Compensation Cafe

Skateboarder Teaches Us When to Think Twice

Not that long ago my son attended a birthday party at a skate park. While the young kids rolled around and the older ones did impressive tricks, the even older folks watched from the sidelines. One of the dads in attendance mentioned that he was pretty good in his youth, but had recently learned that he may need to take a different path.

He recounted standing on the lip of a ramp. The trick to “dropping in” is trusting that you and your board will travel together from horizontal to vertical and back as a team. The process seems impossible for a sane person. There is nothing holding the deck to your feet and nothing holding the wheels to the wall. If you think about it, it’s pretty obvious that you and the skateboard will simply fall to the bottom of the ramp or pool.

He said his brother called out to him and said, “If you have to think about it, you shouldn’t do it.” In other words, if you didn’t have the trust and confidence in yourself in doing it right, you were probably just going to get hurt. Of course, having that level of confidence is no guarantee of success, but without it the only option is failure. As he had gotten older this dad has also become sane. The challenge of reality had trumped the bravado of youth.

Compensation can often be like this. The CEO or head of Sales asks for something that you know CAN be done, but you are not sure YOU can do it. Sometimes we take a deep breath and drop in, trusting on our training and instinct. When we can’t do that, it’s time to ask for help.

I find this stagnates many critical projects. A complete redesign of your pay structure can seem so big that you simply never truly get started. A new approach to incentive plans can seem so complex that we dodge the real task and create something vanilla with the hope that no one will notice (they will). Improving sales compensation can be contentious enough that we simply leave it to the business development leaders to create their own plans. Finding a new compensation consultant when the current one has lost its edge can seem like far more work than you can give. All of these decisions are rational and sane, but none of them help you, your company or your employees.

Ask yourself why aren’t you just “dropping in” the next time you have not started, or delivered on, something hard. Maybe it’s not because you didn’t “have the time” or the right “executive buy-in.” Perhaps you are just sane and no longer want risk falling on your face. When it happens, start with a peer, or bring in a consultant or another specialist to provide a new perspective. We’ve all been there, and getting unstuck is amazing!

Dan Walter is a CECP and CEP and works as Managing Consultant for FutureSense. He is passionately committed to aligning pay with company strategy and culture. Dan is also a leading expert on equity compensation issues and has written several industry resources including the one-of-a-kind 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.

Shock & Awe

When you first look to purchase compensation surveys for your international population, it’s going to be a real wake-up call.  For those accustomed to only US surveys, you will find that the available data in many countries is more limited than what you’re accustomed to seeing, as are the number of companies involved.  What won’t be reduced though is the expense.  Quite the opposite.  If you have multiple countries to deal with, your budget for credible compensation data will likely become a multiple of your US experience.

 When I worked overseas my budget for compensation surveys was 3-4 times my previous US budget – and I only had to worry about Europe.  What a shock that was – spending much more while receiving less.

Each country is like a separate USA, a unique national entity having country-specific labor laws, employment regulations, tax structure, competitiveness challenges and variations of economic strength.  For each, you will need a country-specific survey to assess the local competitiveness of your employees.

International HR practitioners will need to adjust their thinking to react effectively in smaller countries, where the working population is limited and so is the number of survey participants.  It will be difficult to slice data by geography, industry or employee segment, as the data points grow smaller and smaller with each criterion.  For example, a well-regarded Mercer survey for the Netherlands showed 81 participating companies, while the US survey totaled 500.

Availability of locally-grown survey data is another challenge.  I have tried to locate such sources, even those provided only in the local language, in order to create a greater “buy-in” sense from management, but with limited success.   As a result, even global companies with non-US headquarters tend to use multi-national consulting firms.

Accessing International Resources

Should you require information for international compensation practices, below are a number of useful sources, each of which can be tapped via a Google search.  Note: many of the non-US sources focus on limited employee segments or functional areas, which may limit their usefulness during a general search.

