Tag Archives: international hr

The Challenge of International Market Pricing

Posted on April 26, 2010 by | 3 comments

 


Author:
Chuck Csizmar – CMC Compensation Group

“What is the competitive market price for a particular position?”

It’s a simple question.  If you work in Compensation, this is what you do.  And if you’re in the US, the survey sources you can call upon are numerous and well-stocked with participating companies and benchmark matches – the blessings of a large country.  In fact, it is a common practice to segment the data (report separately) on the basis of industry, revenue size, or geographic region.  In some instances you can further refine your analysis by operating budget, staff size or even years of experience.

For those accustomed to such robust analysis it can be a real wake-up call when asked to conduct a similar analysis for operations in another country.  Suddenly your content-rich environment has disappeared, and in its place you find that the availability of good information can no longer be taken for granted.  Now what do you do?

Your large country database is gone.  Instead, you face a limited selection of survey sources and each offers only a fraction of your normal participant count – a far cry from business as usual.

Such is the key challenge when pricing international jobs – the limited number of companies included in surveys, even by the major vendors.  For example, Mercer Netherlands has 81 participating companies.  So it is not unusual for a market pricing analysis to include only 4 – 5 “matches” – but is that representative of common practice?

If you’re the one on the asking end of the original question, let me share the challenges your analyst is likely to encounter.

Impact of Reduced Participation

  • Limited industry segmentation:  Reported data will likely cover multiple industries, with limited or no segmentation.  If you’re in either a high or low paying industry, surveys will provide inflated or discounted  information.
  • Hard to segment by revenue size:  To the extent that larger companies pay more than smaller you lose that distinction as well.  This can be especially problematic if you’re a small company.
  • Global responsibilities vs. strictly national:  The distinction is often blurred between national, regional and global responsibilities.
  • Combination jobs not well represented:  You will find yourself matching against jobs “close to” your own, just to gain a “feel” for pay levels.  If your job content varies from benchmark descriptions, reported data might not capture such idiosyncrasies.
  • Poor matches and / or no data when less than 5 respondents:  Surveys tend to provide an “n/a” when they do not have enough participants.  When you start with limited companies it’s not unusual to find unreported jobs.
  • Forget Regional variations:  While it is often the case that certain geographic regions have higher pay levels, the reported data is usually national.  You may assume that participants are in the higher paid region, at your risk.

What to do?

Frustrating, isn’t it?  You can’t very well throw your hands into the air, complain about poor survey quality and move on to something else.  The limitations are there and you have to play with the cards you’ve been dealt. Management is waiting, wondering what is taking you so long.

Working with limited resources is a test.  Your challenge is to balance an understanding of the subject position, the industry and the vagaries of limited data points in order to determine which figure best represents your position’s competitive value.

To succeed you must utilize subjectivity and your professional judgment to consider the available data and gauge which figures best reflect the job under review.  The correct answer will no longer jump off the page at you.  Compensation has become an art, not a science.

  • To improve your matching, consider either the 25th or the 75th percentiles instead of the median or 50th percentile to reflect your position: this can be effective with poor matches, or concerns that the reported job is either larger or smaller than your own.
  • You may have to add or subtract from a benchmark job to gain a more appropriate figure for your position.  For example, if your job is a VP but the survey matches stop at the Director level (or converse), you may have to adjust up or down to create a better “guesstimate.”  Note: in such a case don’t forget that the incentive percentages will likely differ as well.
  • There is no formula in making adjustments, but changes in organizational level are usually around 15% – 20%.  Within-level description changes are usually around 5% – 15%.
  • If dealing with only a few positions you might have greater success by individually pricing jobs through a vendor’s database of multiple surveys, government sources and local surveys.  Vendors like ORC, Birches Group and a few others offer this select service.
  • Be careful of the arithmetic exercise (averaging averages, inappropriate matches, assuming numbers, etc.) that delivers a figure you cannot validate later.  Caution: a number is remembered, while often the qualifiers that follow are forgotten.  Make sure that you document such concerns before providing specific data.

