normally, higher-level foreign
positions are filled with expatriate employees from the parent country. The general rationale
behind the ethnocentric approach is that the staff from the parent country would represent the
interests of the headquarters effectively and link well with the parent country. The recruitment
process in this method involves four stages: self-selection, creating a candidate pool, technical
skills assessment, and making a mutual decision. Self-selection involves the decision by the
employee about his future course of action in the international arena. In the next stage, the
employee database is prepared according to the manpower requirement of the company for
international operations. Then the database is analysed for choosing the best and most suitable
persons for global assignments and this process is called technical skills assessment. Finally, the
best candidate is identified for foreign assignment and sent abroad with his consent.
The ethnocentric approach places natives of the home country of a business in key positions at
home and abroad. In this example, the U.S. parent company places natives from the United
States in key positions in both the United States and Mexico.

2. Polycentric approach
When a company adopts the strategy of limiting recruitment to the nationals of the host
country (local people), it is called a polycentric approach. The purpose of adopting this
approach is to reduce the cost of foreign operations gradually. Even those organizations which
initially adopt the ethnocentric approach may eventually switch over lo the polycentric
approach. The primary purpose of handing over the management to the local people is to
ensure that the company understands the local market conditions, political scenario, cultural
and legal requirements better. The companies that adopt this method normally have a localized
HR department, which manages the human resources of the company in that country. Many
international companies operating their branches in advanced countries like Britain and Japan
predominantly adopt this approach for recruiting executives lo manage the branches."
The polycenlric approach uses natives of the host country to manage operations in their
country and natives of the parent country to manage in the home office. In this example, the
Australian parent company uses natives of India to manage operations at the Indian subsidiary.
Natives of Australia manage the home office.

Indians popular choice for senior roles at Asian companies

ET Bureau| Jul 10, 2018

Nikon and Sony have appointed Indians to lead their local operations, which were earlier
managed by the Japanese. Asian consumer electronics makers are increasingly placing their
trust on Indian executives, especially at a time when several of them are struggling in their
home turf, or finding the going tough in the largest markets, and are expecting India to play a
bigger role when they are expanding to emerging markets.The number of expats in senior roles
in the Indian arms of Sony, Panasonic, Hitachi and Daikin too have come down, while Samsung
too now has Indian executives in their global think tank. At Daikin India, Indian executives have
replaced expats in seven critical functions like deputy plant head, senior vicepresident (tech
support) and general managers for service, HR (factory) and R&D. In Panasonic, expats in mid-
tosenior roles are now 20%, compared with 40% three years ago
Hitachi Air Conditioning India said overseas entities have begun to realise that business is best
understood by locals and have started handing over major roles to them. The overseas entities
send in their representatives from various departments to share best practices being followed
by various entities all over the globe. The process is laid down between local entity and global
teams and then those processes are monitored and administered.Empowering domestic
leaders helps companies to understand the pulse of the market, aids in faster decision making
to facilitate growth, gets the best of local knowledge to promote R&D and deliver customised
products for local customers.
2012, July: Indian Information Technology companies supported nearly 2.8 lakh jobs in America
in the year 2011 by way of foreign direct investment through acquisitions of IT companies. India
invested nearly $ 5 billion in foreign direct investment. Top Indian IT companies like TATA, HCL
technologies India's fourth largest software export, Infosys and Wipro stepped in United States
to set up their subsidiaries and recruited American nationals from colleges and experienced
professionals who had the local knowledge and domain expertise. local employees have the
requisite knowledge and understanding of culture, people and were in a particular region.
3. Geocentric approach
When a company adopts the strategy of recruiting the most suitable persons for the positions
available in it, irrespective of their nationalities, it is called a geocentric approach. Companies
that are truly global in nature adopt this approach since it utilizes a globally integrated business
strategy. Since the HR operations are constrained by several factors like political and ethnical
factors and government laws, it is difficult to adopt this approach. However, large international
companies generally adopt the geocentric strategy with considerable success.
For international recruitment, especially on foreign soil, organizations generally use manpower
agencies or consultants with international connections and repute to source candidates, in
addition to the conventional sources. For an effective utilization of the internal source of
recruitment, global companies need to develop an internal database of employees and an
effective tracking system to identify the most suitable persons for global postings.
The geocentric approach uses Ihe best available managers for a business without regard for
their country of origin. In this example, the UK parent company uses natives of many countries
at company headquarters and at the U.S. subsidiary.

4. Regio centric Approach

The Geocentric Approach is one of the methods of international recruitment where the Multi
National Companies recruit the most suitable employee for the job irrespective of their
Nationality.
The Regio centric approach uses managers from various countries within the geographic
regions of business. Although the managers operate relatively independently in the region, they
are not normally moved to the company headquarters.
The Regio centric approach is adaptable to the company and product strategies. When regional
expertise is needed, natives of the region are hired. If product knowledge is crucial, then
parent-country nationals, who have ready access to corporate sources of information, can be
brought in.
One shortcoming of the Regio centric approach is that managers from the region may not
understand the view of the managers at headquarters. Also, corporate headquarters may not
employ enough managers with international experience.

The regiocentric approach places managers from various countries within geographic regions of
a business. In this example, the U.S. parent company uses natives of the United States at
company headquarters. Natives of European countries are used to manage the Italian
subsidiary.