New research from the International Bar Association has revealed a demand for transnational laws in human resources. Matt Packer looks at the findings and asks what implications they could have for legal services outsourcing
A good human resources (HR) function plays an integral role in the development of a company’s hiring strategy, and addressing employees’ day-to-day concerns. Both parts of the function are subject to internal, corporate procedures and statutory employment laws.
But what happens when companies go global, and must tailor those procedures according to the countries they trade in? What happens when there are so many companies trading in so many countries that it becomes hard to define which procedures should be implemented, and where? Does this mean that a more unified approach to HR is required?
New research from the International Bar Association (IBA) has aimed to tackle those questions – and the results will certainly pique the interest of anyone connected with global staffing issues in the field of legal business.
The research, entitled Looking to the Key Human Resources Legal Issues of the Next Decade, was conducted by the IBA’s Global Employment Institute (GEI) in an effort to probe the employment-related legal hurdles that are set to emerge from globalisation. Its goal: to identify ‘the most important HR issue of the 21st century’.
Launched in September, the survey asked HR directors in 119 multinational firms to rank a series of factors affecting hiring patterns in the global marketplace.
While work-life balance, corporate social responsibility and HR regulation all made it into the Top 10, the leading factor, with a massive 71% of the ranking points, was ‘new HR issues in transnational company operations’ – a term covering themes such as restructuring, outsourcing, insourcing and mergers and acquisitions. In other words, key concerns that occupy the strategic thoughts of in-house legal teams, the law firms they work with and the legal services outsourcing (LSO) providers that help both parties cope with their workloads.
Analysing the dominance of new HR issues, the GEI noted that transnational corporate operations are in the DNA of multinationals as never before – and there are crucial HR issues related to this new reality. Moreover, it added, the findings exposed the lack of a transnational legal framework for the HR issues that arise from those operations.
Reining the underlying subjects into a legal framework of that kind would be an ambitious project for any organisation to take on, and would involve careful and patient negotiation of some complex terrain. Among the topics that the GEI says would need attention in such a process are issues arising from:
• Cross-border regulations
• Data protection
• Assignment of rights to external service providers
• Employee rights
• Staff relocation
• Customer reactions
• Training and education
All told, an intricate problem. It is tempting to say that the demand for a unified HR framework comes from the simple assumption that global markets are diverse and pluralistic, while companies always stay the same. A unified set of laws is required to transcend multiple cultures and match the single-mindedness of global corporations. But are those companies really monolithic entities that never change, no matter where they are trading?
Well – no. Global companies make subtle alterations to their identities, and indeed products, according to the tastes of the countries they work in. They also undergo frequent gear changes on their territorial hiring plans: flexibility that plays a major role in developing solutions that hinge on outsourcing.
The GEI acknowledges this. ‘Outsourcing may not only be relevant for an organisation which is going through a period of financial difficulty,’ says the survey report, ‘but also for an organisation which is experiencing a boom in business but does not have the necessary resources in-house to keep pace with the increasing demand.
‘Experience already shows that there is not a one-way trend in some of these outsourcing operations,’ adds the report. ‘Some companies, after following a clear process of outsourcing, have reversed the trend and have moved to insourcing. Therefore, there is not a general trend for multinationals – particularly consolidated multinationals – to downsize their workforces.’
GEI chairman Salvador del Rey commented: ‘The extension of multinationals to new countries and sectors is making corporate operations ever more complex.’ On the question of reorganisations and outsourcing, he said: ‘Most of the law relating to these areas is very local in character, so the question of “which law to apply” is at the heart of HR directors’ concerns.’
This is especially true for the LSO sector. As consolidation in the sector gathers pace, the LSO entities that emerge will be bigger, will have wider territorial reaches… and will be more prolific in their international transfers of skills and staff. Predicting further substantial growth in LSO, Indiana University professor William Henderson – an expert on employment issues in legal business – told the Chicago Tribune: ‘Sophisticated general counsel are trying to stretch their legal budgets. This [LSO] is the beginning of a wave that's only going to get bigger in the years to come.’
So what would a transnational set of employment laws mean for legal services outsourcing? Would a sector that depends on being dynamic find itself straitjacketed by a unified framework, unable to react quickly enough to the strategic plans of its clients? Or would the laws be developed in such a way that the sector would have the flexibility it needs to provide valuable assistance? And which body would be in charge of making and enforcing these laws in the first place?
The IBA is as intrigued by these questions as any industry professional would be. Mindful of that 71% vote and the concerns that produced it, del Rey promises: ‘The GEI will be monitoring this issue closely.’
To download the IBA report, click here.