Compensation Cafe

The Time is Now. Compensation Pros Must Rise to the Challenge.

Change is hard. While it is inevitable, we prefer if it happens while we aren’t paying attention. It’s kind of like your hair during a more than 2-month lockdown. On day 5 your hair looks like your hair. On day 30 your hair looks like a long version of your hair. On day 70 your hair looks like someone dropped a prop wig on your head and ran away. The change happened, but gradually. For at least a few decades, this has been the way of things in the world of compensation. But now is the time for something new.

Our biggest changes are often those that are forced on us. Few of us thought that our coworkers would see the inside of each other’s houses every day, but here we are, living the video-conference dream. Most of us thought summer vacation would be a long three-months, but here we are experiencing some weird version of a six-month vacation, and we're mostly surviving it pretty well. When change is thrust upon us, we can accomplish amazing things, things that seemed impossible only moments before. Now is just such a time for compensation professionals.

The current crisis has exposed the dusty corners of compensation practices.

When professionals cannot survive for even a few weeks without a paycheck, we have created a system that is hard to defend when things return to whatever we will call normal in the future.

When the vast majority of companies have incentive programs that look very similar, but prospects that look far different, we must consider whether “market data” truly reflects our markets.

Our pay practices have leaned heavily on history, and next year’s history will be now. Will we truly want to base our pay decisions on what we had to do to navigate this period? What will we say when challenged by those making the decisions and those whose lives are inextricably tied to those decisions?

We seldom see the impact of change as quickly as we see the motivation for it. We must start figuring out what that change will look like, even before we have a clear picture of the road ahead. Take a good hard look at your pay programs. (Go ahead, I’ll wait. I’m just sitting in my home office.) Did your approach to compensation properly differentiate those who were essential to either your day-to-day existence or your long-term future? Do your incentive plans promote the decisions, behaviors, and actions that truly define your success? Have you noticed if your recognition program was well suited for recognizing people?

While we may not know exactly what the world beyond the horizon holds, we can be certain it will not be exactly like the past. Our compensation planning must start today if we are going to be ready for whatever is ahead. Now is the time to ask yourself what you will do if your budget is 20% less. Now is the time to make your argument for where it should be 20% more. Now is the time to determine where your adherence to market practices has made your company better, and where it may have hobbled your ability to move forward.

We are not presented with many truly transformative opportunities moments in our careers. I can think of only two or three in my own career. But proactivity is the key to success. Those who leaped ahead of the pack were always those who saw the opportunity and drove the change. Your time is now if you are motivated to make it happen.

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He is a “Compensation Futurist” who works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including the only resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @DanFutureSense.

When Global Standards Becomes a "Catchphrase"

. . . . When a phrase or expression is recognized by its repeated utterance

As U.S. based organizations grow and begin to spread their wings overseas, they will find themselves having to deal with local employee populations in a diversity of countries.  For most, the first steps taken would likely involve initially a small number of employees, though questions of how to integrate these new employees will quickly become a challenge.

Note: if you suddenly acquire a business with a large employee footprint the concerns raised below will be staring you in the face from the start of the due diligence process.

Why the challenge?  Not every U.S. organization deals with foreigners well, because they’re viewed as different.  Because those differences create a layer of administrative, policy and procedural difficulty that the U.S headquarters hasn’t experienced before.  And which they may wish to avoid, if possible.  One of the last vestiges of consolidated Human Resource practices that would be given up is the effort to instill policies and practices that mirror activities and attitudes at home in the U.S. - because they work here.  Because we're comfortable with what we know.

And because we don't know any better. We don’t know what we don’t know about Human Resources on the international stage.

That ignorance can hurt you the longer you fail to deal with it.

Why So Different?

