Topic: Review of the company requirement and legal responsibilities for global reporting with a focus on strategic and legal responsibilities.

Module 7 Unit 1 Globalisation and Strategy Page 1

Master of Science in Business and Reward Management

Module 7 V 1 01.01.15

In Partnership with

The University of Derby Corporate

Managing International or Global Remuneration Practice –

Unit 1 A focus on Globalisation and Strategy

Module 7 Unit 1 Globalisation and Strategy Page 2

Copyright CIPP

April 2015

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Module 7 Unit 1 Globalisation and Strategy Page 3

Unit 1 Globalisation and Strategy

TABLE OF CONTENTS

LEARNING OUTCOMES 5

INTRODUCTION 6

DEFINITION OF GLOBALIZATION OR INTERNATIONAL ENTITY 9

WHAT IS A BUSINESS ORGANISATION 13

Influence on business structure 14

Type of ownership 16

Operational format 16

Size 17

Management structure 18

Nature of international interaction 21

Strategic intent 23

INTERNATIONAL BUSINESS LEADERSHIP 25

Geoleadership Model - Intercultural competent leader 26

STRATEGY – CHOOSING GLOBAL EXPANSION 27

Strategy - Factors for choosing specific country 30

Business structure - Centralizing through Power 34

GLOBALISATION AND ECONOMY POLITICAL IMPACT 36

Technology and impact on global change 38

PAYROLL IN GLOBAL ORGANISATION 39

International implications on human resource and payroll duty 39

Stakeholders involved in manpower planning 40

Duty of the human resource (HR) team 40

Module 7 Unit 1 Globalisation and Strategy Page 4

HR duty statistics Global payroll – payroll process 41

HR duty resourcing process 42

Considering payroll process needs 42

The evolution of payroll processing in a global Organisation 43

International payments 45

International Organisation for Standardisation (ISO) global standards affecting payroll 45

Setting up new payrolls in non UK countries to assist the organisation in global growth 46

Payroll - Governance requirements for process 49

A model for global payroll compliance. 50

Governance responsibilities 51

Performing pro- active process assurance responsibilities 54

Strategic development of payroll processing 56

How organisational structure impact on payroll duty 56

Quality management 59

SUMMARY 61

Module 7 Unit 1 Globalisation and Strategy Page 5

Learning outcomes

Upon completion of this unit it is expected that you will have gained skills to be able

to:

 Understand the importance and impact of strategic focus when

developing and managing a remuneration system within the context

of a global environment.

On completion of the module learners will be able to:

 Appraise the cultural impacts of developing and implementing global

remuneration systems

 Critically review a strategic approach to integrated reporting and

processes, reflecting on the implications for performance

management and financial control

 Design and create an implementation plan for a remuneration

process for overseas employees, critically evaluating the strategic

and operational opportunities and risks

Module 7 Unit 1 Globalisation and Strategy Page 6

Introduction

“Globalization is on everybody’s lips; a fad word fast turning into a shibboleth, a

magic incantation, a pass key meant to unlock the gates to all present and future

mysteries. For some, globalization is what we are bound to do….” “For everybody

though, globalization is the intractable fate of the world, an irreversible process, it is

also a process which affects us all in the same measure and in the same way. We

are all being globalized and being globalized means much the same to all who

globalized.” (Bauman, 1998, P46)

Globalisation describes a process by which national and regional economies impacts

different societies. Cultures have become integrated through the global network of

trade, communication, immigration and transportation.

In the more recent past, globalisation was often primarily focused on the economic

side of the world, such as trade, foreign direct investment and international capital

flows. More recently, the term has been expanded to include a broader range of

areas and activities such as culture, media, technology, socio-cultural, political and

even biological factors, e.g. climate change.

After the fall of the Berlin Wall, some talked about the rise of a “one world way” of

doing business and living. However, more recent events have suggested that those

thoughts were misplaced as we see the success of a number of varying economic

and national systems.

Global trade has grown enormously since WWII, international trade in manufactured

goods alone has grown an estimated 100 times from $95 billion to $12 trillion in the

50 years since 1955. However, globalisation is much more than just trade.

In the last twenty years the breadth and depth of links between nations and between

regions has grown enormously. Communications costs have declined dramatically

allowing easy daily contact via the web and telephone, enabling the outsourcing of IT

Module 7 Unit 1 Globalisation and Strategy Page 7

and other services, to India for example, and the rise in global work teams.

Other critical links are immigration and transportation, particularly airlines. Global

Commission on International Migration (2005) estimates that there are two hundred

million migrants around the world today, they have largely immigrated from the

emerging to the developed countries, particularly to the U.S., Canada, Australia, the

U.K. and Continental Europe. Though there are tensions at times in Europe and

elsewhere, immigration has changed the face of these regions and also considerably

increased the personal links across borders.

Finally the transportation of people and goods has increased substantially in the last

few decades, with great growth on the number of flights across borders. (Moore,

2010). During the 80s and 90s growth rates in the number of airlines seats offered

of 5% a year were not uncommon, in 2010 there are over 2.3 million flights per

month. With this we see a world much more interlinked than in the past.

The interaction between countries is more than the import of materials or goods.

Production of goods can mean items part constructed that are then moved for

completion between several locations before reaching their final destination. People

move with increased flexibility to aid development, promotion, education and labour.

Services are provided with individuals talking to each other from around the world.

Network communication allows both business and social interaction over thousands

of miles in nanoseconds.

It is true that many think of internationalism and globalization as something fairly

recent, yet historians have evidence that the principle of travelling and exchanging

goods over long distances has existed since pre stone age. Of course much of that

would have been land travel, but there are also indications that sea borne trading

was commonplace as early as before Greek civilization.

Whether such trading should be considered as ‘global’ is open for discussion. There

were times when it was less evident, for example when there were periods of high

aggression or virulent plague, when travel for trade became less effective and even

discourage. Certainly by the 17 th

century, commercial links were well established.

Module 7 Unit 1 Globalisation and Strategy Page 8

Braudel (1992) suggests, early international commerce was based on activity usually

funded by high interest loans from wealthy sponsors and involved paying back at

least double the value of the sponsorship on return.

Anyone failing to provide the extensive repayment (unless of course they had been

shipwrecked) would find themselves being placed into slavery until the debt had

been cleared. One cannot imagine that type of security being necessary for loans

now, although some may claim they feel they are financial slaves to interest rates.

Perhaps it was the perceived success of private investment that encouraged

governments at that time to make similar arrangements. Most governments were

under the control of a number of affluent leading individuals and if they were

personally supporting a project they could easily make a strategic decision, on behalf

of a country’s resources, to loan for a personal trading expedition.

Commonly these type of initial global commercial activities were closely linked with

the act of exploration, which in turn led to colonization of the new territories.

Theorists have suggested that globalization has been closely linked to technical and

travel development. It would indicate that increased international trading has

specifically been advanced at key phases of development, for example improved

transportation in shipping, the development of the engine and electricity, and latterly

the computer and internet.

Freidman connected this to the view of the ‘size’ of the world. (Pink 2005)

Fig based on Friedman and Wired magazine interview. Pink (2005),

Global V1

• End 14th to 15th century

• Medium sized world

Global V2

• 17th to 19th century

• Small sized world

Global V3

• 20th century onward

• Tiny world and shrinking

Module 7 Unit 1 Globalisation and Strategy Page 9

Despite all the evidence of global activity over history, for many, globalization still

seems to be a recent phenomenon.

