HUMAN RESOURCE CHALLENGES FROM DOING BUSINESS IN AFRICA: Lessons from twenty South African companies

1. HUMAN RESOURCE CHALLENGES FROM DOING BUSINESS IN AFRICA: Lessons from twenty South African companies 27 March 2008 Marius Meyer 082 859 3593 mmeyer@unisa.ac.za

2. SA GLOBAL PERFORMANCE • Largest producer of gold and diamonds • Largest producer of platinum • Largest exporter of silver and vanadium • One of the largest sugar producers • Largest paper producer • Largest quantity of mangenese • Largest producer of chrome • Cheapest producer of electricity • Largest producer of uranium • Largest brewery (SAB Miller) • One of the best wine producers • Most profitable game park • SAA is one of the safest airlines in the world • UNISA is 4th largest university in the world

3. Different business environment

4. AFRICAN BUSINESS LANDSCAPE Growth through cross-border expansion is a business imperative for survival International buyer-supplier partnerships Establishing new operations in different African countries Local companies will be forced to compete in their once protected backyard with global players Firms are forming partnerships with international partners

5. CHALLENGES • Globalisation • Corporate governance • Profitability through cost & growth • Leadership & capability focus • Change, change, change • Technology • Attracting, developing, retaining staff • HR accountability & reporting

6. GROWING SA BUSINESS IN AFRICA • Are we creating wealth in Africa? • Are we exploiting the rest of Africa? • Do we use fair labour practices? • Are we currently colonising Africa again? • Do we dominate the rest of Africa? • Are we exporting our problems?

7. 11 CASES 3 insurance 2 retailers 2 manufacturing bank cell phone mine food 9 INTERVIEWS 2 banks 2 mines retailer wholesaler chemical cell phone furniture 20 SOUTH AFRICAN COMPANIES

8. COST OF GLOBAL HR FAILURES • 20 – 50% of expatriates fail • Cost varies: $ 200 000 - $ 1 200 000 • 50% of international joint ventures fail • More diverse companies outperform less diverse companies by 8%

9. GLOBAL HR OBJECTIVES • To prepare HR to maintain a balanced focus between global and local HR • To develop new paradigms for helping people to manage change and complexity • To analyse global HR risks & training needs • To design skills training programs around global business practices • To instill awareness for global diversity • To align HR strategies, roles and practices to global & African business strategies

10. ROLE OF HR IN GLOBALISATION “The single most important issue nominated by experienced executives to explain their failures abroad points to the “soft side” of business. Cultural misfits are at the roots of several problems. Parties fail to recognise each other’s agendas beyond the strict business transaction.” Cesar Souza

11. CHALLENGES IN AFRICAN HR:BUSINESS ENVIRONMENT • Adaptation problems • HQ vs country operations • Lack of HR decision-making autonomy • Communication • Lack of global leadership and staff • Organisation culture • Legislation & politics BUSINESS ENVIRONMENT

12. CHALLENGES IN AFRICAN HR:HR POLICIES & PRACTICES • Transferability of HR policies & practices • Expatriate & repatriate management • Skills and talent management challenges • Employee retention (repatriates) • Performance management • Training & development issues • Incompatible remuneration systems • Labour legislation • Structural issues & role ambiguity HR POLICIES PRACTICES PROCEDURES

13. Shareholders Government Board Management Employees Unions Society Regulatory and standards bodies Corporate social responsibility Information technology Internal audit Suppliers Agencies, partners and joint ventures Customers Business and pro- fessional networks Other? STAKEHOLDERS

14. African HR is not a quick fix

15. AFRICAN HR PITFALLS • Assuming that all African countries are the same – a practice will work everywhere • HR-business link is not clear • A lack of cultural alignment - diversity • Inadequate preparation & planning • A lack of consultation with stakeholders • Not growing your people with the company – if the company is globalising, people must also globalise • Absence of HR risk management (both corporate governance & HR governance) • Not enough communication & feedback • A lack of measurement & reporting

16. Global HR risk management is about ensuring that the right people do the right things in the right way in the right country.

