When you’re on the international stage and designing programs to recognize and reward an employee’s extraordinary achievements, it’s important to understand the cultural implications of these programs.  Because not everyone thinks the same way.  Companies with a truly global operating mindset will take into account national and cultural differences that distinguish its widespread employee populations.  On the other hand, domestic-oriented organizations with international operations often struggle with their viewpoint, preferring a standardized strategy.

One size rarely fits all.  One size rarely pleases everyone.

You might think that the positive aspects of employee recognition programs are a universally accepted principle, but that’s only partially correct.  Critical distinctions do exist.  In some cultures / national identities the role of the team is such a core element of employee identification that seeking out an individual contributor for recognition would not be a welcome practice.  Some employees might be reluctant to step forward, not wanting to be pushed into the spotlight.

In other countries you will find that the perceived value of cash as a recognition award varies a great deal.

Case study

A former employer of mine once implemented a global Spot Award program for its worldwide employees – without including their international HR community in the planning discussions.  Finalized program elements and procedures covered employees in over 20 countries in exactly the same fashion.  The premise was to provide immediate (read that, fast) recognition and financial rewards (Spot Awards) for those non-incentive-eligible employees who demonstrated performance above and beyond their normal job roles.  Nominations for awards would come from the employee’s direct manager, though employees could recommend co-workers as well.

While the program was deemed a success in the US (defined by the dollars spent), it proved much less successful elsewhere among the company’s far-flung international operations.

Lessons Learned

The first problem was that Managers outside the US placed a much more conservative financial value on so-called “extraordinary” employee contributions.  Or put another way, the U.S. Managers were more generous in their payment awards than elsewhere.  The result was that the cash payments on a per-employee basis were widely skewed to the U.S. employee.  Notwithstanding the vagaries of the various currency exchanges, the international offices did not spend their allotted recognition reward monies as frequently or as generously as their U.S. counterparts.

I recall one scenario where a US employee received thousands of dollars for a particular project effort, while their European counterpart was given a non-cash award (recognition dinner).  This created more than a few awkward moments when the two employees shared experiences.

The second challenge was that many international employees did not want to be individually spotlighted by the recognition program.  They were willing to receive the award, but would prefer that the recognition remain confidential.  Given that Corporate had planned an internal communications campaign to highlight individual award winners, that reluctance proved quite a hindrance.

Compounding the preference for anonymity was the desire for team over personal awards, as individual employees proved resistant to receiving the planned fanfare or preferential treatment – especially in front of their co-workers (team members).

The bottom line was that the recognition and reward program recognized a smaller than anticipated number of non-US employees, less reward money was spent per international employee, and Corporate Communications was hard pressed to find international employees amenable to being highlighted for the program.  Not exactly what the program designers had intended.

Corrective action

The solution seems straightforward.  If a global program is to affect all employees, then potential national or cultural distinctions among groups should be addressed well in advance.  Taking that step would mean including representatives from those groups in the design and communication phases of the project.  However, such a simple step seems a difficult one to take for many corporate global plan designers.  Why?

When they have the bit between their teeth developing a program that affects the majority of employees, management is often reluctant to change course to include the differing sensitivities of small populations, especially if those populations do not speak with one voice.  What they prefer to do is have local representatives accept the global directives, or at best “tweak” the round peg into the square hole.

How does that approach work for you?  I can tell you that such a tactic doesn’t work for your international employees.

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.

The one constant theme that Human Resource professionals emphasize when it come to international assignments (expatriate employees) is that the experience costs a great deal of money.  Most of you reading this will simply nod your head at such a cautionary warning, yet not fully understand the why of it.  Perhaps the topic doesn’t concern you, for now, but as managers who may become involved in such adventures down the road, you need to know the cause if you ever hope to manage this expensive proposition.

While companies continue to try new strategies for employing talent overseas (shorter assignments, use of third country nationals, extended business trips, shared responsibilities, etc.) two central premises remain; 1) companies will continue sending employees on overseas assignments, and 2) the cost of those assignments continues to be a big pill to swallow.

