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Workforce planning means, Systematic identification and analysis of what an organization is going to need in terms of the size, type, and quality of workforce to achieve its objectives. It determines what mix of experience, knowledge, and skills required and sequences steps to get the right number of right people in the right place at the right time.
The main purposes of international workforce planning in LVMH are as follow: -
From the case study of LVMH we can say that, countries' economies are more connected and intertwined, increasing the need for global business plan for all businesses and businesspeople. Countries are so interlaced economically that a substantive plan to a address global workforce mobility and global business opportunities, whether currently in use or in the planning stages, is a natural next step for all of us.
LVMH still make use of international assignments for training and development, getting its "ticket punched" (rounding out its education in the company), for culture transfers, or to groom its executive leadership.
Rapid expansion of global enterprise, technology that enables geographically disbursed teams, the needs to enhance international business relationship, the implementation of permanent of expatriate assignments, and an increasingly multi- cultural workforce all are trends that are driving international mobility.
The increasingly multi-culture workforce calls in LVMH for the development of managers who can be effective in multiple, complex, and rapidly changing environments. In short, LVMH is building global leaders
LVMH was a global business from the start, however it soon realized that its human resources often lacked international skills. Before 10 years LVMH was found that, too many managers were not fluent in English. Since then, LVMH has sought to create a pool of global managers, with working knowledge of international markets. According to the head of LVMH's Compensation & Benefits (C&B), the definition of global manager is a person with the training or the experience needed to manage a global business. He or she can perform any place in the world just because of global vision and skills in managing multilingual and multicultural teams. A manager must have worked in several countries so that his or her potential can be released, and noticed to achieve such abilities
LVMH believes that the best way to develop its employees is not formal training but mobility. This includes vertical, horizontal and geographical moves within the organization. In order to facilitate mobility, employees' seniority is valued at the group level. International mobility s but one form of mobility, it accounts for one out of five moves.
The main goal of corporate HR management is to ensure information flow and harmonize producers, while leaving final decision to the company, up to a point. The regional HR Director ensures that internal rules are coherently applied within his or her zone. For subsidiaries with no HR Director, recruitment is done by the Regional HR Director.
HR structure divided in five world zones as below
Europe without France
HR function within LVMH
International recruitment is the most HR function within LVMH because, Recruitment is an encounter. The attraction of an international, ambitious group rich in expertise calls for professionalism and personal investment. From this encounter come the talents who will contribute to the Group's future success. The development of women and men in high-performance teams around the world is a key objective of the Human Resources policy. The interest of each employee exactly matches the interest of the Group when it comes to ensuring the development of individual talents, validating personal ambitions and preparing for the future. The importance and specific nature of the culture and the unique skills of each of the Houses are elements that are crucial to the success of LVMH. Knowledge and assimilation of these differentiating factors are therefore key in the integration process. As a result, the career of each new employee begins with orientation seminars within the hiring entity. These sessions may take very different forms depending on the business of the House in question, and generally last several days (from traditional training to field sales experience). After 6 to 12 months in the House, the integration of managers continues with 2 days at the level of the LVMH group. At that time, participants are given an overview of the Group's businesses, its values, exercises to improve understanding of the concept of "luxury", sharing of best practices, the management policy of the HR departments, corporate responsibility programs and more. These days also provide an opportunity to meet and share with managers from the other Houses in the Group. Thousands of new employees from around the world benefited from these seminars in 2008. In order to present the opportunities offered by the Group, the LVMH teams participated in about a hundred events, particularly on the campuses of major prestigious schools and universities in France and abroad.
Particular attention was paid to programs offering internationally recognized MBA degrees, in Europe (IMD, London Business School, INSEAD, HEC etc.), in the United States (Harvard, Columbia, Wharton, Stanford and others) and increasingly in Asia (Tsinghua, Fudan, NUS, Hong Kong University, Waseda, Keiko, Tokyo University etc.). In addition to these encounters, the solid commitment of the LVMH group is embodied in the ESSEC Chair luxury brand partnership and the LVMH scholarships for Asia.
"Recruitment Days": greater requirement for professionalism
Special full-day recruitment sessions were developed in 2008 as part of the "Future A" initiative. They are based on higher requirements for professionalism in the evaluation and selection methods, while offering candidates a unique experience that gives them useful feedback for their professional development. Not only are technical skills assessed, but also the ability to produce and communicate results, the ability to work in a group, the ability to have a strategic vision while knowing how to make a daily commitment and, finally, the potential to become an enterprising leader motivated by a desire for ongoing improvement. Assessment of these aspects is made by LVMH group managers through interviews as well as individual and group role plays. At the end of this intensive day, whatever the result, each candidate receives several in-depth analyses to assist him or her in understanding how he or she was perceived and the contents of the assessment.
