Editor's Note: As organizations of all types and sizes expand their operations across the globe - and as YOUR organizations contemplates a move into a new country - there are some critical questions to be asked and answered. Jacque Vilet provides her Classic tip sheet below. You're welcome.
Once a company decides to set up a facility in a new country, there are important "people" issues that must be addressed --- hopefully on a proactive rather than a reactive basis. Labor cost is a big part of total cost; therefore Compensation professionals need to be involved from the very beginning in order to set up plans that are both competitive and cost effective.
There are a number of questions that need to be addressed upfront before anything is done.
Corporate questions to resolve:
*Global or local compensation/benefits strategy?
*Market position set locally or globally?
*Individual or group bonuses/commissions?
*Local market competitive bonus targets or global bonus targets?
*If stock options are granted to employees outside the U.S., will it be designed on a local competitive basis or set on a global basis?
*Local job titles and salary grades or the same as corporate?
*Supplemental bonus plans locally competitive or the same as the U.S.?
While resolving corporate issues, there are site-specific issues that need to be addressed as well:
Local questions to resolve:
* What are the local labor/employment laws pertaining to compensation/benefits?
* Are there any “representative parties” (labor unions) that either dictate or require approval of compensation/benefits?
* Are there any cultural issues that might impact compensation/benefits?
* What competitors are located close to your new facility?
* Are competitors well-known multinationals or lesser known firms?
* Does your company have a strong company brand in the country?
* Do you have a need for college graduates? If so, are there universities that have degrees relevant for your operation?
* What is the unemployment rate overall and for the key jobs you need?
* What has turnover been for key jobs for the past couple of years?
* Is there a surplus of the key talent your company is looking for?
* What are the best surveys for this particular country?
Let's talk here about a few of the corporate questions:
Individual or group bonuses and commissions: In individualist cultures like the U.S., both bonuses and commissions are usually designed for individual employees. This works fine. However, in some cultures it doesn’t work as well. For example, in Korea and Japan group bonuses/commissions would be the first choice.
If management is willing to be flexible, commission plans could be developed to please everyone. The salesforce as a group in a country could have an overall quota that would be a total of what individual plans would have been. They would have to meet that overall quota, but could work together to achieve it.
Group bonuses would work fine for groups of employees that work as teams for a full year. But for the most part, individual bonuses would need to be used as most employees don’t work on teams full-time.
Market position: If your market position in the U.S. is pegged at the 50th percentile you may have difficulty attracting people if you set the same position in other countries. In “hot” markets such as India you may need to set your position at the 60th or 75th%ile --- at least for certain jobs.
Supplemental benefits: Sometimes top management wants to offer the same benefits globally because they see that as “fair”. In reality you may end up offering benefits that either no one has heard of or are not provided locally. There is no reason to offer something that is not perceived as a “benefit”. IBM made this mistake years ago when it put pension plans in every country where they had facilities. No one had ever heard of pension plans, and employees didn’t understand them. Over time the cost became enormous.
I hope I have given you something to think about.
If you’ve set up compensation/benefits programs in a new country, please feel free to share your experiences.
Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, Texas Instruments and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expatriate twice during her career. Jacque has the following certifications: CCP, GPHR, HCS and SWP as well as a B.S. and M.S in Psychology plus an MBA. She belongs to SHRM, Human Capital Institute and World at Work. Jacque has been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications.
I thought the timing and the title of this article of preparing for a new country was incredibly relevant, given the offer the U.S. is preparing to make for the purchase of Greenland.
Har du nogen fagforeninger her?
(Do you have any unions here?)
We'd all better brush up on our Danish language skills.
Posted by: Chris Dobyns | 08/17/2019 at 11:29 AM
Thanks.
Given our VUCA global world, we are reminded of the need to continue to be very mindful of the bases and importance of local values, behaviors, and workplace practices, before we fashion new programs for those markets. We certainly do not want wholesale transfer of products / services, policies and practices.
Going into a new country or region is, for me, always exciting, with a healthy dose of trepidation to keep one watchful and mindful.
I have witnessed several instances where otherwise 'normal' or 'reasonable' policies and practices from the HQ country appear, and/or become massively troublesome, distracting, or even damaging in application in other countries.
Unfortunately, in a related dimension, many companies still continue to send out inadequately prepared and even hostilely-acculturated leaders and teams who end up spending too much company time, money and resources (millions of dollars) chasing red-herrings, and creating disasters in matters of HR/People, Community-relations, Operations, etc.
Cultural preparation is as important as technical preparation in most cases. And it does not cost a whole lot of money (relative to the damages and costs created by not doing so). It is worth the investment to properly help technically-proficient people to become better prepared in terms of managing attitudes, behaviors, relations, and the delivery of results.
Posted by: E.K. TORKORNOO | 08/21/2019 at 08:17 AM