Fueling Persistent Cost

If you accept the premise that an employee sent overseas should be kept “whole” (expense-wise) with their home country situation (maintaining their income and expense exposure as if they had never left the U.S.), then certain incurred liabilities naturally fall to the company.

This premise is an important point, and a foundation for future planning.   The  assumption is that the employee should not economically suffer, but neither should they receive a windfall.  To the employee the experience should be cost-neutral.  However the same cannot be said for the organization.  They often have to shoulder a sizeable burden.

First of all, the U.S. is one of the few countries in the world where – no matter where you work – you continue to incur a tax liability on your earnings – while also being liable for earned income taxes in the host country as well.  Uncle Sam demands his share, and will follow you around the globe.

The difference is though, that any additional tax liability would ultimately be paid by the company.

And the second dark cloud over expats?  When establishing the terms and conditions that will govern an international assignment, remember that whatever the company provides the employee beyond what they would have received had they remained in the US, is considered taxable income to the employee.

For example, such taxable items would include, but not be limited to:

• Home leave transportation:  A personal expense (vs. a business trip) that includes air fare, taxis, meals enroute, etc.  Terms and conditions usually allow for one trip per calendar year – though that can be negotiable.

• Cost of living allowances:  That monthly allowance you receive to make up the difference in living costs . . . it’s taxable.

• Housing allowances: If you continue to maintain a U.S. residence (usually advised) the company will provide accommodations, but the cost of that residence is taxable to you.

• Utility payments: From electric to water to phone to garbage collection and more, if the company pays for it then it’s a taxable item.

• Supplementary benefits (host country): Additional local coverage (i.e., National Health Service) to ensure immediacy of care wherever you might find yourself overseas.

And don’t forget the family.  Those expenses paid out to provide dependents with programs or services are also deemed as taxable income of the employee.  For example:

• Language lessons: English may be the international language of business, but not so much in the supermarket.

• Orientation: Teaching the expat and family members about the local culture, how to get along, how to fit in and what to expect, while always useful, is especially important when the local language is not English.

• American-style schooling:  Usually a point of insistence for expats with school age children, the concern here is to ensure that the children are educated in a fashion that would be recognized (credit received) by school authorities back home.

You Don’t Know What You Don’t Know

To compound the internal challenges, too many managers know too little about the true costs of expat assignments.   This ignorance leads to misconceptions, misleading comments to employees and in some cases a too casual consideration of costs.

• “They speak English, so just get on the plane.”  It’s a common refrain, as if we all have the same legal system, health care, work attitudes, etc., and any minor differences could be solved by a short conversation.

• “The money’s been budgeted.”  A classic excuse, as if that in any way justifies an expense.

• “Let’s go around company policy to save money. ”  Short term thinking (and shortcuts) that more often results in a failed assignment.  And how expensive is that going to be?

Having spent five years overseas on an expatriate assignment, here are a few “takeaways” from that experience.

• My first W-2:  The amount was a shock, insofar as the tax preparers lumped together as taxable income everything that the company had provided for me.  That was my first realization of exactly how expensive an expat assignment was to the company.  This is where the 2x and 3x annual salary cost guesstimates were born.

• Local confusion:  My UK Controller was unable to determine the expat costs for his business unit.  Lines of communication between the host country and the corporate-sponsored tax preparers broke down often.  That’s when the finger pointing starts.

• Lost information:  After extensive investigation it seemed that data regarding assignment costs and local liabilities were buried among several budget line items.   Highlighted cost metrics were absent, and no one was watching the store.

• Taxation:  There are many confusing aspects of foreign service credits and reciprocity tax treaties.  Not my area of expertise, but even several years after returning from overseas my tax advisor was still dealing with foreign tax credits.  The back and forth of determining corporate tax liabilities, or avoiding them, is a science unto itself.

So yes, international assignments for your employees can be a very expensive proposition.  But those expenses can be monitored; they can be controlled.

Remember this formula for getting into financial trouble: if you take unknown assignment costs and add the lack of stated assignment ROIs, plus throw in a bit of insensitivity for the realities that expats (and their families) face, that recipe will blow up in your face every time.