All this subjectivity means that your judgment might suffer from more skepticism, even criticism, as you cannot simply point to a survey page and say, “there it is.”

Does all this subjectivity ruin the value of your analysis?  Not at all, as long as you inform management about how limited survey resources have impacted your analysis.  They expect an answer to their question (market value?) and you need do the best that you can with the resources you have available.

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NFTC International HR Conference Report – Part II

Posted on April 1, 2010 by | 5 comments


Author:
Warren Heaps – Birches Group LLC

Alan Freeman and I both had the pleasure recently to attend the Houston International HR Conference sponsored by the National Foreign Trade Council (NFTC).  This is the second in a series of posts summarizing the proceedings of the conference.  We hope this will allow our readers to benefit from the learnings of the conference, even if you were not there personally.

Here are some highlights of some presentations at the conference that touched on various aspects of Expatriate Program Management.

Reducing Expatriate Program Costs
Expatriate program costs are an important topic for discussion whenever international HR folks get together.  A presentation by Morgan Crosby and Harry Gram of Airinc focused on two areas that have a big impact on program costs – Housing and Alternative Policies.

Expatriate Housing
Housing is one of the most costly elements included in an expatriate package.  It’s not uncommon for rental amounts to reach $4,000 to $5,000 per month, or more, and that’s not including the associated tax gross-up costs.  In assignment locations with a broad range of acceptable housing for expatriates, the reason for such high costs is often the standard used.  By standard, we mean the size and quality of the property, and most importantly, the neighborhood.

Morgan gave an example for London, where a company could save about 15% per year by substituting high quality housing in the London suburbs for apartments in the most prestigious locations such as Belgravia and Knightsbridge.  This usually means that expats will have to commute a bit longer to work, and occassionally, it may mean they will be further away from international schools.  But the housing in the alternative locations is perfectly acceptable and compares favorably to many different home country housing standards.

Alternative Policies
Another opportunity for cost savings is the use of reduced or modified policies in certain situations.  Many companies are introducing development programs to offer staff the opportunity to gain international experience early in their careers.  These employees are often very willing to take assignments with fewer of the ‘bells and whistles” associated with full expatriate packages.

Companies can respond to this by offering “reduced” expatriate packages.  For example, a lower housing standard; reduced relocation assistance; and efficient purchaser COLAs.  And, since the target population for these development programs are frequently young people, they often do not have school-age children, and some may be single, reducing the cost for spousal benefits and education assistance to nil.

Summary
There is an ever-increasing effort to reduce the cost of expatriate programs. These suggestions are just two of the alternatives companies may consider when looking to generate savings.

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NFTC International HR Conference Report-Part 1

Posted on March 23, 2010 by | 3 comments


Author:
Warren Heaps – Birches Group LLC

A few weeks ago, I had the pleasure to attend the Houston International HR Conference sponsored by the National Foreign Trade Council (NFTC).  The conference was well-attended; over 150 delegates, both corporate staffers and suppliers were there.  My colleague and contributing editor, Alan Freeman, was also there.  We would like to share some of the highlights from the conference proceedings.  We hope this will allow our readers to benefit from the learnings of the conference, even if you were not there personally. This is the first installment of our report.

Global Wellness
One of the most interesting and innovative topics at the conference was Global Wellness.  Two companies, Chevron and Intel, presented their experiences with the development and implementation of wellness programs in the US and in various global markets.  While each company took a slightly different approach, there were many similarities in their experience.

Chevron’s Experience
Chevron is one of the world’s largest integrated oil companies, with operations in over 100 countries.  The company identified cardio-vascular health as a primary risk factor in their population and decided to focus on health awareness and improvement programs to address this risk.  Chevron began their program with pilot tests in the US, Nigeria, Angola and Thailand, among others.

