This post is inspired by Jim Brennan’s “Travel, Currency Issues and Compensation” post last week. In his post, Jim shared:
“A recent story shows a different type of travel/comp relationship. Currency problems in some nations have made travel an occasion for some people to ‘make money’ by acquiring U.S. dollars and converting them on the black market upon their return.”
This is a very broad example of unintended consequences from artificially controlling currency, but there are lessons we can learn about globalization of programs, especially those that impact compensation, recognition and rewards. I’ll leave compensation impacts to my Café colleagues who are true compensation professionals, but I’ll dive into three clear lessons for employee recognition and rewards.
1) Recognition and rewards are not compensation.
Poorly designed programs can be too easily gamed, even by well-intentioned mangers, to make up for perceived deficits in employee compensation. The conversation often sounds something like this: “John, I’m sorry I couldn’t give you a big enough raise this year, but here’s a $1,000 recognition bonus to show you how much we value you and your contributions.” Recognition (and any related rewards) are always the icing on the cake of compensation. As I’ve said before, if base compensation is not appropriate, no amount of recognition can make up for the deficit.
2) Equitable awards ≠ currency conversion.
Many companies make the mistake of applying simple currency conversion to award amounts when expanding a recognition and rewards program globally. This, however, gives a very inequitable rewards experience. In the US, for example, a $100 award might buy a very nice dinner for two, but with only currency conversion applied, could buy the restaurant in India. This is another classic example of employees in some geographic regions “making money” off of employee rewards.
3) Standard of living is relative.
Seeking to get closer to actual purchasing power, too many companies will apply a simplistic tool such as the “Big Mac Index” or a more complex Purchasing Power Parity Index (PPPI). Neither works well for employee recognition and rewards, however, as few employees would choose a Big Mac as a reward. PPPI itself is too broad as it also includes the costs of doctor visits, rent, gasoline, groceries and the like – again, not rewards someone would choose in a recognition program. A true, global standard of living index should be used that removes these elements in appropriate for rewards when considering equitable award comparisons.
In what other ways have you seen recognition and rewards misapplied, misinterpreted or misused globally?
As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin, Montreal and Boston. Follow Derek on Twitter at @globoforce.
Have experienced all 3 of your points, Derek.
When serving as a "translator" between Maritz and Shawmut Banks, I blocked implementation of their mutually-desired recognition program when I correctly identified widespread dissatisfaction with bank base pay as their most crucial issue. Problems with inadequate/chaotic cash comp could not be solved by a non-cash approach. (Ironically, the Maritz exec who brought me in as an interventionist was happy to have a credible reason to disengage from a lose-lose situation.)
Best/simplest case re item #2 & #3 was also long ago, when I learned that, in the Philippines, spouses of my global corporation's Filipino employees were hiring hit men to collect on our standard employee life insurance policy. While merely nominal in the USA, the amount was a fortune there.
What works in one place is not automatically right everywhere.
Posted by: E. James (Jim) Brennan | 01/21/2014 at 07:54 PM
That is a crazy example, Jim! Wish I could say I hadn't heard similar stories before, but thank you for highlighting so powerfully the importance of careful consideration when globalizing programs!
Posted by: Derek Irvine, Globoforce | 01/22/2014 at 08:45 AM