Should you only have a few positions (2-3) in a given country you can reduce costs through individual job pricing, vs. the purchase of an entire survey.  Having more than a few positions though would render this tactic economically unfeasible.  A few notable sources (though others from the above list may also be able to help):

• Birches Group
• ORC
• ER Limited

Another effective strategy for reducing costs is to age current survey data forward, coupled with the use of biennial purchasing.  However, when using this strategy have care to limit its use to countries with stable economies.  Using such standard growth figures would miss the mark in countries showing greater volatility.

The Cost Of International Operations

Too many HR practitioners and their Managers fail to take into account the expenses involved in keeping their international compensation programs competitive, especially where the organization has a small employee footprint.  For companies new to the international scene, and for those with small populations in several countries, the shock of survey costs could be daunting.  Many times the result is a reluctance to purchase the data, in some cases letting matters on the ground continue to fester – potentially overspending and/or creating debilitating equity problems for themselves.

Call it the cost of doing business, but if you’re going to maintain effective operations overseas, and you want to provide a competitive reward package (of course you do!), it would be unwise to shortchange the process by guesstimating or otherwise trying to make-do without credible information.

The cost of surveys is a fraction of the possible financial impact that could result from retaining non-competitive reward programs.

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, "Surprised!," by Rockin Rob

Cafe Classic: Do I Have To?

Editor's Note:  We have often, here at the Cafe, discussed the challenges faced by HR and Compensation pros who serve smaller companies - not the least of which is recognizing (and getting leadership to recognize) the importance of moving beyond informality and complete discretion in making critical people decisions.  In today's Classic, Chuck Csizmar addresses this challenge relative to expatriates and overseas assignments.

Recently a U.S. client asked me to explain why I recommended that they create an international assignment letter for their expatriates.  They only had a few employees overseas and previously had resisted the call to what they described as “playing the lawyer card.”  They felt that management could effectively deal with the circumstances of each expatriate situation as matters came up, and were reluctant to lose what they considered their prerogative – to set terms and conditions as they thought appropriate for each employee.

It's not unusual for small companies to send an employee overseas with little more than a verbal agreement and a series of vague assurances.  These organizations wish to avoid bureaucracy and move quickly.  However, in most cases such casual and hurried arrangements have proven painful and expensive experiences for all concerned.

• The shock employees and their families faced when they came to grips with actually living in a foreign country, vs. simply visiting. 

• The constancy of unforeseen and confusing localized situations (medical claims, driving licenses, bank accounts, schooling, language, etc.) proved such a frustrating distraction for the employee that they lost focus on the job.

• Relationships with headquarters suffered as the employee asked for more and more consideration to redress what they considered coverage gaps in their terms and conditions. 

Providing an assignment letter is a smart idea.

• Protection: Confirming the assignment terms & conditions protect both parties from misunderstandings, misinterpretations and assumptions – before expenses are incurred.

• Clarity: Accepting an overseas assignment is a major step for any employee, as well as for their affected family members.  Clarifying the assignment terms and conditions ensures a smooth assignment for all parties involved.

• Cost control: Define company-paid expenses and conversely what they will not cover.  An understanding will mitigate issues from arising once the expatriate reaches the host country. 

• Standardization: Your international policy should treat all expatriates in the same fashion.  Unique circumstances do occur but the basic principles should be repeated for every assignee.

So how bad can it be, playing it by ear and leaving terms and conditions to be developed over the duration of an employee’s international assignment?  Aren't flexibility and quick thinking positive management traits?

When you court the inherent risks that accompany an undocumented assignment, you should be prepared for:

• Unplanned additional costs

• Constant re-negotiations with the expatriate

• Disgruntled employees and / or affected family members

• Greater risk of assignment failure

Short cuts usually limit the financial and emotional protection the expatriates are going to rely on - at the same time that the company has committed a substantial amount of money to place them far from home. 

When preparing an international assignment letter, you should include the following (as applicable):

• Title, compensation and assignment duration: Critical elements of status and reward in the host country.