The wellness program consists of a health assessment conducted by a third-party, measuring basic health statistics such as blood pressure, cholesterol levels, body fat index, and similar risk factors.  Employees are then provided with coaching on lifestyle and behavioral changes they can adopt to reduce their risk for cardio-vascular disease.  Some of the changes are typically smoking cessation, exercise, weight reduction, stress reduction, sleep and healthier food choices in their diet.  In addition, the company worked with it’s vendors in the the target countries to introduce heart-healthy options in their food service programs, introducing both new menu choices and some items with substitute ingredients or modified recipes, such as reduced sodium content.

The program has been a strong success, and is now being rolled out in additional countries.  There were many learnings from the pilot experience, but here are a few that I thought were particularly powerful:

  • Cardio-vascular disease is often thought of as an illness that strikes mainly in developed countries.  This was, in fact, the initial reaction in Nigeria.  In fact, however, the World Health Organization reports that 82% of deaths from cardio-vascular disease are in low- and moderate- income countries, and affect men and women equally.  Chevron’s employee demographics, which include large numbers of men in their 50’s, are a primary risk group.
  • The counseling sessions which followed the health assessment needed to be tailored to local conditions and culture.  Suggestions for changes to diet, for example, had to be adapted to reference the typical food choices available in country.
  • The communications to staff were adapted to the individual market.  While there was a consistent message, the images and illustrations were chosen to reflect the population of the particular country, so employees.
  • There were measurable results that indicate the program is helping to reduce risk for cardio-vascular diseases amongst the participants.  As the program continues, Chevron will develop statistics to demonstrate specific financial and other impacts; but in the US, there is already strong evidence among a group of staff who have consistently participated in the program since it’s inception that it’s working.

The Intel Experience
Intel Corporation is the world’s largest manufacturer of semi-conductors. They rolled out a wellness program in the US and several overseas markets, including Malaysia, Israel, Costa Rica and China. Initially, Intel staff examined several years of health surveillance data to confirm that staff were properly protected from the chemical processes used in the semi-conductor fabrication process. The study indicated there was no effect from the work environment, and that rather, lifestyle behaviors were the larger risk areas for Intel employees.

Some stress-reduction programs were introduced, but it wasn’t until Intel CEO Andy Grove had a medical event that the focus on wellness was renewed and elevated in the company. Building on a substantial array of existing services, such as occupational medicine, on-site clinics and various online resources, Intel began to introduce a more dynamic program to help improve employee wellness.

The Intel program is a 3-Step Wellness Check, including a Biometric Health Check, a Health Risk Assessment, and Wellness Coaching. The Coaching is provided face to face in most major locations.   In China, the coaching is provided in person by prominent local physicians.   Follow-ups are also integrated with the local EAP. These design changes were made based on the recommendation of the local committee responsible for implementation of the wellness initiative in China. It has proven to be very effective, and Intel plans to continue rolling out the program to additional locations over the next few years.

Observations
I was quite impressed by the efforts of these two prominent global companies in the area of employee wellness.  In both cases, the companies have a long-established focus on employee safety; the wellness initiatives are consistent with this focus and enhances this commitment.

What is especially impressive is the success in introducing the program not only in the United States, but also in overseas markets, mainly in the developing world.  While it’s still too early to draw any major conclusions about the long-term impact of these programs on company health care costs, other related items such as absenteeism, and overall impact in the community, the preliminary data indicates positive impact for the companies, their employees and the community.

What Are You Doing to Promote Employee Wellness?
Global Employee Wellness is a new area of focus for companies, and there is a lot still to be learned.  What is your company doing in the area? Please share your comments and experiences with us!

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Third Culture Kids – Maintaining Stability in a Life Without Roots

Posted on March 21, 2010 by | 3 comments


Author:
Megan Wu, GMS – Santa Fe Relocation Services (Shanghai, China)

[Editor’s Note: We are delighted to feature this article about Third Culture Kids by Guest Author, Megan Wu.  Megan is herself a Third Culture Kid, and is now raising one of her own in Shanghai.  In addition, she serves as Relocation Services Manager for Santa Fe Relocation, a leading relocation provider.]

