Why any business can and should be a multinational business

July 16, 2021

While the trend toward remote work was already on the rise before the pandemic, 2020 taught us that not only can businesses operate with "a work anywhere, work in any way" mindset, they should embrace this to gain a competitive edge in winning the best talent.  

By the end of this year, 51% of all knowledge workers worldwide are expected to be either fully or partially remote according to a report by Gartner, Inc, up from just 27% in 2019. In this environment, HR leaders can not only hire talent from other cities but can and should be expanding their recruitment to hire talent from anywhere in the world. They understand this and are planning for a future of hiring across borders. In our survey of HR and finance leaders from 200 companies, 80% of HR and Finance leaders feel that the ability to operate in different countries is vital to their organization's success.  

Area of opportunity: Latin America 

The specific part of the world a company chooses to expand into or explore for talent will obviously depend on each company's needs and objectives. But Latin America provides an excellent example of a region that is brimming with talent and opportunity - if companies can exercise the Global Fluency needed to tap into it effectively.  

Not only is hiring in Latin America generally cost-effective, but its time zones are similar to the U.S., allowing business interactions, meetings, and other contact and collaboration to occur in real-time more often for US-headquartered companies. Broadband access has grown steadily for years across most Latin American countries, expanding companies’ access to new markets, audiences, and labor pools.  

Additionally, a number of Latin American countries have surpassed countries like China in English proficiency, ensuring less of a language divide. There are also fewer cultural differences between several Latin American countries and the U.S. than there might be between the U.S. and countries in Asia, for instance. This helps to facilitate smoother cross-cultural communication and the creation of one cohesive corporate culture.   

Combating complexity with local insight 

These are important issues to consider, and not just in Latin America. Successfully hiring and managing remote workforces around the globe is no easy feat. In our survey of HR, payroll, and finance leaders from 200 companies, 75% of these report that managing a global workforce can feel challenging, citing issues of corporate culture, lack of employee skills, and unreliable or disparate data as the greatest challenges to operating on the multinational stage.  For a company to truly become multinational, learning how to manage outsourced employees is essential for success.

Additionally, local complexities can make entering new national markets challenging, especially when establishing a local headquarters, understanding and creating rules around hiring, and navigating local norms around benefits management.  For all of these reasons, businesses need to acquire the HR skills, capabilities, and technology needed to operate in a global marketplace to compete for top talent. The framework HR professionals need to apply is Global Fluency

Knowing that expanding into a specific country or region could be beneficial is not enough. A globally fluent organization needs to understand how to recruit, employ, and manage workers in that prospective country. They also need ways to document and integrate that knowledge into its systems and give decision-makers access to it. Being able to anticipate and respond to changes on the ground in a given region proactively and positively is key.  

This requires organizations to strengthen three central areas: intellect, or gathering information; acumen, which is the ability to analyze and use that information to make strategic decisions; and agility, or the ability to quickly respond to changes in the organization or the global market.  

Many multinational companies admittedly lack this global fluency; nearly 40% report a lack of information about what expansion entails as their main impediment to investing in global growth.  The primary concern cited by HR and finance leaders about global expansion is a knowledge gap related to the political risk, compliance laws, and employment and tax regulations of countries they are interested in expanding into. As a result, they are unable to capitalize on the available workforce talent or entry into new markets.  

Unlocking local labor laws in Latin America 

Latin America is an example of a region where local complexities make entering that market challenging. For instance, Mexico recently passed legislation amending several core labor laws to close a loophole some multinational companies had used to avoid their financial liabilities and obligations under Mexican employment law. As a result, multiple companies may now be out of compliance with the local law because of new restrictions on employment outsourcing. Companies caught using non-compliant employment outsourcing services in Mexico risk incurring fines, an inability to deduct expenses for tax purposes, and potentially criminal charges of tax evasion. 

While only time will tell how this law will be enforced and what its effect will truly be on companies doing business in Mexico, the impact that government intervention can immediately have on regular business operations can’t be ignored. Anticipating and complying with new laws is an essential aspect of being globally fluent, and central to supporting a viable work-in-any-way approach to workforce management. 

A company’s global growth is unlimited when HR teams have knowledge of social and political norms or rapidly changing legislation around tax and employment law. 

Integrating intelligence and reacting to changes on the ground 

While acquiring country-specific information is essential, if an organization doesn’t know how to analyze and use that information to facilitate strategic decision-making, it can only go so far. Nearly 40% of senior HR and finance leaders feel that a lack of technological capabilities is the primary barrier to successful expansion and international operation

HR leaders must have the acumen to collect meaningful data, standardize it across all necessary languages, currencies, and time zones, and then apply that data to inform decision-making across the organization. More than that, however, globally-focused businesses need agility to adapt to the realities presented by that data. Even the most useful data and the most thoughtful decision-making can only take an organization so far unless that organization is able to forecast market shifts, anticipate changes in the industry, and respond.  

It should be noted that the ability to integrate and leverage local knowledge to expand into the multinational arena is not exclusive to large corporations. Small and medium-sized businesses can actually be better equipped to hire abroad than larger ones, as they are often less bureaucratic and more flexible where it comes to adapting to new situations. And they are particularly well-positioned for multinational operations when they adopt a globally fluent skill set, especially agility, which allows them to synthesize data and act on it quickly. 

When looking across small, mid-tier and enterprise companies, less than 15% of them have in-house or close-proximity knowledge of every local market that they're in. This presents a huge opportunity for small and midsize companies to build differentiation in their business by bringing that knowledge closer to where it needs to be from a proximity standpoint.  

Big or small, not only can any size company be a multinational business, today’s market demands that they should be. The traditional barriers to, or concerns about, working from anywhere have been demonstrated as obsolete. There is no reason companies shouldn’t be taking advantage of talent- and opportunity-rich regions like Latin America through ethical and compliant expansion. Any company can apply a Global Fluency framework to workforce management to successfully scale globally, and any company can leverage a work-in-any-way approach to recruitment and attraction of the best talent, no matter where that talent happens to be located.  
 

Our Global Employment Outsourcing (GEO) service helps to ensure companies remain in compliance with existing laws in every country where we employ workers on their behalf. Compliance is the foundation of our service and the basis for the trust our clients have in us. For companies that sought to hire in Mexico and may not have been aware of statutory employment laws, like profit sharing, or what fair wages were in the local market, we have been here to help them. We’re happy to talk about how we can help you ensure compliance with employment laws in Mexico too. 

  

  

  

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