Taking Corporate Programs Global – Your Mileage May Vary!

Author:
Jacque Vilet – Vilet International

Companies these days are always striving for global consistency, and one of the ways to achieve it is to use the same corporate programs around the world.  But such an approach can sometimes present unexpected challenges.  I would like to share some of my experiences in this regard, to get you thinking about all the possible ramifications in rolling out corporate programs in multiple countries, and how each of those countries may be impacted.

Stock Plans in the Philippines

My company decided to offer our corporate Employee Stock Purchase Program (ESSP) to all employees worldwide.   The move was well received by the employees in the Philippines who had been upset that prior to this, only employees in the headquarters country could participate.

Employees could agree to have up to 10% of their pay deducted each payday and pooled in a special account.   Semi-annually, stock would be purchased on the open market at the fair market price.   Stock certificates would be given to employees based on the amount of money they had put into the program.  However, upon closer inspection, we became aware of some unexpected results.

For example, a production operator who made 130,000 pesos per year participating at the 10% level, would receive only 4 shares per year at a market price of $65 per share of stock.   Because of their low pay, many did not even participate at the 10% level.  Many only received 1 or 2 shares.  What corporate had perceived as a benefit, and employees had said they wanted, actually turned into a source of discontent among employees.  Employees did not fully understand what the program would net for them.   They only saw that employees in the headquarters country had a benefit  that they didn’t have.

In addition to employees perceiving no benefit, corporate headquarters ended up paying for administration for a program that failed.  This is a good example of not clearly thinking through the possible impact of taking a program global.

Incentives in Japan

The Japanese culture is very group-oriented, and  it is contrary the Japanese culture for an employee to be singled out for recognition or praise.   They believe that groups should receive recognition, not individuals.

The company that I worked for decided that all sales commission plans would be designed the same way worldwide.   All design features of the plan were exactly alike.   The commission payout was based on each individual’s achievement of his/her sales goal.  Suggestions were made by the Managing Director of Japan that paying commissions to individual salespeople was against the cultural norm.   Regardless, the plan stood as designed by corporate.

About two years later, I happened to be in Japan talking to the Managing Director.   I remembered that the Japanese salespeople had been unhappy about individual commission payouts and asked him whether the salespeople had adapted to the concept of individual sales commissions.   He thought a moment and then rather sheepishly told me that they had found their own way of dealing with the issue.   When the commissions were paid, all of the money was put into a pool and then divided equally and given to everyone in the office.   In some cases, employees find ways around corporate dictates.  I never told anyone back at corporate and secretly congratulated them for their ingenuity!    They technically abided by the plan and yet dealt with the actual payout in a way that did not violate their culture.

Does anyone have examples of corporate programs gone wrong when rolled out globally?   Please share them in the comments section below.  We all learn from the experience of others.

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10 Responses to Taking Corporate Programs Global – Your Mileage May Vary!

  1. Pingback: Taking Corporate Programs Global – Your Mileage May Vary! - International HR Forum - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. William Cone

    Everyday…

    I still find the most common attempt is by US centric executives who want to offer a 401(k) globally. Once past the explanation that the term ‘401(k)’ refers to a US tax code and is thus irrelevant outside of the US, the push then becomes to place a Defined Contribution (DC) retirement scheme in every country, NO MATTER WHAT. In many countries, regulatory structures, market structures, or simply a lack of understanding within the employee population and even HR make a mandated DC plan difficult and sometimes foolish to implement. Based on experience, if a ‘global’ retirement scheme does emerge, I believe it will look more like the ‘hybrid’ DC plan that are common in parts of Europe whereby the company and/or insurer ‘guarantee’ a base rate of return/benefit and then offer investments choice to potentially increase that amount.

    Outside of retirement plans, there does seem to be some traction with global ‘wellness’ programs as nearly every country is forced to deal with skyrocketing medical costs, either within government sponsored or company sponsored plans. Wellness programs are a potential tool. Of course, there are major barriers in place, too, such as data privacy rules in Europe and cultural misconceptions in other locations.

  3. Hi William —- I agree with you totally! A good friend of my mine that used to work in HR at IBM told me that when IBM moved overseas (way back in the 50′s???) they plopped in true defined benefit pensions everywhere!! They were totally unheard of. Of course 30 years later they were trying like heck to get out of them. Just another example of U.S. centric thinking.

    Correct — wellness programs are gaining traction. But you have to be careful how you roll them out as well. I have a funny story to tell about global wellness plans. Maybe I will save that for a later article!

  4. Now a days companies always striving for global consistency, and base rate of return/benefit and investments market structures, understanding within the employee population and even HR make implement.
    __________________
    Monica.

  5. Thank you Monica for your input.

  6. One of the great challenges in my career has been convincing U.S. executives that global consistency in benefits programs doesn’t work. Statutory and competitive supplemental benefits vary widely, and what works in one country is not always appropriate, competitive, or perhaps even doable in another. Generally, my advice is that the company determine the level of competitiveness it desires, and then to design programs locally that meet that standard, understanding that components and costs (in U.S. dollars) will differ considerably.

  7. William Cone

    I agree.

    With US centric business leaders, I usually ask them is their company an ‘employer of choice’ or a ‘low cost provider.’ Of course, it is almost always somewhere in between; but, the discussion point is easier to grasp and then can be driven down to what does that vision mean in country X, such as being equal to 75% of the market for benefit program offerings.

    Of course, before that discussion can take place, the company must have a concise and well executed global governance structure that supports the vision, ensure transparency between executive management and the country leaders, and provides the structure needed to review and approve new or revised benefit program offerings. The is especially important today with ‘wellness’ programs, pension reform in Europe, and the continued push into ‘lower cost’ countries.

  8. I agree Susan and William. One of the things that I have tried to implement as well is determining what the philosophy on benefits is at any given company aside from market positon. There are some things that a company really believes and those should be incorporated in plan design in local country design. Examples might include: company believes strongly in life insurance, employee shared resonsibility of cost of medical. Of course the degree of cost sharing would vary and in some countries would have to be eased in gradually i.e. India. Another example might be wellness, but leaving the type of wellness program up to each country. The country I have most difficulty in explaining to top management is India. Historically things like housing allowance, tuition allowance, etc. have been viewed as part of an employee’s total salary base. In the U.S. those things are viewed as benefits.

    Agree, Susan — communication with execs on any HR program/issue outside the U.S. is very difficult. Some don’t even know that “employment at will” is unique to the U.S.

  9. I’ve seen a corporate employee referral bonus implemented globally (without involving a Compensation specialist…) at a fix rate of 2500 EUR. Although the idea was good, problem was we had employees in low cost countries (like Indonesia and Philippines). Shortly after the rollout, this went horribly wrong (for obvious reasons). We slowly began getting our senior management to start thinking globally, but acting locally.

  10. Hello — yes I agree. Corporate rolls out a program with a fixed USD amount as a reward. Ends up being about 2% of salary in Germany and 50% of salary in the Philippines!!! Good intentions gone bad!! Management means well — they just need help thinking through the details.