Creating an HR strategy for emerging markets

Emerging markets are red-hot. In spite of the ongoing global recession, many emerging markets, especially newer ones, are expanding at a rapid pace. And because emerging markets offer pools of low-cost labor and new customers, businesses are looking at them as sources of long-term growth. However, expanding into those markets is not without challenges, particularly in the area of human resources (HR). Organizations looking to expand into emerging markets need an HR strategy that reconciles differences in economic structure, labor laws, and staffing expectations.¹

Not all emerging markets are created equal. For any company, knowing which locale and labor market to tap into is integral to gaining a global competitive edge. With regard to the talent pool, the final decisions depend on availability of talent, size of the potential pool, resources for further education and training, and potential for future growth. Also, developing a local talent team can help HR recruit staff and integrate local policies and procedures with the parent company.

But figuring out those local policies can be tricky. Analyzing labor laws in emerging markets is a critical step. Often, the laws are designed to protect local employees and potentially can strain a company’s budget. For example, in Brazil, if an employee is dismissed without cause, the employer must pay a penalty. Due diligence and communication on the HR team’s part can prepare a company for additional issues and costs arising from labor laws.

Expanding into emerging markets is not without challenges, particularly in the area of human resources.

Emerging markets also pose challenges with respect to staffing and retention. In fact, even when highly skilled individuals are available in an emerging market, there is no guarantee that the private sector will be able to hold on to them. In many emerging markets, local governments are able to lure highly skilled workers away from the private sector by offering them better pay and benefits.

HR steps to expand in emerging markets

Source: PricewaterhouseCoopers, International assignment perspectives, volume 3, 2009

Expanding into an emerging market may position an organization to move forward on the global scene, but without an HR strategy, that move may turn out to be difficult and costly.