Author Archives: Warren Heaps

Why Culture is Important in International Business

Denise HummelGuest Author:
Denise L. Hummel – Universal Consensus

Editor’s Note:  We are especially pleased to welcome our first Guest Author, Denise Hummel, who contributed the piece that follows on the importance of culture in international business

Doing business on a global basis requires a good understanding of different cultures.  What works in your country might not work well in another, and could even be interpreted as an insult!  And in your role as an international human resources professional, it’s important to raise the awareness of cultural issues within your organization to ensure effectiveness.

Consider the following basic questions:

When George Bush gave Chinese Premier Li Peng a gift of cowboy boots embroidered with the American and Chinese flags, was it an appropriate gift?

  1. Yes, a thoughtful sentiment and a keepsake appropriate to the occasion
  2. No, a significant miss on the part of administration protocol experts
  3. Yes, a good choice, if only he had known the Premier’s correct shoe size

Answer: 2. 

Unfortunately, in China, the soles of the feet are considered to be the lowliest part of the body and gifts of footwear, no less embossed with the nations’ respective flag, was a significant miss on the part of administration protocol experts.

When formalizing a deal in the Middle East, it is imperative to

  1. Determine that the contract is iron clad with strict attention to jurisdictional issues of international law to secure a just outcome should there be conflict
  2. Solidify the interpersonal trust relationship as this rapport is critical both during the deal and if conflict develops
  3. Retain legal counsel in the country in which the business undertakings will primarily take place and ensure that this attorney has a golfing relationship with most members of the judiciary.

Answer: 2.

When doing business in the Middle East, the surest indicator of a successful business relationship has very little to do with the content of the contract or the extent to which the language will hold up in court.  Court systems in many of these countries move slowly with inconsistent results, and your business counterparts in many Middle Eastern countries do not put their faith in the legal system to determine the outcome of a conflict.  Absolutely essential to the success of the deal is the interpersonal rapport and relationship established during the negotiation stage and at every point thereafter.  Failure to understand and cultivate this aspect of the deal increases the risk of failure to a critical degree.

In sending an email to a Japanese colleague with whom may wish to collaborate on a potential business deal, you would be most successful if you

  1. Begin the email by addressing the individual warmly and openly, by his first name, immediately closing the cultural gap
  2. Always use Mr. , Miss or Mrs. followed by the last name of the individual, followed by an embracing and forthright interaction
  3. Use the last name, followed by the term “sama” to address your email, followed by clear text set forth with the utmost formality.

Answer: 3.

The risk of email is that it lacks certain social contextual cues such as body language, eye contact and intonation and can therefore create misunderstandings.  There is also no way to see the demeanor or reaction of your counterpart and adjust your communication strategy to compensate for a misunderstanding once it is created.   When in doubt, it is always safer to err on the side of greater formality and deference.  The Japanese have become accustomed to making allowances for informal communication from other countries, but you will proceed with more credibility if you make a sincere effort to adapt to their customs.  The use of the term “san” and, for those in a position of high authority, “sama” is honorific.  Use the last name, followed by the honorific term, followed by extreme clarity and formality in the text, with as few assumptions for context as possible.

Summary

The cultural nuances that affect international business obviously go far beyond the ability to greet your international colleague or choose the correct gift.  Issues related to the culture’s time orientation, whether it is an individualist or collectivist society, space orientation, and power distance, not to mention conflict assumptions and non-verbal communication all affect understanding your colleague across the table, as well as your chances of being understood. 

Preparation by a trained expert related to these issues not only assures that unnecessary blunders will be avoided, it brings to each of us a personal knowledge that deepens our understanding of others, thereby promoting acceptance, understanding, and on the level of international relations, peace and prosperity.

More About Denise:

Report from Mombasa – Africa Forum 2009

Warren Heaps photo

Author:
Warren Heaps – Birches Group LLC

Many of you will already know that last week, the second Africa Forum conference, sponsored by the African Development Bank, Birches Group LLC and ORC Worldwide, was held at the lovely Sarova Whitesands Resort and Spa in Mombasa, Kenya.  The conference was attended by representatives from leading employers in Africa, with delegates from Kenya, Tanzania, Uganda, Sudan, Democratic Republic of Congo and South Africa.  I was lucky to be one of the organizers and presenters at the conference, so I thought I would share some of the proceedings with you.