Globalisation is seen as the worldwide spread of modern technology for production

and communication, to cross all borders, in order for movement of trade, capital,

production and communication.

The term globalisation has been linked to the idea of the opening up of individual

countries, with both local and national perspective becoming much more a focus on

worldwide views rather than just national.

Economists have argued over theories of merger, globalisation and interaction.

However, the reality is that, while there are indications that some countries welcome

integration, there are others resisting worldwide movement by implementing levels of

restrictions. This includes border restrictions, import tariffs, economic and legal

restraints for financial movement or labour. A few countries, for example North

Korea, seek to cut off their economies from other parts of the world.

It is also true that globalisation does not signal that individual countries’ economies

are completely converging. In fact they really are evidence of the on-going

difference. It is because they are not the same that encourages some expansion.

Gray, (2002) suggests that Globalisation is evidence of the reverse of homogeneity.

He says that global markets, where capital and production move freely between

frontiers, ‘work precisely because of the differences between localities, nations and

regions. Had wages, skills, infrastructures and political risks been the same

throughout the world the growth of world-markets wound not have occurred.” (Gray,

2002, p14)

Any definition of the term globalisation is going to look at different factors – all of

which can and do influence business effectiveness and development

Definition of globalization or international entity

You have already considered issues concerning globalization and international

organisations within Module 2 unit 4 and Module 4 unit 2.

Module 7 Unit 1 Globalisation and Strategy Page 10

Whilst studying this module there will be many occasions when you will be asked to

reflect on that material. During this paper our focus is specifically the impact of

global activity.

Activity 1

Review your own interpretation of ‘Global’ or ‘International’ business from your

learning activities in module 2 and 4. Reflect on the research you undertook in

Module 4 on the terms ‘Global’ and ‘International’ business. What definition would

you use to describe a Global or International organisation?

Module 7 Unit 1 Globalisation and Strategy Page 11

It is hoped you will have remembered Hines (2007) definition of International,

Multinational, Global and Trans-national companies and the module concerning the

ensuing focus of reduction and responsiveness.

Critical to the differences between the types of overseas organisations is the level of

investment and the control of value added activities as discussed by Dunning &

Lundan (2008). Consideration should be given as to why there has been so much

rapid expansion of global business, particularly in the latter part of the 20 th

century.

There has been much debate about whether it is technology that has broken through

barriers or if it has been a change in political stance that has encouraged movement.

The discussion has led to theories that imply organisations are impelled to move

globally – either because of being pushed or pulled.

Module 7 Unit 1 Globalisation and Strategy Page 12

Hopefully you will have recalled the following arguments.

Wallace (1997) and Inkeles (1999) support the theory that there is a natural trend

towards globalization because nations merge and build closer working links. The

cohesive bonding between countries goes on to lead organisations to feel they are

being pulled into international growth as focus for both national politics and legal

relations is to merge.

This compares to De Wit & Meyer (1998) whose theory places the emphasis on

‘Global Convergence’ factors. They suggest that the expansion in technical

development results in lower resistance to expansion.

The less restrictions (for travel, communication and commercial exchange) that

exists then the more international growth will occur as it pushes out to new markets.

Activity 2

Review what you would understand as being push or pull pressure on

organisations for global expansion. Use the space below to capture

your thoughts.

Module 7 Unit 1 Globalisation and Strategy Page 13

We are all involved in global trading – probably more that we really anticipate. If not

looking at goods or services there is an impact because of increased flexibility of

labour. There has always been a level of migration but there is a greater acceptance,

almost expectation, of labour mobility. Immigration and temporary labour transfer has

an impact on manpower availability.

There is some argument that technology has led to a change in political strategic

focus through the way communication has broken through barriers. There are

difficulties now in isolating countries because access is now available through

technology in a way that just did not occur 50 years ago. News and information is

available in a way that challenges protective wish. Bauman (2000) suggests there

has been a movement from what he describes as "heavy modernity" to "light

modernity".

The symbolism of heavy modernity as a focus on hardware and that of being

preoccupied with size. Instead the interest is now focused on light modernity, which

is all about software to represent flow and movement; it is fleet of foot. "It all

changed", he argues "with the advent of software capitalism and light modernity. In

the past it was the acre you ruled over – now it is places that you can sell to.”

(Bauman, 2000 p130)

This suggests a level of movement from the need to own and be present to the

ability of being there by remote link. This has only been possible by the

development of computer and Internet communication. It is not just tangible but now

intangible items that can be shared.

What is a business organisation

Stoner & Freeman definition of business describes is “the process of planning,

organisation, leading and controlling the work of the organisational member, and use

of all available organisational resources to achieve stated goals.” (Stoner &

Freeman, 1992, p26)

It is deciding how to achieve those goals, as part of preparing and planning the

associated activities, effectively that creates the need to recognise attitude and

proposed approach to both work and behaviour. It means identifying the strategy for

working in a specific structure.

Module 7 Unit 1 Globalisation and Strategy Page 14

Influence on business structure

The shape and structure vary and the choice of its design is dependent on a number

of factors.

Mintzberg, Quinn, & Ghosbal (1998) suggest that business structure is built based

on two basic approaches. These are either contingency or configuration focus. The

following table compares the difference in focus:

Contingency Configuration

The nature of business Job specialisation – divide by tasks

The environment of the business Behaviour formulisation – standardising

work process

The global strategy of the business Training – instructional programs

The age and history of the organisation Indoctrination – to inculate organisational

norms in workers

The size of business and limitation of

span of control

Unit grouping – business function,

market served

The level of technology in the

organisation

Unit size

The geographical span of activities Planning and control systems

The culture of the organisation Liaison and integrating devices –

logically leading to matrix structure

Leadership and leadership style Centralisation or decentralisation

The following factors have been discussed before in Module 1 and 2.

Module 7 Unit 1 Globalisation and Strategy Page 15

Type of business structure

Type of ownership

Operational format

Size

Management structure

Nature of international

interaction

Strategic intent

Activity 3

Reflect on your previous study in Modules 2 and 4 and consider

 Different forms of ownership

 Operational format

 Size classification

Module 7 Unit 1 Globalisation and Strategy Page 16

Type of ownership

After reflection of past study it is hoped you will recognise the following key

categories of type of business ownership:

 Sole Trader

 Partnership

 Limited Liability Partnership

 Private limited company (sometimes called a corporation)

 Public limited company (also sometimes called a corporation)

 State owned organisation

Depending on the nature of ownership, there will be slightly different objectives for

meeting financial and legal obligations. This will clearly influence the organisations

interest.

Operational format

It is hoped you will have identified the following four types of recognised formats.

Module 7 Unit 1 Globalisation and Strategy Page 17

You may recall in Module 4 it was decided that the area of interest for our

consideration would be those businesses that fell within licensing and managed

contract organisation as these carry the need for awareness of company personnel –

the employees.

Size

Size is recognised as not being a precursor for trying to work internationally. In fact,

indications are that the development of new technology has allowed small business

to proactively establish links overseas, which in the past would not normally have

been feasible through lack of supporting resources

Even classifying business by size is difficult as there are many types of criteria that

could be used. One only has to consider the different definitions within UK

legislation and political groups for defining small, medium and large organisation to

realise how confusing it can be.

National standards, religious ideals and commercial approach can all have an

influence on size classification. As supported by Buckly (1999), this means

Operational format

Investment

Licensing Franchising

Managed

Module 7 Unit 1 Globalisation and Strategy Page 18

assessment may be by different criteria i.e. number of employees, turnover or even

market share.