That you can take to the bank – for withdrawal, not deposit.

Once your company decides to send an employee overseas on expatriate assignment the danger of imminent waste looms large.  The problem usually begins with management not understanding or even choosing to ignore the real costs of the international assignment.  The looming money pit is then deepened by having only a weak business reason to support the assignment.   If you lack a compelling business justification for why an employee is needed overseas, it’s likely that you won’t be able to measure whether their assignment will be a success or not.

Below are some of the major reasons for the cost spiral of money slipping out of your hands; however, this is by no mean an all-inclusive list.  I have no doubt that you can provide your own reasons as well.

• Don’t worry about the ROI

For some companies it’s easier for a manager to have an international assignment given a green light than it is to have a piece of hardware or software approved for purchase.   Where is the business case?   Where is the justification via projected financial return that management should be held accountable for?  Is anyone being held accountable that an ROI is achieved?

You should think twice before agreeing to pay out 2-3 times annual salary (per year) to provide for an expatriate assignment.  “It’s in the budget” is never a good business reason.

• Tell the employee that they are the only one who can do the job

Once an employee realizes that they are the only, or preferred choice for the assignment, you lose all negotiating leverage.   I recall one fellow who insisted that he and his family live in Inner London (meaning: uber expensive) – though the office was 35 mi. north – or else he wouldn’t take the assignment.   Don’t expect someone holding leverage to be reasonable and accommodating when discussing the terms & conditions of what you are willing pay for.

Strive to develop a stable of qualified candidates.   It would also help if you remember that the ability to perform the job should not be the only criteria for selection.  A bad cultural “fit” would be a painful and expensive experience for everyone.

Note: an employee who displays an attitude of doing you a favor, versus appreciating the career opportunity being offered, is a bad bet.  Count on it.

• Don’t bother to create an international assignment policy

Unless you enjoy living in a “let’s make a deal” world, you would be advised to lay down an international assignment policy, and then adhere to it.  You will still be challenged by the employee / spouse to make improvements in their terms & conditions, but without the support of a policy you will be hard pressed to stand your ground.

Note: make sure all terms & conditions have been confirmed before the plane departs.  Once you have an expat on the ground in the host country you have lost whatever leverage you might have had.  From there you will agree to term revisions, because senior management will conclude that having already made the investment you have to keep the expat happy or risk the assignment.

• Focus on the employee; don’t worry about the family

Even an otherwise contented expatriate will be rattled if every night they come home to complaints about life in the host country.  Such a situation will distract the employee from concentrating on their assignment, and eventually you will face the need to further revise terms (increase costs) and / or the employee will throw in the towel and the assignment will be deemed a failure.

Thus you should be sensitive to potential family issues and include everyone in cultural orientations.  The family is the expat’s support group, and if they are unhappy . . . well, you know the rest.

• Confuse assignment costs by using multiple budget categories and line items

This tactic makes it very difficult for someone to follow, or understand the full extent of the costs involved.  During my own five years spent overseas on assignment, neither Corporate nor local Finance was able to explain the full costs involved.   They had assigned expenses into so many diverse costs centers and budget line items that the confusion never cleared.  Imagine the drip – drip – drip of your money if no one is even asking – or looking.

If no one is watching the costs of the assignment, those costs cannot be controlled.  It would be like handing over a blank check – with no guarantees of gaining anything in return.

Finally, watch out for the manager who tries to “save money” by circumventing HR assignment policies.  These creative thinkers consider that short cuts save money, but typically such “cuts” do little more than alienate the expatriate (and / or family) by treating them as second class citizens.  Bad idea.

How many success stories have you heard about or read about that started with the phrase, “We took the easy road?”

It doesn’t work that way, does it?

Yet again and again we see examples of companies trying to push that “Easy” button, often in the face of business logic.  That’s especially true when dealing with the diversity of an international workforce.

Most companies with global operations tend to pay their internationally-based top level executives in accordance with some form of global compensation structure.  They do this to level the playing field for those with multiple country responsibilities, or for those whose assignments take them from country to country.

