International Comparisons Can Get You Into Trouble

In recent months several of my US-based clients faced challenges overseas regarding high employee separations coupled with difficulty in recruiting qualified staff.  These companies were at a loss to understand the cause of their problems, as each felt that they were already providing a more generous reward package for employees then was normal practice in the US.

A quick study revealed that the clients' international employees were indeed receiving a great deal more than their American counterparts.  However, in many areas they were in fact being given no more than the minimum benefit provisions mandated by statutory requirement.  They were receiving only what the company was compelled to grant.  How do you attract, motivate and retain quality staff when the message of your actions is that you are only willing to offer what government regulations say you must?

One client bemoaned having to grant four weeks of vacation upon hire, because it was the law, only to find out later that common practice indicated five or more weeks were the norm.  To employees and candidates they offered no more than what they were required.  By ignoring competitive practice they were now paying the price by struggling to build and keep a quality staff.  They had earned a reputation in the local market as a "minimalist employer."

When American companies first establish operations overseas Human Resources faces a number of challenges that they are unaccustomed to dealing with at home.  Every country is a separate and unique entity, with differences in HR policies, practices and statutory requirements, each of which must be acknowledged and addressed in order to develop and maintain a successful operation.  On top of that are the vagaries of the competitive marketplace, where the same job is paid differently from Rome to Oslo to Buenos Aires - usually coupled with differing social charges and benefit coverage.

Choosing to operate under the guidance of US employment law and US-based corporate practices is a failed strategy.  Maintaining such a US focus (usually for ease of administration) will bring you grief; grief from your employees, from those you hope to hire, and most of all from local governments whose laws you have ignored or bypassed.

Think how you would feel if elements of your own reward package, policies or procedures were based on European or Asian common practice.  Wouldn't go over well, would it?

If you decide that your business strategy requires you to maintain a staff presence in a particular country, then I would advise you to treat that operation the way you would its US counterpart; provide competitive terms and conditions that will attract and retain the right caliber of employees in that country - and ignore how their packages might compare with US or other country counterparts.  If you are not willing to make that commitment, from an HR perspective you would be better off not to engage employees in that country.

Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations.  He is also associated with several HR Consulting firms as a contributing consultant.  With over 30 years Rewards experience Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation.  He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a brood of cats. 

Image: Creative Commons photo by NASA Goddard

Comments

[Derek Irvine, Globoforce]

Great post. The truth of this post goes beyond these traditional compensation and benefit packages, too. Chuck, you say: "Choosing to operate under the guidance of US employment law and US-based corporate practices is a failed strategy. Maintaining such a US focus (usually for ease of administration) will bring you grief; grief from your employees, from those you hope to hire, and most of all from local governments whose laws you have ignored or bypassed."

This couldn't be more true than in employee recognition practices as well. Many global companies we work with today stumbled and failed miserably in past efforts to offer a single global recognition program when relying on a provider or solution based on US practices and expectations. The common example is sending the traditional 10 year anniversary clock or watch to an employee in China (where that signifies death).

On a much broader scale, expectations for recognition vary drastically by culture -- both geographic and generational. If you're establishing your employee recognition practices based on the desires of your generation and your culture, you will insult a vast majority of employees in other parts of the world and from other generations -- certainly not the goal with a positive program such as recognition. This international insult can have long lasting repercussions.

Your point on violating local law is also valid -- too many well meaning HR managers have put their companies at risk by violating local taxation and compliance law they weren't even aware of.

[Chuck Csizmar]

I was nodding my head as I read your comments on international recognition programs. My company once implemented a global rewards & recognition program - with processes virtually the same through 20+ countries. What a flaming failure!

We had employees willing to take the money, but not the recognition. They didn't want their co-workers to know about it! Then we had others who objected on principle to an individual award - as they believed it was the team that was successful. And the complaints went on and on.

At the end of the day we couldn't even give away the money allocated for the program, because we had so few takers outside the US. A real eye-opener about the diversity of opinion, culture and working environment!

[Carol Komassa, PHR]

Interesting article Chuck, how true we don't know what will offend another culture in any environment...ask the question and watch the body language for answers if you have the opportunity with verbal communication and interaction. I've worked with a diverse group of employees both here and in Europe and learned a lot!

A real eye-opener in Milwaukee - a Survey just published yesterday for the "TOP 100 Workplaces" lists 'Direction' at the top of the importance list - pay and benefits are at the bottom!

[Chuck Csizmar]

These days it's worthwhile to remind folks that benefits are more a commodity than ever, and pay remains a dissatisfier, not much of a true motivator.

Most companies of any size offer a similar package of benefits these days, so choosing an employer on the basis of benefit coverage seems a disappearing trend.

Similarly, employees complain about pay when there isn't enough for their perception of self-worth. Increasing that amount may stop the complaining, but doesn't swing attitudes toward the positive. Complaints just focus on different wants. Paying extra (beyond average or "competitive") doesn't increase performance.