Tag Archives: Compensation

Developing Markets Compensation and Benefits Group on LinkedIn

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Posted in Compensation, General, Global HR Expertise, Performance Management, Talent Management

Tagged Compensation, Global HR, managing pay, Talent Management

Sometimes You Have to Spend

Posted on March 18, 2010 by cmc4700 | Comments Off

Author:
Chuck Csizmar – CMC Compensation Group

Many companies with international operations are reluctant to purchase compensation surveys covering their multiple countries, on account of the cost. To them it’s like having to survey multiple USAs, no matter the headcount involved. As discussed in an earlier post, Shock and Awe, the cost of these international surveys can be prohibitive.

For example, if the US-based Acme Manufacturing Company has operations in Germany, India and Argentina, survey costs for these three countries would be 2-3 times the cost of comparable US surveys. As most compensation experts recommend using multiple sources to better gauge market trends, the cost factor very quickly becomes an eye opener. The more countries you operate in – well, you get the point.

Hence the hesitation.

However, is putting off a competitive pay analysis a good business decision? What is gained by keeping ignorant of whether your compensation packages are competitive or not? Of course, by happenstance you may be lucky and are already providing compliant and competitive rewards. More likely though, the odds favor that you’re either overpaying or underpaying your employees.

Long term Impact of the Status Quo

Let’s look at the scenarios that can be playing out while you remain unaware.

Over Payments:

Where local compensation costs are higher than the competitive market, without a corresponding ROI in productivity or performance (more pay is not a 1:1 correlation). You are wasting money.

Most employees will not recognize that they’re being paid above average, so any presumed positive perception is only an illusion.

If you’re overpaying, but don’t realize it because you haven’t obtained credible survey data, you will likely presume that everything is okay. In other words, you’ll think that your pay is on par with the market, when in fact you are paying at above market rates. How much money (the differential) will you be needlessly paying out on account of this presumption? Chances are, the cost of finding out – of potentially identifying a key problem – would be a small fraction of the money being misspent. Is this an efficient use of your reward dollars? I don’t think so.

Underpayments:

Employees feel that they are not being compensated fairly

Your ability to attract the right caliber of employee for your operations will be weakened by low compensation rates

Employee engagement, productivity, morale, attendance etc. will be less than what they should be, feeding off negative employee perceptions

If you’re underpaying, but don’t realize it because you failed to obtain credible survey data, you may also blindly consider that everything is okay. After all, anyone who leaves does so for more money, right? But doesn’t everyone? So you may not learn much through staff defections. Have you considered the annualized cost of losing just one experienced staff member? And should you lose more?

Choosing instead a course of hesitation and delay will not rectify any festering issues; they don’t go away or fix themselves. Instead, your inaction will worsen the situation and make eventual corrections more painful.

Cost of doing business

Do you remember that ad line, “you can pay me now, or pay me a lot more later”?

While squirming to avoid costs the company might try to obtain free data off the internet. Good luck there. Pundits will tell you that the value of free data, even if available is usually less than what you paid for it.

Instead, ask yourself if you would spend a dollar today to save three tomorrow? That’s the question you must answer, to gauge the economic value of knowing the competitive position of your international employees.

Your financial folks might see it another way. They might see only a finite dollar amount being spent, against a “maybe” savings estimate. They will ask you for guarantees you cannot give. It’s not like buying a machine that will increase productivity, lower production costs, raise profit margins and lower the cost of sales – all measurable.

Would you pay to learn how competitive are your services and product lines?

To make informed and effective business decisions, management requires knowledge of present circumstances, the challenges being faced, the import of the status quo and the implications of change. When dealing with the single greatest cost to your organization, employee pay, it would be well worth your effort to spend what is necessary to give senior management the proper ammunition for decisions that could drive the business forward.

Yes, it would be well worth the cost.