The business of global mobility is all about helping people who find themselves in a foreign country and a different culture. Many assignees are families and with that comes a lot of worry on how the children will adjust to the move and the new surroundings.

When a child is moved from one culture to the next they instantly begin forming their own “third” culture to incorporate all the new and the old that they come in contact with, making them “third culture kids” (TCKs). A third culture child is someone who has grown up in a culture not their own. They feel that they no longer can completely assimilate with their home culture, and as they are a foreigner, cannot completely assimilate with their host culture; therefore forming their own third culture. How each child handles this cultural jumble does of course depend on each child’s personality, duration of stay, age, parental attitude, etc.

I am one such TCK, after moving to Shanghai in 1998 at the age of 15. I have lived in Shanghai for 12 years. Now that I am the mother of a 3 year old girl and facing questions on how to best raise my daughter in Shanghai, I have thought a lot about the importance/disadvantages/advantages of being a third culture child. Since my daughter is growing up raised by an American parent, living in China, she is very much growing up in the “third” culture that I myself have created. and all the benefits and challenges that come along with it.

Cultural Acceptance and Diversity
Growing up abroad has given me a greater understanding of other cultures. I have had the chance to come in contact with children from different cultures in school, and now in an international work environment. My friends and colleagues are from many different countries around the world, opening my eyes to different cultures. I have become more aware of the fact that there are different ways of celebrating, smells, tastes etc. This has given me the flexibility and a sensitivity that can be more difficult to obtain when living “at home”.

Learning and hearing foreign languages is also an important factor in the cultural growth of TCKs. The hopes of many parents is that the children will be able to learn at least one or even more languages while being abroad. This is not so easy. After several years in China, I did not speak more than basic Chinese, as most of my world was based in English – at home and in school. My understanding was more than basic, as Chinglish (Chinese and English mixed) was a common “language” at school and I achieved some comprehension of the language this way. It was not until I began studying Chinese seriously at University that I could combine all the conscious and subconscious knowledge I had to actually advance to fluent Chinese.

Based on my personal experience, and similar experiences of friends, I believe it is critical for parents to ensure that there is some aspect of the TCKs life that is submerged in the language they should learn – be that extra language lessons, a special activity or even just spending time with a maid/nanny that does not speak your own language.

Cultural Roots
The flip-side to being culturally aware and flexible is a sense of lacking cultural roots. Growing up, I was asked if I felt rootless every time I returned home for the summer, but could not quite understand the implications until much later. I always felt that I had stability of where I came from and what I stood for. This may not have come from my culture but rather from my family. Wherever my family was – this was home and I know what social/cultural rules applied. To me this has emphasized the importance of having consistency in the home environment – not only in terms of rituals, but also in terms of rules and values.

It was only upon my return to the US after graduating from high school in Shanghai and starting US University that I discovered what the effects were of my overseas experience. My lack of understanding of common conversations such as TV shows and politics was embarrassing. My gap of knowledge in the modern culture with regards to TV shows, commercials, programs/activities growing up, and that my peers did not understand my experiences, was a constant reminder of my time away from “the norm”. Reverse Culture Shock does exist and in my case, resulted in my decision to embrace my overseas experiences, return to my life a nomad and move back to China. Every child deals with reverse culture shock differently, of course. Some will see their return “home” as yet another adventure.

Social Skills
Going to school in a foreign country puts great emphasis on your social skills but also builds you empathy. At any international school around the world, each student will have been “the new kid” at one time or another. Generally I have found that TCKs will have a sense of openness and confidence in handling new situations simply because they have to! During school they will inevitably say many goodbyes to good friends; they have to make new friends continuously. This can lead to many good friends all over the world that will last for a long time, but can also create a situation where a protective mechanism is built up where “out of sight is out of mind”, leaving the TCK with few friends from a specific period in their life.

