In the first of three posts, Howard Wallack writes about a SHRM delegation visit to Cuba.
President Obama and Cuban President Raul Castro announced normalization of diplomatic relations between the two countries last December, and, at a flag-raising ceremony in mid-August, the U.S. Embassy in Havana was reopened. In light of this incipient opening of Cuba for Americans, a SHRM-sponsored executive HR delegation visited Cuba this month to investigate how non-U.S. companies already operating on the island manage, their HR challenges and the prospects for the future. The group of 14 was made up of HR and non-profit leaders.
Our intensive five-day agenda was organized by To Cuba Now, an authorized and licensed educational exchange provider. The agenda included meetings with legal experts on employment and foreign investment law, HR practitioners from governmental and private-sector firms, representatives of foreign companies operating in the country, a University of Havana expert on U.S.-Cuba bilateral and economic relations, an architect working on urban planning and restoration of Old Havana, and U.S. Embassy staff.
What we learned about business operations in Cuba:
Business opportunities aren’t as imminent as we hoped, but are on the horizon.
Foreign companies can operate in Cuba, and a year ago the government announced priority sectors for foreign investment. According to the Portfolio of Opportunities for Foreign Investment, allowable structures include joint ventures, ‘international economic association contracts,” and, in specially approved cases, enterprises with 100 percent foreign capital. Priority industries include agriculture, tourism, energy, mining, transportation, health and biotechnology.
The Cuban labor code was updated in mid-2014. The Cuban government recognizes work as both a right and a social duty of every citizen with fundamental concepts of equal work, equality, nondiscrimination, prohibition of child labor and protection of youth, guaranteed work periods, rest periods, and paid vacation, health and social security.
Hiring in Cuba by foreign firms must be done through a state-run hiring agency. Non-Cuban companies and organizations can conduct their own recruitment and selection efforts, but a list of their preferred hires must be submitted to the appropriate governmental hiring agency for review and approval before contracting. People we met with had mixed experiences, sometimes positive and other times arbitrarily administered, with the approvals often delayed or withheld and without explanation. One employer shared that he waited a year for a response, and all the candidates were rejected.
Once hired, employees are paid wages at levels set by the state for their job category, though pay-for-performance bonuses above the required levels are now being permitted. One international hotel chain shared that they use the results of monthly customer service surveys and feedback received on employees’ results to determine incentives for performance.
Even with the restrictive employment circumstances, HR professionals in Cuba face very similar concerns and issues for the future that we face in the United States. Staffing, competencies, compensation, motivation and engagement are all in play, albeit from a decidedly different point of view and skill levels.
Entrepreneurship is rising fast and permitted in 201 different activities by the government. The category of self-employed workers, known locally as cuentapropistas, is growing fast and now estimated to be approaching 500,000 individuals. Among the job categories now allowed
“non-state” activity are restaurant owners (paladares), barbers and hairdressers, electricians, artisans, carpenters, locksmiths, animal groomers and trainers, manicurists, messengers, music and art instructors, various classes of repairers, translators, room rental, drivers, and more. As a result, at least in Havana, there is an entrepreneurial buzz.
Infrastructure is poor and in need of immense investment. Power outages occurred frequently in our hotel, and the stock of existing real estate is in poor condition and short supply.
Next: In the next installment, Howard Wallack writes about general impressions of Cuba.
Howard Wallack, SHRM-SCP, is director, global business development at SHRM.