Category Archives: Global HR Expertise

The Expatriate Agreement – Yes or No?

Posted on August 31, 2009 by | 7 comments

bio_400x400Author:
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.

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Posted in Expatriates, Global HR Expertise, International Expertise

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Global Salary Budgeting – Smart Approach or Misguided Shortcut?

Posted on August 23, 2009 by | 4 comments

heaps_warren1Author:
Warren Heaps – Birches Group LLC

It’s getting near to the time of year when companies start to draw up budgets for next year.  One of the most important numbers in the exercise is how much to budget for growth on the salary line.  Some organizations assume that making an assumption for salary growth globally based on the figures used in the headquarters country is a good solution.  After all, it’s easy to just take one number and apply it around the world.  Such an approach, however, is flawed.

Just as Chuck Csizmar explained in his recent post about comparing salaries across different countries by converting currencies, global salary budgeting needs to be done country-by-country, and taking a shortcut like the one described above is a recipe for disaster.   Here’s why.

Market Movement Varies by Country
The primary information used by HR and finance to determine salary budgets is market movement (this is a measure of how much salaries increase from one year to the next, usually from surveys) and internal economic assumptions (basically, how much can the company afford?).

Suppose your US-headquartered company decided to apply the US salary increase percentage to all of your markets overseas for a five-year period.  The graph below compares the average increases over the five-year period ending in 2008 for selected markets.

Average Pay Increases

As you can see, the average increase amounts vary a lot by market.  The difference compared to the US ranges from 7.1% (India) to almost 20% (Nigeria).  At the same time, the average in Europe is below that of the US. And that’s just comparing the averages for one year.  If you looked at the cumulative effects with compounding over the five-year period, the differences grow dramatically.

OK, I get it.  I need data for each market.   I’ll just use inflation.
Inflation data is fairly easy to get on a global basis.   You can usually find it for free on various websites, and your local finance folks will certainly have some figures for you to use as well.   They use inflation to budget price increases for your products and to anticipate the impact of price increases in raw materials and other costs of doing business for the upcoming year.   And of course, official inflation figures are produced by the government of each country in an unbiased and apolitical fashion, right?   But what does inflation, or cost-of-living, have to do with salaries?

Cost of Labor is What Matters!
Setting salaries is affected by many factors.  The absolute level of pay is certainly influenced by cost of living – countries with higher costs tend to have correspondingly higher salary levels.  But the main factor affecting salary increases – the one that drives the market movement each year – is an old rule from Economics 101. Three words.  Supply and Demand.   If you are recruiting for positions with hot skills, for example, and there is a shortage of these skills in the market, don’t you end up paying more for these recruits?  If there is high unemployment or an excess of qualified candidates, and positions are easy to fill, isn’t there considerably less pressure to raise salary levels?

Can I just use devaluation instead?
Short answer?  Nope.  Local employees are paid salaries set in local currency, and obtain their everyday good and services in the local market, in local currency.   Devaluation (or revaluation) defines the relationships between the currencies of different countries, usually with a reference to a “strong” currency such as US Dollars, Euros, Pounds Sterling or Yen.   Exchange rate changes do affect the price of goods, for example, especially imports or imported raw materials.   But these fluctuations do not fundamentally affect the cost of labor in a country.  Remember, also, exchange rates are sometimes controlled by governments to achieve other objectives.   Hardly a reliable measure of anything, really.

The Best Approach
To estimate your salary budget properly, you need to obtain data for market movement in each country, and analyze it in the context of your own organization’s situation (market position, health of the business, funds available for increases, etc.).   There are many sources for market data – everyone has their favorites (hopefully some of you are using Birches Group data).  And then you have to apply something no statistic or consultant can provide – your own judgment – to determine the right figure to use in your company.  Interpretation and analysis of the data and applying it to your company’s situation is the art of compensation rather than the science.