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Posted in Compensation, Global HR Expertise, International Expertise

Tagged Compensation, Compensation costs, Global HR, international hr, managing pay, salary surveys

“Think Globally, Act Locally” for Compensation Design

Posted on February 28, 2010 by Warren Heaps | 2 comments

Author:
Warren Heaps – Birches Group LLC

A recent post by Chuck Csizmar focused on the “Easy Road to Global Compensation Success.” In his post, Chuck emphasized that taking a headquarters-country approach to managing compensation systems around the world might not be best, despite some perceived administrative advantages.

“Think Globally, Act Locally”
To steal the popular phrase used to describe environmental strategies, it’s really important to recognize that markets are different around the world, and company compensation programs should reflect a balance between global corporate philosophy and local practice and culture. Successful companies already recognize this when deciding which products to make and sell, how to market and promote them, pricing strategies, etc. So, it should not be surprising to find out that local reward practices differ from country to country.

Salary Scales – A Simple Example
Let’s look specifically at salary scale design to illustrate why local practice matters. Employers use salary scales to define the range of pay that is associated with particular grades or bands within their organization. The definition of the grading scheme should be global; there should be consistent measures of contribution used to determine job level, regardless of market, and they should reflect the corporate culture as well. But should there be one universal salary scale across multiple countries? I believe the answer is no.

Why?
The basic approach to designing a salary scale is defined by the span (difference between minimum and maximum) and the inter-grade differential, or IGD (increase from one grade to the next, usually measured at the midpoint). The table that follows shows two typical salary scale designs, for the United States and Kenya:

*Grade*	US		Kenya
*Grade*	*Span*	*IGD*	*Span*	*IGD*
Support (4-7)	50%	15%	400%	27%
Professional (8-10)	50%	14%	400%	27%
Manager (11-12)	50%	15%	250%	54%

You will notice several differences, including:

Spans in Kenya are much wider than in the US
Spans in the US are consistent between employee groups (although in some models there can be slight variations, usually wider for higher levels)
There is a much higher IGD between Professional and Manager in Kenya, than between Support and Professional; in the US, however, the IGDs are consistent

You can see the differences more dramatically when looking at a graphical representation of the scales in the two figures that follow (click the graphs to open full-sized views in a new window):

US Salary Scale Example

Kenya Salary Scale Exampe

One of the most dramatic differences is the big jump in Kenya between grades 10 and 11, and 11 and 12. In fact, we see this pattern in many developing countries around the world. The shape of the scale midpoints (the pink line) looks like a hockey stick, with the Managers grades (11 and 12) forming the head, while the other grades form the handle of the stick. Contrast this to the shape of the line in the US, which illustrates a more even rate of increases across all levels.

If you dig a little deeper into the numbers, you can identify some reasons why the scale designs in these two countries differ. For example, the market movement for salaries in the US averages around 3.5% (maybe even less last year). In Kenya, market movement in 2009 was over 20%.

With market movement over 20%, if the spans were like the ones in the US, employees would move through the band too fast, and quickly reach the maximum. The wider spans in Kenya also indicate there is great variation in pay levels in the market for the same positions. The Kenyan scale also illustrates that there is a much higher level of difference between the higher paid and lower paid staff, compared to the typical US scale (note: The US scale in this example excludes Senior Executives and CEOs).

There are many other examples of differences in how compensation is defined in a country, which elements are included, and how companies choose to adapt their rewards policy to reflect local culture and practice. Compensation and human resources practitioners are well-advised to become knowledgeable about each market and adapt their company practices accordingly.

What experiences have you had managing compensation in different markets? Share some by adding your comments.

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Developing Markets Compensation and Benefits Group on LinkedIn

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Posted in Compensation, Global HR Expertise, International Expertise

Tagged Compensation, Developing Markets, Global HR, international hr, salary surveys

The Easy Road to Global Compensation Success?

Posted on February 18, 2010 by cmc4700 | 1 comment

Author:
Chuck Csizmar – CMC Compensation Group

How many success stories start with the phrase, “I took the easy road”?