Of course, size for business will impact on how it designs its structure and focus on

its strategic plan.

It can influence power for negotiation and level of influence when dealing with a third

party – things like bank support and perceived attractiveness for economic activity.

Clearly the larger the organisation the greater potential for need for payroll support –

with related legal and service requirement. However size does not just mean volume

in numbers in one locality. A business may be seen as very large because of the

extent they trade or employ personnel in one locality or because of being multi-sited

but having small volumes in each place.

Management structure

Chandler describes structure as ‘the design of organisation through which the

enterprise is administered’. (Chandler, 1990, p14)

The way the business is formulated for management is partly driven by size.

Research has identified three typical structures that are used where the organisation

has enough participants to split. These are defined as organisational, divisional and

matrix.

Stonehouse, Campbell, Hamill, & Purdie (2005) suggest that international

organisations characteristically select one of the following three structures:

 Export Department – where responsibility for foreign sales and

activity is managed and reports to the group

 Mother-daughter structure – where parent company acts as holding

company for autonomous foreign subsidiaries to report back to group

 International development structure – where foreign operations are

transferred to a separate international division and report into a head

section.

Module 7 Unit 1 Globalisation and Strategy Page 19

They suggest this compares to a global organisation where the responsibilities for

foreign operations are managed through one of four structures:

Organisational (functional) structure – based on function activity, which will include

finance, human resource, product design, marketing, research and development,

product.

Product structure - splitting an organisation into separate profit centre sub entities

possibly based on products. The divisions may be separate companies where the

major shareholder would be the parent family.

Board

Finance

Accounts payable

Accounts recievable

Marketing

Sales Customer records

HR

Payroll

Production

Market reserach

Distribution

Corporate board

Product A

Product B

Product C

Administration

Module 7 Unit 1 Globalisation and Strategy Page 20

Geographic structure – splitting an organisation into separate profit centre sub

entities possibly based on products. The divisions may be separate companies

where the major shareholder would be the parent family.

Matrix - based on integrated version of both functional and divisional elements.

Corporate board

Other Europe

Australia

UK

USA

Corporate body

USA

Franchise

• Admin overheads • Mens • Womens • Childrens

• Admin • Mens • Womens • Childrens

• Admin • Sales • Warehouse

Module 7 Unit 1 Globalisation and Strategy Page 21

What is important is that whichever style is selected there is a need to allow it to

include a level of flexibility for regional adjustment. This is often because of culture or

taxation regulations creating a need for a different approach than the parent

organisation whilst not putting at risk proper management control.

Nature of international interaction

Interaction is a two way process; the presence of global organisations are suggested

to have an influence on the culture and economics of countries they are functioning

in. It is also true that changes creating political or economic unrest in one country

can now have significant impact on companies with investment concerned. There

are worldwide repercussions from any country going through a political or financial

crisis.

A business can have different levels of activity within international areas and its

nature will be influenced by that of the specific country. Such factors will impact on

the amount of direct involvement between an organisation and the host country.

The organisations decisions and objectives will vary in focus depending on its scope

of involvement with the environment it is working in. The expectation is that attention

would be primarily internal but that external interest will adjust exponentially.

There are a number of critical influences that impact on the nature and level of

business interaction when working in a country. These vary by locality and can be

influenced by third party or external situations beyond the control of the organisation.

Module 7 Unit 1 Globalisation and Strategy Page 22

Bennett (1999) suggests that involvement can be influenced by both the

organisations requirement and cultural interest as well as the localities statutory and

cultural expectation.

The larger the organisation the more likely it is to interact and have more

involvement with the location. The requirement to invest economically is likely to

create a desire for greater level of interaction. In addition, culturally in some

countries there is an expectation for business to be actively involved in local

activities whilst in other situations this would not be expected or appreciated.

Of course the cultural attitude of the organisation itself will help drive attitude to local

involvement. There are some global entities whose cultural origins reflect a tendency

to want to support local activities, such as education. There are examples of a

Japanese business situated in South Africa who have been very proactive in

donating to education support for local schools. (Perold, 2011)

Statutory requirement may force involvement, for example there may be an

expectation to proactively support local environmental actions – ‘going green’. A

specific example is the requirement to charge for provision of plastic carrier bags in

shops where the revenue achieved must then be passed to country environmental

Interaction levels

Statutory requirement

Size of presence

Economic investment

Cultural expectation

Company cultural

expectation

Module 7 Unit 1 Globalisation and Strategy Page 23

programs – in Wales and Ireland it is a statutory requirement, in England it is an

expectation and in China there is a total ban of using plastic.

The more statutory regulations that exist, the more administration interaction there

will need to be to ensure compliance if the entity cares to be compliant.

By recalling the theory offered by Ebberts & Griffin (2013) as discussed in Module 2,

the extent of involvement is held to be either minimal or as full as possible. The

organisation is either focused internally or reaching out at differing degrees,

potentially as high as wanting involvement in international situations such as

involvement with international cross country forums.

Strategic intent

A business may have different strategic focus but there is ultimately a level of intent.

Either the concern of effectiveness will be looking towards

 the achievement of return for its investor (whether in form of

shareholder or support as in public entity) or

 the reflection of market status – in the sense of showing improved or

maintained service or product supply or control of potential market

share in the related interest area.

Internal organisation

Local community

Regional National World/global

Module 7 Unit 1 Globalisation and Strategy Page 24

Payroll, as a function, has to find its place within the organisation’s structure and to

understand what the organisation’s strategic objectives are in order to meet their

goals.

Marketing orientation

Invester reward

Module 7 Unit 1 Globalisation and Strategy Page 25

International business leadership

Sheridan (2005) suggests that competent leaders are in short supply because of

demographic change and as job requirements and demands have expanded. The

market is bigger and so leaders can be recruited for a wider field.

There is a further concern that international leaders need to have additional skills. It

is recognised that cultural and technical issues have the impact of:

 Complicating negotiation skills

 Causing the need to motivate work across international boundaries

 Creating communication challenges

These are adding pressures to the role and the person taking on such duties need

broader negotiation capabilities and wider cultural capabilities.

But why would international or global leadership be any more difficult than that of a

country specific situation? The main argument is that leadership is fundamentally

that of interaction and relationship with people. If those people are all based in one

cultural situation it has just the one focus. Where there is multi-cultural impact there

is going to be a need for diverse relationships with different people involved in each

cultural experience.

Cultural intelligence is critical as the impact of differences in culture, language, and

working environment has serious influence on the relationship between employee,

client and management. Cultural intelligence effectively means being able to move

out of the comfort of home cultural awareness and to assimilate that of the host-

working environment, (Earley & Ang, 2003)

It has also been suggested that the nature of management will need to be reviewed

– that instead of being focused on handling supervisors and arranging training, the

Module 7 Unit 1 Globalisation and Strategy Page 26

new definitions will be for the concept of design and learning guide. That is to focus

on encouraging self-development, flexibility and adaptability.

In a survey of 500 firms across Europe, America and Asia it showed that 85% of

employees did not feel they had access to adequate intercultural leaders and 67%

felt their existing leaders needed to enhance their skills to meet their roles,

(Gregersen, Morrison & Black, 1998).

Sheridan (2005) has proposed a model of functional skill requirement for the leader

holding a global or international cross boundary duty. Called the ‘Geoleadership

Model’, it promotes a number of competency skills which reflect the areas of ability

an effective leader needs to include. Many are based on aspects that a leader will

need to provide as a general business leader but stretched and enhanced due to the

need for influence on cultural control and appreciation.