Reflections
Looking back I do feel that the advantages of being a TCK far outweigh the disadvantages. I will always be unique. In my role as a relocation professional, I will always have a different way of perceiving the world and a different understanding of the challenges that face our clients, especially the children.

Resources
There are plenty of resources either from the web or books where you can better understand your Third Cultural Kid. Here are a few websites that might provide you with more insight:

Whatever you do as a parent, the most valuable suggestion I can give you is: Tell your child that their life will be different, the lessons they learn along the way as a TCK will be valuable tools in their adult life, and most importantly they are not alone.

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Sometimes You Have to Spend

Posted on March 18, 2010 by | Comments Off on Sometimes You Have to Spend

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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“Think Globally, Act Locally” for Compensation Design

Posted on February 28, 2010 by | 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
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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What Kids Say About International Assignments

Posted on February 22, 2010 by | 11 comments

Author:
Michael F. Tucker, Ph.D, CMC
Tucker International

Some years ago, Art Linkletter had a featured segment on his television show “Art Linkletter’s House Party”  called “Kids Say the Darndest Things.”  Bill Cosby hosted a later version, and there were also similar series in the U.K. and Australia.

We at Tucker International have found this to be true today when we listen to kids accompanying their parents on international assignments.  The following are some of the things we have heard from them during our intercultural training programs for them and their families.

The Turtles, the Cat, the Dog and the Orangutan
A ten-year old boy going to Indonesia insisted that he was only going to go if his two turtles, cat and dog went… unless his parents promised him a baby orangutan.

Mom’s Happy – Dad’s Happy, What About Me
A ten year old boy had this to say about the ease of the move:  “My mom’s happy; she gets a maid.  My dad’s happy; he’ll get a lot of money.  I’m the only one in our family who feels sad about going.  It will be easy for them.  They are old!”

My Mom the Grandma
A ten year old girl summed up her feelings about how long she would be away from the U.S.A.:  “When I get back, my mom will probably be a grandma.”

Boy Am I Lucky
A teenager’s view of the move:  “I hate it.  Everybody keeps telling me how lucky I am to get to live overseas.  But they don’t have to do it… I do.”

The Pilgrims and the Indians “Over There”
A seven-year old girl from the UK moving to the Southern USA was listening to the story of the first Thanksgiving.  When the part came up about the Pilgrim Fathers having the neighboring Indians for dinner on the big day, a look of horror came across her face.  The youth trainer asked what “was the matter,” and the little girl replied, “Ohhh, the Pilgrims ate the Indians for dinner!”

My House, My Pet, Am I Next?
A nine-year old boy broke into tears as he was explaining the family’s international move:  “My parents are selling my house and my dog, I think I might be next!”

We’re Not Really Moving?!!
On the first day of the pre-departure training program, (the family was departing on their assignment the following week), a twelve-year-old girl was asked how she felt about moving to Switzerland.  She said “I don’t know.  I haven’t really thought about it.  I am not sure we are really moving.”

Some of these stories illustrate the need to provide high quality intercultural training for kids.  Young people, generally ages seven and above, are very sensitive to changes associated with international relocation.  They are sometimes left out during the international assignment decision and preparation process.  It is very helpful to counsel and educate them on how to handle changes that greatly affect their lives.

Intercultural training can reduce fear and stress and create a more realistic and optimistic view about the international move.  The results are young people about to become “third culture kids” who are happier, more supportive, adjust easier and have a willingness to culturally engage themselves in the country of assignment.

The best practice followed by many successful organizations is to provide intercultural training for assignees and their families.  Many studies show that if the family fails to adjust successfully while on assignment, the likelihood of a failed assignment is high.

Does your organization include children in pre-assignment inter-cultural training?  What has been your experience with children of assignees?

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The Easy Road to Global Compensation Success?

