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.

An employer’s payroll cost represents anywhere from 40% to 60% of their revenue.  In most cases it’s their single largest expense.  But when you ask someone in leadership how well that money is being managed, an all-too-typical response is a blank stare.  They really don’t know.

They may not even recognize the value of leadership vs. administration when it comes to overseeing the effectiveness of their reward programs – of getting an ROI for those dollars spent.   That value is a matter of someone either making a difference to the organization’s bottom line or simply holding the fort – keeping a finger in the dike.

Without that value recognition, is it any surprise that many companies have placed administrators in charge of their pay programs, managers who don’t rock the boat, keep the processes and paperwork moving along smoothly and who don’t look up from their desk to glance around and ask, why?  Is there a better way, a more effective way?

How would you describe the behavior that characterizes the leadership of your own company’s pay programs?   Are they managing the growth and direction of your compensation costs, or are they just managing administrative routines, paper pushing, in effect practicing a version of “compensation-lite” as your money trickles out the door?

What is Compensation-Lite?

In today’s lexicon the term “lite” usually applies to something that is only a portion of the whole, a watered down version of a fully functioning product or service.  In this case it may represent a failure of management to apply themselves in effectively utilizing reward dollars to positively affect the business and the employees.

How do you know if this tag belongs to you?  How many of these reward practices are used by your organization?

• All competitive market data is viewed the same, regardless of the source – and the cheaper the price the better
• Recommendations for annual merit spend budgets are based on the figures that surveys suggest is common practice – what everyone else is doing.
• Annual salary range midpoint adjustments are based on how surveys suggest other companies will move.
• Perceived effectiveness is based more on whether current problems exist (turnover, morale, burgeoning costs, recruiting difficulties, etc.) than using measurements to gauge developing trends.
• Management actions are reactive vs. proactive in the face of changing business dynamics.  The organization will stay the course until a problem develops.

If your tendency is to follow a similar conservative, half-hearted path as shown by the examples above, then you’re practicing Compensation-Lite, whether you planned to or not.

So What’s Wrong with That?

The administration of standardized policies and procedures is not a bad thing.  In fact, routine processes are critical to providing employees with equitable treatment, as well as with a uniformity of decision-making.  But if this is the extent of your management of reward programs,  opportunities are being missed that could maximize the value of dollars spent, that could improve the ROI from your largest expense item.  The potential liabilities:

• Passive administrators are more often surprised and unprepared for the unplanned.  They do not anticipate, but carry on until a problem develops

• Costs tend to rise when programs are left on auto-pilot.  Reward programs are not self-policing, and if no one is in charge . . . .

• Effective compensation programs require a strategy and hands-on implementation and communication.  Having neither creates an environment of inconsistency and inequity.

• This is work – it is paying attention, being involved in the business, knowing your employees – as compared with “shut off the lights and wake me when it’s time to retire”

But let’s not be too critical.  Sometimes the organization provides little opportunity for compensation practitioners to steer the ship, never mind change course.  Management bias is a reality that we all face, and sometimes it takes the shape of “if it ain’t broke, don’t fix it” or simply a passive resistance to new thinking.  Regardless of the significant expense associated with reward programs, there are those in senior leadership who will dismiss cost concerns with “it’s in the budget” or “we have the money” or similar phrases that may fly in the face of good economic sense.

When faced with such roadblocks a compensation practitioner will have to gauge whether senior management can be educated, even over time, or whether should they give up and go with the flow – ultimately becoming part of the problem.  Or perhaps they should start looking elsewhere for the sake of their career.

Leadership isn’t standing in front of a freight train when senior management bias kicks in, but being able to offer professional advice that is good for the business and the employees.  It’s being flexible enough to pick your battles, while keeping an eye on the direction the organization needs to follow.

So now you know.  Are you satisfied with the way employee costs are being managed?  Is your senior management satisfied with the way their single largest expense is being watched over?

Is it time to provide leadership?

