Author:
Warren Heaps – Birches Group LLC

I am delighted to announce today an exciting new partnership between Aon Hewitt and Birches Group.  Under the partnership, Aon Hewitt will make Birches Group surveys in developing country markets available to their clients, expanding their survey coverage to over 170 countries globally.

The two firms will also collaborate closely on consulting projects and promotional activities.

Here is a link to the full Press Release.

Author:
Warren Heaps – Birches Group LLC

As we reflect back on the 2011 year just completed, we have compiled a list of the most popular posts on the site during the past year.  Each of the posts listed below had more than 1,000 views during 2011.  If you did not have a chance to view these posts when they were first published, here’s a great opportunity to see what you missed.

We have much to look forward to as we enter 2012. We will be adding some new regular contributors to the site, and will be revamping the entire site over the next few months. We appreciate your support and encourage you to add your comments on how we can make the site even more valuable for you. Also, let us have your suggestions for future posts and other ideas you think would be helpful in advancing the site as a resource for international human resources professionals.  Finally, if you are interested in submitting a post, we welcome your participation.  Please contact me to discuss your interest.

Guest Author:
Dean Foster – DFA Intercultural Global Solutions

[Editor's Note:  We are happy to welcome Dean Foster as a Guest Author.  Dean is a well-known expert on culture in business, is a frequent lecturer at various universities and conferences, and  is the author of many books on the topic of culture in business.  He is the Director of his own firm, DFA Intercultural Global Solutions.]

Gift giving can be a little tricky when giving gifts to
international colleagues. Cultural differences can make a terrific gift at home into a terrible no-no abroad. With the holiday season soon upon us, here are some important cross-cultural gift-giving considerations when sending gifts to your international friends and business associates.

• Style can be as important as substance.  Sometimes the wrapping is as important as the gift. Color, style and design can carry different meanings in different countries. For example, both white and black in Asia are colors associated with funerals, while red means health and happiness, and gold signifies wealth and success. A gift presented in a white box is not appreciated in East Asia. Red or gold wrapping is much preferred, and in East Asia, no gift, no matter how small, should ever be presented unwrapped.
• Symbolism is very important in certain cultures.  For example, clocks are not good gifts to give to your Chinese associates, no matter where they are, whether China, Hong Kong, Singapore, Taiwan, or San Francisco. The word in Mandarin for clock is very similar to the word for death. Clocks are NOT appreciated.
• Avoid fine linen handkerchiefs in Korea – handkerchiefs, even of the finest quality, are symbols of sadness. In all Asian cultures, avoid cutlery as well (such as penknives with corporate logos), for they represent the cutting of a relationship. In Korea, avoid pens with red ink: very bad luck! Additionally, the number FOUR in Chinese culture is also associated with death, so avoid giving gift items in a set of four.
• Consider the country’s traditions. Leather goods are not appropriate in India, where Hindu traditions hold the cow sacred; put those leather picture frames and attache cases away.
• Fine brandy or wine, while appreciated in many cultures around the world, is generally a no-no in Muslim countries where Islam shuns alcohol. On the other hand, the Japanese are the world’s largest consumer of brandy and Scotch, so a very fine bottle of either (or of the very American Jack Daniels whiskey) makes a very fine holiday gift in Japan.
• In Japan, citrus fruits are highly prized and very expensive. A box of those well-packaged fancy fruits from Florida or California is a terrific idea: not only is it a special treat, but it can usually be parceled out to many, and in Japan, there are always many on the team. It is a good way to recognize the efforts of the whole office.
• A wonderful gift to your Muslim associate (any follower of Islam, from the Arab Muslim world all the way to Malaysia and Indonesia) would be a fine, silver compass: no matter where in the world they may be, they can always locate Mecca and perform their daily prayers.
• And finally, avoid sending coals to Newcastle: no wines to France or Italy, no beers to Germany, no chocolates to Belgium, etc.

How you present the gift is important. In Asia, for example, one does not typically open the gift in front of the giver. And in some countries, gifts should reflect the status of the recipient.