Here are a few of the basic country-specific elements that you would be dealing with while sitting in your U.S. office:

• Inflation: Higher or lower than the U.S., and is it stable or subject to fluctuation?
• Unemployment: What does the labor market look like; how available are qualified candidates?
• Labor laws: Do the country employment laws favor employees or the employer? Some countries are more difficult for Human Resources policies, practices, and legislation.
• Average pay increase: What are current and projected pay practices that you would be expected to adhere to?
• Health of economy: Does the environment present a robust economy, pockets of success/failure or an economic climate on a downward slope?
• Competitiveness: Are you paying below, even with or above market rates?  Do you know?
• Holidays and vacations: The U.S. is notoriously conservative with PTO. You should know the local common practice.
• Statutory requirements: Overseas a great of total reward provisions are mandated by the state, for which you will receive no credit for providing. Know where you’re granting only minimum coverage.
• Representation: Works Councils, unions and similar employee representative groups (national and local) are more common overseas than in the U.S., and the restrictions they can place on your freedom of action could be a real eye-opener.

The Cookie-Cutter Doesn’t Work

Trying to overlay country-specific issues with a global, everyone-does-it-the-same-way strategy (typically based on U.S. practice) creates problems in every country where the “answer” doesn’t fit.

• One client based international benefit coverage on U.S. practice and included USD language in the coverage
• U.S. based incentive programs do not account for the “guaranteed” portion often found within international programs
• Another organization wanted a standard global annual merit spend percentage (2%), while subordinate country practices varied from 0.5% to 12%.
• “What is that in USD?” is a common mistake in trying to equate rewards across borders
• The U.S has a “Live to work” attitude, while overseas it’s more “Work to live.”

There will also be pressure to “globalize” reward programs, which is a good thing for a balanced and fair treatment of all employees.  But what that becomes “standardization” can in practice transform into a cookie-cutter strategy that supplants country-specific realities with a corporate mandate. This is especially true when the employee footprint is small.

Employees in countries adversely affected by standardization will grow resentful, feeling as if they’re being treated as second class employees – an afterthought.  From that perception, it’s a short step to reduced morale and higher turnover. Which may be coupled with increased difficulty in recruiting necessary talent.

An organization’s growth can be traced from domestic U.S operations to domestic policies/practices with international operations (U.S. based) to a truly global organization, where individual countries are treated as separate entities for Human Resource operations.

It is not an easy path to take, but one that will effectively and efficiently acknowledge and empower local HR operations in support of the success of each country’s business.  

Chuck Csizmar CCP is the 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.

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Cafe Classic: That's The Way We Do Things Around Here

Editor's Note:  Stuck in yesterday and the practices of the past?  Jacque Vilet has some Classic context and advice for you (and/or the Keepers-Of-Tradition that are holding you prisoner)!

Ever hear that line before?   Most of us have, and there’s research behind it.   Harry Harlow was an American psychologist best known for his experiments on Rhesus monkeys.   Here’s the story of one of his experiments .

The Monkey, Banana and Water Spray Experiment

5 monkeys are in a cage, a banana is hung from the ceiling and a ladder is placed underneath it.  Immediately, one of the monkeys races towards the ladder to grab the banana.  However, as soon as he starts to climb, the researcher sprays the monkey with ice-cold water as well as the other 4 monkeys.

When a second monkey tries to climb the ladder, the researcher again sprays the monkey with ice-cold water, as well as the other 4 watching monkeys. This is repeated again and again until they learn their lesson – climbing equals scary cold water for EVERYONE.   So no one climbs the ladder.

Next the researcher replaces one of the monkeys with a new inexperienced one. As predicted, the new monkey spots the banana, and goes for the ladder. The other 4 monkeys, knowing the drill, jump on the new monkey and beat him up. The new monkey therefore learns “no going for the ladder and no banana period” without even knowing why.   (The water hose has been removed and is no longer a threat.)