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Posted in Compensation, Global HR Expertise, International Expertise

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Abrupt Repatriation: Tips to Pass on to Parents

Posted on August 17, 2009 by | Comments Off on Abrupt Repatriation: Tips to Pass on to Parents

Photo Liz Perelstein (2)Author:
Liz Perelstein – School Choice International

Although the merits of sending families home before scheduled repatriation dates are a topic of continuous debate, we know that some companies are resorting to this course of action.  Where children are involved, the situation is understandably more sensitive, and companies are struggling to come up with cost-effective, yet fair and reasonable solutions.

If you find you have to make or implement difficult decisions when it comes to children and their education, preparing yourselves, and helping parents prepare, is the most effective way to handle the delicate task at hand.  Three things that parents should keep in mind are:

  • The resilience of children
  • Opportunities that come from change
  • Thoughtful communication

First, anxious parents need reassurance that children are extremely resilient and don’t, as a matter of course, suffer long-term as a result of transition, although the anticipation of change and the early stages in a new school are challenging for everyone.  In typical circumstances, the children who find change most difficult are those whose parents do.  So it is important that parents make every attempt to recognize and convey the opportunities the family has had and will have, and to address any problems as a family.  Any concerns that children cannot comprehend should be saved until after bedtime.  Parents should share as much about the circumstances as children want to know and are able to absorb, using their questions as a guide.  It is essential that they are told that neither they nor their parents have done anything wrong, and that the current economic circumstances are something that the world is confronting together.  Parents can explain that many of their friends also have been making life changes as a result of the recession.  Some have moved homes, and others have switched schools.  Different families will make different kinds of choices, but sacrifices are now common among friends and family members.

These are some additional tips that can be shared with parents to provide them with peace of mind:

  • Be available to speak with children and to answer any question they may have.
  • Make thoughtful choices about the new school, reflecting on academic and social characteristics of children and how they have fared in their current school, in addition to family values and logistical circumstances.  Gather lots of information and ask many questions about matters important to children, rather than focusing on factors more important to adults.
  • Before starting the new school, engage the head and/or teacher in a conversation about the child so that good class placement decisions are made and the new teacher understands the child, his/her needs as well as current transitional circumstances.
  • Address curriculum differences through tutoring or outside enrichment, but first clarify that there are likely to be discrepancies between performance in their new and former schools; parents should explain that each school teaches different material so that the child is not at fault if s/he struggles at the outset.

Communication, both with the school and with the child, is the key to a successful transition.  When families are calm and thoughtful, a change of schools can give children an opportunity to learn essential life skills such as making new friends and dealing with uncertainty, which is an invaluable part of any education.

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Posted in Expatriates, Global HR Expertise, Relocation, Repatriation

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Reverse Culture Shock (or Why Do I Hate Being Back Home?)

Posted on August 17, 2009 by | 13 comments

maryd-pic5Author:
Mary Dougherty – Shepell-fgi

When employees begin an international assignment, they often experience “culture shock” in the host location.  Many companies provide support services to ease the transition for these families, ensuring a quick adjustment and a productive and satisfying international assignment experience.  But what happens when the assignment is over, and the family heads home?

  • 25% of expatriates leave the company within 2 years of repatriation (National Foreign Trade Council survey)
  • 69% experience significant “reverse culture shock” (Bureau of National Affairs, Washington)

Coming Home is Not So Easy
Repatriation is not as simple as it sounds.  “Reverse Culture Shock” is often experienced by those returning from an international assignment, and this can have tremendous impact on professional and personal adjustment.  The challenges inherent to living in a different cultural context for a significant period of time do not end with adapting to the host culture; they continue through the process of returning home and re-adjusting to what was left behind.  In fact, it is often those who have adjusted most successfully abroad who have the most difficulty returning home.

It can take up to 18 months to adjust and reintegrate after an international assignment; adjustment issues effect employees and their families both personally and professionally.  Understanding the problems that they may encounter upon reintegration is the key to a successful repatriation.