When you send greetings and gifts also carries special meaning. For example, always send a New Year’s greeting card to Japan around December 12. It will arrive just in time to be held for delivery by the Post Office in Japan precisely on New Year’s Day. To have your New Year’s greeting delivered exactly on New Year’s Day is a custom that is much appreciated in Japan.

If you are presenting flowers as a gift (perfect for a dinner invitation to someone’s home), be sure to ALWAYS unwrap the flowers before presenting them to the hostess. Additionally, if you send flowers in Europe, be sure they are odd numbered, and remember, red roses are far too personal and never send chrysanthemums: they are used for funerals (no half-dozen roses or chrysanthemums, please).

Please avoid presenting gifts with the left hand in many parts of the world (it is considered, for example, in Muslim cultures, to be the unclean hand); in Korea, you want to present a gift with the right hand, while the left hand supports the right hand at the elbow. It demonstrates great respect.

Generally, a gift that reflects your home country, and that is difficult to find in the recipient’s country, is much appreciated. Picture coffee table books of America, for example, make fine gifts just about everywhere outside the USA. Europeans would much rather receive a small quantity of quality, than a large quantity of just-plain-good. Well-packaged uniquely American fare, such as maple syrup, or Southern barbecue sauce, is much appreciated.

What to buy? While brainstorming gift ideas for friends and business associates from around the world keep the following tip in mind. Most people love to receive gifts representative of the USA or your local region or city: a baseball cap from the local sports team, a jacket from the local well-known university, or a golf souvenir from the local golf course, are all appreciated. Native American handicrafts are always appreciated. Just make sure such gifts are authentic (no “Made in Taiwan, Japan, or PRC”-type labels on the bottom, please), and are of high-quality. Also, if your recipient has kids, anything for them that is difficult to get in their own country is an outstanding idea.

Sending a gift is always appreciated: sending the culturally appropriate gift will insure a positive memory that will endure long after the gift is gone.

Do you have tips to share about gift giving in your country?  Please post them in the comments.

More About Dean
Dean is one of the world’s foremost authorities on cross-cultural issues and their impact on business.

As Director of DFA, Dean is guest lecturer and faculty for a variety of premier educational institutions, such as Harvard Business School, Columbia University School of Business, Darden Business School, and others. His work has taken him to over 85 countries. He is a frequent guest commentator on culture, work and international social issues on CNN, CNBC, the BBC and other radio and TV shows; he is regularly interviewed in Newsweek, USA Today, the New York Times, and elsewhere.

Dean has written many articles as well as the book, “Bargaining Across Borders”, published by McGraw-Hill. Dean’s other books include the four-book Global Etiquette Guide series (John Wiley & Sons) to Europe, Asia, Latin America and Africa. Dean is a Contributing Editor with National Geographic, writing the monthly “CultureWise” column, appearing in National Geographic Traveler Magazine. Dean is on the faculty of American University, Intercultural Management Institute, Washington, DC, and he received his Master’s degree in Sociology from the Graduate Faculty of the New School for Social Research, NYC.

Dean on LinkedIn

About DFA Intercultural Global Solutions
For over two decades, DFA has provided intercultural training and consulting to the international mobility and training and development industry.  For more information please contact us.

Guest Author:
Rachel Yates – Definingmoves.com

[Editor's Note:  We are very excited to share with you the assignee's spouse perspective on international relocation, from someone who has lived through five such moves.  Rachel Yates edits a website, Defining Moves, devoted to assisting relocating families around the world. ]

I read the post from May, 2011 by Warren Heaps about global mobility policies for the 21st century on this site, and found it to be fascinating, mainly because I am part of the changing demographics Warren described. On paper, we are the traditional relocating family; husband as assignee, spouse as the accompanying partner, and two dependent children. We have relocated through three continents over the last 10 years, and we have struggled. And we are most definitely not alone.

So what do relocating individuals and families really need from HR?

Realistic Expectations
Until you have physically lived somewhere, you have no understanding of the challenges and pitfalls that lie ahead, and you often make the mistake of assuming that the HR department does. Yet very comparatively few people working within HR have experienced international relocation firsthand, so there is a significant gap between the policy theory and practice. This only becomes more commonplace as the diversity of both relocating personnel and locations increases.