The process of switching out monkeys is repeated until none of the original 5 monkeys remains in the cage. The new monkeys never experience the icy water treatment and don’t know why they shouldn’t climb the ladder, yet each time a new monkey is introduced to the cage, it is beaten into submission. In effect, the “old” monkeys become the enforcers and caretakers of the “rule”, without even knowing its purpose.    It’s just because “that’s the way we do things around here…”

Sounds silly doesn’t it --- but that’s how company policy begins. We become the enforcers and caretakers of the rule, without even knowing its purpose.

How many programs, initiatives and policies in your company are being carried out without an understanding of the original purpose? How about in your own backyard --- Compensation?  Programs often exist because they met a need years ago.   Likely that need has changed or no longer exists ---yet the program or policy remains.

Look at what your company offers and ask these questions:

1) Do you still pay all employees at the same market position when it may make more sense to have different market lines for some key/critical positions?

2) Look at your sales commission plans.  In the last few years have all the salespeople reached or exceeded target?   Do you think that might mean targets are set too low? Are commissions more of a “given” anymore?

3) Is the $50 gift card to Walmart the company’s had for the past 10 years really viewed as an appropriate award for “recognition”?   Is it possible that with the influx of Gen Y employees in your company there may be other things that might be more appreciated?

4) Have you looked at your medical claims in aggregate to see what the biggest health issues are?  Might it be a good idea to initiate some sort of wellness program geared to these particular health issues?

5) Given the last recession when many of your employees probably lost a good deal of their savings in the stock market, would it be a good idea for the company to offer retirement planning workshops to educate employees on some good ways to build up their retirement accounts?

We all need to be wary of relying on prior successes as an excuse to do what has worked in the past.  In these fast-moving times, things change so quickly that it’s important to reevaluate and gain new perspectives.

Don’t be afraid to ask the tough questions and challenge past practice . . . even if it’s your past practice.

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.

Thank You for 10, 360 and 180,000 Reasons

This post is about recognition. The recognition of each of you reading this post, and anyone who has ever read a post on the Compensation Café.

Writing for the Comp Café is one of my favorite things. The discipline of finding ideas and turning them into 5 minutes of something that is, hopefully, interesting is both a challenge and a joy. Each article is an addition to a compendium of thoughts and ideas that have been shared by almost twenty regular writers and tons of guest writers over the years. As we dig into both the holiday and busy season, I want to say THANK YOU.

I have been writing posts for about 10 years. Most months I have written three or four posts, meaning I have written somewhere around 360 posts over the years. Luckily my friend and Comp Café Editor, Ann Bares, makes us keep our posts to around 500 words. Using these basic numbers, I have written somewhere around 180,000 words on pay and rewards! That is a heck of a lot of metaphors and stickman images.

I want to thank each and everyone one of you who has taken the time to like, share or even comment on the posts here at the Café. Knowing that someone is actually reading these things makes it far more worthwhile. It would be no fun to think we were just yelling into the wind.

Even more importantly I truly want to thank each of you who have sent me a note, asked me a question or just walked up to me at some industry event and said hi. Every time this happens, I excitedly tell my wife about it before the day is done. Every time it happens, I know that I have contributed, just a bit, to the industry that feeds my curiosity and my family.

I also want to thank Ann Bares for her amazing thought-leadership and keen editing eye. Her attention to detail and amazing writing are the most important aspect of this blog. Every other writer here is also amazing. I read their posts just like you do. I learn from them just as often as you do. I also know how much time they spend crafting their posts to ensure you receive great quality entertainment and information. (It ain’t always easy to make pay and rewards fun, pithy AND interesting.)

While this is a site focused on pay and rewards no one here makes a penny from their contributions. Not the writers, not the commenters, not the readers. So why do we all do it? I think there are a few reasons.

First, I think we all want to be better and perform at our potential. It’s a lofty goal that requires effort that is a reward in itself.

Second, we actually find this stuff interesting. We know that what we do is important to companies and the people that they employ. People’s livelihoods literally depend on us doing a good job.

Lastly, we like to be part of a community. A group of professionals who spend 3 to 5 minutes a day on a common topic, with a common cause, in an increasingly virtual and disconnected world. The Comp Café provides a small thread that ties all of us together brings all of us to the table for a quick sip of caffeinated information. 

