Tag Archives: Developing Markets

Developing Markets Compensation and Benefits Group on LinkedIn

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

Delegation: Leadership Development in Africa – Part 2

Posted on February 10, 2010 by lexlindeman | 13 comments

Lex Lindeman

Dr. Paul Rono

Authors:
Lex Lindeman – HR Boosters
Dr. Paul Rono – Kenyatta University (Nairobi)

In our previous post Leadership Development in Africa – Part 1, we explored the characteristics of effective leaders and the way to develop them. One of the important competencies of effective African leaders is delegation. In many African public and private companies, management asks us to focus on delgation during workshops we conduct for their staff. It seems to them that African managers, especially, need to learn to delegate more than they do already.

Delegation

The main purpose of delegation is to make organizations possible. Just as no one person in an organization or enterprise can perform all tasks necessary for the accomplishment of group purpose; so is it impossible, as an organization grows, for one person to exercise all the authority for making decisions.

If managers delegate poorly it will cause demotivation, frustration, slow decision making and the manager will have no time for his or her subordinates. Good delegation will save time, ensure a better distribution of workload, and ultimately lead to better decisions. And, effective delegation will help to develop, empower and motivate subordinates.

Why Managers Don’t Delegate

Some managers think that no one else can do the job the way they want it done, how they want it done and when they want it done. They think it’s easier and more efficient to do it on their own, and they believe that they can do it better than their employees. These assumptions are incorrect!

Managers are not sure how to do delegate correctly. Here are some of the excuses I’ve heard over the years:

“My team members lack the experience.”
“It takes more time to explain than to do the job myself.”
“A mistake by a team member could be costly for my project.”
“My position enables me to get quicker action.”
“There are some things that I shouldn’t delegate to anyone.”
“My team members are specialists and they lack the overall knowledge that many of my decisions require.”

I came across this small quote in New African, June 2009 by Akua Djanie:

“I don’t know what it is about Africans, but we are afraid of, and shy away from, the idea of delegating someone to take our place when we are unavailable, is it because we think the person we delegate to will do a better job than us? Is it because we want to be seen as the one in charge; the one that can make or break the company, the project or the team? It is unbelievable, but from our post offices, to our small-scale businesses, and to the multinationals, it seems that everyone in Africa is scared to delegate.

Delegation shows the effectiveness of teamwork, because no matter how wonderful someone is at their job, no person is an island. And no project or company can function with only an individual. What delegation shows is that even if a particular person is unavailable, the project, team or company can still proceed because that person has put mechanisms in place to ensure the smooth running of operations. So rather than see delegation as a threat to their positions, Africans should embrace delegation as a strength. It simply does not make sense for everything to come to a standstill because one person is not available or one person is trying to do everything by him- or herself.”

But delegation is not only an issue in Africa; in institutions in the rest of the world, managers struggle with the same issues.

The Organization

Every position in a formal organization has a specified set of tasks or “position responsibilities, authorities and accountability.” Tasks should be delegated (assigned) to the lowest level in the organization at which there is sufficient competence and information for effective task performance.

The three concepts of responsibility, authority, and accountability are the major variables in the theory of delegation:

Authority: Superiors delegate authority – permission and encouragement to take action – but they do not delegate responsibility, which they share with their subordinates. Thus responsibility, as accepted by the one to take action exists and is shared from the point of acceptance upward, level by level, to the top of the organization.
Responsibility: Responsibility is an obligation owed and cannot, therefore, be delegated. No superior can escape, through delegation, responsibility for the activities of subordinates, for it is he who has delegated authority and assigned duties. Likewise, the responsibility of the subordinate to his superior for performance is absolute; once he has accepted an assignment and the power to carry it out, no superior can escape responsibility for the organization activities of his subordinates.
Accountability: Since authority is the discretionary right to carry out assignments and responsibility is the obligation to accomplish them, it follows, therefore, that authority should correspond to accountability. From this logical analysis emerges the principle that the accountability for actions cannot be greater than that implied by authority delegated, nor should it be less.

Advantages of Delegation
Delegation is a powerful management tool. Some advantages of delegation include:

Efficiency: The more a superior is able to delegate, the more time he has for thinking, planning, etc.
Better Decisions: The person who is close to the scene of action should be better able to make decisions than a distant superior.
Initiative: Delegation encourages initiative on the part of subordinates so that the organization can use their skills more fully. Initiative in turn improves morale, because people take increased interest in their work if they are given an opportunity to use their own judgment.
Timeliness: Delegation improves timing of decisions, because it minimizes the necessity for sending recommendations up the chain of command to decision makers several levels above the point where the recommendations were initiated.
Speed: A do-it or-else order eliminates the time-consuming dillydallying of feedback. But speed may cost accuracy and morale.

