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Global Inflation Tops Concerns Among U.S. Multinationals
14 October 2008:
WASHINGTON, Oct. 14 /PRNewswire-FirstCall/ -- While many HR functions are maintaining the status quo during these challenging market conditions, a large number are still committed to moving work offshore, according to a survey of 66 large multinationals by Watson Wyatt, a leading global consulting firm. The survey, which was conducted in July and August 2008, also finds that multinationals are likely to reduce or reorganize their global HR infrastructure.
"Even as the credit crisis grows, the core business strategy for multinationals remains largely intact -- they are focusing on areas in which they have direct control and on actions that have immediate impact," said Bob Wesselkamper, director of international consulting at Watson Wyatt.
To reduce costs and manage profitability, more than four in 10 U.S. multinationals (42 percent) are likely to offshore more production to lower-cost regions, and approximately a quarter (26 percent) plan to reduce HR infrastructure costs at headquarters in the next 12 months. Many also plan to reorganize their HR functions, but in different ways -- 24 percent plan to regionalize and 25 percent plan to globally centralize. Only 17 percent of surveyed multinationals are likely to reduce benefit levels in the United States, while even fewer (9 percent) plan to reduce benefit levels abroad.
Multinationals Are Turning to Offshoring to Reduce Costs During the Economic Slowdown
% of U.S. Multinationals Action Likely to Take:
- Offshore production 42%
- Reduce HR infrastructure costs at headquarters 26%
- Globally centralize benefit staff 25%
- Regionalize benefit staff 24%
- Reduce benefit administration costs through outsourcing 22%
- Reduce benefit levels in the United States 17%
- Reduce benefit levels abroad 9%
- Expand production in the United States 6%
Nearly two-thirds (67 percent) of multinationals list pressure from global inflation as a top concern relating to people costs. Other sources of unease include a global economic slowdown (56 percent) and a weak U.S. dollar (48 percent).
"The U.S. government's intervention will help, but there are still a number of factors at play," said Wesselkamper. "The challenge for multinationals is to prioritize actions to alleviate pressures in the short term without compromising the long-term focus of HR."
For more information on the Watson Wyatt 2008 Global Market Pressures report
Source: Watson Wyatt
