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Red Flag for Global Recognition Programs

bio_400x400 Author:
Chuck Csizmar – CMC Compensation Group

When designing programs to recognize and reward an employee’s extraordinary achievements it’s important to understand the cultural implications of these programs.   Companies with a truly global operating mindset, vs. domestic-oriented organizations with international operations, will take into account national and cultural differences that distinguish its widespread employee populations.

One size rarely fits all.

You might think that the positive aspects of employee recognition programs are a universally accepted principle, but that’s only partially correct.  Important differences exist.  In some cultures / national identities the role of the team is such a core element of employee identification that seeking out an individual contributor for recognition would not be a welcome practice.  Some employees might be reluctant to step forward, or to be pushed into the spotlight.

In other countries you will find that the perceived value of cash as a recognition award varies a great deal.

Case study

A former employer of mine once implemented a global Spot Award program for its worldwide employees – without including their international HR community in the planning discussions.  Finalized program elements and procedures covered employees in over 20 countries in exactly the same fashion.  The premise was to provide immediate (read that, fast) recognition and financial rewards (Spot Awards) for those employees who demonstrated performance above and beyond their normal job roles.  Nominations for awards would come from an employee’s manager, though employees could recommend co-workers as well.

While the program was deemed a success in the US (though defined by only the dollars spent), it was much less successful elsewhere among the company’s far-flung international operations.

Lessons Learned

The first problem was that Managers outside the US placed a much more conservative financial value on so-called “extraordinary” employee contributions.  Or put another way, the US Managers were more generous in their payment awards than elsewhere.  The result was that the cash payments on a per-employee basis were widely skewed to the US employee.  Notwithstanding the vagaries of the various currency exchanges, the international offices did not spend their allotted recognition reward monies as frequently or as generously as their US counterparts.

I recall one scenario where a US employee received thousands of dollars for a particular project effort, while their European counterpart was given a non-cash award (recognition dinner).  This created more than a few awkward moments when the two employees shared experiences.

The second challenge was that many international employees did not want to be individually spotlighted by the recognition program.  They were willing to receive the award, but would rather the recognition be confidential.  Given that Corporate had planned an internal communications campaign to highlight individual award winners, that reluctance proved quite a hindrance.

Compounding the preference for anonymity was the desire for team over personal awards, as individual employees proved resistant to receiving the planned fanfare or preferential treatment – especially in front of their co-workers (team members).

The bottom line was that the recognition and reward program recognized a smaller than anticipated number of non-US employees, less reward money was spent per international employee, and Corporate Communications was hard pressed to find international employees amenable to being highlighted for the program.  Not exactly what the program designers had intended.

Corrective action

The answer seems straightforward, does it not?  If a global program is to affect all employees, then possible national or cultural distinctions among groups should be addressed, well in advance.  However, that would mean including representatives from those groups in the design and communication phases of the project.  Such a simple step seems a difficult one to take for many corporate plan designers.  Why?

When they have the bit between their teeth developing a program that affects the majority of employees, management is often reluctant to change course to include the differing sensitivities of small populations, especially if those populations do not speak with one voice.  What they prefer to do is have local representatives “tweak” the round peg into the square hole.

How does that work for you?


More About Chuck:

10 Rules of the Road for Your Expatriate Program – Part II

bio_400x400 Author:
Chuck Csizmar – CMC Compensation Group

Last week I posted the first five of ten “Rules of the Road” for managing your expatriate program.  I hope you enjoyed reading them.  In this post, I’ve included the five remaining rules.  Enjoy!

Rule #6: Always have a Backup Candidate
It is very important to avoid a scenario where management believes that only one person is capable of handling the assignment.  If all your plans are dependent upon one candidate, and your choice discovers this (they usually do), the assignment from that point will likely become more contentious, problematic, internally disruptive and ultimately more expensive.  You will have lost leverage when trying to apply Company policies, demands for exceptional treatment will increase, costs will rise as a result and the likelihood of equity issues with other employees will increase.

Having a second choice will enable you to more easily finalize an equitable package of terms and conditions, test the candidates’ genuine interest in the overseas assignment and lower inflated egos down to earth.

Rule #7: Do Not Play “Let’s Make a Deal”
Everyone tends to lose on this slippery slope.  The expatriate community is a small group that will eventually learn of any special deals someone received that others did not.  While the expatriate policy document should provide a “safety valve” for approved discretionary exceptions covering extraordinary circumstances, be mindful of creating precedents where the sole reason is to placate an employee (or their spouse).  This problem can be a major dissatisfier for the rest of your community.  Explore cost sharing and trade-offs with the expatriate to mitigate the perception of inequitable treatment.

Certain employees, especially those with a sales background or like temperament, may view many aspects of the assignment terms and conditions as negotiable, simply because it is in their nature to question or challenge what they consider is the Company’s “initial offer”.

A word of caution:  if the employee considers the international assignment less as a wonderful career opportunity and more as a “favor” to the Company, the warning signs should be posted that this might not be a good match.