In an ideal world, there would be a creative element to every relocation policy, which would allow a flexible approach to dealing with issues that were unforeseen by either the employer or the employee. However, in the interim, better access to information for both the transferee and the family is essential at the initiation of the process, rather than simply using cultural orientation packages to ‘mop up’ any concerns. Information needs to come from as wide a range of sources as possible; firsthand accounts from returning expatriates (whether within the company or from a wider professional network), from both corporate and independent expatriate websites and from destination service providers. All can assist in making assignment planning proactive, rather than a reactive approach which is far more difficult to manage.

It’s Not About the Money
Very few assignments are accepted for financial reasons alone – in many cases, families lose income generated by the accompanying partner. Research has repeatedly shown that families accept assignments most often for career development and the opportunity to experience new places and cultures. When location issues become so challenging that family quality of life is negatively impacted or the original goal of global experience is not being met, unless HR are responsive to the needs of the family as a whole, the only option left open is to terminate the assignment.

This has more than cost and productivity implications – it also reduces employee confidence in HR’s ability to manage assignments effectively, and potentially compromises their willingness to be globally mobile or at worst, stay with the company. The issues that create this situation are not exclusive to expatriate life: illness, security, education etc all require time and effort to resolve in the home environment, but when in a host location lack of established sources of support and information magnify the impact. The efforts of HR in partnering to find solutions and in promoting the role of informal support services such as expat networks, online resources and reliable service providers are the critical factors in the decision of the family to stay or leave.

Bear in mind the goal is to get the employee into location, into role and productive in as short a time as possible, and the most effective way to achieve this is to support their family in establishing a stable home life.

Most policies recognize the importance of acclimation, but few recognize that while the employee is fully occupied with adapting to their new professional role, it is the partner that carries out the lion’s share of life necessities. The accompanying partner is a valuable resource; statistically, they are an educated, professional and motivated group, so channeling all the essential relocation information through the already overloaded ‘working’ spouse is an extremely inefficient way of getting things done. Direct dialogue with the accompanying partner does more than ensure effective communication and appropriate use of services; it also conveys a sense of respect for their commitment, and appreciation of their efforts.

So as an expat partner, I have three wishes. And none of them cost a penny.

1. I wish we had access to resources purchased by the company as soon as we know we might be relocating, so that while my partner is defining his role, I can define the reality for the rest of the family.
2. I wish for HR to be an equal partner in making the expatriate assignment successful, who recognizes that people are more important than money, and that supporting the former saves the latter.
3. I wish HR would recognize the accompanying partner as an integral part of the move and communicate with them directly rather than through the partner. When excluding them from the process means that their only input is whether to stay or go, you have a significant chance of assignment failure.

More About Rachel

Rachel Yates is the editor and publisher of definingmoves.com, a website that provides information and inspiration for relocating individuals, partners and families with the knowledge, experience and warped humor of expatriates and locals from all over the globe.

Rachel on LinkedIn

Guest Author:
Jennifer Stein – Global Tax Network

[Editor's Note:  We are happy to welcome Jen Stein as a Guest Author.  Jen is the Managing Director of the Global Tax Network Chicago office.  She has more than 15 years of experience in expat and foreign national tax preparation and consulting, starting her career with Arthur Andersen, and then Ernst & Young, where she served for over 14 years.]

International assignment administration is complex. Sometimes it’s useful to take a step back and review basic components.  The list below, while not exhaustive, is a good starting point to help review your international assignment process and procedures.  Adopting one or all of these components may make your life easier when administering international assignments.

