Compensation

  1. Implementing a Global Compensation System without Solving World Peace

    If you are about to implement a compensation planning system or expand the reach of your current system, are you expanding to include your international groups?  I don’t have to tell you about the challenges of alignment:  different business and economic pressures, cultures, local regulations, plan designs, and established practices to name a few.  Can anyone be successful taking on a project like this?  Yes.  Here are some ideas about how to approach it.

    Start with what you have in common.

    You probably have Compensation Managers in the different geographies, all of whom are representing the interests of their constituents.  Is that bad?  No, it’s not.  The trick is to find the common philosophies and approaches then frame the discovery discussions focusing first on what’s common across the organization.  Often global companies have developed and communicated a compensation philosophy that is a direct result of corporate strategy.  Don’t begin requirements discussions by listing the exceptions and commiserating about how life is spent managing those divergent practices and exceptions.  Start with where you agree. List practices that converge and align with the corporate compensation philosophy.  Try drawing a Venn diagram to come up with the largest set of common practices and approaches to your compensation planning and delivery among your global friends.  This is big picture stuff, but it will guide you when you are down in the weeds of your project implementation.  You may not be able to control business and economic pressures, culture or regulations, but you can influence plan designs, practices, and certainly expectations.  Manage expectations.

    What do you expect compensation planners to do?

    Your line managers are running their organizations and businesses for their real jobs.  Give them the best comp planning tools possible.  First of all, do managers have discretion to make a recommendation?  Or are they validating a formula-driven increase or award?  It will vary from country to country but ask this question, “Is there a way to move toward a common practice that best supports the corporate compensation philosophy?”  For example, often a system can deliver a recommendation within guidelines, and allow the planner to override that if they document the exception.  This can be a middle ground where the system is not completely formulaic, but keeps the free-wheeling at a minimum.

    Designing by committee.

    It’s rare if you are the Compensation or HR monarch of a global organization and can manage by fiat.  Which is a good thing (that you can’t.)  Fortunately you are probably working with really competent compensation and HR professionals in your various business units and geographies.  So use their ideas.  But don’t fall into the trap of thinking that business is an industrial democracy where everyone gets an equal vote.  It isn’t.  You are leading this project, which means you can gather ideas and requirements and then decide, based on your due diligence.  You will most likely operate within a governance structure, but decide.  Otherwise your project will get stuck.  Even if you don’t make the perfect decision now, it won’t be your last opportunity to get it right.  What matters is that the overall result is right:  managers will make good compensation recommendations with the tools you will give them, and as a result employees will be compensated competitively and fairly.

    Making strides toward world peace.

    For the longer run, simplify your compensation plan designs.  I read a piece by David Canter, EVP for practice management and consulting at Fidelity Institutional Wealth Services recently where he said, “Plan designs don’t have to be complex to be successful.”  I didn’t pay him to say this, but I could have.  I have seen all types of plans in my work as an implementer of compensation systems.  They all reach the same place:  employees get compensated.  But the path to that result is often amazingly circuitous and I guess if this weren’t always the case I might be out of a job.  The elegant compensation designs I’ve seen are complete but not overly complex.  Not surprisingly, plans that are not overly complex are much easier to deliver with compensation systems regardless of your chosen vendor.  More importantly, once delivered, employees actually can make the connection between the goals they’ve achieved, the desired direction of their organization, and their paycheck.  It’s hard to argue with that.

    Written By: Peter Sass, Knowledge Manager, Compensation

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