Rule #8: Have a “Hand-Holder” in Place
Another key to a successful assignment is to provide a ‘go-to” person in the host country for the myriad questions that will crop up as soon as the assignee arrives.  Set up a local contact point for host country issues, expatriate experiences and administrative fulfillment of the assignment terms.  Insist that the assignee utilize this person, not their manager, co-workers or even well-intentioned HR people unfamiliar with the expatriate program.  This go-to person should have the authority to make decisions, to “handle” whatever the question might be.

While this sounds like an easy step do not assume that anyone would automatically take this task to heart.  Left to their own devices, host country employees often find it difficult to invest the time to help assignees understand local business conditions and culture.  Thus you need to make it someone’s responsibility.

Likewise there should be a contact person in the home country as well, a designated individual prepared to handle policy interpretations, provide advice on navigating procedures and assuming responsibility for the home administration of the assignment terms.

Rule #9: Do Not Forget That They’re out There
A successful assignment requires constant attention from both the home and host country contacts.  Communication should be frequent, as should the “check-up” calls to gauge the assignee’s temperament.  For example, does the assignee understand the COLA calculations, have any payroll or currency exchange issues arisen, is the family acclimating well, are there issues the assignee would like to discuss?  A key source of dissatisfaction for assignees and their families is a feeling of being “out in the provinces” and therefore out of touch with what is happening back at the office they have left.  Make every effort to ensure that they do not feel marginalized, taken for granted or forgotten.

Make sure the assignee has a Mentor (as compared to a hand holder) back in the home country as well, a Senior Management-level individual charged with representing the assignee’s career interests during the assignment.  This person should schedule periodic career discussions with the assignee.

Rule #10: Have an Exit Strategy
All too frequently companies are at a loss as to what to do with expatriates who have successfully completed their assignments.  It is not uncommon for assignees to leave the Company upon their return from overseas or within the following year, because either no suitable position was available in the home country or what was available was a diminished or less visible role.

After incurring the huge expense for an employee to develop deeper and broader competencies on the international stage, it is a wise business practice to pay close attention as to how best to utilize that increasingly marketable (and therefore valuable) talent when the assignment ends.  Without due care and planning the career cycle of an assignee is left as an afterthought, one that usually crops up late in the assignment;  meanwhile the assignee has been worried (and thus distracted) for a much longer period of time.

While there are no guarantees that future positions will be available back home for employees presently working overseas, the international assignment letter should at least state that the Company will attempt to secure a “mutually agreeable position of similar stature” upon completion of the assignment.  It is in the best interest of the Company and the assignee to carefully plan for a successful repatriation.

Follow though
Well, that’s my list of ten rules.  The road ahead has curves, dips and more than its share of bumps and potholes.  However, if you manage to keep these sign posts in mind (commit them to memory, post them on the wall, send and resend them to managers), the experience does not have to be an endurance course for all concerned.

You will need to keep at it though (persistence is its own reward), because there is no pill or “Easy Button” that will magically ease the journey.  There is no cure for the realities that expatriate assignments will always be costly, procedurally complex and a personal as well as professional risk for those involved.  But by adhering to your own “rules of the road” your expatriate program can reap significant benefits: lower assignment costs, business objectives achieved, satisfied employees and host management, retained and developed talent and ultimately greater overall business success.  It can be done.

More rules?
Do you have rule that I did not include in my top ten?  Please, leave a comment and share your insights with the community.

More About Chuck:

10 Rules of the Road for Your Expatriate Program: Part I

bio_400x400 Author:
Chuck Csizmar – CMC Compensation Group

Even a properly handled international  assignment is a complex beast; the procedural morass that confuses as well as frustrates, the emotional stress placed on the assignee and family, the myriad details that could go wrong (and often do), and dealing with career risks inherent with being “out there”.  And, to top things off, the entire enterprise is extremely expensive!

Even in today’s economy, though, the need to send employees overseas remains strong, and for good reasons – skill development, setting up a new business venture, organizing an acquisition, transferring knowledge through training and development, filling a skills gap, etc.  It is more important than ever to ensure a successful assignment, since failure is very costly and potentially damaging to the business.

To help you manage your assignments successfully, I’ve put together a list of ten “rules of the road” to keep your expatriate program running smoothly.  The first five rules follow below.  Next week, I will post the other five (so watch for them!).

Rule #1 – Have a Policy and Use It
It is tempting for companies new to the international assignment experience to delay the development of written policies and procedures.  With a thought of “we only have one or two people overseas” they deal one-on-one with individual employee situations and make decisions on the spur of the moment that affect only that one assignee.  Such a practice ignores the advantage of standardized practice, and sows the seeds for future problems.

Documentation establishes standard practice, provides a managerial consistency that deflects exception requests and restricts (but does not eliminate) the “everything is negotiable” mentality.  No matter the size of your expatriate program, making ad-hoc or one-off special arrangements without broader consideration of other existing or future expatriates is always a recipe for trouble.  While attempting to placate an assignee, keep an eye that your decision does not aggravate others by creating a perceived atmosphere of special treatment.

Establishing and requiring adherence to an international assignment policy will also help the company lessen the impact of so-called “stealth expatriates”,  employees working in another country without being part of the formal mobility program.  Oftentimes, well intentioned managers with a get-it-done attitude often send people abroad without going through formal channels.  This casual approach to a complex issue usually results in a high rate of assignment failure, as well as additional complexities and the risk of costly penalties (i.e., compliance with tax and visa regulations).

