It Doesn't Work That Way

Whenever I'm working with a client who is new to the international stage, or an organization with only a small employee footprint overseas, a critical challenge we face is the need to educate management as to what they can expect when searching for competitive compensation data.  This challenge tops the list of client "need to know," often trumping cultural distinctions, works councils and even local attitudes toward work.

Many begin the effort by not anticipating much of a problem, as they've been working with U.S. compensation surveys for a long time.  How much can the process differ, they think.  We'll have a look at competitive pay in, say . . . Belgium, or Argentina or Thailand.  We'll get some survey reports, flip a few pages to sort things out, and - there we are.

Just like in the U.S.

Oh, and while we're at it, let's make sure that we capture only data for our own industry.  And searching on companies with a similar revenue size would also help.  And what the heck, let's make sure we nail down local information for the lower rank jobs as well, not just the broader field of professionals and management.

So the thinking goes, it should be a straightforward process.  They just have to pay for a very expensive survey. 

Well, this is one of the reasons that I have grey hair.  Because when the reality of international compensation issues finally hits home, sometimes it hurts to be the messenger.

Reality Bites

Instead of a smooth road to the Answer Man, like you may have grown accustomed to with U.S. surveys, the international road is not only bumpy, pitted and curved, but in some sections an earthquake took out the road entirely!

Not like the U.S.?  Let's see.

• Limited sources: How many companies can there be in Belgium, or Chile?  Of any size or industry.  The smaller the country the less robust the survey population.

• Too few participants: How many actually participate in commercial surveys?  If you start with a lot less companies you have to figure that the participation number will drop like a stone as well.

• National Data: Given the above restrictions, gaining data for a particular city can be an especial challenge.  Because what you'll see most often is only national data.

• All industries data: By now you've guessed this.  Not enough companies and not enough participants will cause the survey to lump data segments together.  You can forget revenue size as well.

• Benchmark jobs:  While common jobs will be reported, those less often seen, especially those utilizing new technologies, are often not represented.  So job matching increases in subjectivity.

• Minimal hierarchy:  Interval jobs like Sr. Manager, Sr. Director or even some career steps (i.e., Engineering ladders) are often not included, as surveys focus on generalized titles to capture as many respondents as possible.
• It's a secret:  Often experienced in  third world countries, or even where the labor market for certain jobs is tight, some companies will refrain from participating in surveys - out of fear that disclosure might lead to poaching.  What you could be left with is a handful of very large organizations, and does that reflect your competitive market?

Dealing With The Pain

In spite of the paucity of available information, at least as compared to a U.S. market experience, you still have to complete your task of assessing the local national competitive market and present recommendations for management to consider.

Simply complaining about the limited data will not provide a successful strategy, or a career enhancing move on your part.

What you have to deal with is less certainty and more sensing a "feel" for reasonable compensation.  And that lack of precision will cause some compensation practitioners and many HR generalists to be uncomfortable.  Because they want to see the answer, not have to figure it out themselves.

But when you're working on the international stage, compensation can truly become more of an art than a science.

Be careful out there.

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.  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 clowder of cats.

Creative Commons image, "Decisions, Decisions," by torbakhopper

Comments

[Jacque Vilet]

So true Chuck. And that is why for many years Intel had no high tech companies to compare to in Vietnam and had to figure out how create salary structures using data from Volkswagen and other non high tech companies.

[E. James (Jim) Brennan]

Excellent points, Chuck. The socialized nature of many national pay systems also dictate so many constraints on individual pay that (a) there are virtually no "benchmark" job rates; (b) employers have very little discretion over compensation amounts and (c) the few optional forms of variable remuneration they can apply become prized secrets not to be shared with rival peer enterprises.

Many if not most plant managers in Central Europe demand bribes to produce survey answers. And what they do supply is highly suspect, too. The world does not operate according to US or Canadian HR values or compensation practices. Other nations have their own laws, customs and traditions.

[Jacque Vilet]

In Russia employees receive "white" wages that are reported on the books and taxed. But employees also may get "black" wages which are not reported so they won't have to pay taxes. Bonuses are usually in the "black" category.

[E. K. Torkornoo]

Great reminders of what I call 'Rewards in the jungle.' Practices in the jungle are all over the map, if you can lay hands on a map. It's often uncharted but getting better thanks to increased penetration by well-established participants and survey providers alike. In one instance, just about five years ago, for a sector with 6 players in a country of 25 million people, the best available survey data showed great reticence to report data for CEO direct reports by function. That made sense in the context. You could practically identify the incumbent by name if you had the data at that level of detail. We ended up having to make 'informed' judgments using data that reported just the minimum and maximum for that level for all functions in each company (very wide ranges indeed). As you indicated there is a fear of poaching. The custom survey (in the absence of regular surveys with wide participation) had to co-opt selected companies from cognate industries to let it all make 'sense' for running some kind of stats. It's always interesting trying to explain this kind of context and the related proposals to bosses at headquarters located in London, Denver, Minneapolis, or Toronto (real HQs of companies in this context). From the field, the HQ questions sounded like: 'What do you mean you don't have percentile pay data on green-eyed, left-handed Lutherans with red-head spouses and three autistic children under age 10?' It requires patience and strong intestinal fortitude to weather the questions and to get buy-in. Thanks again Chuck.

[Maia L.]

THIS is why international comp is fun - challenging but fun.

[Asma Malik]

Thank you so much Chuck, I recently worked on creating compensation structures for a few countries in different regions, and faced exact same challenges. This article and comments on it, validate everything I experienced in the process. Its not easy to pinpoint compensation for an international position, especially the ones rare to find. Even disparity among surveys exist for the same role. Local HR sometimes can provide useful feedback on narrowing down the data per their experience, and may also be able to share a quality local survey available to validate our proposals.

[Warren Antonik]

Chuck, totally agree with your points. We've been facilitating the establishment of salary structures in a wide range of countries around the world. Though its not just isolated to international compensation (its just a bit more obvious). In the US we've found the pursuit of the 'perfect' data set while interesting is fraught with the same issues as international compensation. Survey systems may have great ability to slice and dice data but what you end up with fragmented, non-representative data sets. Ultimately, though its a matter of bringing folks along with you on the journey...and encouraging a focus on being market informed and not necessarily lead. Sometimes its a quick journey ... sometimes its takes a bit of time.