What to Watch For
Here are some common symptoms or situations that repatriating families encounter:

  • irritability/ resentment
  • sense of difference and disconnect
  • disappointment
  • inability to concentrate
  • low morale
  • change in values/attitudes
  • marital conflict
  • fatigue
  • parent/child conflict
  • educational/adjustment problems for children
  • depression
  • feeling unappreciated personally/professionally
  • decreased productivity
  • loneliness

What Can Employers Do?
One way to lessen the negative impact of repatriation is to provide support to the employee and their family in the form of a “Repatriation Debriefing.” Skilled repatriation counselors can help these individuals recognize the symptoms of reverse culture shock, and provide techniques to manage through it effectively.  To support family members, providing an opportunity for the employee and family to candidly and confidentially discuss repatriation challenges with regard to both work-related and family experiences is key. This process provides an opportunity to examine and explore the potential difficulties of returning home, as well as assisting in problem solving and goal setting.

Employers should also carefully manage repatriation assignments to ensure that expatriates are retained in their organizations, and that the new skills acquired during the international assignment are recognized and leveraged.

Finally, don’t minimize the importance of taking care of the family.  When an employee relocates, so does their family, and the impact on a spouse and children can be profound.

These steps will help minimize turnover amongst repatriates, preserving your international assignment investment, and also ensure that your repatriating employees are quickly and effectively reintegrated into their home country.

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Posted in Cross Cultural Insights, Expatriates, Global HR Expertise, Global Mobility Services

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Can’t You Just Convert the Currency?

Posted on August 10, 2009 by | 9 comments

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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Posted in Compensation, Global HR Expertise, International Expertise, Leadership Development

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How Big Must Your Relocation Provider Really Be?

Posted on August 2, 2009 by | 10 comments

edit-Alan Biz Mug Shot 1The Forum recently received a great question via our “Ask the Expert” feature:

“We are a “young” international and domestic relocation management company but our staff has many collective years of experience in the industry. We are having a hard time breaking into the corporate market.  It seems that HR Departments do not want to give us the opportunity to present our services.  How can a small company like ours work itself into the international employee relocation market within a corporation?”

We can truly empathize with this situation, which is one we’ve often seen.  This is especially true in today’s economic environment of slashed budgets and significantly reduced transfer and assignment volume.  Overworked and highly stressed company staff are unlikely to spend precious time, now, to hear about services they’re not currently using.

The reader suggested that the “big” global relocation service firms receive a better reception from prospective clients than do the smaller and newly established firms.  In our experience, this is basically true.  The reader also stated that many of the smaller firms have a stronger service orientation and can be much more responsive and flexible than the big well-established providers.  Indeed, we have seen cases of this too.  It’s possible to demonstrate that smaller firms made up of seasoned experts, but with lower operating overhead and more flexible processes, can be quite cost competitive while providing high quality services as well.

So why are the small firms having difficulty “breaking in”?  What is it that the big firms offer as “competitive advantage”, often successfully, that the small firms do not?

Big firms have a large footprint.

They can point to wholly owned offices and affiliate relationships in a wide array of countries.  This can be a huge issue for corporations that want to have local touch points for their employees and direct knowledge of local environments readily available.  The small firms often don’t have such a geographic footprint and might not be sure how to establish one.

Big firms have globally experienced staff.

Frequently, their staff come from a variety of countries, have lived and worked in multiple countries and speak a number of languages.  They also frequently have individuals with prior international assignment policy development and program management experience on their teams.  This engenders great credibility in the eyes of the corporate buyer.

Big firms leverage their extensive experience.

 They have managed programs covering multitudes of assignees across a variety of countries and industries.  The corporate buyer is far more impressed with stories about “been there, done that” than with honest admissions of “haven’t been there, haven’t done that — yet”.  Corporations tend to be risk adverse and shy away from “being the guinea pig on whose dime the new service provider learns the business”.

Big firms have technology.

They offer sophisticated state-of-the-art, web-enabled capabilities for projecting total assignment costs, managing reimbursements, communicating with clients and their transferees, interacting online with data providers, providing country-specific information, and tracking and reporting expenses.  Many smaller firms do not have such (expensive) technology and, occasionally, cannot demonstrate expertise in managing the complex requirements of expense management and tracking across multiple countries and pay-points.

Big firms have strong relationships with key service providers.