Rule #2 – Require a Business Case to Justify the Expense
Your procedures should require that requesting managers be informed of all projected costs associated with an assignment before an approval will be considered.  Oftentimes a break down of these costs is buried among several budgetary line items, not readily evident to the casual observer.  An inexperienced manager is usually unaware of the true costs involved.  As a rule of thumb, an assignee with family will cost about 3 times salary per year, while an individual assignee would cost 2 times.  You should require the requesting manager to sign off on the expense projections – making their approval visible within the organization.

The business case should also demonstrate why an assignee is required (vs. a local employee).  What is the operational advantage for the business and how success would be measured?  Does the proposal show how the expense will ultimately deliver an appropriate ROI?  Soft answers such as “developing talent” and “global exposure” should rarely be included in the top tier of business justification, unless cost considerations have been relegated to a lower level of importance.

Rule #3 – Stick to Your Approval Chain of Command
Establish a clear hierarchy of who is required to approve both the assignment itself (not simply who supports the request) and the associated terms and conditions.   You should operate on the presumption that managers, especially those with a tendency to use “stealth expatriates”, should repeatedly be made aware of who this “gatekeeper” is and what the requirements are for approval.  A firm hand here will avoid repeated requests searching for someone to say “yes”, while providing an opportunity for the company to speak with one voice.

You should be cautious when dealing with demanding senior managers who support the request but in fact lack the authority to approve the assignment.  If not forced back to the Corporate Gatekeeper for adjudication and confirmation, these senior managers could potentially disrupt the process by their inadequate understanding of particulars, by confusing and aggravating the candidate (or family) with mixed messages and by agreeing to terms and conditions for which they are not authorized.

Note: Once an unauthorized  management representative commits assignment terms and conditions to an expatriate candidate, it will be difficult to correct any errors without compromising the initial goodwill established with that employee.

Rule #4 – Consider Non-Traditional Assignments
While the traditional expatriate assignment typically lasts from one to three years or more, evidence is growing that companies are increasingly using shorter assignments as a means to reduce costs, attract more candidates and reduce the failure rate.

Obviously, the shorter the assignment the lower the ultimate expense will be (taxes, allowances, gross ups, etc.).  However, shorter assignments are also more attractive to candidates who would otherwise have passed on being overseas for several years, usually for family or career reasons.  This opens up a new pool of potential candidates as well.

If the company’s goal can be defined in narrower terms (knowledge transfer, specific projects, filling a skill gap, etc.) a shorter assignment, or even a series of extended business trips might be a more reasonable strategy for the business case.

Rule #5 – Select Employees Who Will Become Good Ambassadors
Whatever the technical capabilities of the person you select for an overseas assignment it is critical that they (and their families) have the right persona for the role they will play as ad-hoc “ambassadors” for your company.  While capability of performing the assigned role is paramount, assignment failure often occurs when the assignee or members of their family are unable to adjust to living in a foreign environment.  Having a flexible nature, as well as at least a taste for adventure will go a long way in making everyone comfortable.

The assignee should live / reside as their local counterparts do, not as the expatriate is accustomed back home (style and size of house, neighborhood, distance to work, etc.).  Cultural sensitivities should be considered, so the assignee may “fit” in with like jobholders.  Your intent should not be to replace an expatriate’s home country style of living.  Working relationships sour quickly if an expatriate Manager or Director lives markedly better than the local Vice President.

Provide cultural orientations and if necessary language lessons for all family members.  Institutional differences (banking, medical care, driving, local bureaucracies, etc.) should be explained in advance.  Surprises should be minimized, as they are usually negative experiences.

Note: Simply because the locals speak English is not a reason to avoid properly preparing the expatriate for the overseas experience.

In Part II of this article, in my next post, I will discuss the remaining five rules of the road for an effective international assignment program.

More About Chuck:

How Effective Are Your International Pay Programs?

Chuck Csizmar – CMC Compensation Group

Has anyone ever asked you this question?   Did you have an answer?

To clarify, the question is whether your company’s international pay plans and practices are operating the way they were intended, and whether you are satisfied with what they have delivered.

When I ask a client this question, the typical reaction is a deer-in-the-headlights return stare, followed by a puzzled frown, perhaps a cough, then – maybe – some mumbled explanation of their employee turnover  situation.

In other words, they don’t have a clue.

A Huge Missed Opportunity

Why is this question important?  The client’s reaction would be humorous if there wasn’t a cash register ringing in the background.   If the method by which you reward your employees for their performance is not working, in any country, your company is wasting money like a silently dripping faucet – or worse.   This money is draining directly from your bottom line and your program flaws are likely also causing resentment among your employees.   Such a waste is also an avoidable expense, one that you can control.  Squandering payroll dollars and upsetting your employees is a dangerous and expensive combination for any organization.

If you consider that upward of 40% to 60% of your revenue goes right back out the door in some form of employee pay (excluding benefits), then the magnitude of your vulnerability should hit home.