Most companies (@85%) with global operations tend to pay their internationally-based top level executives in accordance with some form of global compensation structure – in order to level the playing field for those with multiple country responsibilities.

However, for the rest of their international population it’s not as straightforward.

The Challenge

Companies with local national employees (hourly, professional, management) face a challenge and a risk when it comes to deciding how to reward (pay) in each of their operating countries. Do they “do as the Romans do” and follow local practice, or do they seek to create a standardized global framework in an effort to equalize pay practices?

For those developing strategies to effectively pay employees across the globe, the headache is in dealing with a diverse collection of economies, cultures and competitive pressures – some of which may be moving in different directions. However, the strategy of recognizing country-specific differences in pay methodology often comes up hard against the interests of corporate staff administrators, who traditionally look for the easy way, the simple way, the one-size-fits all way of dealing with far-flung employee groups. For many companies and international compensation practitioners, it is actually the administrators whom you have to overcome.

The headquarters staff will ask, “What difference does it make? Unless otherwise required by legislative action or representation, why can’t we be fair to all our employees in the same way?” Here are a few metrics to illustrate what they wish to standardize:

Value (price) jobs irrespective of locale
The pay mix of base salary and incentives
Universal date for pay increases
Average pay increase percentages
Pay-for-performance vs. general adjustment increases

Why Not?

Why doesn’t one size fit all? Why can’t you treat all employees in the same fashion – because they all belong to the same “XYZ Corporation”, right? You should consider the following before taking out that cookie cutter.

Economy: When you’re dealing with country-specific inflation rates that range from flat to 20%+, do you really want to offer the same percentage salary increases? What if one country is in the grip of recession (US), while another remains relatively unscathed (Australia)?

Culture: In some areas of the world, job and income security needs command paramount interest over pay-at-risk, so in the pay mix the base salary dominates the variable portion. For example, while China has a very aggressive sales compensation environment, in India there is more interest in base salary and their CTC (cost-to-company) package than variable pay-at-risk compensation.

Competition: Companies react to the cost of labor vs. the cost of living. If the market they are in rewards in a certain fashion (pay mix, commission vs. bonus, quarterly vs. annual rewards, etc.), companies who provide a different approach risk lower employee engagement as well as a talent drain.

Representation: National unions often dictate pay actions that could reverberate up the hierarchy as companies strive to maintain equitable treatment with their other employees. Works Councils will have their impact as well.

On the other hand, varying your practices according to country-specific conditions could cause a degree of consternation with the back office staff and their computerized systems. These are folks who like things neat and pretty. In their defense though, senior management often asks for standardized metrics that may be difficult develop and compare:

Tabulating global statistics when definitions or methods vary

Identifying global trends based on diverse conditions

Balancing the impact of cross border movement

If you force international operating units to convert their practices to an uncommon format and methodology, the result could be more than just confusion and local administrative difficulties. It could also mean the greater likelihood of overpayments in some quarters while paying less in others – all for the sake of sameness and common report generation. This would result in a combination of hurting employees while also hurting the business.

Remember that ease of administration is rarely an effective rationale for making good business decisions.

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

Tagged Compensation, Global HR, international hr, management development, managing pay

What Would You Do As A New Compensation and Benefits Manager?

Posted on February 15, 2010 by Warren Heaps | 9 comments

Author:
Warren Heaps – Birches Group LLC

A few weeks ago on LinkedIn, Ravinder Bhan asked the following question:

“You have just joined a company with more than 15, 000 employees as a (Compensation & Benefits) manager. What are the first three things you would do to make a lasting impact at the organization?”

As soon as I noticed this question, I was compelled to answer it. Here is the answer I posted:

“This is truly an excellent question. For C&B to be an effective business partner and not just another run of the mill HR function, as you state above, it requires an immersion in the business.

