TM - August 2007 - (Page 26) recruitment & retention assessment & evaluation compensation & benefits performance management learning & development succession planning [compensation & benefits]by Robert Mattson What’s the best compensation strategy? It depends on whom you ask and what country they call home. An effective, global compensation program needs to be tailored to regions, cultures, currencies and even local laws because, in every language, fair pay might not have the same meaning. Designing, planning and managing compensation on a global basis can be challenging when companies expand into new markets and attempt to create consistent processes in multiple countries. When it comes to compensating a globally dispersed workforce, organizations need to manage intricate data-privacy regulations, as well as different cultures, currencies, time zones and languages, while aligning employees across various regions toward common goals. According to a September 2006 Watson Wyatt Worldwide survey of 275 companies with operations in two or more global regions, more than half plan take a centralized approach to their global compensation structure. Global organizations that adopt this approach can universally realize the benefits of standardization across their entire operation. But even with implementing a centralized compensation structure, there are other challenges global organizations need to navigate when crossing continents and countries. Understanding the issues and options for accommodating variations in compensation structures, differences in local data-privacy laws and managing local customs — and even holiday schedules — is necessary to improve an organization’s ability to compete in a global world. Benefits of a Centralized Approach ty to consistently enforce policy throughout the organization, shorter compensation cycles, reduced IT expenses and audit trails to demonstrate compliance. One immediate benefit of a consistent, centralized global system is shorter compensation cycles. This allows companies to automate workflow, and it enables managers to see who has taken action, as well as quickly identify process bottlenecks. The planning process is inherently more efficient when managers have access to online guidelines and decision-support tools such as automatic calculations. Another benefit of a centralized approach is the ability to lower IT costs by streamlining systems. Companies that maintain separate systems require distinct yet sometimes duplicate skills and schedules to support islands of technology that perform similar tasks and functions. As a result, they incur increased costs, whether they support these systems using internal IT resources or external vendors. In addition, they also have to manage multiple service-level agreements and pay for separate hardware, operating systems and databases. Even with a centralized system, challenges still arise from global competition. For example, maintaining equity globally while accommodating market-specific practices such as allowances (whether to meet government regulations or local-market expectations) can be an obstacle. Although increased visibility through a centralized system provides insight into corporate policy adherence, there are global variations in terms of allowances that need to be accommodated. Another challenge is accounting for differences in local dataprivacy laws and options for managing the compliant sharing of information. Beyond Compensation: Navigating Data Privacy Around the Globe According to the Watson Wyatt survey, the key drivers for centralization are consistency between rewards and results, and maintaining a consistent position vis-à-vis market and internal equity. There are two facets of a centralized approach: the creation of a centralized compensation structure that provides consistent guidelines while maintaining flexibility and providing an automated system that helps manage the compensation structure. Having a centralized system also offers greater budgetary control, increased visibility into compensation and performance review processes, the abili- One key issue that organizations wrestle with is how data-sharing and privacy regulations vary from country to country. U.S. businesses tend to focus on domestic or industry-specific data and reporting requirements such as Sarbanes-Oxley and HIPAA. A shift in processes and thinking is required in other 26 August 2007 talent management magazine www.TalentMgt.com http://www.TalentMgt.com
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