Management time, though is too often misdirected by worrying about whether next year’s average pay increase will be 2.5%, 3.0% or 3.5% of payroll – or whether distinctions should be made on a country-specific basis.   However, the 800 lb. gorilla in the room is not the increase percentage, but the payroll itself – that huge amount of fixed and variable pay expense already budgeted.  That is the figure that should receive the lion’s share of attention.

What do you mean by an “Effective Program”?
Each Compensation program that you have in place (or set of practices) was likely designed or intended to perform a certain function.  For example:

  • Salary Structure or pay hierarchy – to offer the opportunity to earn competitive base pay
  • Incentive Plan – to reward employees for achieving job-related objectives above and beyond their normal duties
  • New Hire / Promotional Guidelines – to staff the company with the right caliber of employees
  • Pay-For-Performance – to recognize and reward higher achieving performers for their contribution to the company

How do you know if you need to be concerned about these programs / practices?  There are signs for those prepared to look.   Some examples:

  • Poor documentation of job responsibilities:  No one likes to write job descriptions, including me, but their absence, antiquity or inaccuracy can create an environment of blurred responsibilities, grade and title inflation and over staffing.  The direct result is an increase in fixed costs.
  • Absence of a Procedures Manual:  You can not expect managers to follow a consistent company process when they have little or no guidance.   They will fill the vacuum with chaos and damaging precedents, each of which is an expensive end product.
  • Dashboard metrics not in place:  To understand success you need to measure it.  If you haven’t established criteria to track the who, how and why of your compensation programs, then you won’t be able to understand whether your programs deliver desired results or not.
  • One size fits all:  Where the company has decided that each national program should look like the one at headquarters (different country), for ease of administration and communications
  • Poor visibility of pay decisions:  Proper rewarding of good performance should be a celebration in the open sunshine, not hidden in a closet hoping the boss won’t notice.  If a manager can grant pay increases without at least one additional level of signature, then the opportunity for improper (wrong amount, wrong employees, wrong reason) pay increases will flourish.
  • Toothless Performance Appraisal Process:  If your process of rewarding employees focuses more on activity than results, if it does not measure performance, if objectives / work routines are not tied to business needs, or if the appraisal document is viewed as an administrative headache, chances are the monies coming out of that process are a) providing little motivation for future performance, and b) are viewed more as delayed compensation than true pay-for-performance.
  • Limited Reward Differentials:  If the reward difference between a high performing employee and “Joe Average” is less than 2% you’re better off to consider across-the-board increases rather than go through the painful process of actually assessing individual performance.   If your plan essentially rewards everyone (is that really pay-for-performance?), then you’re not going to have enough money to properly reward those most critical to business success.  And who do you think will leave in a huff?  Not Joe Average, that’s for sure.
  • Weak Budgetary Controls:  Is there anyone assigned to watch the compensation purse strings in your organization?   Someone to say “that’s too much” or “you can’t give that large an increase”?  Someone perhaps to limit the growth of fixed costs?  Absent the presence of limiting factors (“controls” is such a harsh word) your costs will rise, as undisciplined managers in an unstructured environment will increase pay decisions in order to be liked by their employees.

Steps to take now
So what can you do?   You can find out.   You can ask questions.   You know the warning signs now, so avoid complacency and do not simply wait for the fire alarms to ring.  Become an advocate for systemic change, for policies and processes that improve the way your company rewards its employees.

By the way, have your internal audit folks ever scheduled your compensation programs for a checkup?  If so, it’s usually the HR documentation of processes that get a look, not whether those processes are effective or are even damaging the business.  They tend to look in the wrong direction.

Will a comprehensive review of your pay programs ensure that you will save money?  Improve your pay programs?  Improve retention and morale?  Unfortunately, there is an “it depends” answer to those questions.  The review will highlight your weaknesses and vulnerabilities, and show you the pathway to efficiency, cost savings and the effective use of your payroll dollars.  But by itself a comprehensive review can do little more than show you the way.   To reap success from your study, Management must be willing to make critical decisions that differentiate pay on the basis of employee value and performance.

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The Expatriate Agreement – Yes or No?

Chuck Csizmar – CMC Compensation Group

Recently I was asked by a US client to explain why I recommended that they create an international assignment letter for their expatriate employees.  After all, they only had a few employees overseas and previously had resisted the call to what they described as “playing the lawyer card”.  They felt that management could effectively deal with the circumstances of each individual expatriate situation as matters came up, and were reluctant to lose what they considered their prerogative – to set terms and conditions as they thought appropriate for each employee.

This is not the first time I have been asked that question, as it is not unusual for small companies or non-profit organizations to send an employee overseas with little more than a verbal agreement and a series of vague assurances.  These organizations wish to avoid bureaucracy and move quickly.  However, in most cases these casual and hurried arrangements have proved painful and expensive experiences for all concerned, largely because:

  • The shock employees and their families faced when they came to grips with actually living in a foreign country, vs. simply visiting.  The local realities of daily life, combined with cultural differences compared against “back home” became quite a wake-up call when they were no longer insulated by the transitory nature of a business trip.
  • The constancy of unforeseen and confusing localized situations arising (medical claims, driving licenses, bank accounts, schooling, language, etc.) proved such a frustrating distraction for the employee that they often lost focus on the job – the reason they were there in the first place.
  • Relationships with headquarters suffered as the employee asked for more and more consideration (increased payments) to redress what they considered coverage gaps in their terms & conditions.  The trust element was weakened as employees felt they were being short-changed by management.