They know and work with a variety of firms providing assignment cost of living and housing data, international tax experts, destination country employment counsel, cultural and language training firms, etc.  These pre-existing working relationships mean single point of contact and seamless service provision that is extremely attractive to corporate clients.

Big firms invest in polished marketing campaigns.

They advertise, host and sponsor conferences, deliver keynote presentations, conduct webinars, host booths at SHRM and ERC conferences, develop highly polished web sites, publish surveys and articles, etc.  This does not, of course, make the big firms better at providing services but, at the end of the day, polished marketing does impress prospective clients and creates name recognition.

Big firms have the advantage of name recognition.

 Finally, there is the cliché that no procurement professional was ever fired for hiring a well-known “big name” even if there was a service breakdown later. Let’s face it, in many corporations there is a built in bias toward hiring only name firms and avoiding the perceived risk (accurate or not) of hiring unknowns.

So what can a small/new firm do?

Emphasize responsiveness, service orientation and flexibility.

Probably the two most critical attributes in which to excel and compete are outstanding service and price.  Responsiveness, flexibility and competence are critical in what, I think we would all agree, is a service industry, after all.

Build internal international expertise.

This should be done via hiring highly experienced, preferably well-known, and globally networked staff and through education such as the SHRM GPHR and ERC GMS programs.  Travel and learn from first-hand experience about assignee destinations around the world.  External consultants also can be quite helpful in this area.

Invest in technology.

The ability to project and track costs, communicate with management, transferees and other services providers, e.g. the client’s international tax firm, and manage data is critically necessary.

Develop and nurture relationships with complimentary service providers.

This must include in-country providers and data, immigration, tax, language training and cultural training firms, among others.

Create name recognition through a well-focused and professional marketing campaign.

Demonstrate how the firm should be perceived as a trusted advisor and capable service provider. Create a public presence in the industry.

Delight your current clients and enlist them as your champions

When courting new business, make use of recommendations and testimonials from satisfied clients.  Ask your clients for leads and to make “warm” introductions.  Word-of-mouth recommendations are priceless.

Direct business development efforts towards smaller firms.

They tend not to have the budget for, and less of a bias toward, the big firms. It’s also relatively well known that the big firms don’t give their best attention to small accounts. Go where there IS business AND less competition.

Implement a “Blue Ocean” strategy.

There are many capable providers of  global mobility services, large and small.  The market, especially in the current economic scene, may actually be over-supplied with providers.  Competition is fierce.  We would suggest that small firms specifically target prospects whose mobility needs – geographically and transfer types – best match the firm’s geographic footprint and operational strengths.  Approach those firms that are not being approached by the multitudes of providers.

Seek out the advice and counsel of those with depth of experience and expertise.

We believe that seeking guidance and mentoring from experts can be quite worthwhile.  Professionals with prior “in-house” corporate experience, as buyers of external global mobility services, across a variety of industries are especially valuable.

We again thank the reader who submitted the question.  Now we invite our readers to share their views.  Please let use know your thoughts via comments on this post.

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Posted in Expatriates, General, Global HR Expertise, Global Mobility Services, International Expertise, Relocation

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Report to Our Readers – July, 2009

Posted on July 29, 2009 by | 2 comments

heaps_warren1Back in April of this year, we launched the International HR Forum Blog.  It was a bit of an experiment.  None of us were experienced bloggers.  Some of the authors knew each other and had worked together; some met for the first time virtually during our initial conference call.  But we were all very excited to try a bit of the latest technology to reach out to the broad HR community and share our expertise and passion for international human resources.

After just over three months, we could not be more pleased with the results!

The Forum is catching on!
The Forum has had over 12,000 page views since its inception.  We are averaging between 100 and 200 page views a day, and over 3,000 page views a month.  We are very pleased with these results.

We Are A Global Community
The most fascinating aspect of being involved with this blog has been the diverse community that participates.  You can see this for yourself – just check the different flags in the Feedjit box, or for a real treat, click on the box and look at a whole page of feed statistics.  Depending on the time of day, you will see an array of flags from every region in the world.  In the morning here on the east coast of the US, I notice the visitors from Europe, Africa and the Middle East.  During my evening hours, the Asia/Australia contingent is there.  And during the workday, many of my colleagues in the Americas check in.