• Housing and cost of living allowance: Should include the amounts involved and the frequency of review.

• Benefit coverage: How will home country benefit protections be handled in the host country.

• Relocation: The policy coverage for the employee’s residence, to include movement of household goods overseas.

• Property management: What will happen to the home country residence?

• Tax preparation: Assistance provided in both countries.

• Home leave: How often, and in what circumstances?

• Schooling, language, cultural orientation.

• Repatriation: Strike a balance between the employee’s concerns and the company’s natural vagueness for what the future might bring.

These represent only a portion of the questions that your expatriate candidate will have.  Should your company consider taking a casual approach to sending an employee overseas, be aware of the risks involved.

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.

Can the "Median Employee" Become a Useful Measure?

When the Executive Pay Ratio is in the news, you can bet lavish executive pay is the point. It certainly is for the recent "Bloomberg Opinion" that "CEO Pay Is an Underrated Risk to Stocks."

But this article, surprisingly, also addresses median employee pay levels. Let's face it, we all try to forget median pay from one year to the next. It's not because it's hard to remember, it's more likely the crummy associations with 1) what it takes to calculate it, and 2) how it influences the Pay Ratio. But what if median pay could be made useful as an analytic? Has anyone tried that yet?

I mention it because the Bloomberg article has a great graphic illustrating that, "The difference between CEO and worker pay was once a fraction of what it is today."

"The CEO-to-worker pay ratio was 20-1 in 1965 . . . The ratio gradually swelled during the three decades that followed, climbing to 342.5 to 1 by 2000. With few exceptions, it has hovered near 300 since then."

The thing is, we know why the executive portion of the ratio has become so high, but I think we have very limited insight into why the median employee measure is at present levels. We know that there is a technical reason -- it includes part-time employees which skews the number considerably in certain industries like retail. We know that increase practices since the Recession have led to relatively lower salaries. But surely there are additional reasons? Insights that would be valuable to your compensation strategy development.

For example, since the seventies, organizations have been downsized, resized, reorganized and "technologized." How has your company evolved to the organization structure you have now? What are the stages of your company's evolution over the last 30 years or so? In each stage, who would have qualified as the median employee, and what does this say about the type of organization structure your company had at that time. Is there a clear alignment between talent strategy and pay in each of the organizational structures that you identify? What has your company learned over the years?

Then there's today's issues. If part-time employees take up such a large percentage of your workforce, what does that mean about the definition of the "most valuable players" in your organization? Do a large number of employees have a greater direct impact on the bottom line than a few strategically placed high potentials? If you don't have a large number of part-timers, who are your median employees, and how have your pay policies affected them? Step back and consider whether the picture you've painted is optimal, given current business operations and results. Consider other ways the "median employee" can be used as an analytic for your company in the coming years.

What about the future? In three years, based on your projected talent strategy, what title should qualify as median employee? Is it the same job title as today? How will your pay strategies affect this evolution?

I'm guessing that this type of analysis would offer insights that would be valuable for both strategy and communications. Strategy, in that there are bound to be insights that lead to practical adjustments. Communications, in that there are bound to be details that can be helpful in explaining pay and business priorities, and how they have evolved/are evolving.

[BTW, the Bloomberg article includes a link to a really interesting interactive chart of Pay Ratios by industry, from low to high of 1,000 of (pretty much) the largest U.S. public companies.]

Margaret O'Hanlon, CCP brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm, re:Think Consulting, provides market pay information and designs base salary structures, incentive plans, career paths and their implementation plans. Earlier, she was a Principal at Willis Towers Watson. A former Board member for the Bay Area Compensation Association (BACA), Margaret coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at https://gumroad.com/l/everythingiscommunication.

Cafe Classic: Global Compensation Philosophy - One Brand, 31 Flavors

Editor's Note: What better to warm our hearts in January than a global compensation strategy informed by an ice cream brand analogy.  Take it away, Dan Walter!