1. Have a written tax equalization policy for international assignments.  Why?  Because by having one it will:
• Enhance assignee mobility and satisfaction;
• Protect assignee cash flow;
• Minimize special negotiations;
• Help make international assignments tax neutral;
• Control assignment costs; and
• Limit the risk of tax non-compliance.
2. Have a written compensation policy for international assignments.  Why?  Because by having one it will:
• Help ensure the assignee’s purchasing power in the host location;
• Provide tax-effective delivery of base compensation and assignment allowances;
• Control assignment costs;
• Ensure consistency; and
• Improve assignee perception as to the fairness of the program.
3. Follow the written policy.  Why?  Following the established, written policies will:
• Lowers assignment costs;
• Eliminates special deals;
• Increases assignee satisfaction; and
• Conforms to corporate strategy.
4. Coordinate/interact with the payroll department.  Why?  HR should interact with payroll to ensure:
• Seamless payroll delivery – especially assignment allowances;
• Reporting of tax costs on all assignee remuneration is accurately and timely – both in home and host country;
• Elimination of  costly correction efforts;
• Proper maintenance of records and transactions for accounting and payroll; and
• Full compliance with host country payroll reporting requirements.
5. Create oversight for  hypothetical withholdings and payments.  Why?  One department should be responsible for the management of hypothetical withholdings and payments, in order to:
• Provide a centralized reporting point for international assignee compensation;
• Supply direction as to what hypothetical tax needs to be withheld during the year;
• Increase internal control of tax payments made to or on behalf of the assignees; and
• Increase assignee confidence in the tax equalization system.
6. Establish  budgeting procedures.  Why?  With good budgeting in place, you can:
• Eliminate the surprise element when the assignment should be approved;
• Identify tax saving benefits in advance;
• Mitigate tax exposure in home and host country;
• Provide an opportunity to accrue “trailing” assignment costs (tax equalization clear-out, final host country taxes, etc.); and
• Help to control assignment costs and conform to corporate strategy.
7. Integrate with corporate tax.  Why? Corporate tax is an important partner with HR and payroll for expat tax matters, such as:
• Coordinating expatriate planning with corporate tax planning, including inter-company charges, book/tax differences, and legal structure; and
• Ensuring tax risks are managed appropriately.
8. Establish a process to select  assignees.  Why? A good selection process is the best way to ensure successful assignees.  Best practices include:
• Identify not only the skill-set, but also the traits and personal characteristics required for the position and environment;
• Determine the family’s enthusiasm for the assignment;
• Discuss the impact of the assignment on the employee’s career goals; and
• Have all the corporate parties in the transfer identify and agree upon expectations, goals and perceived benefits of the position.
9. Develop repatriation procedures.  Why? Because all assignments must end eventually. Do you follow the following steps to ensure smooth repatriations?
• During the assignment, is there a mentoring program to help the assignee keep abreast of company and local news?
• Is a meaningful position (if not promotion) provided to the returning employee?
• Does the corporation acknowledge and utilize the repatriating employee’s international skills?
• Is reverse culture shock acknowledged and help provided?
• Does your company have a global business perspective that understands the great investment made in international assignees?
10. Actively manage communications with assignees.  Why? You can never over-communicate with assignees.  Be sure your communications are:
• Frequent and timely;
• Clearly understandable;
• Informative;
• Concise and to the point; and
• Professional in tone.

The above list illustrates various groups that often interact as part of a successful international assignment program.  As we all know, a breakdown in one area can reverberate throughout the program, impacting both Company administrators and the assignees. Utilization of even one of the above components can have a positive impact on your international assignment program.

What tips can you offer that are effective in your organization?  Please leave a comment with your thoughts.

More About Jen

Jen on LinkedIn

About Global Tax Network

Global Tax Network provides international assignment tax compliance and consulting services for corporate global mobility programs, including program development, ongoing tax management, and special projects. The firm is recognized as a leader in consulting for emerging to mid-sized global mobility programs. GTN has six U.S. offices, with allied partners and resources in more than 100 countries to support assignee home and host tax requirements.  For more information please contact us.

Author:
Warren Heaps – Birches Group LLC

Companies are increasing the pace of international expansion, constantly seeking new opportunities and new markets.  One of the most commonly asked questions through our Ask the Experts feature and on other sites is how to prepare, from a human resources perspective, for international expansion.  It might be opening a new office, or just hiring one or two sales reps, but either way, there’s work to do.  If your company is expanding to a new country, what questions should you ask (and answer) as an international HR expert to help prepare your firm?