Geoleadership Model - Intercultural competent leader

Change Flexibility in adapting to dynamic cultural

environments

Capability Intercultural expertise at all organisational levels

Care Balanced interest and value to profit and stakeholders

Communication Engaged connection and interaction with diverse

cultures

Consciousness Self-awareness of own culture background and bias

Context Situational perspective with no judgment

Contrasts Cultural difference in leading and motivating followers

Module 7 Unit 1 Globalisation and Strategy Page 27

Strategy – choosing global expansion

Mintzberg (2000) suggests that strategy is a combination of:

 ‘Deliberate strategy’ – where the plan is created with an intention to

get to a certain objective based on an ambition or objective, and

 ‘Emergent strategy’ – where a plan is in reaction to events not

forecasted.

An organisation should move into global involvement after careful assessment of

benefits.

Drivers for choosing to go global

Activity 4

Review module 2 and 4 to reflect on what type of drivers could motivate a business into global involvement.

Module 7 Unit 1 Globalisation and Strategy Page 28

There are a recognised number of potential drivers that can create the interest.

Your reflection should have identified the following drivers, which would basically mean:

 Resources, to source or acquire at the most economical rate,

 leverage for achieving increased market share where there is

potential or new market,

 compete against rivals – to defend market influence,

 the potential for new products or services for example because of

environmental opportunity.

These are shown in the following diagram.

Globalisation allows business access too many more markets than the home market

they originally invested in. Reaching new customers through expansion into new

Strategic objective

Competative market

New /improved products or

services

Reduced or protected operational costs

Increased market share

Module 7 Unit 1 Globalisation and Strategy Page 29

territories or maintaining current customers and going on the journey with them into

new countries is exciting and requires thorough planning.

Challenging questions need to be asked to ascertain if a country is strategic to your

growth and can offer the business real opportunity or is it a flight of fancy that should

be explored by “dipping a toe” to assess reality.

In experience it is a combination of strategic research to assess factors such as

demographics, geopolitical stability, freedom of markets, local skill base and

educational institutions as well as whether the market is growing, shrinking, tax

advantages and the ability of your business to make an impact within the country

identified that will help to build the appetite for growth.

Having practical experience on the ground – consultants available to review and

assess needs, wants and opportunities which often leads to deploying a sales

community into the targeted area first.

It has been established that a common development pattern for an organisation is to

start by exporting to another country, then finding a business case for establish a

sales office in the locality. It is a short development step to then seek local

manufacturing and resource access in the locality leading to a fully established

business office and then a number of network subsidiaries.

However this is not the only route for expansion and extension into one or more

countries.

From one perspective the driver for choice of country can be linked to the

assessment for industry – it is about business need as linked with primary,

secondary, tertiary, or quaternary.

Export Sales office Manufacture

local Network of subsidaries

Module 7 Unit 1 Globalisation and Strategy Page 30

Strategy - Factors for choosing specific country

There are a number of additional factors that can contribute towards the selection of

which country a business will decide to expand into. This is particularly relevant

where the commercial aspect of goods and supply are very similar between one

locality and another. The need to make such a choice may be driven by a

combination of any of the following for selective focus drivers.

Activity 5

Reflect on the meaning of industrial motivated focus as under primary, secondary, tertiary or quaternary drivers.

.

Module 7 Unit 1 Globalisation and Strategy Page 31

All the factors above will be influenced by both where and when a company will

expand. They also impact on the number and type of employees the organisation

will find themselves responsible for and can influence the nature of payroll and HR

support that will be required.

Your previous examination and consideration of module 2 and 4 will have discussed

the key issues in these areas.

Focus

Transportion

Communication

Workers skills

Pay rates

Political stability

Statutory complexity

Module 7 Unit 1 Globalisation and Strategy Page 32

Transportation: The speed we can take goods from one place to another may have

improved but there is a concern that increase costs may eventually outweigh the

benefit. For example what will happen as fossil fuels become more expensive and

airfreight become prohibitive – will there be a point when we say the transfer of

goods is not effective and local production is good – will we hear ‘buy local’?

Communication: There is a lot of theory and information available about this area but

there are clear issues of concern. Firstly consider the need for clarity – that of

making sure the information being conveyed is clear and understood. One challenge

is the assumption that the language we think we have in common is actually not

necessarily the same and understood. Pure English is substantially different to the

English used in daily life within the country. Add on top the additional dimension of

body language and meaning of hand gestures, it is obvious that multi-cultural mix will

complicate communication. The situation is exasperated when there are two

Activity 6

Reflect on these areas as discussed within module 2 and 4 and make

notes of your observations about each factor. Consider how these

impact on areas of your own organisiation where it has global links.

.

Module 7 Unit 1 Globalisation and Strategy Page 33

languages involved. Care of over translation adds a burden to cross border

communication.

English is basically a language of borrowed words and meanings. There are words

that have been taken from other languages and absorbed into our daily use and we

have taken meanings to change the context from original intent. We assume that

our understandings are known universally.

Workers skills: By making savings through earnings level can sometimes lead to

suffering skill shortage. It could then be necessary to either accept the cost for

training as an investment or cause a need to import skills. An example is India where

global organisations invested heavily in technical training for service, language and

computer skills in anticipation of heavy transfer for work in those areas.

Pay rates: Many organisations moved production overseas from their base when

technology and communication development allowed goods to be transferred in a

cost effective manner. However, it brought immediate issues with home countries

economic base as concern rose over employment impact. Whilst pay levels may

lead to the decision to expand the organisation overseas, it directs them to identify a

criteria of pay structure within the organization. The need to both control and

establish ethical treatment by showing they are not looking to exploit some countries

for labour and to agree a suitable policy for handling international transfers. The

decision about what to pay individuals can have an impact on the host countries

labour market and may even have ethical implications where there is an expectation

to behave and pay individuals in a certain way.

Political stability: Any organisation entering a locality will look for stability in the

political situation – if for nothing else, to try and ensure there is some economic

structure. Where it is not stable the organisation has to assess the level of its

commercial risk and for physical danger for their employees. Is it reasonable to ask a

person to travel to live in an unstable or even dangerous situation? What about their

security and duty of care? On a commercial basis, is there a danger of expense for

investment where the rules are going to change so that costs then become

prohibitive? These are questions, which need to be considered before movement,

not afterwards.

Module 7 Unit 1 Globalisation and Strategy Page 34

Statutory complexity: This area has a direct impact for both commercial activity as

well as payroll and staffing treatment.

It can impact on what type of registration the company must make for establishing

the right of presence. There may be rules about whether it is possible to hire

employees directly or a requirement to use an agency to get labour. This can

influence cost for the organisation.

Business structure - Centralizing through Power

The placement of head of departments for HR and finance, and devolvement of

empowerment to local office or head office will impact on the role payroll must utilise

to meet organisational structure and hierarchical procedure for decisions.

Governance style is the intended approach toward the way an organisation should

be managed, with deliberate focus on policies, its working processes and who

should be empowered to make the business decisions.

The more decentralised an organisation is, the more accountability will be allowed in

localised areas. The head office normally retains accountability for decisions when

processes are focused on a centralised structure.

Structure of the business can fall into different working behaviours and decision-

making authorities. These polarise between hierarchical to consultative working

structures and is usually reflected by where the decision power is placed within the

organisation.