It’s impossible to list all of the countries from which we’ve had visits – the posting would be too long.  But as I write this post, there have been visits from at least 15 different countries in the last several hours.  We’ve had visitors from developed countries in Western Europe, Canada, Australia, etc.  But equally, we have had excellent participation from developing markets such as Vietnam, Indonesia, Gabon, Nigeria, India, Brazil and more – even Mongolia!

It’s this diversity that makes the blog experience  so rewarding for us.  To know that we are reaching an audience from so many places, large and small, is more than we ever expected.

We Have Almost 125 Subscribers!
In the short time we’ve been writing, almost 125 people have subscribed to the blog, automatically receiving our posts via email or their RSS reader of choice.  This is especially gratifying to us, since it sends us a message, as authors, that you value our content, and want to be kept informed about it.

Our Connections
Many of you follow our content via postings through various LinkedIn Groups.  We have arranged with several of the group owners to automatically post our blogs as news articles in the groups.  Similarly, several other HR and non-HR related sites have picked up our feed for the benefit of their readers; we’ve listed these partners in the Other Resources section on the blog.  If you are a group owner or blogger and would like to feature our feed, just let us know.

Going Forward – Get Involved!
The experiment that has evolved into the International HR Forum is a success, and we are committed to continue blogging to provide you, our readers, with the most interesting and relevant content.  You can help us.

Blogging is just another type of communication, and it’s most rewarding when it’s two-way.  We invite you – encourage you – to make use of the comments feature on the blog.  Let us know what you think, if you agree or disagree, if you think our content is terrific, and how we can improve it.  Offer suggestions for topics, guest bloggers, great resources to share, etc.  The more active the community of readers becomes, the more useful the blog will become as well.

Help us spread the word – share the blog with your friends and colleagues. You can just tell them, or use the Share link to send them a link to one of our postings.

Thanks
Finally, on behalf of all of the authors, we would like to express a special thank you to each of our readers, for supporting this initiative.  Without you, we would not exist.  And because of you, we are thriving.

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Posted in General, Global HR Expertise

Recalling Expats? Handle with Care

Posted on July 28, 2009 by | 2 comments

Photo Liz Perelstein (2)Author:
Liz Perelstein – School Choice International

“In recent months, companies have begun recalling expats from multiyear assignments up to 12 months early… The CEO of a Pacific Northwest manufacturer (who requested his publicly traded company’s name not be used) is pulling his European division manager home after only eight months of a two-year assignment because the business can’t continue to foot the $500,000 annual bill for his salary and living expenses.”  –Workforce.com, March 16, 2009

Education is a top priority for middle class families in every culture worldwide, and always has been.  This is true of 32,200 Tamil school girls praying before entering examinations in Madurai, Chinese families who have pinned all of their hopes and dreams on their sole child, and parents in the Northeastern part of the United States who are still, according to The New York Times blog The Choice (July 18), willing to spend $40,000 on college placement counselors for their children despite the economy.  This results in scarcity of suitable school options in major cities globally.  Even if there are vacancies in less popular schools, those that are generally considered “top tier” are overbooked no matter what the economic situation.

As a result, repatriation, which always is difficult, brings additional challenges when it is sudden and forces families to seek schooling for their children mid-year, particularly under rushed and stressful circumstances.  In addition to the logistical challenges involved in gaining admission to schools, children are excluded from extracurricular activities – the cricket team already has been chosen, as has the cast of the play – essential aspects of re-entry if they are to successfully make friends and reintegrate into their home cultures. Repatriation to one’s former home is particularly difficult, according to The Art of Crossing Cultures by Craig Storti, because expectations and reality clash.  When employees are moved home without sufficient notice, they, and their families, do not have sufficient time to process the emotional aspects of the repatriation so it is all the more important that they receive assistance with the logistics of the school search and transition, as together both aspects are quite overwhelming.