Keynote Address
The conference opened with a wonderful conversation with Dr. Sipho Moyo, Residential Representative for the AfDB in Tanzania.  Dr. Moyo spoke about what managers look for from HR in terms of support, ideas and insight.

Overview of African Markets
The keynote address was followed by an overview of African markets.  The presentation included statistics capturing the impact of the global economic crisis on Africa, through reduced GDP growth rates across the region, higher inflation (double digit levels in over 25 countries), and reduced trade.  There was also a discussion about the nature of the labour markets in Africa, and the key role leading employers across all sectors, including international public sector organizations, play in the market.  Finally, some summary market data was shared for all countries in Africa, with a special look at Kenya, Mozambique, Malawi and Nigeria.

African Cafe I
The next session was a series of small group discussions.  Three topics were selected by the group – Market Intelligence, Impact of the Global Economic Downturn, and Incentive Pay.  Each topic was featured as a discussion group, and  participants rotated through all three topics, thus having a chance to participate in all of them.  These were lively, interactive discussions, where participants were able to raise issues, share their experiences and learn from the experience of others.

Focus on East Africa
Since the event was held in Kenya, we turned next to an in-depth look at the East African market, focused on Kenya, Tanzania, Uganda, Rwanda and Burundi.  There was comparative data to highlight the similarities and also the unique features of each labour market in the region.

Building a Pan-African Workforce
A lively discussion followed led by Awinja Wameyo of AfDB, about the challenges the bank faces in building a workforce for their operations across 25 countries in Africa.  Topics of particular interest to the group included recruitment of professionals from the African diaspora, and the desire for diversity, and how best to achieve it.

Market Intelligence
Day Two began with an in-depth look at market intelligence, and how the Birches Group surveys are tailored to address many of the challenges faced in small, volatile markets, with such a wide range of practices.  Birches Group staff demonstrated the Indigo survey portal for the group as well.

We also spoke about the comparative framework — how to best determine the right approach to matching positions in the African market to survey benchmarks consistently.

African Cafe II
Next we had another series of discussions on topics chosen by those in attendance at the Forum:  Intra-Regional Assignments, Performance Management and Talent Sourcing.  It was a wonderful chance to share insights and learn from each other.

Untying Knots
Following lunch, we kicked off the final afternoon of the Forum with a stimulating presentation about Performance Management and Pay Design.  Gary McGillicuddy spoke about the Birches Group Community approach to performance management, which uses multi-rater feedback and the answers to three simple questions to manage evaluations effectively and efficiently.  Gary also spoke about the “Wedding Cake” of pay design, demonstrating that in an organization, time-based, competency-based and performance-based compensation systems can coexist to drive overall organizational effectiveness.

Employer Branding
The closing presentation was an overview of employer branding.  Curtis Grund of ORC Worldwide shared his personal experiences as well as a summary of the leading practices in employer branding.  Curtis also looked at some employer website to highlight best practices.

In Summary
The Africa Forum 2009 was a great opportunity for human resources professionals in Africa to discuss critical issues, learn about trends, and most importantly, share information with each other and form what we hope will be an ongoing network for sharing and collaboration.

We expect that Africa Forum will be repeated, next time in Southern Africa.  Stay tuned for more information about next year’s Forum.  We are grateful, also, to the African Development Bank, for lending it’s name and providing resources to make the Forum a reality.

Conference Presentations
If you were unable to attend the Africa Forum, but would like to receive copies of the presentation materials, please let me know by using the Contact Us link.  Just indicate your interest in receiving the Africa Forum materials.

More About Warren

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Birches Group

Labour Market Dynamics in Mongolia

Warren Heaps photo

Author:
Warren Heaps – Birches Group LLC

This former communist country has undergone a rebirth recently, but still faces economic and and social challenges.  These factors, in turn, have a strong influence on the local labour market practice.