Posted on February 18, 2010 by | 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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Tips For A Successful International Relocation

Posted on January 27, 2010 by | 6 comments

Author:
Matthew Shore – Move One Relocations

[Editor’s Note:  We are pleased to welcome Matthew Shore as a Guest Author.  Matthew is Communications and Marketing Manager for Move One, a leading global relocation, moving and logistics firm serving Eastern Europe, Asia, Middle East and Africa.  He is an expat himself living in Budapest, Hungary, with his wife.]

It’s no secret that the stresses of international relocation on employees and their families can take their toll. The magnitude of its effects can be on par with divorce or a death in the family. Delivering the right support for employees and their families during the first critical months after their move may mean the difference between the success or failure of an assignment.

Focus on the Family
It is often the family of the assignee that experiences the most difficulty when relocating internationally.  For example an accompanying spouse who has left his or her friends, family and other support networks to relocate can experience profound feelings of loss and displacement that can persist for long after arrival in the new location.  Providing new expats with the means to become self-sufficient and thrive in their new environment is therefore vital for the success of an assignment.

Best Practices to Support Your Assignees
It’s normal and predictable for assignees and families to experience culture shock and other challenges when taking a new assignment.  Targeted support for families on the ground at their new location helps to reduce their anxiety, speed up their sense of regaining control, and ensures a productive assignment.  It is also good practice to offer support with the aim to keep morale high by offering services that address the full range of all family members’ needs, from orientation and cross-cultural training, to recreation, social integration, security and education, as well as employment options for the traveling spouse.  This support falls under eight categories:

  • Welcoming and orientation. Provide a point of contact for the newly arrived family.  Offer information, contacts, destination resources, and welcome events. It is also beneficial to arrange repatriation workshops for departing families.
  • Employment liaison. Finding purposeful work for spouses can be key to successful adjustment, and the provision of multiple employment resources should be made available.  Maintaining contacts in the local economy, providing aid in exploring alternatives such as home-based business, and assistance in applying for functional training are all good practice, and help the non-working partner get the best out of life while overseas. In today’s economy, virtual assistants are an increasingly widespread option for professionals as well as administrative work in companies small and large.
  • Education liaison. Most relocation companies provides information and contacts for local schools, but offering managed support programs for youths and childcare resources is also beneficial.
  • Information and resource management. Making resources such as internet and intranet access is helpful in the interim period until home access is established, as well as literature and events in the local culture.
  • Guidance and referral. Offering EAP services such as confidential counseling, as well as resources and referrals for such issues as divorce, spouse/child abuse, adoption, death, and mental health concerns.  Be sure to use an EAP that is sensitive to cross-cultural issues, and is familiar with international assignments.
  • Community liaison. Cultivate relationships with community and social organizations and local resources that can benefit expatriates.
  • Events and cultural programming. Cultural events as well as informative programs and workshops on host-country culture help families to orient and adjust to the new culture.
  • Crisis management and security liaison. Relaying security information to the community. This includes ensuring crisis preparedness, emergency evacuation information through alerts and seminars, as well as rebuilding the community after a crisis.

Tools such as our city guides, and our online magazine for expats in Budapest can go a long way to address some of these points, reassuring the new assignee and their family that life in the new destination isn’t going to be a total departure from their old life, and that they can and will ‘fit in’ with their new environment.

For me there is a personal angle, too.  I moved to Budapest when my wife was offered an assignment here.  I can assure you from my own experience, taking the time to ensure that expat families are made aware of the social options in their new city helps a great deal.  For example, Move One recognizes that for non-working spouses of assignees – more-often-than-not female – finding a circle of friends quickly can make a world of difference.  This is why we make a point of supporting local expat groups and schools with sponsorship and practical assistance as part of a commitment to the local expatriate communities where we operate.  Of course, there is added value for us, in terms of brand awareness, to be visible in the local community, but we recognize the importance of supporting these organizations for the greater good of our clients.

There are many new online resources to help families with their moves as well.  Are there any steps you have implemented for your assignees that have been particularly effective in helping them adjust?  Please share them in the comments!

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Shock and Awe

Posted on January 22, 2010 by | 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 2nd 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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