However, for the rest of their international population it’s not as straightforward.

The Challenge

Companies with local national employees (hourly, professional, management) face a challenge and a risk when it comes to the decision as to how to reward performance  in each of their operating countries.  Do they “do as the Romans do” and follow local practice, or do they seek to create a standardized global framework in an effort to somehow equalize pay practices?

For those charged with developing strategies to effectively reward employees across the globe, the headache is in dealing with a diverse collection of economies, cultures and competitive pressures – some of which may be moving in different directions.   This strategic desire to recognize country-specific differences in pay methodology often comes up hard against the interests of corporate staff administrators, those who traditionally look for the easy way, the simple way, and the one-size-fits all way of dealing with far-flung employee groups.  For many companies and international compensation practitioners it is actually the administrators whose resistance you have to overcome.

The headquarters staff will ask, what difference does it make?  Unless otherwise required by legislative action or representation, why can’t we be fair to all our employees in the same way?  Here are a few metrics to illustrate what they wish to standardize:

• The value of jobs (price) irrespective of locale (same pay, just different currencies)

• The pay mix of base salary and incentives (80/20, 70/30, 60/40, etc.)

• Universal date pay increases (everyone’s performance is reviewed on the same date)

• Average pay increase percentages, regardless of local conditions

• Pay-for-performance vs. general adjustment increases (whose culture is it, anyway?)

Why Not?

That’s the easy way.  But why doesn’t one size fit all?  Why can’t you treat all employees in the same fashion – because they all belong to the same “XYZ Corporation,” right?  I would suggest that you consider the following before taking out that cookie cutter.

• Economy:  When you’re dealing with country-specific inflation rates that range from flat to 20%+, do you really want to offer the same percentage salary increases?  What if one country is suffering through a recession and sluggish recovery (US), while another remains relatively unscathed (Australia)?

• Culture: in some areas of the world job and income security needs command paramount interest over pay-at-risk, so in the pay mix the base salary dominates the variable portion.  For example, while China has a very aggressive sales compensation environment, in India there is more interest in base salary and their CTC (cost-to-company) package than variable pay-at-risk compensation.

• Competition: companies react to the cost of labor, not so much the cost of living.  If the local market rewards in a certain fashion (pay mix, commission vs. bonus, quarterly vs. annual rewards, etc.), companies who provide a non common practice approach risk lower employee engagement as well as a talent drain.

• Representation: National unions often dictate pay actions that could reverberate up the hierarchy as companies strive to maintain equitable treatment with their other employees.  Works Councils will have their impact as well.  It’s not unusual for management employees to receive increases based on what the national contract dictated for the rank-and-file.

On the other hand, varying your practices according to country-specific conditions could cause a degree of consternation with the back office staff and their computerized systems.  These are folks who like things neat and pretty.  In their defense though, senior management often asks for standardized metrics that may be difficult develop and compare:

• Tabulating global statistics when definitions or methods vary

• Identifying global trends based on diverse conditions

• Balancing the impact of cross border movement

If you force international operating units to convert their practices to an uncommon format and methodology, the result could be more than just confusion and local administrative difficulties.  It could also mean the greater likelihood of over payments in some quarters while paying less in others – all for the sake of sameness and common report generation. This would offer up a damaging combination of employee inequities and additional expenses – both of which are not helpful to the company’s bottom line.

So it would be worthwhile to remember:  ease of administration is rarely an effective rationale for making good business decisions.

In recent months I have dealt with several US clients who faced an overseas challenge of high employee separations coupled with difficulties in recruiting qualified staff.   These companies were at a loss to understand the cause of their problems, as each felt that they were already paying out a great deal more in Total Rewards (compensation, benefits, etc.) for employees then they were accustomed to in the US.

A quick study revealed that, while the client’s international employees were indeed receiving a great deal more than their American counterparts, in many areas they were in fact being given no more than the minimum benefits mandated by statutory requirement.  How do you attract, motivate and retain quality staff when the message of your actions is that you are only willing to offer what the government says you must?