 

Brief History and Background

Mongolia became an independent country in 1911.  By 1924, however, a Soviet-influenced government was established, and flourished until the early 1990s.  A new, democratic constitution was adopted in 1992, and democratic elections were held in 1993.  Since then, Mongolia has been making the transition to a full market economy.

Over the last several years, Mongolia has enjoyed a robust growth rate, with GDP increases from 7.3% in 2005 to 10.2% in 2007.  Much of this growth has been driven by the mining sector, with large operations focused in cooper, gold and other commodities.  There also has been increasing foreign investment in other sectors, such as software development, telecom and food.

The global economic crisis and collapse of commodity prices has resulted in a slowdown in Mongolia.  GDP growth for 2008 dipped to 8.9%, and the Asian Development Bank predicts a further drop to just 3.0% for 2009.  From January, 2008, to April 30, 2009, the local currency, the Tugrik, has depreciated against the US dollar by about 22%, putting additional pressures on the Mongolian economy, which imports 80% of its oil, and many other basic commodities and raw materials.  Projected inflation for 2009 is about 9.5%.

Overview of the Labour Market

Birches Group recently completed the annual survey of the market in Mongolia.  The information that follows is based on the recently published survey results.

Total compensation levels in Mongolia range from about $7,400 for unskilled support staff positions such as Messengers and Drivers, to $36,000 for Managers and other senior level professionals.

mongolia-pay-ranges

Total Compensation in Mongolia

Let’s focus in on Working Level Professionals, i.e., college graduates with 3 to 5 years of experience in their respective fields, such as Finance, HR, Procurement, Engineering, Sales and Marketing.  In the graph, this group corresponds to the second column in the Professionals category.

For a Working Level Professional in Mongolia, the median total compensation ranges from about $14,000 to $22,000.  However, as the “footprint chart” illustrates below, there is a much wider range of compensation in the market – from around $9,500 to over $30,000.

mongolia-compensation-footprint

Market Footprint – Working Level Professional

The footprint chart shows the full range of the market, from the 25th percentile of the minimum or entry level salary to the 75thpercentile of the maximum, as well as the MRP or “market reference point” which illustrates the average rate for incumbents in the job.  By viewing the market with this perspective, employers can gauge not only the market references, but also get a good idea about the span of pay (from min to max) in the market.

What else besides salary?

As is common in developing countries, the typical package in Mongolia for a Working Level Professional includes not only salary, but allowances, incentives and in-kind benefits.  Let’s take a closer look at the market practice for these items.

At the 50th percentile, the average breakdown of total compensation is as follows:

Composition of the Compensation Package

mongolia-compensation-breakdown

Composition of Compensation Package

The chart above indicates a base salary of $15,926, representing about 84% of total compensation.  The rest is made up of allowances (6.5%), short-term incentives (4.5%) and in-kind benefits (5.2%).  The most common allowances are meal and beverage allowances, and cash allowances such as 13th month, mobile phone allowance and seniority premium.

For in-kind benefits, the chart below shows the categories provided; recreational activities and meals are the most common.

mongolia-in-kind-benefits1

In-kind Benefits

 In Summary

Mongolia is a dynamic market which has experienced good growth in recent years.  While there is much slower growth occuringnow, employers with businesses there still must keep abreast of market changes.  Rich survey data is one of the best ways to ensure that your compensation packages remain competitive, cost efficient, and responsive to your employee’s needs.

More About Warren

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Birches Group

Repatriation Survey Request

Friends

Below is a request from Stacey Peterson, a doctoral student at Florida Institute of Technology, seeking your help in identifying potential respondents for a survey she is conducting.  If you, or anyone you know would be a likely respondent, please forward the information.

Thanks,

Warren

===================================================

I would like to invite you to take part in a research study titled Repatriate Knowledge Sharing Environment: Measure  Development, which is associated with Florida Institute of  Technology.