Here are ten questions that provide a good start:

1. What type of entity will be established?  This is the first question you should ask.  Will there be a subsidiary or branch?  Is it a joint venture (JV)?  Exclusive distributor?  The answer to this question will impact almost everything you do, from hiring contracts to tax treatment.  And be sure to consider permanent establishment issues, too.  If you don’t know what is, consult with your corporate tax department.  They will know.
2. Will the company be hiring employees in the local market directly?  There are many options to consider – direct hires, contractors, or third-party PEOs.  Each have advantages and disadvantages, and will also impact your costs and tax structure.  If you are establishing a JV or an Exclusive Distributor, can all the staff be employed by your partner in-country?  Even your expat GM?
3. Can you find the talent you need in the local labor market?  If you decide to hire locally, is it feasible?  Have you checked the availability of talent for the skills you are seeking?  What’s the competition for talent?  Who are the dominant employers, and can you compete with them?  What is the typical recruitment process?  Are recruitment firms common?  What are the best universities for recruitment? Can you advertise for specific age or gender requirements (this is permitted in many countries)?  If yes, is it consistent with your overall corporate philosophy and standards to do so?
4. Are there any positions to be filled by expatriates?  You’ve decided to hire mostly local staff, but there are still some key roles to be filled by expatriates.  Do you have an expatriate policy?  Are there special considerations in moving staff to the new location?  How difficult will it be to obtain visas and work permits?  Are nationals of certain countries favored over others?  What is the culture like?  Are nationals from particular countries more likely to assimilate and be more effective than others?  What payroll arrangements can be made, and what are withholding and reporting requirements for expatriates?  If you’re starting a JV, how will the costs of the expatriate employees be shared by the partner organizations?
5. How is compensation structured?  Have you obtained a high quality salary survey of employers with whom you compete?  Have you examined the typical practices outlined for compensation?  What is offered besides basic salary?  Many countries have statutory and non-statutory allowances and in-kind benefits — be sure your survey has detailed information on these.  How are incentives structured?  Is it an individual-centric culture or more team-oriented?  Do you need to adapt your incentive structure to accommodate culture?
6. What standard, statutory benefits provided?  You must be sure to provide all of the required allowances and benefits under the local labor law.  There could be requirements that apply to your expatriates, too, even if they are paid at home or headquarters.  Consult with a qualified payroll expert or accountant to be sure.  Be sure to include mandated employer contributions and social taxes in your costing exercise.
7. Do employers provide additional, employer-sponsored benefits?  Your survey should provide this information.  You should also examine which insurers provide benefits, and if they are part of any existing pooling networks your company may have in place.  For pensions, make sure your finance department is directly involved, as pensions often give rise to financial reporting and other actuarial calculations that must be coordinated globally.
8. Are individual employee contracts required?  You need a labor counsel familiar with contracting requirements for local staff and expatriates.  Don’t use your “usual” contracts or offer letters – they probably aren’t valid in the new country.
9. To what extent are unions present in the market?  In some countries, every employee is covered by a union.  Some unions are organized by industry, and contracts apply to all companies in that industry and geographic area of the country.  Works Councils in Europe have an active role that must be considered when facilities are expanded or closed.  Your labor counsel should provide assistance here, too.
10. What options exist for payroll services?  Can you outsource payroll, or should you run it yourself?  Compliance is critical with payroll, so relying on an outside expert is usually a good idea.

The list above gives you a good starting point.  Examine these questions, research the answers, analyze what you find, and you will be well positioned to take the lead as a strategic resource for your company as you expand internationally.

In an upcoming article, I will provide a comprehensive list of (mostly free) resources you can use to support your research and build your networks.  Stay tuned.

More About Warren

Warren Heaps

Warren on LinkedIn

Developing Markets Compensation and Benefits Group on LinkedIn

Email Warren

Author:
Warren Heaps – Birches Group LLC

Recently on LinkedIn there was a somewhat heated and lengthy debate about job evaluation.  Many were questioning why companies should even bother with such an “archaic” exercise, while taking pot shots at a well-known job evaluation methodology that shall remain nameless (but begins with the letter H).  Some folks proclaimed market pricing was the solution to everything and rendered job evaluation a pointless and unnecessary process for a modern company.  This post will hopefully provide a more balanced view of this question.

Job Evaluation is not Dead
The main reason a company uses job evaluation is to define internal relationships.  Organizations are complex, and once they get even slightly large, it becomes necessary to make it clear to employees and managers alike what the natural roles are in the company.  These are very easy to spot — the places where there is clear and discernible differentiation between roles.  You’ve seen this in your organization, maybe without realizing it.