Everywhere you look these days companies are striving to find ways of doing more with less;  jobs are eliminated and the survivors have to work harder, employee reward budgets are trimmed to the bone or frozen, and the concept of pay-for-performance itself is coming under challenge.  Across the country you can hear the constant litany of cut, cut, cut.

Employee morale has plunged off a cliff.

However there is one reward strategy you can employ that doesn’t involve following the popular drumbeat of negative messages and takeaways.   Already other functional departments (i.e., Marketing, Engineering, Advertising) have taken a different tact from that “me too” philosophy.   Instead, creative minds set themselves apart, pushing brand identification to carve out market niches away from the beaten path.  Perhaps Human Resources could take a page from that playbook and view employee rewards in a more forward thinking fashion.

HR can stand out from the crowd.

Why not create a pay philosophy of greater rewards coupled with greater expectations?

Companies fear wasting money on those who don’t perform, so they often limit the opportunities provided by their reward programs.  They can’t afford a reward strategy that balloons payroll without an adequate ROI.  To take a different road they could increase the amount paid to key employees while restricting those who don’t perform.  That would place the high achievers in your organization at a fair or even generous pay level, but the winners here would be only those who deliver an ROI back to the company.  You can afford to reward high performers, can’t you?

Employees who produce results are worth the money.  If you’re fearful of overpaying those who aren’t performing, you hold the solution in your hands / policy manual.  All it takes is the discipline to hold employees accountable and to take action against those who aren’t performing, who aren’t worth the money you’re paying them.

Do you know what percentage of your workforce is rated at an average or lower level of performance?  50%? 60%?   If you still grant every employee an annual increase, you won’t be able to differentiate and properly recognize your key performers.  You won’t have enough money.  In that case the reward bar will be lowered to cover the most common performance level.   Instead, why not raise the performance bar and get rid of those who can’t keep up?

If a manager has $10,000 for annual increases and tries to balance rewarding both high and average performers, the increases granted won’t be enough to recognize key players.   Why?  The merit spend is calculated on average performance, but high performers need much greater increases to feel recognized and appreciated.  However, a request to grant more than $10,000 will be denied, so what do most managers do?  They trim the increases of their best performers, in an effort to spread rewards as broadly as possible and keep everyone happy.

Does that work?

Of course not.   High performers will be discouraged and may rethink their future efforts as well as their commitment to your company, but your “joe average” will be pleased.  As behavior rewarded is behavior repeated, by this make-everyone-happy tactic you will have encouraged more average performance and less high performance.  Does that sound like your reward strategy?

Okay, but if this concept is such common sense, why is the practice of holding employees accountable so seldom used?

The Management Fear Factor

• Fear that employees are somehow “owed” annual salary increases.  We have to give them something.
• Fear of not knowing how to conduct effective performance appraisals.  Do they really measure performance?
• Fear of alienating  the majority of  average employees (see bullet #1)
• Fear of exercising  the discipline necessary  to manage employees (they want to be liked)

With a process designed to monitor and weed out the lower performers, and at the same time pay the higher performers well,  over time you would retain more of those you want and rid yourself of those you don’t.  The employee performance bar would rise, fostering a dynamic work environment that will feed business performance.

You can afford to do this.  Consider the impact of increased performance levels on your bottom line.  Isn’t it worth the initial outlay of money to make that happen?

Caution:  the bean counters (Finance) are perennially afraid of spending a dollar to save two – or in this case, spending a dollar to earn three.  They believe that the dollar cost is real, while the suggested gains are “soft”; promises that can’t be guaranteed.

There is no easy way around this phobia short of direct intervention from the top.  Lacking Senior management support compensation entrepreneurs will face a wave of passive resistance, if not outright defiance by managers tying to “help” the average employee.

Providing high performing employees with greater rewards can create a win-win scenario, a greater attraction for talented outsiders, an improved  team atmosphere focused on pushing the company forward – and less inequities to drag and drain the goodwill you’ve established.

Try it.  Spend a dollar and earn three.  It’ll be worth the effort.

