Editor's Note: In today's Classic, contributor Jacque Vilet confronts misunderstanding and misapplication of the notion of "consistency" in compensation -- including some of the interesting ways it is applied to international remuneration. Bet a few (or more) of you have similar stories to tell!
Being consistent; that is usually the mantra of HR, especially when it comes to compensation. Many managers understand “consistency”. Which means that all that time you’ve spent on compensation training and communication with management has paid off, right?
There are occasions where the consistency mantra can get us into trouble. Let me share an example that happened to me several years ago at Company X. I was cruising along one day at work, putting the finishing touches on merit budget recommendations for all the company’s operations outside the U.S. I had been working feverishly to finish in order to give the information to the CFO before he went ahead and plugged in the U.S. merit budget increase worldwide. (We’ve all had that happen haven’t we!).
I received a phone call from a manager who sounded panicked. He wanted to talk to me right away. I recognized his name as an Engineering Manager who had recently been promoted to a position with responsibility for an entire product line --- including employees in 5 different countries. This international “stuff” was all new to him.
When he arrived at my office he showed me a spreadsheet he had prepared with all his employees worldwide and their salaries. In one column he had their local salaries in local currency. In another column he had their salaries converted to U.S. dollars.
He was agitated and told me that we had to “fix” the salary problem immediately. When I asked him what the problem was, he looked at me with disbelief and pointed out their pay was not “consistent”. For example his employees’ salaries in Japan were averaging US$30,000; employees in Germany were averaging US$120,000 and his employees in the U.S. were averaging US$80,000. He couldn’t believe that I couldn’t see the problem.
I blessed him silently for caring enough about his employees to at least review their compensation. He was taking his new responsibilities seriously and trying to do the right thing. I knew I could go into a lengthy explanation about why his issue was not relevant and even give a little economics lecture. But realizing that he needed just a simple answer, I told him that his employees in every country were being paid competitively for their jobs. If they transferred to another country permanently, then we would have to make adjustments. But, for now, their salaries were very competitive in Japan, Germany, the U.S. and all the other countries where they happened to be working.
I showed him survey data for each country so he could see how his employees’ salaries compared to the same jobs in that market. I told him that the issue of “consistency” does not mean that we pay employees in the same job the same salary worldwide. It just means that we pay employees competitively in their own country.
After poring over the surveys he felt much better. After all, as an engineer he couldn’t dispute “data” could he?
I have had the same issue with C level management as well. They just can’t seem to wrap their head around anything but US$. From a cost to the company perspective they are right. But when it comes to paying salaries, setting policies for vacation time, setting annual bonus targets ---- they need to understand the importance of local competitiveness and cultural impact.
The lesson I learned here was that as simple as we try to make compensation concepts for managers, there are still issues they don’t understand. While these may be the things that are second nature to us as compensation professionals, we need to practice getting “outside” our own heads and trying to see the world as our managers see it.
Jacque Vilet has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She typically works with companies that are growing overseas either organically or through acquisitions. Her expertise encompasses many areas of HR --- compensation, benefits and wellness, labor law, learning/development, strategic workforce planning and mergers and acquisitions. Her true passion is studying globalization and its current/future impact on companies and jobs. She has managed both local/ in-country national and expatriate programs and has been an expatriate twice during her career. She has certifications from HCRI, World at Work and Human Capital Institute as well as a B.S. and M.S. in Psychology and an MBA. Jacque has been a speaker in the U.S., Asia and Europe and is a regular contributor to various HR and talent management publications.
Creative Commons image "International Currency" by Warriorwriter