ORC Sightlines
April 2004
- Competitive Pay Structures in the “Global Job Market”
- Growing Popularity of Restricted Share Schemes in UK
- HR Leaders on Guard Against Hack-tivism
Competitive Pay Structures in the “Global Job Market”
Is there such a thing as a global job market? No, not if you take that term to mean a single market with identifiable jobs and pay scales similar to a local marketplace. When we recruit employees, we determine rewards with reference to the trends and practices of a specific market place, but globally there is no uniform frame of reference. Nor can we say there is a global market in the sense of one equitable system that pays the same for similar jobs across the organization, regardless of location. A global market may be equitable from a headquarters perspective, but inequitable when applied locally.
Nevertheless, companies can—in fact, often must—compete globally for employees to fill key jobs and then, despite the difficulties, they may want to harmonize the pay for those employees worldwide. First, let’s look at the two main difficulties:
- Hazy definition of the market
The market is different for every job since industry, academic discipline, size of company, available talent pool, and so forth all affect where you will recruit and what you will pay. These differences are even more pronounced when projected globally. - Lack of reliable data
The variables defining a domestic market for jobs in countries such as the US, Canada, the UK, and other stable economic markets are manageable because of the availability of consistent, reliable data that takes many of the factors into account. Survey data is not so clean in all countries however. Some surveys fail to differentiate according to industry, organization size, or whether the employer is national or multinational. Unfortunately, there is no survey source that represents a worldwide or global market.
Even though market data cannot be relied on, it is possible to create a compensation system that will permit your company to compete successfully on a global scale for those jobs that truly are filled from a global talent pool. The first steps to take include:
- Deciding which employees really need to be considered global resources
Those might be the employees with skills critical to the organization’s mission and who have strong international political, cultural, and business expertise, such as might be demanded in a multinational company. - Resisting the siren call of internal equity
Accept the notion that some key people will be paid more than others working in the same location, but only as dictated by the objective requirements of the competitive market for those jobs. - Analyzing multiple sources or unusual sources of pay data for
those jobs
Understand who your competitors for these employees are and where they are headquartered, since they may be paying their global employees according to headquarters pay structures.
Where external sources are lacking or unreliable, pay can be determined by the value of the job to the organization. Determine the contribution that an individual job adds to the organization. If the contribution is unique or new to the organization or adds value to the strategic direction of the organization, then the pay will be unique as well. A good balance among all rewards (direct and indirect) can lead to a system that balances locally driven pay levels with globally balanced opportunities for greater reward through either fixed, variable, or benefit components.
Growing Popularity of Restricted Share Schemes in UK
Neil Coleman, ORC Worldwide’s vice president of global compensation, highlighted the reasons why restricted share schemes are expected to become a common feature of executive remuneration packages. Speaking at the Global Reward Meeting Group on in London, Neil suggested that the combined effect of expensing of stock options, increased requirements on disclosure, and heightened public anxiety about rewarding failure may drive organizations toward longer-term compensation mechanisms that restrict payout if certain performance criteria are not met. (In the UK, restricted stock based on performance criteria are more common than the US practice of linking restrictions to time.)
Network members also exchanged ideas and related experiences on linking pay to performance management systems. Interestingly, no two companies had similar systems and the overriding message was that even the most effective schemes decay in the medium term and need frequent facelifts.
HR Leaders on Guard Against Hack-tivism
Computer hackers have become so adept at infiltrating information systems that they can wreak havoc in the workforce with disconcerting ease. At a recent ORC meeting, HR and security leaders among ORC’s client companies were alerted to the risk of computer-savvy employees and outsiders who can make mischief—whether just for the fun of it or as “hack-tivists” making a political point.
Hackers can strike in any number of imaginative ways. One example cited was a company whose compensation system was invaded, resulting in the broad dissemination of salary information within the organization. Identity theft is another potential way of wreaking havoc and wasting untold person hours. (On average, identify theft victims spend several hundred hours resolving the resulting issues.) HR leaders were also alerted to the potential for “evidence” in misconduct investigations to be planted on employees’ computers in an attempt to frame them.
What can HR leaders do to protect their companies and information assets?
- First, be aware of where you are vulnerable. If you have employees accessing confidential information on your systems remotely, you may be exposed to greater risk. System security is only as good as its weakest link. Instant messaging and wireless connections may increase risk if not properly secured.
- Second, move to protect your perimeter. It may be worth the expense to help your employees set up strong personal firewalls around their home computers, for example.
- Educate your workforce. Passwords stored on computers or palm pilots should be encrypted. Identity theft should be reported to HR. (Often victims of identity theft are embarrassed to admit it. Make it comfortable for them to come forward.)