A hierarchical structure is normally where people are appointed to roles that are in

layers of increasing power, in a vertical fashion. The higher in status and closer to

the board of the business then the more influential one is deemed to be. Normally a

hierarchical structure is associated with being bureaucratic and where power is held

close to senior management control.

Moving to a more consultative approach involves the empowerment of staff and

reducing the layers of supervision, so that teams work beside each other rather than

in layers of management.

Module 7 Unit 1 Globalisation and Strategy Page 35

Jackson & Shuler (2001) suggest this involves looking at the business as a network

organisation with different ways for lines of communication.

It tends towards using project teams to control change and has management of

areas in divisions rather than hierarchal and authoritative procedures. Such a

structure can help speed the decision making process.

They also suggest that network organisations are more likely to develop links and

partnerships with other organisations. Such relationships are said to be reliant on

‘social capital’, which intentionally includes a level of trust rather than purely formal

authority structures.

The more centralised the power focus the more likely the payroll process will require

focus control to be held in the centre of the business rather than separated out.

Bartlett & Ghoshal (1998) have suggested there are four models or types of

transnational conglomerate. As part of the definition there is an association of level

of decision centralisation. This includes:

 The multinational organisational model

 The international organisational model

 The classic global organisational model

 Complex global organisational model

Module 7 Unit 1 Globalisation and Strategy Page 36

Globalisation and economy political impact

We hope you have remembered the observation that a relationship issue is one of

balance and how power is recognised. An organisation may be willing to invest in

order to achieve beneficial returns and on the other side individual countries may be

inclined to encourage such investment. However they will at same time find it

culturally and politically necessary to monitor and control the working relationship.

Countries and regions may want to encourage effective income and improved

revenue, but they do not want to release control or suffer unacceptable influence on

their culture or economic dynamics. As you may now realise it is a matter of

monitoring and control of such a working relationship and reaction to that behaviour

as to where control on power may be focused.

You may recall in module 2, acculturation was described as appreciating the

difference and implication of possible behaviour due to cultural influence – that of

being the state where the home country is able to recognise and adapt their

behaviour to maximise an effective relationship with a host country.

Having accepted the ability for any business to adapt to change is critical, but it must

also be understood that international change will be made more complex by the

need to adjust to foreign cultures, including new social environments.

Full control from Parent company

Classic Global organisation

Integrated control -localised and centralised

Compex global organisation

Some control from centre

International organisation

High level of decentralisation

Multinational

Module 7 Unit 1 Globalisation and Strategy Page 37

Academic examination has identified four strategies that can assist in effective

movement towards acculturation.

These are:

 Assimilation

 Separation

 Integration

 Marginalisation

These approaches stylise the attitude and focus on working process in order to allow

the global entity to work.

Assimilation finds the organisation not trying to keep each global location’s culture

separate, but instead accept one as the dominant group that sets the behaviours and

working structure.

Separation is the direct opposite to assimilation in that each location keeps its

cultural identity, minimising control and contact from the home country.

Integration is where a country or entity is able to combine the influence and nature

of an external cultural style without losing the focus of their own culture. This is also

known as Biculturalism (effectively describing the situation of working with two

influencing styles working in co-existence).

The outcome from effective integration of multiple cultural influence can be the

development of a new cultural style arising from the harmonisation of two or more

cultures. Adoption of such working influence would be described as transmutation.

Marginalisation is where the company loses contact with their original culture and

nature but avoids adopting the dominant culture; so in fact becomes something

completely outside the host situation.

Whichever path the organisation follows, the actual process of change is found to

need specific stages:

Module 7 Unit 1 Globalisation and Strategy Page 38

 Behavioural shifts – changing behaviour

 Culture shedding – eliminating tradition

 Culture shock – sudden exposure to an unfamiliar culture

 Acculturative stress – stress related to adapting to different cultural

expectations

Berry says “Acculturation strategies have been shown to have substantial

relationships with positive adaptation: integration is usually the most successful;

marginalization is the least; and assimilation and separation strategies are

intermediate.” (Berry, 1997, p41)

Technology and impact on global change

Dicken says “Technology is without doubt, one of the most important contributory factors understanding the internationalization and globalisation of economic activity.” (Dicken, 1998, p3).

Ruggerio argues, “Telecommunication is creating a global audience. Transport is

creating a global village”. (Ruggerio, 1996, p27).

Earley & Ang (2003) suggest that the selling and exportation of goods are possible

without having a human presence in the country in some situation.

Global technology has allowed marketing and promotion to be internationally spread

– television and networking mediums mean extensive markets can be made aware

of what is available outside of the immediate locality. The question is, does global

development occur because organisations are now able and aware of how to

expand? Alternatively, is it that the market is demanding to be supplied because the

client is now aware what is potentially available in other localities and demand to get

the same opportunities?

Module 7 Unit 1 Globalisation and Strategy Page 39

The influence of technologies on products has been in a number of ways – impacting

on potential new features, new functions, improved reliability and lowering of costs

because of enhanced technical capability.

Yet the term technology is more than production. Stonehouse, Campbell, Hamill &

Purdie suggest that “the many ways the word is used is testimony to the plethora of

ways in which it can impact on business strategy”. (Stonehouse et al, 2005, p120)

Just as technology can be the influence in manufacturing and transportation of

tangible production of goods, so can it impact on communication, the interface and

exchange of information as well as the presentation and promotion of services and

interaction of an organisation.

The use of enhanced technology is however restricted by the extent of financial

investment in order to maximise use as well as the limitation of the environment and

availability of skills in locations where the organisation is trying to work. The other

challenge all organisations face – competitors and clients – is the level of ongoing

enhancement. As soon as purchase and integration occurs there appears a new

version, enhancement or change making today’s latest version only hours from being

yesterday’s old style of working.

Payroll in global organisation

There are many influencing factors impacting on the payroll process within a global

situation.

International implications on human resource and payroll duty

The workforce required in a transnational organisation will need careful review

depending on the tasks involved. The areas of HR and Payroll responsibility are not

necessarily subject to change but the scope may have added complexity due to

cultural and geographical implications.

Module 7 Unit 1 Globalisation and Strategy Page 40

Stakeholders involved in manpower planning

It is also important to appreciate that there are a number of departments and

stakeholders in an organisation that will contribute towards the effectiveness of cross

border interaction:

 Legal (internal or external depending on organisation size)

 Human Resources

 Employees – (labour relations e.g. trade union)

 Finance /treasury/accounts payable

 Technology department

 Business senior management

 Warehouse/production/design

 Marketing/sales

Duty of the human resource (HR) team

The three focus responsibilities of a human resource team (with or without global

coverage) is identified as being the following:

 The need to plan workforce – numbers and location

 To organise their duties and treatment of conditions – including

ensuring payment and compliance to contractual promises

 The monitoring of employees treatment and organisations strategic

and actual processes to ensure compliance and maximum

achievement of best practise.

Module 7 Unit 1 Globalisation and Strategy Page 41

HR duty statistics Global payroll – payroll process

The International Labour Organisation (2004) indicated that a conservative estimate

shows 70% of global business ventures worldwide fail due to the mismanagement of

intercultural differences. This impacts on the payroll department as much as any

other part of the business management practices.

One of the problems, however, is that senior managers and possibly even payroll

managers, may not have a global mind-set. There may be a view that there is a

great deal of transferability of parent country working processes and an assumption

that existing practices can be easily rolled out in foreign environments.

Whether this is through ethnocentrism, inadequate information or a lack of

international awareness it can create a challenge for achieving the appreciation and

resources necessary to implement an effective payment process.

