C HRISTOPHER N ORTH : L INKING S UCCESSFUL HR P LANNING WITH S OCIAL R ESPONSIBILITY AND H UMAN D EVELOPMENT

“We have a very significant interest in the immediate and long-term needs of the greater community here in Tijuana, as well as larger Mexico,” says Christopher North, vice president and general manager of Aerodesign de Mexico, part of C&D Zodiac, Inc., of the United States and Zodiac, S.A., of France. Aerodesign’s 430 employees in its two buildings in Tijuana, near the California, U.S.– Mexico border, design and manufacture commercial aircraft interiors (such as seats, overhead bins, and lavatories) for major aircraft manufacturers such as Airbus and Boeing. North’s personal commitment to the local community is evidenced by the non-profit organization founded by him and his wife, Julianne, known as Build a Miracle, which builds homes and provides educational opportunity in impoverished areas of Tijuana. North adds, “And our interest in the community is further reflected at Aerodesign in programs focused on employee education and training and in creative benefits programs such as housing subsidies.”

North’s interests in social issues in Mexico go back more than twenty years when he was an undergraduate at Loyola Marymount University in Los Angeles, where he and his wife started a student service group organizing monthly trips to orphanages and communities in northern Mexico. Part of that effort included raising over $100,000 to purchase land and build a trade school at a boy’s home in Tecate, Mexico, which they ran hands-on after graduating and during the first six months of their marriage. From this experience, North saw firsthand a need to make up for the country’s educational system that, due to extreme poverty and administrative obstacles, was failing to prepare youths for a future competitive labor market. After the completion of his MBA at UCLA, in 1991, North founded Aerodesign along with the owners of industry leader C&D Aerospace. North translated the needs he had perceived in the non-profit sector into HR policies, such as the following:

• Educational expense reimbursement program for school-aged children of employees • Technical training and English language instruction

• An on-site adult education school offering primary and secondary education to employees • Up to US$2,000 in building materials or cash as a home-down-payment subsidy

“We never say no to anyone asking to take an English or technical course,” says North. However, this commitment to education and skill development, for both employees and their family members, is not without significant benefit to the company. North adds, “With greater competence in English, (continued)

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Environmental scanning should consider such longer-range factors as national birth- rate statistics, health conditions and mortality, the nature and quality of educational systems within a country, and changing demographic trends in workforce participation to gain a clearer picture of the nature of the global labor force available for supplying long-term future work demand (that is, for the next five or ten years).93 _{For example,} several developed countries in Europe and Asia are reporting a significant decrease in birth rate, presenting a challenging economic future with a larger percentage of older workers and retirees and fewer younger workers, placing increasing demands on health Profile 5.1 (continued)

our Mexican managers don’t have to depend on me and other bilingual executives as they interact with English-speaking customers and suppliers.” This development is especially important at Aerodesign because the company has no foreign-born employees besides North himself. “World Class Quality, Mexican Pride” adorns the wall above the main production area and embodies, among other things, the idea that at Aerodesign, there is no limit to how high local talent can rise. North further claims that a focus on training and the resultant ability of the company to support fully integrated finished product manufacturing with engineering support has insulated the company against competition from other low-cost labor regions such as the Far East. Productivity and experience become more important than the impulse to move abroad in search of labor for under a dollar per hour.

The result of proactive HR policies such as those at Aerodesign in the long term is a stronger Mexican labor force; in the short term the company enjoys increased workforce commitment and loyalty, directly translating into productivity and employee retention. In fact, at Aerodesign turnover averages less than 12 percent annually, while maquiladora facilities commonly experience turnover above 100 percent per year. North has developed a strategy for dealing with both turnover and lack of formal education: “One key to manufacturing success in Mexico, whether the issue is high turnover, the lack of experienced personnel, or both, is the identification and development of a core team, an A-list of individuals at all levels that can successfully move from one project or department to another and infuse the organization’s unique culture, competency, and spirit into new programs. Within this group, future leaders and managers are groomed—there are success stories that motivate others to excel.”

Low turnover increases the reliability and certainty of a capable workforce that is available to meet work demand—critical to effective human resource planning and achievement of business objectives. Besides education, provision of building materials, and down-payment assistance, North has initiated other practices to build employee loyalty and retention, such as a subsidized lunch program and payment of the employee portion of the social security tax. All of these benefits are provided by the company under programs that are income tax free to the employees. “While many companies provide a lunch program or transportation subsidies, very few are aware of the existence of our other benefits programs, which by being tax free to the employees, increase their take-home pay and leverage our payroll expenditure to its maximum potential.” A final benefit of creating a desirable place to work is the decrease in recruitment costs as internal employee referrals become the primary means of finding new employees. According to North, because turnover has so many causes, there is no single remedy, and only a multifaceted approach to the creation of a desirable workplace will minimize its impact. He does make it a point to debunk one myth about turnover in the border region. North explains, “One of the common misconceptions is that employees who come from the south to work here only do so for a brief stay until they can find a way to get across the U.S. border. This is simply not the case. The majority who come here to work for our company and other maquiladoras are much more likely to stay here or return to the south than to cross the border.”

care and retirement benefits.94 _{In particular, Russia’s demographic profile has several} serious implications for the country’s economic future pertinent to HR planning. Ac- cording to one study, in the absence of large-scale immigration, Russia with its low birth rate will not have the labor resources to sustain high economic growth rates. In addition, poor health conditions and mortality will affect the quality of the workforce and make it all the more difficult to sustain the productivity improvements needed for desired growth in support of continued economic transition.95 _{Related to national edu-} cation trends, it has been reported that the United Kingdom is among the lowest in participation rate in advanced secondary education in countries of the European Union and lags considerably behind Germany, France, and the Netherlands in the extent of post-school training that young people receive while same-aged cohorts pursue higher education.96 _{Pertinent to MNCs in their long-range planning for international work} sourcing, this information suggests that in the years ahead the labor market in the United Kingdom might have less of a local labor force capability for meeting the work demand of high-tech and knowledge-based jobs.