Coming from an environment where every expatriate was given a detailed assignment letter “before” getting on the plane, I was at first taken aback by the client’s question – because the absence of mutually agreed terms and conditions is almost certain to eventually prove very expensive to companies trying to take a “short cut.”

Here are some reasons why providing an assignment letter is a good idea:

  • Protection:  Like any contract, confirming the terms & conditions of the assignment protect both parties from misunderstandings, misinterpretations and assumptions – before expenses are incurred.
  • Clarity:  Accepting an overseas assignment is a major step for any employee, as well as for their affected family members.  The more you are able to clarify exactly what the terms and conditions of the assignment are, the more likely you are to ensure a smooth assignment for all parties involved.
  • Cost control:  Defines those expenses that the company will pay for and conversely what they will not pay.  An agreement here will mitigate issues rising once the expatriate is on the ground in the host country.  Concerns raised once the assignee is relocated usually result in increased company costs, as negotiating leverage is lost and the company feels compelled to avoid alienating a very expensive investment.
  • Standardization:  Your international policy, whether written or only a matter of case law precedent, should strive to treat all expatriates in the same fashion.  Unique circumstances do occur but the basic principles should be repeated for every assignee.

So how bad can it be, playing it by ear and leaving terms & conditions to be developed over the duration of an employee’s international assignment?  Flexibility and quick thinking are positive management traits, are they not?

Unfortunately, when you court the inherent risks that accompany an undocumented assignment, you should be prepared for:

  • Increased costs that you have not planned for
  • Constant negotiations that attempt to improve the lot of the expatriate
  • Disgruntled employees and / or affected family members
  • Greater risk of failed assignment

Taking that short cut usually limits the financial and emotional protection the employee and their family are going to rely on, at the same time that the company has committed a substantial amount of money to place them in an overseas location.  That is not a good management practice.

When preparing an international assignment letter, what elements should be included?

  • Title, compensation and assignment duration – critical elements of status and reward in the host country
  • Housing and cost of living allowance considerations – should include the amounts involved (as applicable) and the frequency of review
  • Benefit coverage (medical, dental, life, vacation, holidays etc.) – how will home country benefit protections be handled in the host country
  • Relocation considerations – the back and forth policy coverage for the employee’s residence, to include movement of household goods overseas
  • Property management (as applicable) – what will happen to the home country residence?
  • Tax preparation – employee obligations in both countries.   Usually a statement of company liability for “additional” taxes is included.
  • Home leave – how often, and in what circumstances?
  • Schooling, language, cultural orientation (as applicable)
  • Repatriation – a balance is usually struck here between the employee’s strong concern and the company’s natural vagueness for what the future might bring
  • Connection to international assignment policy – refer to the policy as the source of company rules and procedures
  • Unique and individual circumstances (as applicable) – if it’s different from the norm, write it down!

The items listed above represent only a portion of the questions that your expatriate candidate will have, and the list is not all-inclusive.  So should your company consider taking a casual approach to sending an employee overseas, unsupported by a signed assignment letter, be aware of the risks involved.

Is there a scenario of an employee being asked to live overseas where circumstances would not require an international assignment letter?

I don’t think so.

More About Chuck:

Can’t You Just Convert the Currency?

Chuck Csizmar – CMC Compensation Group

It is human nature to look for simple solutions to perplexing problems.  Simple avoids confusion, keeps you “on message” and helps create greater employee awareness and appreciation of programs and policies. However, when you are dealing with the diversity and complexity of international compensation it is just not that easy – nor should it be.   For those seeking the simple life it can be difficult to understand and accept that each country operates in a different environment from the next.

Perhaps because of its long history of isolationist tendencies, or perhaps due to a bit of Yankee arrogance, but US managers tend to struggle with the challenge of this concept more than other players on the global scene.

For the most part US Managers do not want to hear that pay levels in Finland, or Argentina or Tunisia are different from the US.  They would rather treat everyone the same, call it globalization and consider themselves a one-world player.  Many push an agenda of simplicity that is in fact a misleading distortion, will be a costly strategy to implement and its results will more than likely irritate key talent within their workforce.

Consider the senior manager who simply wants to convert a foreign national’s salary into US dollars – based on a concern with what they call “internal equity”?  The assumption is that everyone pays approximately the same for an “XYZ Manager”.

Other considerations:

  • If simple conversion was a viable approach, why do we not see such formulae prominently displayed by salary survey providers?
  • Employees will be skeptical of the simplistic approach, as in their mind too many local realities would be ignored in favor of what is perceived as the Company somehow saving money
  • Lacking a strong correlation you will either needlessly increase your compensation costs, or under-value your employee talent and risk disengagement – or worse

I once developed a formulaic approach that explained to a COO why he could not (should not) establish internal equity between the US and the UK by simply converting GBP into USD.   I factored in a host of elements, including local taxation, competitive pay levels, incentive practices, cost of living, required social charges, benefit costs, etc. to make my case.   My point was that a simple conversion would be a distortion of the economic realities that drive pay levels in both countries.