To that end, here are my three things:

Understand the business. Talk to the business leaders, their deputies and employees. Learn what the company does. Don’t just sit in corporate and get opinions from those at HQ – go into the field and see what happens there. If it’s a manufacturer, visit a factory. Spend time with the sales force, meet some customers. And if the company is global, and you are responsible for international as well, get on a plane and follow the same steps in the key operations overseas.

Take inventory. Compile information about how the company manages C&B. Hold off on judgement – instead, focus on gathering information and getting a complete picture of what are the prevailing practices. Talk to managers about what’s working and what’s not. Learn the HRIS system and do some analysis yourself. Speak with the incumbent consultants to understand their role and their perspective about the company’s practices. Find an industry group of peers and get involved, and do some benchmarking.

Formulate your strategy for impact. To do this, look for opportunities to make changes that will improve efficiency and eliminate bureaucracy; programs to empower managers to manage rewards, and hold them accountable to do so; initiatives to support globalization (if applicable); develop dashboard metrics for management to measure effectiveness of C&B programs; and finally, cost-saving steps, such as multi-national pooling of insurance and strategic relationships with providers.

Of course, the above is not a one-year plan — it would take two or three years to achieve. But there would surely be a lasting impact.”

There were other answers to the question, about 15 all together. I was flattered to be cited as the Best Answer (many of the other answers were excellent as well). If you want to, take a look at the whole Q&A on LinkedIn. But the timing coincided with the Olympic Games, so I sort of felt this is my gold medal. Those of you who know me, know for sure that there is no way I will ever get a real Olympic medal :-).

These days, there is so much being stated about how HR needs to “get a seat at the table” and “become an effective business partner,” I thought sharing this topic with our readers would be beneficial. In particular, I am keen to understand what your first three things would be if you were to find yourself in the situation described above?

Would you follow the same steps that I outlined? Why or why not? What else would you do? How would your actions be influenced by the culture of country where you operate?

Please tell me your thoughts by leaving a comment. I am very anxious to read some more “Best Answers!”

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Developing Markets Compensation and Benefits Group on LinkedIn

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Posted in Benefits, Compensation, Global HR Expertise, International Benefits

Tagged Benefits, Compensation, global benefits, Global HR, International Benefits

Three Rules for Compensation Surveys in Smaller Developing Markets

Posted on February 2, 2010 by Warren Heaps | 6 comments

Author:
Warren Heaps – Birches Group LLC

Almost every day, I hear from a client or prospect looking for reliable market data in some small developing market, usually located in a part of the world that the big consultants have not yet discovered. After all, our company focuses on those places!

One of the most common discussion points is about the difficulty the client is having in finding a survey which meets their needs in these markets. You see, most clients have a very “developed world” view of what makes a good survey. But in smaller markets, you need to look at surveys through a different lens.

What Makes A Good Survey?
The exchange is typically something like this:

Client asks, “Do you have a survey for Gabon, in West Africa?”

I say, “Yes, we have a survey there, and for all of the countries in Africa.”

“Wow,” says the client, “that’s impressive. How many bio-tech companies are in your survey?”

“Bio-tech? None, I’m afraid. We have a pharma company, but their office is very small. Are there even any bio-techs in Gabon?”

“Well we are looking to open an office there, so we need to be competitive in our sector. Do you know any other surveys I could look at?”

And so it goes. This client, like many others, is looking for a survey in Gabon, a relatively small market, with the same parameters as they would apply in Germany. Sector based surveys are very popular in developed countries, but in many small, developing markets, sector surveys just don’t work.

Rule #1 – Think Outside Your Sector

Why? Simple. The sector just isn’t big enough. There might only be two or three similar companies, or like in our Gabon example, none at all. To get a good sector survey together you would need at least eight to ten companies with a workforce of at least 20 to 25 staff. But sometimes that’s not even enough.