Regardless of the country of repatriation, employers can provide:

  • Accurate and easy to use information in the form of books, research, websites and web based tools;
  • Transition assistance so that families understand that the former school may no longer be the best school for a child given the wealth of experiences s/he has had overseas as well as the curricular differences;
  • Expert help in identifying and getting into schools that meet the unique needs of each child at this point in time;
  • Specialized assistance for children with special needs, gifted children, and those seeking schools in particularly competitive locations.

This is something that companies must think about if their goal is to develop policies that will serve them in good times as well as bad.  Benefits of good support when employees with children are recalled are rapid employee productivity, increased loyalty, talent retention, willingness to take future assignments, and improved morale, which includes encouraging other employees to undertake assignments when needed.

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Posted in Expatriates, Global HR Expertise

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Resourcing in Southern Africa

Posted on July 20, 2009 by | 1 comment

Imported Photos 00033Author:
Yendor Felgate – Emergence Consulting

Recessionary times have dramatically impacted the volume and level of resourcing opportunities available in Southern Africa.  Anecdotal evidence from resourcing companies we engage with or have trained over the last 6 months, suggest that in the first half of this year we have seen vacancy levels oscillate between 30 – 60% less vacancies.

The impact in Southern Africa has been uneven, with the obvious exceptions being Angola and Mozambique, where local environments and skills shortages continue to fuel resourcing opportunities.  The relatively small markets of Namibia, Zambia and Botswana have slowed, with a number of companies placing moratoriums on new or replacement hires. These markets are highly susceptible to any slowdown in the worldwide demand for commodities, even impacting governments, who tend to be the largest employers.

South Africa is by far the largest resourcing market in the region and has been similarly impacted.  The knock on of the slowdown in the region has led to increased Southern African applicants applying for South African jobs.  In turn South African companies increasingly look to apply job moratoriums in the work place, with an overt South African first policy. When speaking to companies, many are literally ‘holding on’, using natural attrition to right size their businesses.  Our sense is that this can only go so far, and that we will see a range of corporate restructuring in the South African market in the last of half of this year, despite the perceived upside of hosting the World Cup next year.  Such a dramatic market change has impacted applicants and recruitment companies alike.

Firstly this has slowed down the use of non-South Africans in the South African market, which is a big blow to encouraging Southern Africa as a region, to utilise skills co-operatively.  Our view is that companies and recruitment agencies continue to miss significant upside opportunities in the hiring of African talent, both in terms of pricing and value add.

Secondly, the South African recruitment market will go through a significant restructuring of the players offering recruitment services.  The larger companies will consolidate during this period, with some of the more adventurous ones looking to expand in the region.  Small to medium companies are under pressure, with some already closing.  In order to survive, these entities will increasingly need to come up with different customer propositions or products.

We see the market differentiating between low cost producers and the higher end players, who increasingly operate in a more consulting role, with a wider range of products or services.  This period will be very difficult for ‘traditional’ players, who want to simply ride out the storm, as margins will reduce in tandem with the recession.  This will be exacerbated by the trend of companies accessing candidate databases directly and using social networks in lieu of recruitment agencies.

The third impact will be an escalation of tension between stakeholders around what it means to employ people.  Governments will look to protect full time employment, whilst the market will intensify their search for labour flexibility.  This tension has already erupted in Namibia, with the recent banning of labour broking and the South African government is also looking to do the same.

This brings us back to the question of where next for commercial recruitment.  We have a two scenario view.  The first or low road suggests that recruitment becomes unattractive as a commercial venture with the banning of labour broking and the commoditisation of recruitment.

The second scenario is hardly a high road, but one that will benefit those recruitment companies that look to diversity their services and become low cost producers when mining their candidate IP.  This implies a significant change in current recruitment approaches, pricing and funding models.

In the short term, our sense is that a complex combination of the two is occurring currently.  None of the above in our mind necessarily benefits applicants and we think that recruitment professionalism will be increasingly under pressure.

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But . . . We Already Pay Competitive Wages!

Posted on July 16, 2009 by | 1 comment

Author:
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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