You don’t.

One client bemoaned having to grant four weeks of vacation upon hire, because it was the law in that particular country, only to find out that the normal practice granted five or more weeks.   By focusing on only statutory requirements and ignoring competitive practice they found themselves paying a steep price in struggling to build a quality staff.  They had also earned a reputation in the local market as a “minimalist employer”.

And like first impressions, a company’s reputation is hard to change.

Human Resources to the rescue?

When American companies first establish operations overseas Human Resources faces a number of challenges that they are unaccustomed to back at home.  Every country is a separate and unique entity, with differences in HR policies, practices and statutory requirements, each of which must be acknowledged and addressed in order to maintain a successful operation.   On top of that you will find that the myriad employment laws (little standardization here) is a major cost and operations consideration, both in complexity, strictness and required documentation.

In addition, you must deal with the vagaries of the competitive compensation marketplace, where the same job is paid differently from Rome to Oslo to Buenos Aires – usually coupled with social charges and benefit distinctions as well.

Operating under the guidance of U.S employment law and US-based corporate practices is a failed strategy.  Maintaining such a US focus (usually for ease of administration) will bring you grief; grief from your employees, from those you hope to hire, and most of all from local governments whose laws you have ignored or bypassed.

If you decide that your business strategy requires you to maintain a staff presence in a particular country, then I would advise you to treat that operation the way you would its US counterpart; provide competitive terms and conditions that will attract and retain the right caliber of employee in that country – and ignore how their reward packages might compare with US or other country counterparts.  If you are not willing to make that commitment, from an HR perspective you would be better off not to engage employees in that country.

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 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 criteria.  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 the 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.

Towers Perrin                                    Mercer                                 Compensation Research (UK)

Culpepper                                           Hewitt                                  CSi Remuneration (Aus)

AON Consulting Group                  Hay Mgmt Consulting     VenCon Research Intl (Ger)

Radford (high tech)                         McLagan (Finance)          Economic Research Institute (ERI)

IPAS (high tech)                                TymWork (Sw)                  Western Management Group

Taylor Root (UK)                               CFA Institute                      Euro Comp (Western Mgmt)

Federation of European Employers (FedEE)                         Executive Resources Ltd (ER Limited)

Watson Wyatt                                   Birches Group                   European Remuneration Network (Ger)

Organization Resource Counselors (ORC)                              Ernst & Young

PricewaterhouseCoopers            Croner Reward (UK)       Robert Walters (UK)

Baumgartner & Partner (Ger)     Interconsult Ltd (UK)      Australian Institute of Mgmt

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 a 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.

It hasn’t been that many years ago that the term “business casual” was coined.  To many business leaders though, the phrase meant no more than wearing a red tie, and perhaps only once a week.

Well, that was then.  Today, attitudes and customs are quite different, and typically much less conservative.  For example, it is not uncommon in some circles for male employees to forgo the use of socks within an office environment.  I know, because recently I visited such an office and saw for myself.

But is this clothing revolution a global phenomenon, where everyone is doing it, or are there minefields of differing customs out there, waiting to trip up the unwary business traveler?

According to a new global survey (Ispos / Reuters), clothes still do make the man – or woman.  Depending on where an employee lives, putting a best foot forward – at least at work – is still key to upward mobility and career success.

Or sometimes not.

As you might expect though, customs of acceptance have evolved – though not in a uniform fashion.  Researchers have found that attitudes about the use of proper attire in the workplace differ from country to country, which leads to some interesting and diverse attitudes about perceived workplace “slackers” and “achievers.”

Have you ever arrived at a meeting dressed for the Boardroom, only to discover everyone else wearing collared shirts and slacks?  Awkward, isn’t it?  A scenario you would wish to avoid.