Multinational companies have enough complexities, why add to them? This is a refrain I hear from people who promote “global” programs in which a single tool is used across all regions to help build a corporate culture. For the sake of simplicity, let’s will call this the vanilla plan. In all the years I have been in this industry, I don’t think I have seen a vanilla plan work for more than a couple years. Tons of money can be spent in design and communication, but global markets, regulatory changes, management goals and other factors all change too fast to allow any long-term traction to this type of program.

I prefer a more flexible concept where everyone gets a similar tool. You can build in variations on the theme to ensure everyone gets something that works for their needs.  Let’s call this the 31 flavor program. Everyone gets ice cream, but there are enough flavors to keep nearly anyone happy. Some flavors are always available and in use, while other flavors are traded out as seasons and tastes change. These programs allow better alignment with current rules and an easier path for making modifications to meet future changes.

Some companies claim to have these programs, but when you look closer they actually just have many different variations of vanilla. Handling these multi-vanilla programs is nearly as difficult as those with many flavors, but without the added flexibility.

Obviously, there are tons of reasons to stay away from 31 flavor plans, but few of them are based on the fact that they don’t work. Administration can be a real issue, but systems are getting better everyday. Communication, though, is not a valid argument. In fact, designing programs to better fit local norms can allow for a far more streamlined and effective communication effort.

Company A decides to roll out equity around the world. They read that RSUs (Restricted Stock Units)are fairly easy to get approved in most countries and design a typical US-style program with units vesting annually over three years. They roll out this plan around the world without regard for average tenure of employees in different locations. They work to create competitive global market differentials, but don’t put much research into the tools and associated features their non-US competitors are using to deliver those pay levels. They spend a ton of time and money explaining how the program works, why the international employees have a plan that does not take advantage of their local tax-qualified plans and how the plan is designed to motivate and retain them for the future. Employees get similar pay offers from competitors with tax advantaged plans, or plans that simply fit their cultural norms and key players slowly drift out the door.

Company B spends a bit more time working to create a more flexible framework. Not only does the plan allow for multiple variations of features on RSUs, but they also offer locally tax-qualified sub-plans in locations with large enough, or critical enough, populations. The plans are communicated by combined teams of professionals from the corporate headquarters and locals with experience and expertise in the specific plans and local culture. Employees see no reason to leave as long as the company performs, because both their pay levels and delivery mechanisms are competitive. More importantly, they can understand the programs and talk to friends or colleagues who have similar compensation. As rules change, headquarters stays updated via the local players. Changes are made when needed and desired employees become long-term team members.

Yes, the examples above are simplified. Of course, there are implementation and administrative costs associated with the 31 flavor approach. But imagine if you walked into a store that sold only ice cream and when you looked into the freezers you saw tub after tub of slightly off-white vanilla ice cream. No matter how great it tasted, you wouldn’t want to come back often. Most importantly, its unlikely you would ever recommend the place to your ice-cream loving friends.

Dan Walter is a CECP and CEP and works as Managing Consultant for FutureSense. He is passionately committed to aligning pay with company strategy and culture and is considered a leading expert on equity compensation issues. Dan has written several industry resources including an issue brief on 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.

Becoming Their Strategic Partner: Your Opening Act

Would you be willing to ask your executives whether they consider you a strategic partner? Who in our profession would be willing, frankly, given the push back we've endured in the past? Especially in small companies where the executives themselves are struggling to be strategic, although they would never admit it.

The current take on effective leadership in our tumultuous 21st century is that the CEO, CFO and CHRO should be seen as the "central brain trust" in each organization, since the pressure to solve complex, fluid talent requirements will continue to mount. This scenario places compensation at the heart of business strategy development -- as well as your company's financial performance -- for the upcoming decade, at the very least.

This mindset is the inspiration for my recent Compensation Cafe article, "Setting the Stage to Become Their Strategic Partner" and today's article, which is a basic how-to intro. We in HR are finally, clearly, part of the solution. It's a great place to be, but we've also got to realize that we'll underperform if the CEO and CFO don't come to see us as a required part of the solution. HR involvement in strategic decision making should become SOP, in the same way that certain executive deliberations don't really count unless the CEO (or the in-house attorney) is in the room.