It is recommended that you should review Module 2 and 4 for discussions

concerning HR duties. It can be suggested that HR has different focus points

Planning Organising Monitoring

Module 7 Unit 1 Globalisation and Strategy Page 42

concerning the management and control of the organisations human resources, i.e.

the employees.

The HR function would be a contributor to the development of company policy

concerning recruitment approaches. This then leads to the practical aspects of

selection activity – that of recruitment and the induction into employment.

Once this has been established it is necessary to create ongoing maintenance of the

working relationship. These functions may remain a direct responsibility of the HR

department. However, in some organisations the role is placed under the

management control of other departments or even outsourced to third parties for

support. Hence in some businesses the payroll is placed as part of the Finance

department or outsourced to a third party, just as training may be a separate

business section and assessment to fall under line manager control.

HR duty resourcing process

Considering payroll process needs

The payroll objectives are going to need to work towards the organisations corporate

objectives. Regardless of the type of business it is likely strategic aims will include a

mixture of the following factors:

Policy development

Recruitment

Induction

Maintenance

Payment ?

Assessment ?

Training ?

Departure ?

Module 7 Unit 1 Globalisation and Strategy Page 43

 Reduced processing and operational costs

 Return on investment

 Increased quality and effectiveness

 Customer satisfaction

 Increased reliability, maintainability and market appreciation

 Management and employee satisfaction

 Improved accuracy, statutory compliance and timeliness of activity

 Reduced exposure to risk

The ability to be able to meet obligations and strategic goals will not only satisfy the

organisation’s needs but, by showing an effective approach will encourage further

involvement and investment. It really encourages working relationships where there

is a positive expectation for the parties concerned to be effective and flexible.

Key to the identification of the method for working is a clear assessment of planning

requirements.

Planning is a continual activity reviewing as needs and priorities adjust. Clearly the

introduction of increased global interest creates new issues and will adjust priorities.

Changes in legislation, services and production issues will create new payment

requirements. Any global process introduced will need to include the capability for

flexible adjustment as new situations occur.

The evolution of payroll processing in a global Organisation

Many global organisations have an internal payroll model that has simply evolved

over time without any co-ordinated design or strategy. This is because until recently

processing payrolls was not seen as a something that could be done on a global

basis, primarily due to the barriers in terms of technology, language and a general

understanding of what needs to be done.

Module 7 Unit 1 Globalisation and Strategy Page 44

As organisations have expanded their global foot print, the payroll aspects have

usually been left ‘as is’ on an existing country by country basis to mitigate any risk of

employees not being paid. This has resulted in a mixture of local in-house payroll

processing combined, and in some cases, with payrolls being outsourced with a

multitude of service providers:

 Ineffective internal reporting

 Multiple payroll vendors to manage

 Governance issues

 Lack of standardisation

 Increased costs

 Tax and other financial implications

 Multiple payments for both employees and disbursements from

multiple bank accounts

In some instances, and particularly where the numbers of local hires in a country are

small, the local office would have direct contact with the local in-country payroll

service provider and would provide the payroll instructions and receive the payment,

which is clearly a risk from a financial control aspect.

As a result of little or no strategic direction regarding payroll, global organisations

have found themselves having to process a large number of different payments from

numerous local bank accounts for both the payment of net salaries and the payment

of Taxes and Social Security to the relevant authorities. This is neither cost effective

or the best use of people’s time and in cases where the local office makes the actual

payment again open to fraud.

However, with the growth of the Internet and its enhanced security, the introduction

of web translation services and cloud computing have now altered attitudes. Payroll

is seen as a business support service that can be managed from a global

perspective.

Module 7 Unit 1 Globalisation and Strategy Page 45

It can be centralised in terms of internal resource if required, consolidated in terms of

core systems across the globe and broadly standardised in terms of the key HR end-

to-end processes, in order to deliver efficiencies in terms of bottom line costs to the

organisation.

International payments

Just like payroll processing/service design, the processes by which all UK and non

UK based employees are paid may well have also been evolved on a country by

country basis, again without modification where the “if it’s not broken don’t fix it”

approach is applied. As with the payroll, in many instances when a new legal entity

is created, when a new market is entered into, so a new local bank account has also

been created. It should be noted that in some countries the payment needs to be

paid from a local bank account in the local currency – they could not be made from a

bank outside of the country.

International Organisation for Standardisation (ISO) global standards affecting

payroll

Capturing data on a global basis for payroll processing and then reporting on it often

requires an acknowledgement and adherence to some global standards and

practices. Care is needed to understand these global standards, which might be

influenced by different international bodies. (Abo ISO)

Currency codes

When reporting cash values different currencies need to be identified by using the

relevant ISO 4217 currency code. Currency codes are composed of a country's two-

character Internet country code plus a third character denoting the currency unit.

Here are some examples:

Country Currency Currency code

Module 7 Unit 1 Globalisation and Strategy Page 46

United Arab Emirates Dirham AED

India Rupee INR

United States Dollar USD

Hong Kong Dollar HKD

South Africa Rand ZAR

Country codes

When reporting data by country you may wish to identify country specific data by

using the relevant ISO 3166 country code.

Here are some examples:

Country Country code

United Arab Emirates AE

India IN

United States US

Hong Kong HK

South Africa ZA

Setting up new payrolls in non UK countries to assist the organisation in global

growth

It is important that the global payroll manager is involved at the earliest stage in any

move the organisation may be considering into new territories/markets so that

appropriate arrangements can be made. Quite often these activities are classed as

confidential and sensitive commercial information so if the company you are working

for is listed on the stock exchange, the global payroll manager will need to be added

Module 7 Unit 1 Globalisation and Strategy Page 47

to the “Insider List” as once the news is public it may influence the company’s share

price.

However, quite often the first employee movement into a new territory/market may

be a member of the existing sales team as an overseas secondment/assignment for

a limited period of time. This may then extend to employing local hires and it is at

this point that a new payroll will need to be set up.

It is not always possible to set up new legal entities from day one in every new

territory entered.

Countries such as China have very strict restrictions and an organisation entering

the Chinese market will normally have to initially use a global contingent worker

service to establish a base for trade having employees. It is recognised having to

work through a workers service will place restrictions on the business – it curtails

what the ‘employees’ are allowed to do in terms of trade and duties. This makes

most organisations eager to set up the right to manage their own workforce. It is

quite usual that after an initial qualifying period that an organisation coming from

overseas will want to set themselves up as an official WFOE - Wholly Foreign

Owned Enterprise. This can lead to most of the trade restrictions being lifted, and

they then move the staff onto direct payroll control.

As one would expect from the name, a WFOE or WOFE is the same as a Limited

liability company, which will be wholly owned by foreign investor(s). In China, the

WFOEs originally existed in order to encourage manufacturing activity focused on

export of goods produced or to allow the introduction of advanced technology.

Gradually these conditions were abolished and now WFOE have increasingly

included companies interested in being service providers such as consulting and

management services, software development and even trading. Having that interest,

any enterprise in China that is 100% owned by a foreign company or companies can

now be called a WFOE.

