The newest entrants into the European Union offer multinational companies ample opportunity for growth. But HR professionals first must be aware of how business is conducted in these countries and prepare their assignees accordingly, before sending them on assignment there.

Flying the flag in the new accession states

Last May, with great fanfare, 10 Central and Eastern European (CEE) countries— Estonia, Latvia, Lithuania, Poland, the Czech Republic, the Slovak Republic, Hungary, Slovenia, Malta, and Cyprus—entered the European Union (EU).

Their integration into the European community has triggered pride and optimism in a region that emerged, after the fall of the Iron Curtain less than a generation ago, with little more than hazy memories of personal freedom, democracy, and private enterprise. While the region has enjoyed substantial economic development over the past 15 years, there is no question that EU accession has ushered in a bold new era.

It also has added more than 75 million people to the EU marketplace, providing significant buying power and increasing investment opportunity for the multinational companies already doing business in the region, as well as for companies evaluating their prospects in the much needed sectors of energy, telecommunication, manufacturing, environmental technology, and financial services, among others.

While the long-term benefits of accession may not be felt for another five years, a number of trade and foreign investments are already in place.

In Poland, according to Edgar Fulton, commercial counsellor at the US Embassy in Warsaw, the French have established a substantial leg-up in the telephone industry, and the English have made significant strides in the establishment of supermarkets. But there, as in the other new EU member nations, there is ample opportunity in the burgeoning automobile sector, as well as in real estate, entertainment, and tourism. Upgrading the region’s infrastructure is another priority, including roads, utilities, and sewage systems—and there is no shortage of American companies joining European and Asian investors in seeking a piece of the pie.

Transferees and business travellers to the CEE region may be pleasantly surprised at the available amenities and creature comforts. No longer considered 'hardship posts,' cities like Warsaw, Budapest, Riga, and Prague offer a wealth of theatre, fine dining, shopping and other cultural diversions—there is even world-class golfing in Estonia.

But these countries are latecomers to the table of international commerce, and as incoming investor companies navigate the intricacies of their labour codes, and customs regulations and processes, the human resource professionals supporting manpower needs should take a hard look at the people, policies, and strategies that need to be addressed for transferees, as well as locals.

6 Tips for maximizing success with people strategies in the CEE region: Hire a mix of motivated, high-potential locals. As a rule, younger workers are more educated, eager, and less affected by the wary, ex-Communist mentality. But older workers, while more reticent to “sell themselves” as candidates, can offer more experienced skills. Provide business briefings and workforce development programs, as well as language and cultural training for long- and short-term assignees. Select a supplier with extensive global resources and trainers fluent in CEE languages. Assign experienced and motivated transferees at management levels. These are the individuals who will develop your CEE staff and set the tone for operational procedures patterned after your business model and expectations. Search for a skilled local person to facilitate communication between home management and local staff. Charged with dual advocacy, this person must have a clear understanding of your business model in order to communicate with locals on such things as policy, benefits, security, and employee expectations. This person also will need to provide employee feedback and communicate with management about local staff concerns or questions. Consider the local mindset and experience when bringing HR policies into the CEE workplace. In terms of salary, for example, a longstanding former political tradition in the CEE has tended toward equal pay for equal responsibility regardless of individual production. Effective training and job development programs will help locals understand and support such concepts as performance appraisals and merit pay.

The newest EU nations share a common recent history shaped by strict, bureaucratic regimes, and for many of their citizens the notion of being 'European' means welcome liberation from the vicious patriotism of the past. Being part of the EU community provides them with an identity that is loose, free, and varied—flexible enough to include anyone who chooses to participate, and vague enough not to exclude anyone.

At the same time, these new EU nations have distinct and very different cultures, and each country is intent on carrying forward its own identity, mentality, and traditions. Lumping them together as simply “new Europeans” is a common and regrettable mistake, as I heard recently from Pawel Walentynowicz, a language and cultural trainer for Prudential Relocation in Eastern Europe.

Cultural misconceptions can lead to social and business gaffes that undermine productivity, Walentynowicz observed. Training for transferees to the region should be specifically targeted to help them understand national mindsets.

In Hungary, for example, it is customary for office workers to make personal calls from office telephones during the first hour of the working day. It is perfectly acceptable to use that time to call their children’s school, make appointments with dentists or hairdressers, or invite friends to dinner. A transferee manager unaware of the custom could alienate his staff in his first week on the job just by announcing a more restrictive policy!

Potential pitfalls abound for locals as well, whose understanding of American values and work habits is limited. A history of low salaries, long hours, and a shortage of jobs for skilled workers has given the average CEE worker a strong drive to do well in new positions. But companies seeking to effectively integrate their labour practices in the region should understand that globalization is greatly impacting economic and employment strategies in such areas as privacy, leave policy, discrimination issues, and pension. Effective orientation training at hiring can help locals develop in harmony with your business culture and mentality.

Another issue to be considered as the low cost of labour lures more multinationals to the new member countries is the changing attitude toward work hours.

Across the Union, improved working conditions are viewed as an agent of social progress, and the 35-hour workweek announced with such pomp in France in 1999 was widely seen as a major triumph for labour unions. But today, as globalization forces new economies, Siemens in Germany recently announced that its 170,000 employees will be required to work 40 hours. Continental Tires, Volkswagen, Thomas Cook, and others are going down the same road. Seat, the Spanish carmaker, is shifting part of its production from Spain to Slovenia, and the venerable Bosch-France is reducing payroll costs to survive.

Phenomena such as these have many Europeans—including the newest EU nations—wondering where the backsliding will lead. Clearly, this is an area where those setting 'people policy' in the new EU nations need to establish a clear precedent and the necessary means to communicate it.

For the most part, skilled 'head-hunters' and international recruiting companies are still scarce in the CEE region, so establishing effective HR strategies from the start are critical to developing a motivated and productive local workforce.

As American Chambers of Commerce in the CEE will confirm, technical and capital investments are streaming into the region as the EU’s newest member nations forge ahead with integration into the world economy. The spoils may be greatest for companies whose HR policies are transplanted with care and nurtured to take root in this largely untested foreign soil.

Develop a program for incorporating local custom into HR policies. Be mindful of traditional celebrations in many CEE countries, such as Women’s Day, Children’s Day, or the January celebration of Orthodox Christmas, and adapt policy whenever possible to accommodate the expectations of local staff.

November 2004

Jack Keogh is vice president, global workforce development, for Prudential Relocation, Trumball, CT. He can be reached at +1 203/268-3126 or email jack.keogh@prudential.com.

Reprinted with the permission of Worldwide ERC(R) from the November 2004 issue of MOBILITY