For example, is there a difference between an entry level analyst and a director?  Sure there is, and it’s obvious.  What about a clerk and a senior clerk?  Not so clear, is it?  There could be a difference, but maybe the senior clerk does the same work, and has just be at it for a longer period of time.

A clear example of role differentiation is found in the medieval guilds — apprentice, journeyman, master were all clearly defined roles.  The military is another obvious source of well defined roles, albeit sometimes a bit less flexible than what is desirable for a company.

Good job evaluation approaches are easy and transparent.  They are not chock full of calculations, point values and other pseudo-scientific analyses that require a Ph.D or specialized training to understand.  Good systems are those that identify specific factors that are relevant to your company, define values for the factors that illustrate clear differences, and can be administered and maintained by managers with oversight from human resources.  That’s right – managers should own job evaluation, not HR or compensation.

How Companies Use Job Evaluation
Most companies use job evaluation to define salary grades or bands.  In turn, these are used to assist in the administration of various human resources policies, almost always including salary administration.  It’s also common for certain perquisites and benefits to be awarded based on grade.  Sometimes there are even little details, like office size or location, type of phone, size of computer, etc. that are determined by grade.

Global organizations often strive to define global bands in order to assist in the career management of staff across the enterprise, as well as to ease administration of expatriate positions.  Sometimes the installation of a global ERP system requires global grades in order to simplify the configuration and ongoing maintenance of the system.

All of these reasons, and many more, are enough to lead me to conclude that job evaluation still plays an important role in almost every organization.

Market Pricing is not a Substitute
Not even close!  Market pricing is a process which companies use to determine the market rates for a particular position.  Market pricers will have you believe that all you need to do to build your compensation structure is to price all the jobs, and array them top to bottom.   I don’t think so.  Here’s why.

• Some positions will not be matched with market data.  For example, in small developing countries, insufficient data points for specific occupational roles may reduce the number of discrete benchmarks to a small number.
• Some of the market rates found will not match up well with expected internal relationships.  What if the market rate is higher for a position than what your organization thinks it’s worth, especially relative to other positions?  When do you draw the line in the sand and preserve the internal team cohesion instead of letting the market dictate what you must do?
• Job evaluation is used for many purposes.  Market pricing can be done separately from job evaluation, and almost always is to some extent.

What’s the Right Approach?
That depends, of course,  on your company culture and operating style.  Many younger companies initially shy away from job evaluation, citing all sorts of reasons.  But when companies grow it almost always becomes necessary to use job evaluation to help manage the growth.  It doesn’t matter which job evaluation method you use — Birches Group Community™ is an excellent choice.  Just make sure the method is easy to use and understand, especially by “regular” people, not just human resources.

What is your opinion?  Have you experienced positive results from a job evaluation project?  Share your experiences in the comments.

More About Warren

Warren Heaps

Warren on LinkedIn

Developing Markets Compensation and Benefits Group on LinkedIn

Email Warren

Author:
Warren Heaps – Birches Group LLC

Many companies use salary scales together with salary grades to manage their compensation programs globally. There are many advantages to doing so, including cost management, positive employee relations and transparency which enables managers to be directly accountable for pay decisions.

In developing markets, creating salary scales is more challenging than in countries with more stable economic conditions. Developing country markets are volatile and often fluctuate from year to year based on a combination of factors. Cost of labor (supply and demand), tax and labor law changes, general economic conditions (such as inflation), business growth and expansion,  as well as unplanned events such as natural disasters, civil unrest and the like are all in the mix.

Maintaining a salary scale in such a market is even more important for employers, to ensure competitive market rates are maintained under even the most difficult conditions. What makes it even more complex is the myriad of allowances and in-kind benefits that are typically provided in a developing country. These allowances cover a broad range – from 13th month to vacation allowance to housing, food, transportation, mobile phone allowances and more. In-kind benefits include various food and beverages, company cars, recreation, travel, even Pilgrimage benefits every few years. The scope of allowances and in-kind benefits is large and variable between countries, and even between employers in the same country.  In our surveys, we see the percentage of total compensation represented by allowances and in-kind benefits ranging from as little as 4.7% in Mozambique to over 35% in Nigeria.