Many global recruitment agencies offer services to initially employ and pay workers

overseas through their own already established legal entities, which allow a foreign

organisation to establish a base before handling payroll needs. There are also some

international payroll service providers who can provide these services. These are

Module 7 Unit 1 Globalisation and Strategy Page 48

sometimes called global employment outsourcing solutions and they will both employ

and pay employees initially for a client. The advantages of using these services are:

 Fast deployment of staff in new territory

 Local compliance

 No need for internal expertise on local employment laws or local

laws concerning the withholding of tax or the payment of Social

Security

Before any new country payroll can be set up with the relevant Tax/Social Security

authorities the global payroll manager will need to obtain:

 Evidence of the company’s registration in that country

 When setting up only a small office or branch in that country it may

be necessary to assign someone in that country to officially act on

the organisations behalf and be the appointed liaison between the

Tax/Social Security offices - if so formal power of attorneys will need

to be established. In Eastern Europe this is a common practice and

local payroll providers will not normally engage with an organisation

without this legal agreement is in place.

 They may also need to supply evidence that a local bank account

has been established, this is particularly important in some countries

as payments in respect of Tax and Social Security can only be paid

over to the relevant authorities from a local bank account of the

same currency.

 Bank account signatories

Module 7 Unit 1 Globalisation and Strategy Page 49

Once a completed application has been processed the relevant references will be

issued, which will need to be quoted in any correspondence/communication/data

exchange with the Tax/Social Security authorities.

Here are some examples of Tax numbers used in different countries:

Country Issuing authority Name/type

India Income Tax Department (ITD)

PAN (Permanent Account Number)

TDN (Tax Deduction Number)

Portugal Ministerio de Finanças NIF (Fiscal identification number)

Canada Canada Revenue Agency (CRA)

BN (Business Number)

New Zealand Inland Revenue Department (IRD)

IRD Number

USA Inland Revenue Service (IRS)

EIN (Employer Identification Number) or FEIN (Federal Employer Identification Number

Payroll - Governance requirements for process

The strategic requirements for payroll processing must pay strict attention to the

principle of governance – the control of management and adherence to compliance

and objective co-ordination. Part of that assessment is the understanding of where

control and responsibility is to be placed. Where there is international or global

involvement this is complicated by identifying how centralised this will need to be.

Module 7 Unit 1 Globalisation and Strategy Page 50

A model for global payroll compliance.

Managing just a UK payroll and constantly ensuring compliance in an ever changing

world of rules and regulations often presents a challenge to the most knowledgeable

of payroll managers. Imagine that task multiplied by 10 or 20 or even 30 different

countries.

A global payroll manager cannot possibly be expected to know all the rules and

regulations for each and every country that locals are hired in. However, it is

necessary to put in a framework to monitor and measure global compliance in every

country.

A simple solution could be to retain a payroll expert (SME) in each and every country

but this may not be a cost effective solution if numbers are small or if global payroll

processing has already been centralised into a shared service approach. Another

solution is to outsource the non-UK payrolls but even if they are all outsourced, the

responsibility for compliance still remains within the organisation – possibly under the

payroll manager’s duty.

One approach is to create the organisations own global compliance framework using

perhaps regional experts, outsourcers and the employees themselves to understand

potential risks and to seek assurances on control, accountability, capability,

compliance and security across the end-to-end payroll process.

Module 7 Unit 1 Globalisation and Strategy Page 51

The following suggested tasks and activities, to ensure global compliance and

mitigate risk, are interchangeable depending on the number of levels in the

organisation that are responsible for global payroll processing. It should be noted

that the local level may well be the local in-country payroll provider or if not the local

in-house payroll team.

Governance responsibilities

The following are suggested placement of duty.

Global level responsibilities – global governance, payroll strategy and policy,

standards & rules, resources, payroll processing costs and global vendor

management.

Regional level responsibilities – regional governance, implement global policy,

review geographical performance, review geographical audit readiness and regional

vendor management.

Local level responsibilities – review day to day operations, payroll accuracy,

control & compliance and local vendor management.

Module 7 Unit 1 Globalisation and Strategy Page 52

Global Payroll Governance (2014)

Decisions concerning risk management can also be shared over differing levels of

activities:

Global level responsibilities – assess global controls and risk status based on

country & regional input and develop global action plans

Regional level responsibilities – consolidate country input, monitor country

performance, and assess regional control and risk status

Local level responsibilities -Perform local self-assessment and assess controls,

Identify local risks and develop local action plans

Module 7 Unit 1 Globalisation and Strategy Page 53

Global Payroll Governance (2014)

Global Payroll Governance (2014)

Module 7 Unit 1 Globalisation and Strategy Page 54

If the above tasks are regularly carried out, as part of business as usual (BAU), then

a proactive continuous approach can be adopted to mitigate the risk of non-

compliance. When any of the below events occur a re-assessment would be initiated

by the relevant level.

Performing pro- active process assurance responsibilities

The following are suggested activities subdivide by level responsibility.

Global level events – external/internal audit activities, business financial control

reviews supplemented with payroll assessment reviews

Regional level events – outcomes of external/internal audit findings, unsatisfactory

payroll self-assessments for a specific country, new and emerging risks and any 3rd

party fines & penalties imposed

Local level events - Requests for assistance, new and emerging risks

Global Payroll Governance (2014)

Module 7 Unit 1 Globalisation and Strategy Page 55

From the diagram it is clear the intention is that activity feeds both down and up

between levels as incidences occur.

The slide below suggests what aspects of payroll you may want to assess on a

regular basis.

Global Payroll Governance (2014)

Regardless of whether the payroll operations are run on a mature in-house model, in

the midst of transformational change or whilst bedding down a new supplier/client or

system, it means the processing must continue on a controlled, day to day, weekly,

and month to month basis.

Its focus must include process documentation, applications with information

technology, segregation of duties, accountancy, risk assessment and transaction

execution. Phases of concern include strategy, policy, standards and rules concern.

Module 7 Unit 1 Globalisation and Strategy Page 56

The end-to-end HR/payroll processes can be unforgiving; getting it ‘nearly right’ is

unacceptable to the employee concerned (the customer).

The pressures on day to day operations and transactional processing can lead to

process inefficiencies and an increasing risk of weakened controls and non-

compliance with both internal and external requirements. Implementing a global

governance model may well cause additional work but it will also give peace of mind!

Strategic development of payroll processing

Often reality for strategic development of the payroll process is that it is evolved by

accident. As the organisation moves into new countries so agreed practise is

adapted to deal with the most recent expansion.

The act of simply absorbing the latest local area can have the positive impact of

using local expertise. Where the source is reliable this can be an effective approach

to ensure country specialisation.

The problem of using a local partisan approach can lead to complicated practise of

multiple vendors, diverse governance issues, little or no standardisation and

integration challenges for reporting. There can be difficulties of time consuming

maintenance and working with a number of banks for finance handling. Such

multiple activities can be costly.

However some organisations might resist adjustment when the process seems to be

working – effectively ‘If it’s not broke don’t break it’.

How organisational structure impact on payroll duty

There are several factors that impact on payroll duty. Much of the consideration in

this area has already been discussed in module 2 and 4.

Module 7 Unit 1 Globalisation and Strategy Page 57

Process mapping for payroll needs

Hopefully you will have identified three key areas for administration that is a concern

for international payroll work – that of cross culture control, reaction to system needs

and, of course, reacting to identified pay duties.

Cross culture means being able to assess and appreciate the differences between

the host and home countries, particularly to be prepared for any potential clashes for

working and communicating between each other

System requirements include consideration about the type of system and procedures

that could be used particularly about the interaction of reporting and movement of

data.

Review Section 4 from Module 2 or Section 2 of

Module 4 to consider three key administration areas for

international payroll process – as expounded by Morgan (1986)

Module 7 Unit 1 Globalisation and Strategy Page 58

Finally, pay duties is the focus on what specific requirements will be involved

because of the different country legislation requirements, special tax needs and how

communication interaction will need to be met.