If the HR leadership goal is to educate your execs about how your company can set its sights higher when it comes to talent acquisition and management, this time of year is especially convenient for planning efforts if you are on a calendar-year schedule. You have some time leeway now that incentive work is completed, and can shift to improving and strengthening your strategic leadership competencies and those of your team.

Professional consultants would start this type of initiative by interviewing all your execs and then turning their findings into a picture of where your company is going. This framework would be confirmed, then used as a reference for ongoing strategic decision-making. Few HR practitioners would easily win support for such an interview project, though, since we're supposed to have those insights at our fingertips. It's ironic that formal information-gathering on leadership views would provide you (and the rest of leadership) with insights, but that the effort would diminish your stature.

Instead, strengthen your leadership abilities by shifting HR staff focus from problems to solutions. Start by identifying the fixes that will clearly make compensation practices more effective (here are examples of potential communication improvements), but don't limit your attention to current HR processes. Project where the company is going in the next two to three years. Consider what's on the CEO's mind and how much change the CFO believes you can afford. Given those business priorities, what are the talent needs of the immediate future going to be?

You should develop your own opinions and become alert to upcoming changes that will require HR support, especially based on your company's growing reliance on technology. Look at the gap between what you are doing today and what the company will need from you two or three years from now. How are you going to address that gap and how soon can you start to prepare?

This is not to say that you can decide on your own how HR will do things differently in the future. Instead, realize that to put HR directly into that brain trust, you need to be ready (on any day) to influence your company's future. It takes a set of talking points that you and your colleagues have made ready for any and every discussion, based on thoughtful HR departmental deliberations and ongoing analyses that are regularly updated to reflect your company's strategic shifts.

Margaret O'Hanlon, CCP brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm, re:Think Consulting, provides market pay information and designs base salary structures, incentive plans, career paths and their implementation plans. Earlier, she was a Principal at Willis Towers Watson. Margaret is a Board member of the Bay Area Compensation Association (BACA). She coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at https://gumroad.com/l/everythingiscommunication. 

Canadian Doctors Pushed Themselves Away From the (Pay) Table

In Quebec, the infrequent and unusual has happened. Doctors refused a proposed raise. Not because the increase was insufficient, but because they would rather see the money go to the staff who support them and the patients they serve. In the world of HR and Compensation, this not the standard.

There are stories of individuals, including the occasional CEO who has “reallocated” their pay to others. But groups of professionals agreeing to forego payment in respect of others who may be in greater need is unusual enough to make the news.

In my career, I have had this occur, without prompting, only a few times. Each time it was refreshing and eye-opening. Each time, someone further up the ladder questioned whether it was a good idea. In more than one case the request to allocate pay to others was ignored, in other cases, a new approach was devised to use the compensation budget more effectively.

Yes, ignored. Why? Some of the reasons included; exacerbating the ongoing pay compression on the top of the company, insufficient motivation or incentive for the individuals claiming they were making enough, and a slavish need to adhere to a compensation philosophy or model that apparently wasn’t working.

In one of my favorite examples, we discussed a more leveraged and lucrative sales incentive plan with future recipients. As a group, they expressed concern that the distribution and support teams were the stars that need better pay. One individual actually said, “It doesn’t seem fair to pay us for selling more since we are just creating more work for everyone else.” Yep, a salesperson said that to me and sincerely meant it.

In another case, a CEO kept his pay low for several years.  Out of respect (and a misunderstanding of pay structure), other executives were also kept below market. After several years of growth and significant performance, the CEO and executives wanted to take the artificial cap off their pay, but the company has become accustomed to having that extra cash for operations, and the Board had become comfortable with the pay levels. Catching up with the market, proved to be an effort that drove everyone close to the brink.