Barriers to Delegate

Many managers will find a ‘good’ reason not to delegate; here are some pretexts which can be found in any work environment:

The need to be needed: A superior who has an intense desire to make or keep subordinates dependent will find it difficult to give sincere recognition for job achievement by them.
Fear of losing control: When superiors delegate, they run a risk of the subordinates not doing the job well, and losing control of the performance for which he is accountable.
Fear of surrendering authority: Whenever you delegate, you surrender some element of authority (but not of responsibility!) This is inevitable. By effective delegation, however, you get the benefits of adequate time to do YOUR job really well.
Perfectionism: Just as you have to develop staff to do jobs quickly without your involvement, you will have to let people make mistakes, and help them to correct them. Most people will, with time, learn to do jobs properly.
The Desire for Reward: Many managers enjoy the rewards and self-fulfillment associated with achievement of doing work. Delegating to subordinates necessarily means that the subordinates will get the reward.
Fear of Competition: Other managers are afraid that if they assign work, and their subordinates develop, they will someday outperform them, overtake the manager in the hierarchy of the company.
It’s a Effort: Delegation takes time. In the early stages, managers need to invest time in training their people to take over tasks. When coaching and checking are taken into account, it may even initially take longer to achieve the desired outputs. In time however, with the right people, your coaching investment will pay back handsomely.

It is common for people who are newly promoted to managerial positions to have difficulties delegating. Often they were promoted because they were good at what they were doing. This brings the temptation to continue trying to do their previous job, rather than acting as a manager, and focus on developing their new subordinates.

How to Overcome Weak Delegation

Here are ten tips for you to help you to delegate more easily:

Define assignments in the light of expected results.
Select the right person to which to delegate.
Open up the lines of communication with your subordinates for consultation and counseling.
Establish proper controls for proper use of authority.
Reward effective delegation and successful assumption of authority.
Be willing to give other people’s ideas a chance (never say: “Yes but….” This means NO!)
Be willing to release the right to make decisions (we call this empowerment).
Allow others to perform even though they make mistakes.
Trust your delegated junior. Delegation implies a trustful attitude between the two.
Establish and use broad controls. Responsibility is not delegated, hence the need for you to establish a means of feedback to assure yourself that the authority delegated is being used in support of the organizational objectives.

Conclusion: Weak Delegation in Africa?

As I said earlier, delegation is a global problem. But a very positive aspect is that Africans are very keen to learn and to try things out. This attitude toward change allows Africans to learn to adopt delegation faster and easier. Studies in Africa show that Africans are ready to accept delegation of duties more easily than in the western world. Many managers in Africa learn easily to delegate and delegation is readily accepted, respected and honored. Demonstrate how how important the jobs, the expectations, the goals and tasks are, and the African is keen to accept.

Mike Boon (2007) stated that accountability is one of the key area that must be stressed when delegating tasks to an African manager:

“Through this accountability, they become leaders and others will follow them.” When a manager or leader encourages accountability through delegation, the result will be growth and progression.”

More About the Authors

More About Lex:

More About Paul:
Dr. Rono is a lecturer at Kenyatta University in Nairobi. He is an authority on leadership development, and has published various articles related to leadership development in Africa with a progressive yet adoptable and realistic view. Watch for his new website coming soon!

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Posted in Africa, General, Global HR Expertise, Leadership Development, Talent Management, Training

Tagged Africa, Developing Markets, emerging markets, leadership, management development, Training

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

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

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Posted in Africa, Compensation, Developing Markets, Global HR Expertise, International Expertise, Talent Management

Tagged Africa, Asia, Compensation, Developing Markets, emerging markets, Global HR, international hr, managing pay, Talent Management

Expatriate Challenges in Developing Countries

Posted on November 5, 2009 by Warren Heaps | 14 comments

Author:
Warren Heaps – Birches Group LLC

Today I had the pleasure to deliver a presentation to the Thames Valley Chapter of the Forum for Expatriate Management. If you are not familiar with this organization, I urge you to visit their website – there is a wealth of great resources to be found regarding all aspects of international assignment management.

My presentation focused on the unique challenges of expatriate assignments in developing countries. There is information about:

the challenges of designing expatriate compensation packages;
the emerging trends in the sources of talent for these assignments;
some comparative information on hardship pay (a key element of packages to some developing countries); and
a couple of ideas about alternative approaches to consider.

If you would like to look at the presentation in its entirety, please send me an email using the Contact Us page.

If you have some thoughts or questions about this topic, use the comments feature to share them!

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Developing Markets Compensation and Benefits Group in LinkedIn