For those of you out there currently “in transition,” or perhaps looking  to make a change from your present employer, at some point in the search process you’re going to have to deal with the “gatekeeper,” the employer’s internal recruiter.  Did I hear a groan?  It can’t be helped, because it’s highly unlikely that you’ll reach the employment offer stage without dealing with this person.  Perhaps a few tips ‘n tricks can help you gain an advantage, one that could make all the difference.

Note to self: You can make this relationship work for you.

The Recruiter’s own performance is being measured

Your success is their success.  Picture a spreadsheet with 10, 15 or even 20 job titles – all open jobs the responsibility of your recruiter.  Every job filled, no matter how, is a sign of good performance  (call it a white mark); every job remaining open past a projected fulfillment date is a black mark.  Recruiters are constantly challenged to produce candidates; the quicker the better.

That’s what they are measured by: finding qualified candidates for open jobs.   While conducting their searches the recruiter can help you with your own efforts, but only if you can help them in turn.  Do you have what they need?  During each interview recruiters consider whether their target can gain them another white mark, and they can’t afford to waste time.  So you need to start your convincing from the first contact.

Their job is to separate the wheat from the chaff.  Which are you?

Recruiters don’t hire people.  They introduce qualified candidates to the hiring manager, who in turn makes the ultimate decision.  Thus another performance measure is how many qualified candidates are brought forward (call it the “second stage “).

If you don’t pass muster (meet their qualifications criteria) they’ll drop your resume like a hot potato and move on.  That’s how recruiters gain a reputation of being cold, unresponsive and lacking compassion for your situation.  Remember the spreadsheet?   Recruiters often lack time for the social niceties of returning phone calls and emails from those not considered qualified.  If you can’t help them you’re pushed off the radar screen.

Engage the recruiter; anything else is a strike against you

You don’t have to be friends, but a positive and polite demeanor is always helpful.   Displaying a superior attitude, especially one laced with tones of arrogance and condescension (you’re an executive candidate, right?) will do more than lose you style points; it could cost you much more.  Candidates labeled “high maintenance” or having a poor attitude tend to get lost in the resume pile.

A smooth interview process serves everyone’s interests;  this is where the candidate remains personable, professional and consistently demonstrates a strong interest in making a contribution to the company.  When you emphasize your conviction that this opportunity is more than just a job to you, the recruiter will see you as a potential white mark.

Help them to help you

The specifics of an employment offer are not developed by the recruiter; they are the messengers who deliver the offer.  However, as soon as you seek improvements (the push back) they become your spokesperson to management and to HR.   Such negotiations are handled by the recruiter acting as a go-between.  They will plead your case (provide the “why?” arguments) to the hiring manager and perhaps HR, so give them the ammunition (specific justifications) they need to help press your case.

At this point the recruiter will want you to succeed, as they have skin in the game now too.  So help yourself by providing specific examples as to how you can help the company.  This will strengthen your case for when the recruiter needs to explain what you want and why you want it.

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Bottom line?  The recruiter can be your friend, if you can help them.  If you can avoid making their job more difficult (remember those 20 open jobs?), if you  can work with them, and can stay positive, polite and professional the recruiter can be your best advocate when it comes to  getting a job offer and negotiating the best terms.

They can get you the job . . . or not.

In recent months several of my US-based clients faced challenges overseas regarding high employee separations coupled with difficulty in recruiting qualified staff.   These companies were at a loss to understand the cause of their problems, as each felt that they were already providing a more generous reward package for employees then was normal practice in the US.

A quick study revealed that the clients’ international employees were indeed receiving a great deal more than their American counterparts.  However, in many areas they were in fact being given no more than the minimum benefit provisions mandated by statutory requirement.  They were receiving only what the company was compelled to grant.  How do you attract, motivate and retain quality staff when the message of your actions is that you are only willing to offer what government regulations say you must?

One client bemoaned having to grant four weeks of vacation upon hire, because it was the law, only to find out later that common practice indicated five or more weeks were the norm.   To employees and candidates they offered no more than what they were required.  By ignoring competitive practice they were now paying the price by struggling to build and keep a quality staff.  They had earned a reputation in the local market as a “minimalist employer.”