In these rare cases, the “best practices” playbook is insufficient. If the request is honored how does the business catch up when more budget is available? How does a company explain to the lowest paid members in the group that the highest paid “make enough” (for now?) Is the company prepared to create a hybrid incentive plan that motivates salespeople while funding incentives for those who “make sales happen?”

I wish I had answers to all of these questions, but like so many compensation challenges, the answers are likely to be as unique as the individuals and company. I’d (and I suspect subscribers would as well) love to hear from individuals who have addressed this issue. What was the impetus? What was the short-term solution? What was the long-term impact?

Lastly, I wanted to follow-up on my last post “Why Do You Pay Women Less?” As of yet, no one has answered to the very not-rhetorical question. But, since published, we have had International Women’s Day, and UK companies have started to release pay gender equality results. An example that proves the problem, Deloitte said that females in their UK practice make about 43% less than males. As of yet, they have not written a response to my passive-aggressive article.

Dan Walter, CECP, CEP is the President and CEO of Performensation. He is passionately committed to aligning pay with company strategy and culture and considered a leading expert on equity compensation issues. Dan has written several industry resources including an issue brief on 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 @Performensation.

Ripped from Today's Global Headlines: Lessons on Executive Pay Ratio Communications

Another compensation story hit the global media today. It happened in the U.K., but it could just as easily have happened here. And its particular set of events should give Compensation Cafe readers a lot to think about and discuss, given the Executive Pay Ratio work that has most everyone scrambling right now.

Carrie Gracie of the British Broadcasting Corporation (BBC) resigned her position as China editor last week to protest pay inequality within her organization. The fact that she did it in an open letter, even though "Speaking out carries the risk of disciplinary measures of even dismissal . . ." is not the sign of a peevish employee whose emotions have gotten the better of her. Ms. Gracie, a 30 year BBC veteran who is fluent in Mandarin, had been urged by the BBC to take the China editor position. "She is widely regarded as one of the BBC's most talented journalists," reported the Guardian. She has apparently tried to work this through channels.

The U.K. has an Equality Act 2010, which the media summarizes as, "men and women doing equal work must receive equal pay." (Many of you know far more about this legislation and odds are you don't find it that simple in practice.)The BBC has been hounded by pay allegations for years--overpaying stars, underpaying women, poor cost management and so on. 

While this is clearly a different legislative and cultural issue than the Executive Pay Ratio, there are valuable things to learn from this dust up. Here are a few to keep in mind as you work on Executive Pay Ratio implementation:

If somebody seems "overpaid," odds are it will be easy to spot those who are "underpaid." I think it's unreasonable to believe that you are paying everyone equitably -- especially if you don't have the staff, resources and culture of, say, Google or Johnson & Johnson. As we have talked in many Compensation Cafe articles, people use numbers as "anchors" for comparative purposes. You can expect the Executive Pay Ratio and Median Employee to be used as anchors for comparison. In other words, they will automatically raise questions -- even among executives, as the Carrie Gracie story illustrates.

Don't kid yourself, most of these are good questions and odds are you have answers, but you have to be prepared. As I've suggested before, once you begin to catch sight of the size of the Ratio and the salary of the Median Employee, start looking at the jobs in a wide band above and below -- these employees will consider those numbers as anchors. What story do the titles and pay histories of these employees tell? Factor these insights into your communication strategy and consider making compensation adjustments that are warranted.

Trying to massage the message is bad mojo. In July 2017, the BBC published the salaries of its highest paid "stars," showing those paid £150,000 and over. Ms. Gracie did not make the list because of her £135,000 salary, but was clued into the size of the pay disparity compared to others in similar positions when, for example, the BBC's North America editor's salary was shown to be £200,000 to £249,000. (And why didn't they think she'd have questions?)

The salary announcement followed a much lauded salary audit and report, which included charts comparing pay for men and women -- except the audit didn't include all BBC employees. Move forward a few months, and you can read a British politician's comments, "The BBC cynically manipulated its equal pay audit in an attempt to hide its discrimination against women such as Carrie. . ."