Europeans have been found to have the most casual attitude when it comes to work clothes.  Only 27 percent of Europeans reported that they wore traditional business clothes to work (jackets and ties for men, dress suits for women).  People in Hungary might be the most casually dressed workers in the world.  Only 12 percent of Hungarians reported that they wore “business clothes” to work, while 46 percent said they thought clean and pressed shorts were appropriate office attire.  On the other hand, workers in India might be the best dressed, with nearly 60 percent of survey respondents reporting that they wore business clothes to work.

Many workers worldwide no longer equate dressing well for work with what they consider success.  Approximately 40 percent reported that they wore casual business clothes to work.  However the same percentage of respondents said that people who wore such casual attire in the office would probably not be hired or promoted into senior management positions.  Additionally, 66 percent of respondents believed that senior managers should always appear better dressed than their employees.

For many then, conservative dress is never out of style.  In some circles (usually non high tech) casual dress may even give the “perception” of a lack of professionalism.

Workers in India held the harshest views for people who wear casual clothes to work.  Nearly 60 percent of Indians described casual business dressers as “slackers”, and 64 percent said that such casual dressers would never reach senior management positions.

For a contrary viewpoint, in Central Florida business casual is often the proper attire, across the organizational hierarchy.  In fact, wearing a tie would cause co-workers to stop and stare.

When it comes to bosses wearing casual clothes in the office, Swedes appear to have the most lenient attitudes.  Only 27 percent of Swedish respondents reported that they believe that wearing casual clothes on a regular basis would hinder workers from attaining high-level jobs.

Generally speaking though, the higher up you are in the company’s structure, the greater the reluctance to “dress down.”  One Business Unit Head acquaintance in Europe suffered through so many shocked looks when he once wore jeans to work, that he never repeated the experience.

So what’s the takeaway from the survey data for the business traveler?  When in doubt, ask ahead.  Don’t assume.  Getting the lay of the land in advance is always smart thinking.  As a rule of thumb though, remember that you can always dress down by taking off the tie or power jacket, but the opposite won’t work nearly as well.

Anyone who has ever been involved in a merger or an acquisition team remembers their first time; how green they were, how much they didn’t know and how much of a challenge it was just getting up to speed.   They didn’t know what they didn’t know.  Most neophytes are shell-shocked by the complexities involved, the myriad moving parts – and when the business target is an international concern, or has a foreign footprint, then it’s often a case of “what do we do now”?

Provided below is Part II of a due diligence checklist for international M&A deals, one that I wish I had when I was thrown to the wolves for my first overseas acquisition.  This is not breakthrough material, and is likely a derivation of thinking that has evolved for years, starting from the first time one company decided to take over another.   If you’re new to the process, it is a reminder of critical research steps, what mustn’t be forgotten.

This particular list comes via my friends at White & Case LLP (www.whitecase.com), who make this information available as a service to the profession.  When combined with Part I information it is thorough (some might say “exhausting”).  Though some search elements may not be warranted in every case, I think you’ll find the checklist to be excellent preparation material.

• External agreements:  Do any external agreements (with third parties) limit HR flexibility? (i.e., are there acquisition agreements from earlier deals that limit reductions in force?  Has the seller signed onto any customer codes of conduct imposed on customers’ suppliers?  Is the seller a government contractor who has taken on public-procurement obligations affecting HR?).  Separately, look at outsourcing agreements with HR service providers like payroll, “temp” agencies, benefits and whistleblower hotline services.

• Payroll:  Check the seller’s payroll processing compliance as to deductions, withholdings, reporting, compliance with mandatory payments to unions, and remittances to agencies including tax, social, unemployment and housing funds.  How is payroll issued?  Are there any extra deductions (such as for charitable  contributions or employee loan repayments)?  Does the seller properly pay mandated benefits like premium pay, vacation, profit sharing and thirteenth month pay?

• Wage / hour compliance:  Verify compliance with wage / hour laws, cap-on-hours laws, overtime payments, payments during business travel and exempt-status designations.

• Duty of care:  Get information on duty of care / safety / evacuation and other protocols such as for hazardous-duty work and occupational health / safety law compliance, including for expatriates.