I remember reviewing a survey once in a Central American country when I was a corporate compensation executive. I was excited that the survey included 12 consumer goods companies (including my former employer). We thought that with 12 companies, there would be enough data for some robust statistics. It turns out there wasn’t. Only 4 of the employers in the survey had a large presence in the country; the rest had small sales offices, and some had less than 10 staff in total. Our company had staff over 150, including a regional headquarters and a factory.

So you see, a sector-based survey with 12 employers yielded good data for only a handful of positions. My company, along with the others that had larger operations, were unable to use most of the sector data due to lack of matches.

Okay, so now you’re just looking for a survey – any survey. Which employers make the most sense in order to get the market intelligence you need to make the right pay decisions?

Rule #2 – Look at the Leaders

Leading employers in all sectors usually have a full range of positions, from support to professional to executive. These employers also have a strong employer brand, making them the preferred employers in the market. The best talent naturally gravitate to these companies, as they are the ones reputed to be the best places to work. More often than not, the leaders are multi-national companies or international organizations.

The multi-nationals are known to have disciplined approaches to reward, governed by global principles set down from headquarters. They view compensation and benefits in a strategic way, and know the importance of using market data to determine rates of pay and benefits.

International organizations include employers such as the World Bank, various Embassies, the United Nations, the European Union, and so on. These organizations are usually well-established in smaller developing markets, and attract the top echelon of the workforce. Surprised? One of the reasons is that many international organizations have very competitive pay programs which are benchmarked not only against each other, but with the private sector as well.

Together, a combination of leading private sector employers and leading international organizations captures the top of the market in many small countries. So it’s a good place to start.

But wait a second. You’re thinking “How will I compare my mobile telecom company to the World Bank? They are not comparable to my company!”

Rule #3 – Use Cross-Occupational Job Matching

First of all, there are common occupations in all employers that are easily comparable. For example, positions from accounting, finance, human resources, procurement and IT; plus secretaries, administrative assistants and less skilled support roles common in developing countries, such as drivers, security guards and messengers.

For professional and managerial positions, the real challenge is finding enough matches for a particular occupation to be able to report the data separately. In order to ensure that there is data available for each professional level in our surveys, we often double-match positions to both a specific occupational benchmark (e.g., Brand Manager) as well as a generic professional position (e.g., Working Level Professional). In case there are insufficient matches for Brand Manager, we can still report the aggregated data for all positions matched to Working Level Professional. In this way, clients are assured to get a comprehensive picture of the market, even if the specific occupational matches fall short in the survey.

Is this good enough? How many organizations use a different salary structure for each occupational group? There are some, but not too many. Using cross-occupational data is not really such a stretch, is it?

In Summary
There are other factors to consider when evaluating a compensation survey in small developing countries, but these three rules will help get you started. I will write another post in the future discussing some of the other challenges. In the meantime, please share your experiences working with surveys in these countries.

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Developing Markets Compensation and Benefits Group on LinkedIn

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Posted in Africa, Compensation, Developing Markets, Global HR Expertise, International Benefits, International Expertise

Tagged Africa, Benefits, Compensation, Developing Markets, emerging markets, Global HR, managing pay, salary surveys

Shock and Awe

Posted on January 22, 2010 by cmc4700 | 3 comments

Author:
Chuck Csizmar – CMC Compensation Group

When you first look to purchase compensation surveys for your international population, it’s going to be a real wake-up call. For those accustomed to only US surveys you will find that the available data in many countries is more limited than what you’re accustomed to seeing, as are the number of companies involved. What won’t be reduced though is the expense. Quite the opposite. If you have multiple countries to deal with, your budget for credible compensation data will likely become a multiple of your US experience.

When I worked overseas my budget for compensation surveys was 3-4 times my previous US budget – and I only had to worry about Europe. What a shock that was – spending much more and arguably receiving less.

Think on it, though: each country is a separate USA, a unique national entity having country-specific labor laws, employment regulations, tax structure, competitiveness challenges and variations of economic strength. For each you will need a country-specific survey to assess the local competitiveness of your employees.