The lesson? If you have tough messages to give, do the work, tell the truth, no matter how tough it will be for employees to swallow. And don't think your Steering Committee should be the only set of advisors you'll need to help you get it right. You'll benefit from a broader audience, too. Do a draft, run it by "virgin" ears. Listen to the candid feedback and identification of sore points, and have the courage to address what they've identified. Test the next draft, too.

Transparency is a talent issue as much as a compensation issue. Ms. Gracie states that the BBC is "not living up to its stated values of trust, honesty and accountability." Expect your employees to hold you to your company's Values, too. Be sure that you think deeply about how they apply in the Executive Pay Ratio situation, and how you are going to demonstrate them in your roll out. I'd even say, go so far as developing a matrix that itemizes the actions that you take that align with each Value. If you don't take your Values seriously, expect candid rebukes from employees.

Note that Ms. Gracie wants to return to her old post in the BBC newsroom, "where I expect to be paid equally." In other words, if you're only going to pay me that much, BBC, then I'll work at a level where that pay is equitable. It's sort of a balanced quid pro quo, I guess, but not one that many American employees would pursue. In this job climate, U.S. employees would just move on as soon as they could.

Margaret O'Hanlon, CCP brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm, re:Think Consulting, provides market pay information and designs base salary structures, incentive plans, career paths and their implementation plans. Earlier, she was a Principal at Willis Towers Watson. Margaret is a Board member of the Bay Area Compensation Association (BACA). She coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at https://gumroad.com/l/everythingiscommunication.

Job Evaluation in Your Future?

A job evaluation project can be a tough sell. Executives want the best numbers at their fingertips but they often stop listening when they discover the amount of time and detail work involved in job evaluation.

If you're pitching a job evaluation project or salary structure update for next year, get ready to do a good deal of upfront persuasion. Not only will you need the executives to approve the budget, you will also need some of them to act as sponsors who will speak out supportively for the project in what's bound to be a lengthy project schedule.

What will convince executives about the value of the time and technical commitment that's involved in job evaluation? Boy, do I have a resource for you. 

Check out Mercer's "Global Job Evaluation Return on Investment Survey Results Report" for real data. Undertaken to, "examine the relevance of job evaluation in today's environment . . .," it can provide you with a range of findings bound to influence executive attitudes. And if you're going global in your work, there are breakouts on views in Europe, the Middle East, Africa, Latin America and the Pacific, as well as North America.

Here are a few examples from North American participants.

• Reliability--91% report that job evaluation helps them make reliable compensation and benefits decisions
• Improved Efficiency--61% report that responding to individual grading requests took less than 5 days following the job evaluation project, compared to just 37% of survey participants meeting that timeframe before the project
• Cost Savings--53% report that their company's ongoing job evaluation work costs less following their completion of a job evaluation project
• Payroll Management--69% report savings in pay packages of 1% to 5% as a result of their job evaluation project

Just as important, participants report that clear and consistent job evaluation methodologies provide them with a common language to use for discussing job attributes and facilitating the alignment of roles across business segments and geographies.

Thinking your executives may still be skeptical if Mercer's survey sample doesn't adequately represent your company? Hmmm . . .

569 HR professionals responded. Participants are from 14 industries and 56 countries. Their companies' headcounts range from less than 1,000 employees (27%) to more than 100,000 employees (6%). In other words, the findings should be hard to ignore.

Margaret O'Hanlon, CCP brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm, re:Think Consulting, provides market pay information and designs base salary structures, incentive plans, career paths and their implementation plans. Earlier, she was a Principal at Willis Towers Watson. Margaret is a Board member of the Bay Area Compensation Association (BACA). She coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at https://gumroad.com/l/everythingiscommunication.

 

Cafe Classic: He Said / She Said is Always Expensive

Editor's Note:  Today's Classic features some timeless advice from Chuck Csizmar on documenting the terms and conditions of an expatriate's overseas assignment.  Ultimately much smarter (and more financially viable) than waiting for the inevitable game of "he said / she said" to erupt.