When American companies first establish operations overseas Human Resources faces a number of challenges that they are unaccustomed to dealing with 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 develop and maintain a successful operation.  On top of that are the vagaries of the competitive marketplace, where the same job is paid differently from Rome to Oslo to Buenos Aires – usually coupled with differing social charges and benefit coverage.

Choosing to operate 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.

Think how you would feel if elements of your own reward package, policies or procedures were based on European or Asian common practice.   Wouldn’t go over well, would it?

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 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.

Have you ever walked out of a store because of poor customer service?  Or felt frustrated because the company representative at the other end of the phone did not seem to care?  Or after enduring a bad experience with an employee at a particular establishment you said “never again”?

Customers react first and foremost to the employee they are dealing with, the one they are facing, whether the transaction is financially significant or not.  To the customer, that employee “is” your company, and these buy / not buy decision-makers will consider the treatment they receive a reflection of your company, for good or ill.

It is worth noting that the person who just caused you to take your business elsewhere is likely one of the lowest paid employees in that organization.   Does that reward / impact relationship make sense to you?  It would seem that the organization does not recognize / reward (value) the impact that their employees can have on customer relations.

Does your company acknowledge and measure the value and impact that these employees can have?  Or is this skill set a compensable factor at all?  Have you ever checked?

Many companies have long ignored the importance of the customer-facing job (non-direct sales) in determining a position’s value to their organization.  They consider education (what you know), experience (how long you have been doing something) and competitive survey data (what others are paid for a certain set of skills) in setting their pay scales.  The fact that the position also has the power of gaining or losing customers is often lost on them as “just part of the job description.”

Some job evaluation systems may give a nod for those facing customers on a regular basis, but such recognition is not often viewed as a critical factor – nor does it help determine where in the salary range the incumbent is paid.

Oftentimes it is the lower paid employee or the position with the least amount of “cachet” that presents the jobholder with the opportunity to influence customer action and reaction.  As an example, the employees most commonly approached by guests at Walt Disney World are the Custodial workers.

Is it not surprising then that these employees can have as great an impact on customer good will and retention as your executives?  Studies have also shown that having a pleasant experience when dealing with a company often outweighs price considerations and marketing glitz.

However that does not mean that you have to pay more to these employees than the marketplace suggests, but it is in your best interest to ensure that they are fairly treated:

• Ensure that actual pay centers on the middle of the range or higher.  Do not risk minimum pay scale workers interacting with your customers.
• Hire well into the salary range.  This is not a time to be cheap.  That dollar you saved today could cause you to lose a great deal more later on.   It pays to remember that it costs a great deal more to gain a new customer than to retain an existing one.
• Modify your performance appraisal process to recognize the customer facing role; attitude is just as critical here as know-how and experience.  Your customers place great value on the smile and pleasant demeanor they receive from your employees.
• Develop a point of pride for these workers, coupled with fair and competitive pay, to encourage that the right caliber of employee applies for these positions.
• Avoid structuring these as “dead end” jobs.   Offer upward opportunities for higher performing employees.
• Listen to them; they are talking to your customers and their suggestions for process improvements – even new products and services – should be considered.

How do you know whether your company is vulnerable?  1) Ensure that these positions are regularly surveyed for competitive pay practices, and then 2) Create a report segmenting the actual pay of your customer-facing employees to determine the average compa-ratio and spotlight the presence of low paid workers.   Then you will know how well you are paying those closest to your customers.

Now we should have a final word about direct sales, which is perhaps the ultimate customer-facing job.   Be careful that your training and recognition programs remember to acknowledge the importance of the customer-facing relationship – beyond an immediate financial impact.  Rewards should not be all about short term results.  A customer made unhappy by your sales rep can decide to; 1) not place an order, 2) limit their order and split their requirements with another vendor, and / or 3) spread a negative comment to their professional associates that reflects poorly on your company.

Each unfortunate scenario reinforces the financial and long term impact of the individual employee.

Such would be a hard lesson indeed.