International HR practitioners will need to adjust their thinking to react effectively in smaller countries, where the working population is limited and so is the number of survey participants. It will be difficult to slice surveys by geography, industry or employee segment, as the data points grow smaller and smaller with each criteria. For example, a well-regarded Mercer survey for Sweden showed 202 participating companies, while the Netherlands counted 81. Meanwhile the US survey totaled 500 companies.

To compound this dilemma of accessing credible data you will typically be required to pay “list” costs for each survey, as compared to the US where I was able to gain lower 2^nd copy costs and often times managed to wheedle discounts or “anticipated” participation rates. Such tactics are not as readily available overseas.

Availability of locally-grown survey data is another challenge. I have tried to locate such sources, even those provided in the local language, in order to create a greater “buy-in” sense from management, but with very limited success. Even global companies with non-US headquarters tend to use the multi-national consulting firms.

Accessing International Resources

Should you require information for international compensation practices, below are a number of useful sources, each of which can be tapped via a Google search. Note: many of the non-US sources focus on limited employee segments or functional areas, which may limit their usefulness during a general search.

Towers Perrin	Mercer	Culpepper
Hewitt Associates	PwC	CSi Remuneration (AUS)
AON	Hay Group	VenCon Int’l Reseach (GER)
Radford	McLagen	Economic Research Institute
IPAS	TymWork (SWE)	Western Management Group
Taylor Root (UK)	CFA Institute	EuroComp (Western Mgmt)
Federation of European Employers	Executive Resources Limited	Watson Wyatt
Birches Group LLC	Euro Remuneration Network (GER)	Organization Resources Counselors (ORC)
Ernst & Young	Croner Reward (UK)	Robert Walters (UK)
Baumgartner & Partner (GER)	Interconsult Ltd (UK)	Australian Institute of Management

Should you only have a few positions (2-3) in a given country you can reduce costs through individual job pricing, vs. the purchase of an entire survey. More than a few positions though, would render this tactic economically unfeasible. A few notable sources (though others from the above list may also be able to help):

ER Limited
ORC
Birches Group

Note that I have not included sources from the current vogue of online surveys, like PayScale and Salary.com. To my mind these sources still have credibility problems to overcome before they would be accepted by senior management as a viable resource.

Another effective strategy for reducing costs is to age current data forward, coupled with the use of biennial purchasing. However, if utilizing this strategy have a care to limit its use to countries with stable economies. Using such standard growth figures would miss the mark in countries showing greater volatility.

The Cost of International Operations

Too many HR practitioners and their Managers fail to take into account the expenses involved in keeping their international compensation programs competitive, especially where the organization has a small footprint in a given country. For companies new to the international scene, and for those with small populations in several countries, the shock of survey costs could be daunting. Many times the result is a reluctance to purchase the data, in some cases letting matters on the ground continue to fester – potentially overspending and / or creating debilitating equity problems for themselves.

Call it the cost of doing business, but if you’re going to maintain effective operations overseas, and you want to provide a competitive reward package (of course you do!), it would be unwise to shortchange the process by guesstimating or otherwise trying to make-do without credible information.

The cost of surveys is a fraction of the possible financial impact that could result from retaining non-competitive reward programs.

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Tagged Compensation, cost of HR, Global HR, international costs, international hr, international resources, managing pay, salary surveys

HR and Reward Challenges in Developing Markets – Beyond BRIC

Posted on January 20, 2010 by Warren Heaps | 5 comments

Author:
Warren Heaps – Birches Group LLC

We are all hopeful that 2010 will be a better year for business than 2009. When that hoped for upturn finally takes hold, where will your company find growth? If your company is like many others, the answer to that question points to developing markets in Africa, Asia and Latin America, where growth rates are higher and opportunities are great.

Growth is Robust
Post-recovery estimates from the IMF for 2010 indicate worldwide GDP growth of 5.7% is expected, while GDP growth in developing countries is expected to climb 9.5%.