The primary investigator conducting this research is Stacey M. Peterson, whose interests in this area grew out personal experiences as the daughter of a repatriate (i.e. employees who  have been relocated to a foreign country on assignment for a number of years and return to the home country upon completion) and doctoral work in the field of international business  practices.

This study investigates how the social dynamics of an organization’s culture may affect the utilization of repatriate international knowledge.  Repatriate Survey data will expand understanding and identify the factors necessary for a favorable knowledge sharing environment for repatriate knowledge.

To be eligible for this study, you must:

  • Work at an organization which employs repatriate employees (you do not need to be a repatriate)
  • Be employed at your current organization for a minimum of four  months
  • Participation in this study consists of answering a number of questions in an anonymous survey and will take approximately 20- 30 minutes.  Your personal information will not be recorded and, therefore, will not be connected to any of your responses. Additionally, your participation is voluntary and you may withdraw from this study at any time.  Your responses are greatly appreciated.

If you meet all the criteria and wish to participate, please access the survey through this link (or copy and paste the link in your address line):

http://www.questionpro.com/akira/TakeSurvey?id=1198397

You are kindly encouraged to forward this email to additional colleagues who meet the criteria.  Your participation in this research study is extremely valuable.  Your responses can help increase an understanding of the social dynamic influencing the use of repatriate international knowledge.  This, in turn, can then be successfully leveraged to give organizations an advantage when operating in the global marketplace.

If you have any questions, the researcher can be reached at sfehir@fit.edu or by phone at +1.321.674.0184.  Your time and assistance is greatly appreciated.

Stacey M. Peterson
PhD student
Florida Institute of Technology
Melbourne, FL 32901

Email: fehirs@aol.com or sfehir@fit.edu

A Glimpse of Pay and Benefits in Africa

Warren Heaps photo

Author:
Warren Heaps – Birches Group LLC

Africa is a Diverse Continent

Africa is a vast continent with over 50 countries.  There is much diversity, too, amongst the people, cultures, climate, economies and businesses across the region.  Not surprisingly, there is also tremendous diversity in compensation in Africa — not only the obvious differences in actual amounts of pay, but importantly, a wide range of practices in addition to base salary.

Pay and Benefits in Africa

Birches Group recently examined the total compensation for Working Level Professionals – college graduates with five to eight years of experience and a level of technical expertise in their respective profession.  Typical positions included Accountants, Brand Managers, Bankers, Engineers, Human Resources and other occupations across ten markets in Africa.

Pay Ranges in Africa

Pay Ranges in Africa

The results confirmed the wide range of absolute pay levels – from around $40,000 to over $110,000 per year.

Allowances and In-Kind Benefits Are Important

The salary numbers only tell half the story.  In many developing countries, employers provide allowances and in-kind benefits to local staff.  These benefits include cash allowances such as 13th month and vacation bonus, as well as cash or in-kind payments for transportation, food, housing, recreational activities, and more.

Percent Allowances and In-Kind Benefits

Percent Allowances and In-Kind Benefits

Allowances and in-kind benefits provide from 8% to over 30% of the total package, depending on the country.  Therefore, it’s critical to consider these elements in designing pay packages.  To overlook these “extras” and focus just on base salary would result in a potential gap against the market.

Global Approaches Need Local Tailoring

Global employers take pride in having consistent approaches to compensation around the world.  But in developing countries, local practices and insights need to be fully considered in the broader context of the employer’s compensation strategy.  The best way to ensure your pay package is competitive is to reference a good market survey, that captures all of the elements of compensation in the market, from the leading employers present in the market.

More About Warren

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Birches Group

Welcome to the International HR Forum Blog!

Welcome to the International HR Forum.  This Blog represents the collective thoughts and expertise of a group of HR professionals with many years of experience in international HR.  The bloggers have worked in all areas of international HR, including expatriate and local national compensation, benefits, cultural adjustment and EAPs, international schooling, expatriate taxes, and more.  All of us have worked for large companies or consultancies, and are now working as entrepreneurs, dedicated to bringing our expertise to those who need it effectively and efficiently.

We hope you will check back here often, as we will be posting topics of interest to anyone involved in international HR activities.

Warren