Nature of structure

The shape and focus of any organisation is going to have an impact on the approach

and procedural preference for running a payroll activity. Key factors include:

 Place of payroll; HR or finance

 Governance style i.e. centralisation requirement

 Function preference; system in house or outsource

 Technical investment; system capability for shared service (SSC)

New payroll process

Any organisation will need to reflect on the requirement of payroll process and, at

times, to assess the requirement for a new approach. This can be because of new

movement to a location, a restructure in strategic focus, a wish to assess process

effectiveness and cost control. In some situations the requirement to change is

forced on the organisation – for example the present supplier will no longer be able

to meet the organisations needs or to offer a compliant service. At that time the

organisation will need to perform a vigorous review of both its strategic focus, its

legal and contractual practical requirements and availability of resources.

As part of that activity it will be necessary to access:

 Workforce; who and where they are and how they are to be paid

 Strategy; what is the focus and preference for activity

 Operational system; what integration and support as resource is

available

Module 7 Unit 1 Globalisation and Strategy Page 59

 Knowledge; what resource exists internally both now and potentially

The issue of assessing and preparing for a new working process is discussed in

more detail later in this module.

Quality management

Many organisations now value quality management as a method for achieving

success with its clients and include it as part of their strategic process. It is important

to appreciate quality is not about providing a cheaper produced product and it

involves all management and team members to participate in the aim to offer quality

results in whatever duties they perform. The total organisation is involved in

achieving total quality management (TQM)

Understanding this will help identify the role payroll has in the success of the

organisation to achieve true quality management.

In 1978 Phil Cosby, an academic, promoted the concept of a holistic approach to

quality management. As Macdonald & Piggot (2000)explain, Cosby did not actually

use the term ‘total quality management’ but the concept is now viewed as being the

introduction to that principle and in doing so focus working attitude as a total

integrated issue not as quality by department.

Communicating the principle of TQM, monitoring successful processes and

integrating the product to show TQM attention is a complex activity when there are

multicultural influences. It makes quality a global issue.

Quality management is an approach to managing change and new situations. The

principle is that by all parts of an organisation needs to work with the intention to

provide quality service – not just for its own activity, but in order to support the other

parts of the organisation that they are also be able to meet their quality objectives.

Doing so will naturally mean the product or service that is offered will have quality

which will in turn will maximise its attractiveness to the client.

Module 7 Unit 1 Globalisation and Strategy Page 60

The key areas of TQM include

Management has the primary responsibility for quality – it is by their leadership and

behaviour, partly revealed by their decisions, that the environment of quality control

will become an integral aspect for working behaviour. They have the power to

control resources and influence changes.

The ordinary employee may identify quality issues but they are unlikely to have the

power to establish the change required.

Kaisen and TQM

Kaizen is the principle of involving the whole workforce. Its objective is to motivate

the employees into working with quality focus not just because they are rewarded

through a prize or bonus but also because they see it as integral to the working ethic

– to promote and enhance the employer’s service to its client. When effective, the

promotion of Kaisen can lead to a boost in employee moral giving them the feeling of

integration to the organisation and so lead to self-respect because of that status.

Total quality management

Kaizen

Management action

Education

Module 7 Unit 1 Globalisation and Strategy Page 61

The natural extension to Kaizen is the appreciation of education as a necessary and

vital aspect in order to achieve total quality management. The success of TQM is

dependent on the weakest link in the chain of activity.

Every person, who can impact an activity inside an organisation, needs to

understand how he or she could influence quality production. It can only occur if all

those that can have impact understand and work to the same objectives.

SUMMARY

It is commonly accepted that one of the basic challenges for an organisation is to

decide on the definition of an international or global whilst the extended description

for a multinational company is to be called transnational.

Part of the impact on the approach to managing the process of the organisation is

the understanding and reaction to the nature of the business itself and who are the

owners. Understanding where the responsibilities and accountabilities lye help

assess and appreciate the subtle pressures on the decision makers when trying to

work cross border.

Global presence impacts on the strategic decision making them more complex

through pressure of logistics, culture and environmental influence. These factors

mean there are extra considerations to add to the normal issues faced by any

organisation.

The success of an international organisation is very much about the people involved

in decision-making – possibly even more than the influence of external forces.

Resources and intelligence will also influence any decision-making attempts.

It is true that external events will impact on business processes but failures in being

able to make decisions can be equally as devastating.

Of course it is possible that international issues can impact on an organisations

success. Environmental, economic or political influences will be felt cross border to

various levels. Having involvement in other countries can lead to a need to react to

legislation change, adjusting to economic movement and even handling

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environmental concerns, which are not the same in every locality. It is because of

this variety of potential impact that there is a need for suitable and adept leadership

– to handle the variety and differences in behavioural expectation.

Part of reviewing the nature of international organisations is understanding that the

key to the effectiveness of any business is the quality and capability of the

manpower as a resource. Having access to international involvement creates a

bigger pool of available resource. It is therefore very important to have careful control

over manpower recruitment, making appropriate selection and allocation of labour,

ensuring the right people are in the right roles, and that skills and performance are

effectively assessed on an ongoing basis.

Part of the decision process is the need to reflect both interaction and

interdependency of all the different business elements of the organisation as by

locality and product interest.

It is also important to understand how the organisation has an impact on others,

including the economic, political and cultural situation of the country involved. There

is the influence of the financial contribution through use of labour and resources and

the payment of employment revenues (both taxes and social benefits such as

national insurance). Such influence is not always popular, but in many situations the

countries are keen to get the presence of business in the area and are willing to offer

promotional incentives to encourage them to stay.

The choice of where to locate will be influenced by a lot of factors including

environment and technical advancement. It means being aware of the importance of

the political situation and the economic circumstances of each country. There is also

a need to appreciate their specific legal structure. As business look to grow and

expand, to support an ever-increasing demand or just to raise revenue and profits,

then a view to international expansion is an obvious consideration.

Whether entering new markets for revenue growth or for cost management, then

knowing those markets and how to create profit from them is important.

An emerging country may be growing, but may be saturated already by the services

or products you want to offer. So although growing as an economy, it may not have

anywhere near the opportunity you hoped it might. Whereas an established

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economy, with a market that is open and not dominated by any particular “player”

may well provide more opportunity than first realised.

Businesses are driving to increase their market share, create additional value from

the intellectual property (IP) that they have available and create new markets in

growing or changing economies.

Sourcing cheaper locations to provide services or products also means investing in

the local economy and supporting what the local population find to be most important

to them. For example, in Asia community days, for employees to take and support

local schools or charities, is a very important factor for an employer to consider

alongside individual remuneration packages.

Ethical behaviour is relevant no matter which country is involved; but cultures value

different ethical aspects. The company’s stance is reflected in the way individuals

are treated and in the behaviour that is taken for legislation compliance and

treatment of the environment.

The payroll department has a key role in supporting the international organisation. It

contributes towards effective administration and helping the employer’s strategic

focus in the way it behaves and meets its objectives.

The department will be influenced by the style and culture of the company and this

can impact on the approach they take towards providing a payroll service and the

resources they are given access to.

The payroll role requires appreciating the needs of the employees in each country

and the challenges that exist being involved there. It means understanding the

legislative requirements but always the ultimate objective will be to ensure everyone

gets paid accurately and on time wherever they reside.