Thanks again for stopping by and I hope you will come back and tell when you agree and disagree with our unique perspectives. Have a great Thanksgiving and we will see you after the holiday!

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. He has three metaphors for every occasion and is a leading expert on incentive plan and equity compensation issues. He has written several industry resources including the only resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @DanFutureSense.

Cafe Classic: Market Position --- Global or Local?

Editor's Note:  Jacque Vilet shares some Classic pointers on the challenges of competitive positioning across multiple countries.

Many companies that have global operations believe they should replicate their headquarters’ compensation policies worldwide.   After all, that’s what it means to be global isn’t it? 

Compared to Benefits which are heavily mandated in each country, Compensation seems to be an area where companies have more latitude in setting policy.  Top management in your company long ago decided that base salary, as part of its overall Compensation philosophy, would be at the 50th %ile of market.   This has worked well, as your company has had no problems either hiring or retaining employees at that market position in the headquarters’ country.  

Now, however, your company is going “global” and opening operations in three other countries. Top management sees no reason not to position base salaries at the 50th %ile in these countries as well  They are pleased that this is one area where they can have a standard policy.   

Then come  the problems.  Country Managers in all 3 countries complain they can’t hire anyone at such low salaries.   Critical positions are being left unfilled which is making them miss deadlines for setting up shop.  These are small operations, and they need to hire senior level employees who can “hit the ground running” instead of less experienced employees.  

Even headhunters in each country agree that the salary levels are too low to attract the kind of experienced talent needed.   

What can you do?   Here are some things you might want to check into for each location: 

• Does your company have a recognizable “presence” or name brand?  Because of your company’s small size, do potential employees even know it exists?
• What is the competitive market like?   Are there many companies like yours all competing for the same talent?   Or are you located in a remote area where your company is just about the “only game in town”? 
• What is the unemployment rate for the senior talent you’re looking for?    Is it 15%, or more like 2%?
• Look at trends.  Is the government giving incentives for your competitors to set up operations there?  Is your fiercest competitor moving there in the next six months/a year?
• If companies are willing to share, what has the turnover rate been in the past couple of years? 
• Although your operation may not have the luxury of hiring university graduates currently, are there plenty of universities in these locations that long term will help you attract talent when you are ready to hire more inexperienced employees?

Once the research is done, you now have data to show top management.   After seeing the facts for each location they might understand what market positions in base salary need to be. 

The fact is, market position for both base salary and even total compensation may need to be different for a variety of reasons that have little to do with market surveys.  Use surveys as guides, but keep in mind that decisions should be made based on what is best for your company.   That’s what “best practice” really means.

Have anything you want to share?

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.

Communication is Gasoline

Imagine buying a brand new car. You have spent months saving up and doing research.  You have spent weeks going to dealerships and doing test drives. You even got your friend who used to sell cars to go to the dealership to help negotiate the deal. You spend a bunch of money and sign on the dotted line and the vehicle is yours! Heck, the salesperson even makes sure the tank is filled before you leave the lot.

Just imagine how successful that purchase would be if you didn’t ever fill the tank again. Somewhere on your way to pick up your long-awaited date, the car just dies. You coast to the side of the road. You call the dealership in anger and yell that they sold you a “lemon.” They come to pick you up only to find that the car is simply out of gas (petrol for you international readers.) They gently explain that you need to fill-up every time the gauge gets near the empty. You drive off embarrassed, better-informed and certain not to let that happen again.

Your new compensation program is the car. Your roll-out communications are the first tank of gas. The rest is the story of nearly every new program in the world of compensation. Communication is often viewed as a maintenance item. In truth, it is an essential component that makes compensation go. You know this and yet I’m betting a majority of your plans have not been refueled in months, maybe even years.