The numbers of expatriates are increased by 35% and increasing
Importance of workforce international mobility in LVMH to achieve its aim
LVMH a global business it soon realized that its human resources often lacked international skills. In 1987, too many managers were not fluent in English, since then, LVMH has sought to create a pool of global managers, with a knowledge of international markets. The head of LVMH's compensation and benefits defines a global manager as a person with the training or the experience needed to manage a global business. He or she can perform from any place in the world thanks to a global vision and skills in managing multilingual and multicultural teams. To achieve such abilities one must have worked in several countries so that his or her potential can be released and noticed.
LVMH believes that the best way to develop its employees is not formal training but mobility. This includes vertical, horizontal and geographical moves within the organization. In order to facilitate mobility employee's seniority is valued at the group level. International mobility is but one form of mobility it accounts for one out of five moves.
LVMH prefers to use the term International Mobility rather than Expatriation. Divergent to the model of international mobility which suggests perpetual group, where the term expatriation suggests organized repatriation. For example, a John leaving in a Paris auxiliary of 22 people to take on a worldwide assignment will not be expatriated. He will sign a local contract in the country of his assignment. He will be considered 'internationally mobile' because it is most improbable that he will ever work again in France for LVMH. The skills he will have acquired abroad will mainly exceed the ability needed in France.
The international mobility policy is part of a career development scheme which requires the training of global manages on a limited basis. LVMH does not want to create a legion of expatriates who live out their careers outside their home base. Often in the same country maintaining their benefits, in such case expatriates are disconnected from their home base Moreover, such practices are not cost effective.
LVMH's appeal to global managers does not rely mainly on its mobility but salary but on its home based salary on which the mobility salary is calculated. This appeal is also greatly increased by the role of international mobility in career paths. International mobility is like an investment, the return on investment for the expatriate be the high future incomes generated by a promotion achieved through successful international assignments.
Benefits of career development and expatriate compensation practices to global managers and the company
The group does not aim to attract expatriates through high compensation levels. The group is striving for cost efficiency. It is aware that a good package is necessary, but that is not the main incentive to go abroad. Research on French expatriates shows that compensation is not the main motive for accepting an international assignment.
French managers' motives for expatriation
Desire for change
Personal experience in another culture
Increased prospects of future promotion
Desire to escape home country's economic and social environment
To distance one's self from certain personal problems
The basic balance-sheet approach for compensation package is based on the principle that expatriates should neither lose nor gain from their move. The group's C&B department has retained this approach as for its compensation package policy. The home-based salary will increase during the length of the assignment. The mobility salary is compared to local labour market averages in compatible countries. The group delineated two types of countries, the "compatible" countries, roughly including OECD countries, and the "incompatible" countries. The net salary is then "grossed up" by adding taxes and social contribution of the host country
Host-country gross salary in local currency
Home-based gross salary in parent-country currency
Net salary in local currency
Home-based net salary in parent-country currency
LVMH's C&B department has adapted the balance-sheet approach for its housing policy. A consultancy provides them with the housing market rate for the host country. LVMH's local correspondents verify this information. Potential expatriates may also have their own knowledge of market rates. As a rule, all the parties involved are honest, but they might not always understand each other perfectly. Once the local market rate is agreed on, LVMH will compensate the expatriate but he or she has to contribute 15% of his or her home-based gross salary.
LVMH works with consulting firms specialized in overseas Cost of Living Allowances (COLA) calculation. It uses a positive index to protect its employees from losing money when they move to a country with a higher cost of living and uses a negative index when they move to a country with lower cost of living. Here the balance-sheet approach is strictly applied. C&B corporate relies on the internal exchange rate used by the corporate finance department, in order to avoid any complaints from financial expatriates. The calculation of the cost-of-living differential is based on the assumption that all employees, regardless of their family situation, save 30% of their home-based net salary. The COLA is set at the time of departure.
C&B does not rely on outside consultancies to determine its incentive allowances. A Foreign Service premium is calculated by taking into account four criteria, namely, the environment (health facilities, pollution, and climate), personal security, social amenities and the everyday quality of life. International mobility is like an investment, the return on investment for the expatriate will be the high future incomes generated by a promotion achieved through successful international assignments. It also compensates for the possible loss of profit sharing benefits resulting schemes exists at the corporate level.