17. LESSONS FROM 20 CASES • Communication, feedback, communication, feedback … • Planning and doing your homework is critical • Balance between transfer & adaptation • Build on successes (what worked, culture, values, brand, competencies, approaches) • Identify & develop local talent • Balance consistency & flexibility • HR function plays a critical role - culture • Global HR governance framework & risks • Clear HR policies, procedures, practices • Use of technology to optimise HRIS • International HR standards • Global leadership development – “global mindset” • Educate HQ – share knowledge & learning • HR measurement systems

18. Triple bottom-line: 3 P’s PEOPLE (Social) PLANET (Environment) PROFITS (Financial performance) + + S U S T A I N A B I L I T Y

19. WHAT IS HR GOVERNANCE? HR governance is the act of leading the HR function and managing related investments to: • Optimise performance of the organisation’s human capital assets; • Fulfill financial & other responsibilities; • Mitigate enterprise HR risk; • Align the function’s priorities with those of the business; and • Enable HR executive decision-making Mercer Consulting

20. HR GOVERNANCE The process, structure and actions needed to lead, direct and control HR practices to achieve the goals of the company. LEAD DIRECT CONTROL Where do we want to go? (vision, strategy) How will we get there? (policies, systems, practices) How will we ensure that we get there? (measurement)

21. We need better International HR Administration

22. Selection Induction Training Performance management Remuneration Succession planning Employment relations Organisation development Diversity and employment equity Health and safety Ethical organisation culture HR IMPLICATIONS OF CORPORATE GOVERNANCE

23. GET YOUR STRUCTURE RIGHT

24. 4 3 6 5 7 1 2 8 GLOBAL PERFORMANCE FRAMEWORK Product/ Service Delivery Focus Criteria 1 2 3 4 5 6 7 8 9 10 11 Drivers ENABLERS Customer Satisfaction + + = RESULTS Stake- holder value

25. AFRICAN HR ISSUES • Expatriate and staff management • Knowledge transfer to expatriates/locals • Retraining and development for repatriates • Career management for locals, expatriates & repatriates • Mentoring programs to connect locals, expatriates and repatriates • Talent management strategy

26. Rules must make sense – or staff will resist it!

27. TYPICAL AFRICAN HR RISKS • Expatriate costs vs benefits • Expatriate failure - culture • Legislation • Political instability • Ethics • Skills levels • Employee retention • Staff morale

28. We need HR risk management

29. ROLE OF HR • Intercultural effectiveness surveys • Pre-departure planning for international assignments • Global advisory HR committees • HR globalisation = risk management • Evaluating the success of global HR

30. Be a watchdog for ethics!

31. PRINCIPLES FOR EFFECTIVE HR GLOBALISATION • Balance global integration with local needs • High involvement among local site staff • Integrate HR with business unit & local HR strategies • Expect problems and work through them (use a risk management approach)

32. GUIDELINES FOR HR RISK MANAGEMENT • Do a proper analysis of HR risks • Do a complete HR due diligence • Liaise with all relevant stakeholders • Develop HR solutions to mitigate risks • Do regular HR audits, including risks • Measure progress and improvements • Liaise with risk manager

33. GLOBAL HR RISK AND GOVERNANCE MODEL CORPORATE GOVERNANCE FOCUS: PERFORMANCE & COMPLIANCE CORPORATE GOVERNANCE PRINCIPLES R I S K M A N A G E M E N T External stakeholder engagement in broader business context Corporate Governance Model: Design, Processes, Roles Global Business Strategic Intent: Leadership and Operating Model Global Business Operating Ccntext HR Corporate Governance Model: Design, Processes, Roles Global HR Strategic Intent HR Leadership Global HR Operating Context Internal stakeholder engagement in business value chain HR Policies and Standards HR Value Chain Delivery HR Systems HR Operating Model HR GOVERNANCE MEASUREMENT & REPORTING CORPORATE GOVERNANCE OUTCOME: TRIPLE BOTTOM-LINE

34. Balance flexibility with order

35. CRITICAL QUESTIONS • Do you have a global HR governance framework in place? • Do you comply with legislation in all African countries where you operate? • Have you identified global HR risks & solutions? • Do your HR practices add value to corporate governance & the global business strategy? • Have you done a stakeholder analysis? • Do you implement ethical business practices throughout your organisation? • Have you audited the HR function for global alignment?

37. To be world class, you have to treat your people as an asset on the balance sheet rather than a cost on your profit and loss account. Thus, the human resource function has come to occupy centre stage. Clem Sunter

38. CONCLUSION A more inclusive and devolved international role of subsidiary HR functions is needed in African countries. Without HR risk management, global business will fail. Let us take on this challenge to help our companies and its people, and ultimately all our African nations to reap the benefits of globalisation.

39. THANK YOU! I hope you are successful in doing great business and HR work in Africa. Any questions?