So, how do you set a salary scale that reflects the allowances and benefits you offer, compared to the market (and the allowances and benefits offered by others)?  At Birches Group we have developed an approach which allows employers to set scales that include specific allowances and benefits, and that deliver a fully comparable market position. Here’s how we do it.

1. Establish your desired market position (e.g., 60th percentile), based on total compensation, inclusive of base salary, allowances, in-kind benefits and incentives.
2. Determine how much to adjust your scale to make it fully comparable to your target.
3. Calculate the value of all of your over-base compensation elements. Decide which ones you want to include in the scale (13th month or all fixed allowances, for example) and which ones are not included. Be sure to consider the tax treatment if any allowances are exempt from tax.
4. Subtract those allowances, benefits and incentives not included from the fully comparable scale in step 2.
5. The resulting scale is now good to go. When the scale amounts are combined with the items subtracted, the resulting total compensation is still fully comparable to your desired market position.

Why do it this way?  Each employer in the market has a different pay mix. Some offer many over-base elements and some offer few or even none. The only way to consistently measure such a market is to ignore the variations and use total compensation as the comparison point. The subtraction of your company’s specific over-base elements allows you to maintain a unique pay mix and still measure your overall competitive position.

What challenges have you faced in managing scales in developing countries? Please share your experiences in the comments.

More About Warren

Warren Heaps

Warren on LinkedIn

Developing Markets Compensation and Benefits Group on LinkedIn

Email Warren

Guest Author:
Nikki Goodstein – Cisco Systems

[Editor's Note:  We are happy to welcome Nikki Goodstein as a Guest Author.  Nikki is a leader in Compensation & Benefits at Cisco Systems, Inc. and has a depth of experience designing and implementing global mobility programs. Before establishing the strategy and redesigning the program at Cisco, she led Global Mobility at The Coca-Cola Company. Nikki began her international HR career at Johnson & Johnson as part of their international compensation organization and has held HR roles in both the business as a generalist and in centers of excellence.]

Sorry, there is no talent planning “crystal ball,” but that does not mean you don’t need a plan!

Many companies with mature global mobility programs have evolved to measuring assignment success by leveraging available data across several key employment metrics:  performance over time, promotions/career opportunities, years with the company post repatriation, engagement scores reflecting manager performance, etc.  When consolidated into a dashboard, these metrics can help tell the story of success or challenges in your global mobility program.

But what about companies with smaller programs or less mature environments?  Many do not yet have employment metrics, or their population is too small to effectively use metrics as a tool.  What can be done to ensure that these organizations are effectively managing their talent, and properly leveraging their global mobility program as a talent strategy?

There is a simple solution: They can create a planning tool.  I favor one that is talent focused and simple – it is called “What’s Next?”  A “What’s Next?” planning tool should first gather the all of the known data on a transferring employee.

Here are the simple steps:

• Begin by looking at past roles and discover where the employee has  been and how they progressed in their career.  Remember to consider their work history prior to joining your company, since it probably is relevant in planning their future.
• Look at their existing role.  What was the catalyst for the move to this role?  What are some of the key competencies and skills that allow them to be successful in their current job?
• Create some context.  In partnership with the hiring and/or sending manager, create some context around their assignment role.  Why are they going and what will they be doing?  How long should it take?  What skills will the candidate leverage and what skills do they need to acquire?  With this data, establish assignment objectives.  Assignment objectives are not the same as annual performance goals/objectives, although at times they may overlap.  Assignment objectives should be two to three concrete statements that describe success at the end of the assignment.  They can be developmental for the assignee (build an understanding of the growth opportunity in second tier China cities), they can be a critical milestone for the business (grow market share and revenue in existing markets in the Mediterranean Division by X%), or suggest an exit strategy (identify and train a successor for the General Manager role).
• Develop “What’s Next.”  Now that you have the assignment objectives and a time frame, you can start to develop “What’s Next”.  Again in partnership with the sending and hiring manager, identify 2-3 roles that could be appropriate for the assignee when they complete the current assignment, taking in consideration the skills and competencies they have and those that they will gain.  For example, one future role might be a lateral move that gives them exposure to another product or a complex customer, another might be a promotion to lead the division that they left, and a third could be another assignment.  The key is to have 2-3 viable options.