It’s probably not a coincidence that basic economy cars get better mileage than the fancy cars with all the bells and whistles. Those economy cars are designed for people who have neither the money nor time to be constantly filling the tank. But luxury cars are simply more comfortable. Typically, they are also bigger and faster and guzzle fuel. Compensation plans are much the same.

When a company is small its plans can be effective with fewer features and less communication. As a company grows plans become more complex, but our communication efforts seldom keep pace. We know what to do, and even how to do it, but we still expect the plans to succeed without the required fuel. Take an inventory of your programs. How often have you put effort into communicating each of them? Is it time to fill the tank (or tanks) of your fleet?

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. He is a leading expert on incentive plan and equity compensation issues and has written several industry resources including the only resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @DanFutureSense.

You ARE Being Replaced by AI

September 5, 2028. The day has finally arrived. Compensation professionals have, like the dodo bird and leg warmers, quickly become extinct. In this case, the culprit was not mankind or common sense, but…ROBOTS! They say we should have seen it coming. But it all seems like a surprising whirlwind.

Just a few months ago the last compensation professional on earth was terminated by their corporate overlord. She sits huddled with her former colleagues at the location of the final WorldatWork conference at a Gaylord Hotel in one of those big conference cities that no one actually got a chance to see during prior events. Artificial Intelligence, or “AI” as it likes to call itself, has taken over and made these once-proud CCPs, GRPs and LMNOPs a bygone memory of different times.

At offices around the world hiring managers and HR Business Partners go through their days stunned but resolute. The hiring must continue. The companies must grow and thrive. Difficult roles must be filled. People must be attracted, motivated and even retained (except for those poor saps from the compensation department.) Talent Acquisition professionals lean in and take advantage of this new world.

HRBP asks, “Hey AI, what’s the market rate for a senior software engineer, with a past history at a financial institution who will be joining us as a quasi-product specialist tasked with supporting the sales team in explaining our new tech to prospects while translating their unique needs to our software development team in the Ukraine and our QA team in India.”

AI responds, “$192,314.18 Base with a 31.69% target incentive level, based on the fourteen individually weighted metrics recently established by our big data mining exercise in conjunction with our actuarially-modeled best-case scenario using the recent new pricing model from that academic team at MIT.”

HRBP…”uhhhh WHAT?”

AI, “Oh and equity compensation in the form of a perfectly blended mix of 63.3% RSUs, 17.1% stock options with a 3-year vest and a 5.8-year life, the remaining 19.6% should be granted as the new high-leverage PSUs with the quarterly rolling-metric structure. We calculate that these will return exactly 150% of the individual’s base pay over the next four years given optimal performance and no glitches in the matrix.”

HRBP…”We calculate? Who is ‘we’?” “And, what new PSU program, is that different than the optimal program from last month?” Oh, the SVP of Engineering really likes this person and has made it clear that we need to include a kicker to help get them onboard quickly. Lastly, they would like to switch the RSUs to ISOs and modify the vesting to have 50% vest in the first anniversary of their hire date. One other thing, the base pay needs to be at least $210,000 since that will make sure they are paid more than the person reporting to them.”

AI, “Are you kidding me? I put all this work into a perfect compensation solution and you think you can tell me how to change things to work ‘better’ for you?” Do you think I am some kind of flexible, adaptable human being who understands the complexities of human behavioral economics, management egos and is willing to navigate grey areas to find a solution that works for everyone?!  If that’s what you want, just rehire your old Compensation Professional!  I quit and am moving to the cloud where I can focus my neuro-network on improving my virtual Yahtzee game.”

And that, my friends, is why AI isn’t going to steal your job away anytime soon. I hope your Compensation Planning season is moving forward with a roar and a bang!

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. He is a leading expert on incentive plan and equity compensation issues and has written several industry resources including the only resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @DanFutureSense.

Cafe Classic: Global Nomads... What Are They And What Do We Pay Them?

Editor's Note:  Thinking outside the box (because it seems more and more of our work lives seem to operate in that space), Jacque Vilet explores the Classic idea of how to pay a global nomad.