Recently I was asked by a U.S. client why I recommended that they create an international assignment letter for their expatriate employees.  After all, they only had a few employees overseas and previously had resisted the call to “play the lawyer card.” They felt that management could effectively deal with the circumstances of expatriate situations as matters came up, and were reluctant to lose what they considered their prerogative – to set terms and conditions as they thought appropriate for each employee.

This is not the first time I've been asked that question, as it's not unusual for small companies or non-profit organizations to send an employee overseas with little more than a verbal agreement and a series of vague assurances.  These organizations wish to avoid bureaucracy and move quickly.  However, often these casual and hurried arrangements have proved painful and expensive experiences:

• The shock faced when coming to grips with actually living in a foreign country, vs. visiting.  The realities of daily life, combined with cultural differences compared against “back home” become quite a wake-up call when no longer insulated by the transitory nature of a business or vacation trip.

• The constancy of unforeseen and confusing local situations (medical claims, driving licenses, bank accounts, schooling, language, etc.) proved such a frustrating distraction that employees lost focus on the job – the reason they were there in the first place.

• Relationships with headquarters suffered as the employee asked for repeated consideration (increased payments) to redress what they considered coverage gaps in their terms & conditions.  The trust element was weakened as employees felt they were being short-changed by management.

Coming from an environment where every expatriate was given a detailed assignment letter “before” getting on the plane, I was at first taken aback by the client’s question – because the absence of mutually agreed terms and conditions is almost certain to prove expensive to companies trying to take a “short cut.”

So why is providing an assignment letter a good idea?

• Protection:  Like any contract, confirming the terms & conditions of the assignment protect both parties from misunderstandings, misinterpretations and assumptions – before expenses are incurred.

• Clarity:  Accepting an overseas assignment is a major step for any employee, as well as for family members.  The more you clarify the terms and conditions of the assignment, the more likely you are to ensure a smooth assignment for all parties.

• Cost control:  Defines expenses that the company will pay for and conversely what they will not.  An agreement here will mitigate issues rising once the expatriate is on the ground in the host country.  Concerns raised once the assignee is relocated usually result in increased company costs, as negotiating leverage is lost and the company feels compelled to avoid alienating an expensive investment.

• Standardization:  Your international policy should strive to treat expatriates in the same fashion.  Unique circumstances do occur but the basic principles should be followed for every assignee.

So how bad can it be, playing it by ear and leaving terms & conditions to be developed over the duration of an employee’s assignment?  Aren't flexibility and quick thinking positive management traits?

Yes, but when courting the inherent risks that accompany an undocumented assignment, you should be prepared for:

• Higher and unbudgeted costs.

• Frequent negotiations to improve the expat's situation.

• Disgruntled assignees and / or affected family members.

• Greater risk of failed assignment.

Short cuts usually limits the financial and emotional protection the employee and their family will rely on, while the company has committed  substantial monies to place them overseas.  That is not a good management practice.

Terms and Conditions

When preparing an international assignment letter, the following  key elements should be included.

• Title, compensation and assignment duration – critical elements of status and reward in the host country.

• Housing and cost of living allowance – should include the amounts involved and frequency of review.

• Benefit coverage (medical, dental, life, vacation, holidays etc.) – how will home country benefit protections be handled in the host country.

• Relocation –coverage for the employee’s home country residence, to include overseas movement of household goods.

• Property management (as applicable) – what will happen to the home country residence?

• Tax preparation – employee obligations in both countries.  Usually a statement of company liability for “additional” taxes.

• Home leave – how often, and under what circumstances?

• Schooling, language, cultural orientation (as applicable).

• Repatriation – a balance is usually struck here between the employee’s strong concern and the company’s natural vagueness for what the future might bring.

The items listed above represent only a portion of the questions that your expatriate candidate will have.   So should your company consider taking a casual approach to sending an employee overseas, unsupported by a signed assignment letter, be aware of the risks involved.

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.