Making It Work
Over the course of the assignment, set up periodic check-ins with the employee and the manager so you can revisit the plan and test the viability of “What’s Next” in the context of a constantly evolving organization and business environment.  Make necessary changes and keep the plan alive!  Although business climates and leadership changes can alter a plan significantly, if you have a plan, you will be able to move more effectively through the changes and ensure an assignment is successful for both the company and the employee.

What techniques have you found to be effective in managing your mobile talent?  Please share your thoughts in a comment.

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Author:
Warren Heaps – Birches Group LLC

Managing salary budgets on a global basis is a real challenge.  In some companies, the process is often dictated by the corporate finance department, which establishes the amount of growth in the budget “salary line” which is acceptable for the following budget year, say 3%.  That’s 3% in the currency used for budgeting, usually the headquarters country currency.

So how do compensation professionals make the global salary budget “come in at 3%?”  It’s kind of like fitting a square peg in a round hole.

Understanding the Realities
First of all, accept the reality that once finance establishes the rate, it probably won’t change.  There is no point to argue that it’s not enough, or it’s unrealistic for the countries you are managing, because corporate is viewing this on a global basis, and when all the countries are rolled up, 3% is still going to be the number.  But you can manage your countries more strategically by following these simple steps.

Simple Steps to Manage Salary Increase Budgets

1. Calculate how much money is available across all of the countries you manage.  If it’s 3% in dollars, apply that percentage to the proper figure in each country, and add them all up.  This is the amount that you need to match to in the end.
2. Before you allocate budget money for increases, you need to first understand where you stand versus the market.  The best way to do this is to compare your data to one or more market surveys.  In doing the comparison, you need to keep in mind the compensation policy that has been established, which will define the market reference to which you should compare (e.g., comparators, percentiles, pay mix, etc.).  Compare your salary scales to the desired market position.  How much would it cost to move your midpoints to match the market?
3. Next, determine the compa-ratio.  I suggest, if you have salary scales defined, that a calculation of actual pay divided by internal salary range midpoint is the way to go.  If no scales are defined, use the target market position from your market data instead.  Summarize the individual compa-ratios.  Be careful about using averages, since they often hide important anomalies.  A weighted average by grade is a good way to identify if you have problems with specific groups of staff.  If you notice extreme outliers, toss them out of the mix.

Now you have the information you need to do an allocation.  To illustrate, let’s suppose that you are managing three country budgets.  The three country operations are different in size, have different overall compa-ratios, and exist in three distinct country markets each of which experienced market movement, in their local currency, at different percentages.  The table below summarizes the information for the three countries:

As you can see, using the 3% figure in headquarters currency, the combined amount available for pay increases is 896,667.  If each country moves their salary scale midpoints to match the market, and increases pay for staff to get an overall compa-ratio of 100 versus the new scale, 1,365,556 is required, well over the 3% threshold.

Now the fun starts.  You need to tweak the numbers to get within your budgetary limits.  This can be accomplished by reducing the scale match to market to a bit less than 100, and/or, not moving to an overall compa-ratio of 100, but instead, settling on something a bit less.  Since the dynamics of each market are different, as well as the company’s market position and compa-ratio, you need to look at each country separately and allow for different solutions in each.

In my experience, you will probably want to keep your salary scales in line with the market as best you can, pretty close to fully comparable.  In the exercise above, this is the lower cost part of the equation.  In determining how much to allocate for increases to move employees within the range, you need to consider market movement as well as employee expectations, which are usually driven by inflation (for a good explanation of why cost of labor is more important than cost of living, see my post here on that subject). In the end, though, the budget constraint will force your hand a bit.

Handling budget allocations is never easy, especially when the answer is provided in advance from headquarters.  But thinking about it one country at a time, as well as in groups of countries, will allow you to allocate slightly different amounts in each country while still meeting the overall goal for your budget.

Please share your experience in managing pay increases across the globe.