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Employee Benefits Live 2015: Global reward - strategy or principles
- 2. • Executive pay review • Executive STIP and LTIP • Incentive principles • Salary review principles • Benchmark data procurement What we manage globally…
- 3. What we manage locally • Benefits design • Benefits procurement • Non-executive STIP • Salary review budgets and distribution • Recognition programmes
- 4. A global reward strategy: should we?
- 6. Gender pay gap: in force March 2016 Government considerations UK government require companies with 250 or more employees to report on the gender pay gap
- 7. Regulatory considerations Country Advisory vote on the remuneration report Binding vote on future remuneration policy Binding vote on director remuneration Vote on share- based incentive plans Japan For companies with an audit and supervisory board Option plans only UK At least every 3 years USA Australia Changes only France For companies voluntarily complying with the local code Changes only When for board members Italy Binding for financial institutions only Germany Changes only Switzerland No but policy should be described Netherlands Changes only Shareholder votes: say on pay
- 8. Market expectations Cultural considerations 32% 42% 30% 33% 37% 31% 27% 27% 24% 31% 34% 10% 41% 7% 14% 5% 4% 8% 3% 5% 9% 1% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Average US Average WoW UK Germany France Italy Spain Australia Singapore China % of base salary STIP LTIP
- 9. Cultural inconsistencies? Cultural considerations Perfrormance score China Singapore Australia Spain Italy France Germany UK Group (UK) US 1 0% 0% 0% 0% 20% 0% 4% 0% 0% 0% 2 30% 8% 0% 7% 0% 17% 13% 6% 8% 7% 3 10% 25% 56% 64% 20% 55% 73% 53% 52% 39% 4 60% 67% 44% 29% 20% 28% 10% 37% 30% 43% 5 0% 0% 0% 0% 40% 0% 0% 4% 10% 11%
- 10. Requirements for consistency Internal framework Global Mature vs. emerging Multiple zones Local Typical approach One global approach consistent across all regions and markets 2 zones 3-5 zones Defined for each country / market Geographic zoning Mature and emerging markets North America, Europe and Australia, emerging markets etc. Market zoning Key business and new ventures Multiple business activities
- 14. Think global act local?
- 15. • Budget and affordability • In line with market activity and affordability • In line with local legislation • Market legal requirements • Overall affordability • Global principles Global consideration Local flexibility Global with local flexibility: salary review
- 16. • Regulatory requirements • Perceived value or market worth • Income tax / social security benefits • Availability of benefits or suppliers • Core requirements • EVP / brand supporting requirements • Global employees / nomads / 3rd country nationals Global consideration Local flexibility Global with local flexibility: benefits design
- 17. • Local message • Key messages from a more visible line leader • More opportunity to use local teams as part of the communications cascade • Key message • Feeling of being part of something bigger Global consideration Local flexibility Global with local flexibility: communication
- 19. Keep it social
- 21. @richardbeeby
Editor's Notes
- We're in a totally different place from Rob – as we don’t have a globally consistent set of principles at all – Mostly due to how we as an organisation have grown, but each business and each country currently has the licence and autonomy to do what it wants! This does cause some problems and also means that we aren’t always efficient as we could be. We do run some programmes and activities globally:
- Our executive population is roughly our top 3% of the organisation globally – so the main board down to about level 4 or 5 depending on the size of the market. For that population – we run a globally consistent salary review – but allow local flexibility for the % of increase given We also have a globally consistent bonus scheme with the same bonus percentages and triggers globally and also for our LTIP For our non-exec population, we have consistent principles in place
- We do a most of our reward and benefits activity on a local basis – with local businesses owning the activity, the roadmap of new activity and also the budget for activity.
- We do have the odd discussion about what we should drive globally – and whether we should even drive a central globally consistent reward agenda? There are definite pros and cons of both a globally consistent reward strategy and a local reward strategy. When considering what approach, there are a few things to keep in mind.
- We know that reward and employee benefit programmes have to be tailored to Government considerations regulatory ones too and cultural differences Plus there's the internal framework too. I want to just take a look at a few examples that may affect that thinking
- Here’s a good example of where it may be necessary to do something different on a local basis due to government intervention. In the UK from March next year, mid-sized and large companies are going to have to publish their gender pay gap. It’s going to be interesting to see what comes out of the consultation n terms of requirements, but it could still change the way that some organisations will need to look at their reward strategy on a local basis and may have wider implications on a regional or even global basis. It’s certainly one to watch!
