Benchmarking Regional Roles – What Works?

Author:
Warren Heaps – Birches Group LLC

More and more companies are consolidating operations into regional centers, using a base in one country to manage businesses in multiple markets. This makes good sense for several reasons:

  • Efficiency – regional offices eliminate duplicate resources and allow organizations to focus on customer-facing positions in smaller markets.
  • Expansion – a regional approach allows for gradual expansion into new markets, permitting “testing of the waters” before entering a market.
  • Local knowledge and expertise – staff in a regional center are usually familiar with more than one of the markets in the region, so can often help bridge market, language and cultural differences.

So regional offices sound like a great model for many companies. But how does a regional role impact compensation? This is a subject of considerable debate amongst compensation professionals.

Here’s my take:

Regional roles should be benchmarked against the market where they are located.  So, a regional role based in Kenya, focused on East Africa, should be compared to the Kenyan market. Now, I know some of you would suggest I’ve got this wrong — you think a blended approach using data from multiple countries would be better. Why?

A blended approach could result in a lower number since lower-paying, less developed markets come into the mix. In the East Africa example, would you include Ethiopia? Rwanda? Tanzania? Uganda? Burundi?  In Central America, would you look at data from all six countries for a position in El Salvador?

I believe a better approach is to use local market data for the regional office location. It’s usually the largest and most sophisticated market and typically has a more robust (but not necessarily the highest-paid) labor market. But how do you match regional jobs with local country roles? What if there are insufficient regional positions in your survey for a good measure of the market?

The simple solution is a regional “premium” which usually takes the form of an increased grade level. For example, in Kenya, if a country-based Brand Manager is an internal grade 8, a regional Brand Manager might be slotted as a grade 9. This reflects a premium for the regional role to compensate for added complexity, multiple market coverage, more customers, etc. You may debate if this is enough — that really depends on your business and how the jobs are actually structured.

This is a better approach because you end up using solid benchmarks to build your country market profile, and then overlay the regional jobs using mostly internal criteria. This makes sense because each organization structures their regional roles a bit differently, and none are really solid survey benchmarks.

Another point-of-view argues that a regional position competes for talent across many countries, so all of the countries are appropriate to consider in deciding on compensation levels. But, each country market is separate, impacted by multiple factors besides availability of talent. Consider standard of living, exchange rates, tax and social insurance differences and benefits, to name a few. It’s impossible to reconcile these factors into a truly blended regional pay rate, unless you are willing to just take the highest country as the starting point. Even if you could create a blend using multiple country data, there is a high likelihood that for more senior level professional roles, the sort that are usually regional, there won’t be clear benchmarks from every country of the regional markets used in your blend. So your blend will be compromised and variations will prevail for each position.

One more issue to think about is how to treat foreign nationals in a regional office. Most regional offices will recruit nationals from neighboring countries. Are these incumbents expats, even if there is no possible role for them in their home country? Many will have previously migrated to the regional office headquarters and are then hired; will you provide any special benefits? How should expenses such as schooling be treated, especially if languages are different (for example, a Uruguayan in Brazil, or a French national in Germany)?

My view is “it depends.”

It depends on each unique situation, and sometimes it will be necessary to provide something extra. Generally, though, I would discourage treatment of locally-hired foreigners as expats, and even for those recruited from the region, a modified local-plus approach makes more sense for the company.

By now, you are probably thinking that this stuff is getting really complex. Is there a better way that is easier to communicate and administer? There are many “better” ways – it depends on the unique needs of your organization. I bet most of them, however, are complex, because this is a complicated subject.

What is your experience managing pay for regional roles? What pitfalls have you encountered? What are your “better” ways? Please share in the comments.

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Warren Heaps

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7 responses to “Benchmarking Regional Roles – What Works?

  1. Pingback: Benchmarking Regional Roles – What Works? - International HR Forum - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. I agree with Warren that the pay should be related to the appropriate grade in the country from where the regional service is performed. The job should be properly graded based on the facts of scope, accountability etc and it may, or may not, be at a higher level than a peer job doing the same function in the domestic environment.
    I have seen several cases in, for example Kenya which is a key hub location, where a regional HR manager says they should have more more money because of the regional nature whereas the domestic HR manager actually managers a bigger unit.
    To add further possibilities the hub location could be where the incumbent usually works rather than a defined central entity.

  3. Nikki Goodstein

    It ‘depends’ is an accurate assessment as it is important to try to predict the future a bit and understand what might be next for the incumbent before determining current pay relative to expatriate allowances.

    Regarding regional pay, I once developed a pricing methodology that was based on local market but scope data was determined to compare complexity across regions…as not all regions are the same – so that regional roles across the company had a consistent measurable approach. The general job requirements were the same, but due to measures of complexity, the outcome resulted in 3 different grade levels. Complexity factors took into consideration basic scope data like revenue but also considered infrastructure, number of customers, types of customers, market opportunity….we even looked at crime and weather.

    • Thanks for your insights, Nikki. I wonder how crime is taken into account for your model, but overall, I think a cross-regional comparison is an excellent approach to ensure consistency within the organization.

      Warren

  4. I am challenging the idea of surveying the local regional office pay rates, since the job scope and responsibilities is entirely different. I think that if we are using a proper job evaluation methodology, the regional jobs can be weighted high in the “Accountability and problems solving” factor for example.

    I experience in my company a different approach where the expat pay rate is determined based on his/her home country. Did you encounter such model before?

    • Suha,

      You are exactly right, and this is my point. Regional roles are too unique to serve as benchmarks in a survey. Instead, use your internal JE process to assign the proper internal band to the role, and then apply your salary structure for that band to determine pay levels.

      Warren