• Discrimination / harassment:  Verify compliance with local discrimination / diversity / harassment laws including laws on pay equity, affirmative action, mandatory training and “bullying”.  Verify compliance with the seller’s own discrimination / harassment policies: many international discrimination / harassment policies go well beyond local laws.

• HRIS:  Look into the seller’s employee data processing and human resources information systems (HRIS).  Investigate transferability of HRIS and how HRIS complies with data protection laws.  Has the seller made all required notices / communications to employees about HR data processing?

• Powers of attorney:  Find out what powers of attorney employees, officers and directors hold.  These are particularly critical in Latin America, where there can be different levels of powers, some of which include the power to dispose of company assets.

• Management oversight:  What controls does the seller’s headquarters use to monitor local management’s compliance with laws and corporate policies?

Using this checklist should provide you with an advantage during the due diligence process, an early on understanding of what to be looking for, what questions to ask.  So if you find yourself with limited time in the “war room” (documents center), have this checklist with you to help ensure that your due diligence is thorough.

A little preparation can pay tremendous dividends.

How many success stories start with the phrase, “I took the easy road”?

Most companies with global operations tend to pay their internationally-based top level executives in accordance with some form of global compensation structure – in order to level the playing field for those with multiple country responsibilities.

However, for the rest of their international population it’s not as straightforward.

The Challenge

Companies with local national employees face a challenge and a risk when it comes to their decision as to how to reward (pay) in each of their operating countries.    Do they “do as the Romans do” and follow local practice, or do they seek to create a standardized global framework in an effort to standardize pay practices?

For those developing strategies to effectively pay employees across the globe, the headache is in dealing with a diverse collection of economies, cultures and competitive pressures – some of which may be moving in different directions.  However, the strategy of recognizing country-specific differences in pay methodology often comes up hard against the interests of corporate staff administrators, those who traditionally look for the easy way, the simple way, the one-size-fits all way of dealing with far-flung employee groups.  For many international compensation practitioners it is actually the administrators whom you have to overcome.

The headquarters staff will ask, what difference does it make?  Unless otherwise required by legislative action or representation, why can’t we be fair to all our employees in the same way?  The metrics below illustrate what they would wish to standardize:

• Value (price) jobs irrespective of locale
• The pay mix of base salary and incentives
• Universal date pay increases
• Average pay increase percentages
• Pay-for-performance vs. general adjustment increases

Why Not?

Why doesn’t one size fit all?  Why can’t you treat all employees in the same fashion – because they all belong to the same company, right?  Consider the following before using that cookie cutter.

• Economy:  When you’re dealing with country-specific inflation rates that range from flat to 20%+, do you really want to offer the same percentage salary increase?  What if one country is in the grip of recession (US), while another remains relatively unscathed (Australia)?

• Culture: in some areas of the world job and income security needs command paramount interest over pay-at-risk, so in the pay mix the base salary dominates the variable portion.  For example, while China has a very aggressive sales compensation environment, in India there is more interest in base salary and their CTC (cost-to-company) package than variable compensation.

• Competition: companies react to the cost of labor vs. the cost of living.  If the market they are in rewards in a certain fashion (pay mix, commission vs. bonus, quarterly vs. annual rewards, etc.), companies who provide a different approach risk lower employee engagement as well as a talent drain.

• Representation: National unions often dictate pay actions that could reverberate up the hierarchy as companies strive to maintain equitable treatment with their other employees.  Works Councils will have their impact as well.

On the other hand, varying your practices according to country-specific conditions could cause a degree of consternation with the back office staff and their computerized systems.  These are folks who like things neat and pretty.  In their defense though, senior management often asks for standardized metrics that may be difficult develop and compare:

• Tabulating global statistics when definitions or methods vary

• Identifying global trends based on diverse conditions

• Balancing the impact of cross border movement

If you force international operating units to convert their practices to an common format and methodology, the result could be more than just confusion and local administrative difficulties.  It could also mean the greater likelihood of over payments in some quarters while paying less in others – all for the sake of sameness and common report generation. This would offer up a combination of hurting employees while also hurting the business.

Remember that ease of administration is rarely an effective rationale for making good business decisions.