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Slides from my session at the 2015 Employee Benefits Live event in London.
How to develop a global reward strategy while retaining local flexibility
- Creating a global benefits strategy with space for differences in local application
- Striking a balance between global efficiency and local agility
- Global versus local approaches to benefits strategies
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!
Employee Benefits Live 2015: Global reward - strategy or principles
• Executive pay review
• Executive STIP and LTIP
• Incentive principles
• Salary review principles
• Benchmark data procurement
What we manage globally…
What we manage locally
• Benefits design
• Benefits procurement
• Non-executive STIP
• Salary review budgets and distribution
• Recognition programmes
Considerations for programmes
Gender pay gap: in force March 2016
require companies with
250 or more employees
to report on the
gender pay gap
Country Advisory vote on
Binding vote on
Binding vote on
Vote on share-
For companies with
an audit and
Option plans only
UK At least every 3 years
Australia Changes only
with the local code
When for board
Binding for financial
Germany Changes only
No but policy should be
Netherlands Changes only
Shareholder votes: say on pay
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
% of base salary
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%
Requirements for consistency
Global Mature vs.
Multiple zones Local
2 zones 3-5 zones
each country /
• Budget and affordability
• In line with market activity and affordability
• In line with local legislation
• Market legal requirements
• Overall affordability
• Global principles
Global with local flexibility: salary review
• 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 with local flexibility: benefits design
• Local message
• Key messages from a more visible line leader
• More opportunity to use local teams as part of the
• Key message
• Feeling of being part of something bigger
Global with local flexibility: communication