Regional comparisons are even more dramatic:

Sub-Saharan Africa – 9.6%
Latin America & Caribbean – 10.5%
Middle East – 14.9%
Central and Eastern Europe – 1.4%
Euro Zone – 3.6%

As you can see from these figures, growth in the developing world is expected to be almost three times greater, on average, than in the Euro Zone. Investors have already discovered this; according to Bloomberg Business Week, the top ten performing stock market indices since December 31, 1999 are all developing markets, ranging from 901% gain in Ukraine, to just 318% in Brazil. With potential like this, it’s not surprising that more and more companies are focusing on new markets in these regions.

HR Challenges
The landscape for operating in developing countries is different from what many companies may be accustomed to in Western Europe, the US and elsewhere in the developed world. For HR, the most prominent challenges are in two areas – talent and reward.

The Talent Challenge
Developing country markets are smaller than big developed country markets. Fewer employers participate in the market, and not all sectors are represented, but those that do are all vying for the same people – the best talent. Highly educated professionals are often in short supply, especially those with advanced degrees which are often obtained in the US or Europe. While professionals may have training and education in a particular occupation, it is very common for these individuals to switch occupations for advancement opportunities. They become generalists rather than specialists, and switch between sectors often as well.

Leading Employers Play a Key Role
Certain employers are found in a lot of developing countries, and help to define the labor market. These employers include companies from the banking; consumer products; oil, gas and mining; and telecom and technology sectors. Many of these companies are global multi-nationals which have been operating in developing countries for many years, and have a lot of experience with the conditions. The other major players are international public sector organizations. This group includes employers such as embassies, development banks, multi-lateral agencies such as the UN, and leading international NGOs.

Know Your Competition for Talent
Many private sector companies are surprised when we suggest they consider the international public sector as part of the group of leading employers with which they compete for talent. After all, what do oil companies or banks have to do with embassies or the World Bank? The answer is a lot!

International public sector employers are involved in a lot of the same activities as private sector companies. For example, an MBA graduate being recruited by a consumer goods company for a brand manager role is the ideal profile for an embassy public information officer. The engineers that the oil sector seeks can be deployed as project managers for infrastructure development funded by the World Bank, or an NGO such as the Global Water Project. In addition, of course, there are occupations that are common to all employers, in areas such as administration, finance, human resources, IT, etc. The lesson is to expand your focus in developing countries to include not only companies outside your sector, but some of the relevant international public sector institutions as well.

How Can I Be Competitive?
The second significant challenge for companies in developing markets is figuring out the reward structure. Compensation schemes are different in each country, but there are some common themes across developing countries which differ from more developed countries. For example, the span of salary ranges is often much wider than the typical 50% to 67% often found in developed countries. The differential from one grade to the next can vary dramatically depending on the levels — often the jump from manager to executive can be 35% or more.

Base Salary is Just the Beginning
It is quite common to provide cash allowances, such as 13th and 14th month, as well as transportation allowances or housing allowances in many countries. In addition, in-kind benefits such as beverages or meals, transportation (commuter buses) and subsidized loans are found in many markets. The value of allowances and in-kind benefits can be substantial, ranging up to 30% or more in some countries.

Good Market References Are Important
One way to ensure a competitive position in the market is to establish your position with reference to the leaders, using a high-quality compensation survey. The survey should include values for base salary, cash allowances, in-kind benefits and short-term incentives. In addition, you’ll need to be aware of the social benefits and other statutory pay practices, how pensions and insurance are provided, and how the income tax scheme influences how compensation is structured.

In Summary
Developing markets are exciting, diverse and challenging. Human resources professionals need to become aware of the unique market dynamics in smaller developing countries, including the role of leading employers and the complexities of how rewards are provided.

Note: Birches Group conducts total compensation surveys in 147 developing markets. Visit our website for more information.

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Developing Markets Compensation and Benefits Group on LinkedIn