Sad to say, but the explanation was ignored and the COO, though he acknowledged the logic of my argument, continued to prefer a simple conversion to establish relative values in his own mind.

To operate successfully on a global basis management needs to understand, to truly believe that each country operates like a separate and sovereign national entity, with distinct economies, taxes, competitiveness, employment laws, culture, statutory benefit requirements, etc. that make a 1:1 comparison with any other country a distortion that will cause you to either over spend or under spend your reward dollars.  Either result should be avoided.

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But . . . We Already Pay Competitive Wages!

Chuck Csizmar – CMC Compensation Group

What doesn’t happen when your company pays competitive wages?

You’ve read your company’s want ads and heard the pitch from your recruiters; you offer competitive wages to qualified candidates.  That’s got to be a strong hook for attracting talent, right?

Big deal.

You regularly update your country-specific pay structures based on market trends, so the opportunities you offer your employees should support your retention and motivation strategies, right?

Not enough.

Most employees presume that your company is already doing or aspiring to meet the goal of competitive pay.  After all, companies routinely advertise the practice (“we offer competitive wages”) and candidates in return expect this of potential employers.  But what happens when your goal of offering competitive pay is finally achieved?  Are employees pleased and content?  Can companies rest in their efforts to attract, motivate and retain?

I’m afraid not.

When in a situation where they’re not paying the “going rate”, management fervently hopes that employee challenges and criticisms will disappear once they reach that difficult-to-achieve target.  I say difficult because it’s not only an illusion but an expensive problem if you have a large body of underpaid employees.  And once you climb that mountain, well . . . so what?

What doesn’t happen when you offer competitive pay is that your recruitment problems have not magically disappeared, your employees won’t be satisfied and your compensation program has achieved nothing more than being average – and isn’t that a “C” grade in school?  Is that where you want to be?  Is that a practice that ensures your employees will be content to stay with you?  As far as aspirations go, it’s only middle-of-the-road.  You will find that it is not an advantage to pay the going rate, but it is definitely a disadvantage if you don’t.

Even if your company does pay “the going rate” or the norm or the competitive average (what the survey data shows), that means that approx. 50% of the companies out there are paying *more* than you.  That’s what average gets you, with half doing more and half doing less.  Is that what your company aspires to achieve?

Remember, no one leaves your company for less money – so all you’ll hear from your employees is about how so-and-so is making more money somewhere else.  And of course, employees only hear what supports their own notions – so they wouldn’t pay attention to the whole rewards package, just the specific components that confirm their opinion that your company isn’t paying enough.

The only way to avoid this scenario is if you become the premier paying company in your market / industry – and can you afford that cost?

Lest we forget, it is important to differentiate between having a salary structure (grades, salary ranges and midpoint) that provides competitive rate “opportunity” and actually paying employees at those rates.  Some may describe this as whether the company is “walking the talk”.  I recall a client who boasted that their salary range midpoints were continually adjusted to mirror market rates, but later was embarrassed to discover that their actual pay practices delivered pay levels well below their own published midpoints.  However, it did help explain the high turnover and low morale.

For their part, employees will relate to what they are being paid, not the midpoint of a salary range or other such declared “opportunity”.  To them the company’s supposed “competitiveness” is more illusion than fact; especially if they’re experienced and have been with you for awhile.  Thus the company needs to keep its focus on actual pay vs. opportunity pay.

Why do employers fail to pay the “going rate”?  Typically it is not a strategy, but a series of practices that have evolved over time.

  • For various reasons some candidates will accept a lower rate than should normally be paid for their knowledge and experience, and managers tend to view this as good news and a cost savings.  In fact it is more like putting a skeleton in the closet and hoping it doesn’t haunt you later on.  One day these same employees will change their minds.
  • Once you’ve started down the slippery slope of paying some employees below market rates the practice is soon compounded by the well-intentioned practice of internal equity.  Managers don’t want to pay similarly qualified new people more than existing employees, so the new hires are offered either below market pay or placed inappropriately in higher value jobs to get them more money (a different problem for another article).
  • Pay-for-performance systems have a hard time keeping up with the increased marketability of employees.  A minimally qualified employee hired at the minimum rate will gain knowledge and experience (and thus marketability) faster than a company’s annual merit system can recognize.  This is compounded when you have to hire a qualified worker and discover that the market requires you to pay more than what you’re paying your more experienced employees.

So, what’s the answer?  You likely won’t find management agreement to become the premier payer in your area, so you should consider instilling some flexibility into your pay practices.  You should consider targeting certain key jobs in your organization (highly skilled, difficult to replace, etc.) and make sure those jobholders are well paid for the market.

Other positions that are not as skilled and more easily replaceable you could continue with your “competitive opportunity” strategy.  Any losses would be more easily absorbed.  This approach is somewhat akin to ring-fencing your key talent, protecting them against poaching while recognizing / rewarding those with the most potential impact on your business.

So be careful when you proudly claim how your company provides competitive wages.  You may not be correct, and if so – big deal.

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What’s In A Title?