Expatriates are also entitled to additional benefits such as paid education for children, paid home-leaves, temporary housing for up to 30 days, loans for housing deposits or for purchasing a vehicle. Costs of moving are also covered. According to French labour laws, in addition to their 5-weeks' vacation. Some countries are far less advantageous in term of vacation time. The expatriate package is prepared at the corporate level but the final decision is left up to the companies.
Career development strategy through international mobility
The head of LVMH's C&B defines a global manager as a person with the training or the experience needed to manage a global business. He or she can perform from any place in the world and skills in managing multilingual and multicultural teams. To achieve such abilities, one most have worked in several countries so that his or her potential can be released, and noticed. The group believes that the best way to develop its employees is not formal training but mobility including vertical, horizontal and geographical moves within the organization. In order to facilitate mobility, employees' seniority is valued at the group level. International mobility is but one form of mobility, it accounts for one out of five moves.
The international mobility is a part of career development scheme which requires the training of global managers on a limited time basis. LVMH does not want to create a legion of expatriates who live out their careers outside their home base, often in the same country, maintaining their benefits. In such cases, expatriates are disconnected from their home base. Moreover, such practices are not cost effective. HR convinces a manager to become internationally mobile by offering him or her more difficult job with more freedom to perform his or her task than at home.
Most of LVMH's expatriates fit two profiles, one those sent out by the company HQ to control its subsidiaries and protect its interests and other those sent out to develop their skills. International mobility mainly aims at developing managers. Many expatriates are high potentials. International mobility is likely to entail a fundamental functional move. The head of HR development recalls the case of a French insurance expert in the fashion business unit who was sent to Romania to head a shoe factory. The group recognizes the need to take risks in order to develop high potentials. LVMH wants to put them in new situations to help them build up new skills and prove their determination.
International transfer policy
The International Transfer Department operates at the corporate level to provide support to the group's companies. It defines its role through five main functions:
Determining expatriate packages in order to guarantee internal equity between the group's various companies
Helping the group's companies address specific issues regarding international transfers
Providing information and advice on the evolution of external rules which govern international transfers, i.e. labour laws
Conducting , spreading and explaining LVMH's internal mobility policy
Monitoring of international mobility data.
Corporate HR's purpose is to define clear and simple principles that can be applied to all subsidiaries in all countries. In order to facilitate mobility within the group, LVMH is trying to harmonize its practices to allow for a more global workforce. The prime condition for achieving this goal is to make equity a priority, between both countries and employees. The group didn't choose to set up an international corporation which would centralize HRM and would dictate the compensation policy of the entire organization. The organization would like to avoid situations where line managers are confronted with the frustrations of expatriates earning less than their colleagues in the same position. As a result the manager could feel uneasy and would not know how to cope with such discrepancies. LVMH has chosen to maintain a decentralized organization where corporate HR defines general principles.
The group's corporate policy of international mobility is very recent. Before 1987, each company proceeded according to its own international transfer policy. The foundation of the corporate policy was laid out at the group's creation. The companies gradually adopted this policy which was eventually formalized in July 2000. Today, each company HR possesses a copy of the International Transfer Policy charter which covers all main aspects of international mobility. The charter does not focus on career development but rather on the formal procedures related to international mobility.
LVMH encompasses all the aspects pertaining to an expatriate package. It is meant to be used by company HR directors. Some technical annexes are for the use of the companies' C&B staffs so as to facilitate communication with the International Transfer Department and to provide answers to potential expatriates' concerns. Indirectly, this charter helps expatriates understand their package. The charter was first published as a paper document. It structures and formalizes past practise and tries to build a common policy. The International Transfer Department is now considering broadening its information supply to HR companies through the use of its intranet.
The International Transfer Department relies on the information flowing from LVMH's vast international networks to better determine the needs of HR decisions makers. International transfer experts can then provide a helpful framework of reference on which HR companies can rely on. As the number of international assignments rises, the group is considering its future needs. It is looking for ways to strengthen its expertise and its ability to assist companies' HR teams. HR structure of The Group has to cope with the growth of group and the rising number of expatriates. International transfer policy has a clear mandate to spread the group's key values and it is also a part of the process by which LVMH tries to define its future policy of career development
Case study of LVMH
Michael Armstrong 2006, A Handbook of Human Resource Management Practice, 10th Edition, Published by Cambridge University Press, pp 54,66,99-109,363-388
Melissa Brayer Hess and Patricia Linderman 2002, The Expert Expatriate, Published by Nicholas Brealey in association with Intercultural Press, pp 17-33