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Global HR planning should keep in mind what it wants to become in the long run related to organization capability—including shared organizational core competen- cies and culture and workforce alignment or shared mind-set—and plan its HR ac- tivities and policies accordingly.97 _{For example, Royal Dutch/Shell desired to develop} a “multicultural multinational” organization, where the senior management team at its London headquarters would become more globally competent in its long-range and top-level decision making. Therefore, to achieve this strategic objective it used global HR planning to develop specific policies and practices in international workforce staffing and development that resulted in thirty-eight countries being rep- resented among its London senior management team.98

International firms large and small also should carefully plan their selection, train- ing, performance management, and remuneration practices to support the acquisi- tion of common core priorities and competencies that promote alignment and coordination across national boundaries.99 _{This increased alignment and coordina-} tion in turn can contribute to faster, consistent, high-quality responsiveness to cus- tomer needs around the globe. For example, the great global success of McDonald’s has been based largely on the company’s ability to quickly transfer to foreign entre- preneurs the overall capability of managing the entire complex McDonald’s busi- ness system in a consistent manner, yet with sensitivity to local market conditions. In addition, the development of an MNC culture characterized by common values, beliefs, priorities, and identification with the company also creates a deep and en- during structural mechanism within the MNC to informally teach, influence, and reinforce desirable behavior throughout the MNC.

Companies that have as a major strategic objective to develop greater company-wide global leadership capability have been encouraged to increase, through global HR plan- ning, their number of young managers involved in extended foreign assignment experi- ences (including inpatriation). Here the expatriate is sent abroad more for the purpose of

individual professional development (and collectively over time, organizational devel- opment) than for accomplishing more traditional business goals abroad.100 _Furthermore, an expatriate assignment should be considered as only a part of the employee’s experi- ence with the organization; longer-range HR planning should consider expatriate return (repatriation), placement, and ongoing career development. In fact, some companies have created positions in charge of global talent management, where a professional or team is responsible for setting up systems to identify potential leaders, track careers company- wide, provide and structure a variety of international experiences, and monitor assign- ment performance for future planning.101 _{Some MNCs also actively promote internal} MNC sharing and dissemination of new knowledge and experience gained from foreign assignments for enhancing global orientation, alignment, and leadership capability.102

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Global succession planning concerns the selection of talented employees to replace senior managers who leave the MNC because of retirement, reassignment, or for other reasons. Effective succession planning emphasizes minimizing disruption and confusion arising from such leadership changes, with a view to implementing com- pany strategy and achieving organizational goals in a smooth and continuous man- ner. There is strong evidence that companies with a predetermined, formal succession plan for their senior managerial assignments, including two levels below the top, enjoy a higher return on investment than those without such a plan.103

Building on their long-range HR planning for developing desired capability and glo- bal leadership talent throughout the organization, MNCs should engage in careful glo- bal succession planning to reduce chance and uncertainty and ensure the availability of senior executive leadership talent for future company guidance. In some companies, succession planning is integrated into a twice-yearly people-review process. Global suc- cession planning first involves making a projection of future needs for senior managers within the firm. Then there is a careful selection from pools of promising manager candidates throughout the MNC to find those best suited to fill higher-level manage- ment positions. Finally, a flexible plan is formulated to ensure that these potential suc- cessors develop the core competencies needed to advance the strategic interests of the organization. To further develop this plan, management and human resources should work collaboratively with the identified, interested high-potential individuals to design six-month, one-year, and three-year development activities—with regular opportunities for feedback and reassessment—involving such activities as formal training, interna- tional virtual teams, short-term foreign assignments, and extended foreign assignments.104

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Global HR planning provides a vital link between MNC strategy and the implemen- tation of strategy through the human factor. Global HR planning should scan the environment for both immediate and longer-term threats and opportunities as they influence the supply of labor and human talent to meet immediate and anticipated long-term work demand. This critical function also should carefully examine appro-

priate approaches for organizing and designing work and working arrangements to meet company objectives as well as carefully consider sources of talent—both inter- nal and external—for filling work demand. Finally, HR planning should look inter- nally to design and coordinate various HR activities that build long-range capability to ensure MNC survival and competitiveness.

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1. What changes in global work supply have taken place that contributed to the situation of Gap and its global workforce?

2. What are possible forces that might contribute to an MNC’s lack of a sense of responsibility toward workers in different parts of the world who produce its products or deliver its services? In fact, what external forces can even interfere with this sense of responsibility?

3. Is this opening scenario dealing only with a global phenomenon? Can you think of local work outsourcing arrangements where there is a clear gap be- tween the nature of treatment and benefits of an organization’s regular em- ployees and outsourced or contracted workers who also supply labor to meet the organization’s work demand?