Chuck Csizmar – CMC Compensation Group

I once faced a client situation where I was asked to uncover why a Senior Accountant (non-exempt) reported to an Accountant (exempt).  This same company used the title “supervisor” to describe individual contributor positions and it was not uncommon for Managers to report to Managers and Directors to report to Directors.

Given that these situations occurred in a large and presumably sophisticated company, one might ask – is there really a problem here?  What’s the big deal, and is anyone being harmed?  Advocates would say that offering an employee a special title is a harmless and inexpensive reward, one that doesn’t raise employer costs.  It also improves the morale of affected employees.

Where do these scenarios come from?

  • Managers grant esoteric titles to those for whom they have limited means of reward.  “They won’t let me give you the salary increase I think you deserve, but let’s change your title to xxxxx”.  Like greasing a squeaky wheel for a short term fix they want to do *something* to keep the employee quiet / motivated / not thinking of leaving.
  • Employees are given job opportunities (titles) where none should exist.  Have you experienced the long serving Secretary / Administrative Assistant promoted to the newly created role of Office Manager, all while performing the same job?
  • As a salve to employees a “special” title is used because somehow the position (usually clerical) is considered so different from other jobs that it needs to be specifically identified.  Special titles can also be seen as reflecting on the importance of the managers themselves.

In my experience it is usually those in management who consider themselves “above the fray” who do not see title inflation (puffery) as a problem.  Interestingly enough, that level of management can be severely put out if the same title giveaway happens within their hierarchical level.

At the risk of being called Mr. Gloom & Doom, let me explain the type of harvest that you can expect from planting these problem “seeds”.

  • Role clarity (job duties, business impact, decision-making, etc.) behind questionable titles will become blurred.  This in turn would generate more confusion as the company creates Senior Managers and Group or Area Directors and other in-between titles in the hierarchy to differentiate the “real” jobs from the inflated titles.
  • When attempting to determine the competitiveness of your positions the less accurate the title is in relation to the work performed, the more likely your analysis will be skewed.  Benchmarking unique, employee-specific and inflated titles will make a correct assessment of your competitiveness more difficult.  This could have real cost impact.
  • Those with inflated titles will expect whatever perks or privileges that normally accompany the title and their absence could cause difficulties.  It’s an awkward conversation when you tell an employee that the import of their new level in the organization is “title only”.
  • Inflated titles can be a detriment to incumbents as well, such as the “Director” who now only qualifies for a “Manager” title with a prospective employer.  These employees have limited opportunities outside your company because other employers would be reluctant to hire someone where the title is lateral or even backward to what they currently hold.  The result could be that mediocre performers remain with your company because they have no where else to go.
  • The natural extension of inflated titles is inflated grades / salary ranges, as the bogus “senior” position would be placed in a higher grade than the “intermediate” position, right?  This practice will gradually increase your fixed costs without a corresponding rise in either performance or capability.
  • Some employees legitimately find themselves in a dead end job, and granting them a cosmetic title as a salve doesn’t help anyone.  Lead or supervisory mail clerk?  Or the “supervisor” that no one reports to?
  • Employees do not like giving up these inappropriate titles.  Thus employee relations / morale issues will likely develop if you try to correct poor past practices.  You may have to develop creative “buy out” scenarios or grandfather employees.

If you are in a situation with inflated, redundant and confusing job titles, what steps can improve your lot?

  • Organize a Spring cleaning exercise:  start with the low hanging fruit by eliminating (deleting from your systems) all titles that are unoccupied.
  • To avoid backsliding you should accompany that initiative by implementing tighter procedural requirements necessary before a “new” title can be authorized.  While perhaps only a finger in the dike or closing the barn door after the horses have left, you must cut off the flow of new problems before you can effectively address the core issue of incumbents.
  • The company would need fewer job descriptions if the wording was more generalized.  Standardized titles would clear away much of the role responsibility confusion while clarifying an employee’s duties.

Especially in clerical positions, the general nature of duties for most positions (filing, record keeping, secretarial, forms processing, correspondence, etc) lends itself to standardization – which in turn makes it easier to move employees from position to position without having to “promote” someone when their title changes.

Bear in mind though, that title standardization makes more sense in a conference room than it does during an employee discussion.  A “Senior Depository Research Clerk” will always sound more important than a “Clerk III” or even “Senior Clerk”.

Companies try to reduce the number of titles whenever a new HRIS is established (that’s usually when the huge number of active titles becomes widely known).  Anyone who has been exposed to the process of implementing an HRIS (SAP, Peoplesoft, Oracle, etc.) will tell you that job title standardization is a key component of the project.

However there is always a degree of passive resistance when individual leaders realize that *their* area is being cleansed of superfluous / redundant / misleading titles.

Fewer titles can mean more role clarity in your organization, greater accuracy in assessing pay competitiveness, more control of labor costs and indeed higher morale as employees know where they stand and what they must do to succeed in your organization.

A final caution: be careful of setting up titles without occupants “in case we want to promote someone down the road.”   Guess what?  You will.

