Multinational companies continue to explore how to best structure their businesses and employees in Latin America as they continue to look for ways to capitalize on the myriad opportunities throughout the region.
Despite the region’s impressive growth, there’s no model formula for success and many firms are still searching for what works best for their people and products, a gathering of human resources executives said during WorldCity’s HR Connections on Sept. 13.
The list of issues companies must deal with is long. Safety, salaries, taxes, quality of life for employees, company hierarchy and previous responsibilities are all key factors.
On top of that the “uncertainty of the economic forecast is really a question, said Howard McCarley, director of the Universite des Talents of North America for Club Med. “We just finished budget season, it’s almost like running two budgets.”
There’s “the real one and the one you’re actually going to hit,” replied Stacie Thomas, vice president of human resources for Bacardi U.S.A.
Companies are also facing the challenge of having no fresh blood in their ranks as hiring freezes abound and people hold onto their jobs “like barnacles,” McCarley said.
Meanwhile there’s heavy competition for management-level talent throughout the region, and those being scouted for jobs know they’re in demand, and their value.
With “how hot Latin America is… it’s translated into salaries, making it impalatable to some of our clients as to what they have to pay,” said Marjorie Kean, managing director for Diversified Search. “You bring people into a general management position and they end up making more than the head of the region.” That theme rang true for many of the heads of human resources in the room, as did how much more complicated the job becomes when they start looking at hiring in Brazil.
“We end up not looking at Brazil unless it’s absolutely required because the salaries are outrageous, Kean added. A “general manager in Brazil is making $600,000” a year.
Much of that is due to the tax structure in Brazil, profit sharing between companies and their employees and the fact that many workers are unionized, including management. In an attempt to deal with those costs, some companies are looking at ways to vary their compensation systems so they don’t find themselves paralyzed by payroll.
We “sometimes resort to creativity such as signing bonus,” said Sara Baker, who heads human resources for Western Union Latin America. We’re “going to review our core compensation structure with a focus on variable compensation.”
Later, a handful of HR heads whose companies are in the midst of restructuring their global operations also discussed the challenges and opportunities they’ve seen as the business takes on a new shape.
“We have a new CEO and we’re moving from a regional structure to a business unit structure,” said Sabine van der Meulen, director of human resources for Medtronic Latin America. We are “moving to about six business units, which are all medical devices, and you have people sitting in Minneapolis who will now be managing the world for their business lines.”
With all those changes, communicating who reports to who and that no one has lost their authority is key to ensuring the overhaul runs smoothly
“The perception is that region/country managers will lose a lot of power,” van der Meulen said. We have to “help them understand they still have authority even though their people now report centrally.”
The popular trend, it seemed, is to have country or regional executives responsible for their area’s profit-and-losses while also managing a business line so marketing can be tailored to customers of that area.
Kean of Diversified Search said Procter & Gamble used this strategy to its advantage to deal with smaller countries that might not warrant dedicated staff.
“If you were the country manager for Brazil you also ran the diaper line for the region, the head of Venezuela ran toothpaste,” she said. That “allows you the cluster regions so instead of having a general manager in small countries you end up having one person be the general manager for the cluster.
“They become the head of a product line,” she added, “so they end up having people reporting to them and they have more control over the” business.
HR Connections is one of seven event series organized by WorldCity to bring together executives on international business topics. The HR series is sponsored by the University of Miami School of Business Administration and Diversified Search. The next HR meeting is set for Nov. 14.