- We know we’re starting to see increased regulatory pressure on executive pay – there is an investor push for a stronger link between pay and performance This is important for us all – whether looking at executive pay or entry level talent – whether we’re a UK listed Plc or a start-up in a trendy part of east London because the principles and the way that plans are designed will start to filter through. If we’re going to remain relevant as a function – we need to look at the trends and anticipate how they’ll affect us. This is one area where a degree of local flexibility will be crucial – so that local markets can respond to local regulatory requirements but also important that a degree of global control is retained.
- We’ve spent some time looking at whether it’s appropriate to have one globally consistent scheme or reflect local markets. So – in this analysis here – we looked at one level of the organisation – roughly a global grade 17-18 level exec – to see globally what the market was doing in terms of STIP and LTIP
- I find this analysis really interesting – we looked at the performance score distribution across several of our largest markets. We ask for standard distribution, but don’t mandate it, it’s just our guided distribution
- Global companies often use some form of ‘zoning’ for financial performance and target calibration to reflect the degree of maturity or the economics of the entity The global approach here is simple, but it provides little or no differentiation for market maturity The next two do work well for a company operating in diverse businesses or markets and can be defined to local market requirements whilst maintaining a degree of global consistency The last approach is tailored, but can be more time consuming to operate
- We know there is growing globalisation and convergence The so called “Americanisation” or “McDonaldisation” of the world – we know that through modern media, people are becoming more connected than ever before which means that our people are talking to each other more than ever before
- If we needed any proof of that statement, then this slide shows it perfectly from Business Insider recently. Whilst it took the phone over 70 years to reach a 100 million users, we're seeing the pace of change accelerate so much Mobile phone was double digit years Facebook around 5 and Instagram and WhatsApp even less And the less said about Candy Crush the better!!
- This is nothing new – but against the backdrop of recovery from an economic downturn, surprising scenes of refugees and migrants across Europe and the threat of a Brexit – there may be some surprising backlash to the ongoing commercialism and globalisation caused by global brands. This matters to us – and requires us to keep a degree of localism in our thinking – because we cannot hide from the affects of globalisation and we may need to respond to government policies in our reward and benefits practices.
- So. At it’s most simple – I think the decision around global vs. local decisions is just recognising that countries are different with distinct government and regulatory challenges So, I suppose it’s quite a tired mantra now – but it probably does come down to thinking globally, but retaining the ability to act locally – so whilst that’s quite old hat – it does still need us as the reward profession to translate this into practice. So - I thought of three things that probably work best with a global strategy or set of principles, but operate best at a local level or at least with a high degree of local flexiblity
- The annual salary review is a good area to consider localism
- One of the big benefits challenges is consideration to global benefits – as in different markets, certain benefits are just not available, or they don’t have the same worth – such as with tax advantages or not perceived to be as important – such as buying additional annual leave in some northern Europe markets
- So my tips for the future Be prepared to use technology to communicate and be part of your reward and benefits strategy. We already saw how technology is used by an increasing number of people I would make the use of technology part of your strategy - globally and local!
- Think of “people like me” How much of your reward strategy can you share socially – think about the employee brand and how this will attract people to your organisation and retain them. Having a statement such as “we will pay the market median” – may not actually be that attractive. Is there a real dichotomy of wanting to be “world class” or “attract and retain the best” and “high performance” with “average pay, average benefits and average total reward?” What can your people shout about?
- When I was at university – one of my friends wrote her dissertation on mass customisation – at the time – it seemed quite a mind-blowing concept that on the mass market, using all of the efficiencies of mass production that you could have customisation. I think that time is now. One thing is clear now: benefits tailored to our own organisation’s demographics can only increase engagement and productivity. Employees come from different places, they are different ages and they have different requirements. Whether we look to segment reward programmes totally, segment benefits programmes or just segment and bespoke communication around our plans – that will only bolster employee engagement – and this is something, that might just be better done locally!