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Five Easy Ways to Waste Money on Expatriate Assignments

Chuck Csizmar – CMC Compensation Group

Once your company decides to send an employee overseas on expatriate assignment the danger of imminent waste looms large. The problem usually begins with management not understanding or even choosing to ignore the real costs of the international assignment. The money pit is then worsened by having only a weak business reason to support the assignment. If you lack a compelling business justification for why an employee is needed overseas, it is likely that you won’t be able to measure whether their assignment will be a success or not.

Below are some of the major reasons for the cost spiral of money slipping out of your hands; however, this is by no mean an all-inclusive list. I have no doubt that you can provide your own reasons as well.

  • Do not worry about the ROI

For some companies it is easier for a manager to have an international assignment given a green light than it is to have a piece of hardware or software approved for purchase. Where is the business case? Where is the justification via projected financial return that management should be held accountable for? Is anyone being held accountable that an ROI is achieved?

You should think twice before agreeing to pay out 2-3 times annual salary to provide for an expatriate assignment. “It’s in the budget” is never a good business reason.

  • Tell the employee that they are the only one who can do the job

Once an employee realizes that they are the only, or preferred choice for the assignment, you lose all negotiating leverage. I recall one fellow who insisted that he and his family live in Inner London (meaning: uber expensive) – though the office was 35 mi. north – or else he wouldn’t take the assignment. Do not expect someone holding leverage to be reasonable and accommodating when discussing terms & conditions of what you will pay for.

Strive to develop a stable of qualified candidates. It would also help if you remember that the ability to perform the job should not be the only criteria for selection. A bad cultural “fit” would be a painful and expensive experience for everyone.

Note: an employee with an attitude of doing you a favor, versus appreciating the career opportunity being offered, is a bad bet.

  • Do not bother to create an international assignment policy

Unless you enjoy living in a “let’s make a deal” world, you would be advised to lay down an international assignment policy, and then adhere to it. You will still be challenged by the employee / spouse to make improvements in their conditions, but without the support of a policy you will be hard pressed to stand your ground.

Note: make sure all terms & conditions have been confirmed *before* the plane departs. Once you have an expat on the ground in the host country you have lost whatever leverage you might have had. From there you *will* agree to term revisions, because senior management will conclude that having already made the investment you have to keep the expat happy or risk the assignment.

  • Focus on the employee, not the family

Even an otherwise contented expatriate will be rattled if every night they come home to complaints about life in the host country. Such a situation will distract the employee from concentrating on their assignment, and eventually you will face the need to further revise terms (increase costs) and / or the employee will throw in the towel and the assignment will be deemed a failure.

Be sensitive to potential family issues and include everyone in cultural orientations. The family is the expat’s support group, and if they are unhappy . . . well, you know the rest.

  • Separate assignment costs into multiple budget categories and line items

This way no one would understand the full extent of the costs involved. During five years spent overseas on assignment, neither Corporate nor local Finance was able to explain the full cost of my assignment. They had assigned expenses into so many diverse costs centers and budget line items that the confusion never cleared. Imagine the drip – drip – drip of your money if no one is even asking!

If no one is watching the costs of the assignment, those costs cannot be controlled. It would be like handing over a blank check – with no guarantees of gaining anything in return.

Finally, watch out for the manager who tries to “save money” by circumventing HR assignment policies. These creative thinkers consider that short cuts save money, but typically those “cuts” do little more than alienate the expatriate (and / or family) by treating them as second class citizens. Bad idea.

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Are You A Minimalist Employer?

Chuck Csizmar – CMC Compensation Group

In recent months I have dealt with several US clients who faced an overseas challenge of high employee separations coupled with difficulty in recruiting qualified staff.   These companies were at a loss to understand the cause of their problems, as each felt that they were already paying out a great deal more for employees then they were accustomed to in the US.

A quick study revealed that, while the client’s international employees were indeed receiving a great deal more than their American counterparts, in many areas they were in fact being given no more than the minimum benefits mandated by statutory requirement.  How do you attract, motivate and retain quality staff when the message of your actions is that you are only willing to offer what the local government says you must?

One client bemoaned having to grant four weeks of vacation upon hire, because it was the law, only to find out that everyone else was granting five or more weeks.   By ignoring competitive practice they were paying the price by struggling to build a quality staff.  They had earned a reputation in the local market as a “minimalist employer”.

When American companies first establish operations overseas Human Resources faces a number of challenges that they are unaccustomed to back at home.  Every country is a separate and unique entity, with differences in HR policies, practices, and statutory requirements, each of which must be acknowledged and addressed in order to maintain a successful operation.  On top of that are the vagaries of the competitive marketplace, where the same job is paid differently from Rome to Oslo to Buenos Aires – usually coupled with social charge and benefit distinctions as well.

Operating under the guidance of US employment law and US-based corporate practices is a failed strategy.  Maintaining such a US focus (usually for ease of administration) will bring you grief; grief from your employees, from those you hope to hire, and most of all from local governments whose laws you have ignored or bypassed.

If you decide that your business strategy requires you to maintain a staff presence in a particular country, then I would advise you to treat that operation the way you would its US counterpart; provide competitive terms and conditions that will attract and retain the right caliber of employee in that country – and ignore how their packages might compare with US or other country counterparts.  If you are not willing to make that commitment, from an HR perspective you would be better off not to engage employees in that country.

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