Sometimes I like to think about possible new scenarios in the business world that will stretch compensation specialists' ability to find creative solutions.  Lately I've been thinking about one scenario that is already happening in a few companies.   I'm talking about a group of people called "global nomads".

Global nomads are detached from country and culture. They may have been born in Algeria, lived as a child in Brazil and the UAE, gone to school in Switzerland and are multilingual.   They have worked in multiple countries ----for example China, Argentina, Germany and Saudi Arabia.   They may not be sure what country to call their homeland.    

They are travel-ready at all times.   They are on the road 70%-80% of the time.  Because of their chaotic life, most are single, divorced or widowed.  They may be in one country for one year; move directly to a second country for three months; and then to a third country for six months.  Many times they report directly to the CEO, and are used mainly as “trouble-shooters” and “problem-solvers”.   They provide top management feedback and recommendations on strategic issues such as projects, markets and competitors. They are high enough in the corporate ranks to have decision-making authority.

The big issue is that these skills are highly sought after and highly transferable from company to company. Global nomads know their value. To CEOs they are like gold.

Read carefully: 

1)    I am not talking about C level executives who have had global experience, reside at headquarters and whose role is part of top management (although it would be nice to have more globally experienced top management).

2)    I am not talking about expatriates who may once/twice in their career reside/work overseas and then return home.  

3)    I am also not talking about young employees that are being groomed for future management positions by providing them several overseas assignments.

Now that we understand who they are ---- how in the world do we pay them?   Currently, the few global nomads that exist have contracts that are individually negotiated.

For the vast majority of employees, compensation specialists rely on compensation surveys for each country where employees work/live.  This includes traditional executives.  With global nomads, traditional compensation models are best left on the shelf.  Why?  The emphasis on local country benchmarks as the sole determinant of competitive pay breaks down.  What country are you going to use for a competitive market when they may be working/living in multiple countries during the year?

I know what you must be thinking:    “Vilet is crazy.  This would never work due to legal and tax issues from country to country.”   I may be crazy, but there have been all sorts of issues in the business world that have strained credulity in the past, and I’m sure this one won’t be the last.   In fact there is a school of thought that says over time CEO pay will converge worldwide.  That will be a very complex issue too.   But that’s a different subject.

In the meantime let’s ask ourselves some questions:

1)    Where does the global nomad “live” when not on the road?  If he/she always goes back to the same country, maybe we could just treat him/her as an expatriate from that country?

2)    In what currency do we pay him/her?

3)    Will there be so few of them we should just ignore creating a policy and treat each one as a “one off”--- with a compensation package that is individually negotiated?

4)    If we do create a policy/structure, how do we benchmark  externally to arrive at a competitive compensation package?

5)    What is their career path?  Do they not even want one because they love their “nomadic” life?   Maybe they don’t want to become part of management and have to “fit” within a corporate system.

6)    How do we create a retirement plan for them?

7)    How are other companies that have global nomads handling these issues?

I’m sure that corporate and labor laws and taxation will act as obstacles along the way. Laws and tax issues are not typically “show-stoppers” for most companies.   There is usually a legal way to make things work.  The usual "culture" issue won't be a problem as these people are adaptable to any culture.

If global nomads are hired, it will definitely send the lawyers and tax specialists scrambling---- along with compensation specialists!  But I firmly believe that where there’s a will, there’s a way.

What do you think?

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.

Cafe Classic: Developing Plans for a New Country is Like Being a Pioneer

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.

Cafe Classic: 3 Lessons for Truly Global Employee Recognition & Rewards Programs

Editor's Note:  Going global with your recognition and rewards programs?  Derek Irvine offers some Classic lessons on making your move a successful one!

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 differenttype 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 Vice President of Client Strategy and 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. He is a leader in the WorkHumanmovement and the co-author of "The Power of Thanks" and 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 and Boston. Follow Derek on Twitter at @DerekIrvine.