You Don’t Want To Hear This

When working with a client new to the international stage, or an organization with only a small employee footprint overseas, one of the pressing challenges that compensation practitioners face is educating leadership as to what to expect when dealing with international rewards. Of special note is the quandary of obtaining reliable sources of foreign compensation data.

For most U.S.-based companies determining the market price of their employees is a consistent need; to determine the competitive, comparative value of local jobs. To do this you need to know what similar jobs are paying within each country.

Many corporate practitioners begin their global study not anticipating a problem, as they’re accustomed to working with U.S. compensation surveys. How much different can it be? they ask. We’ll have a look at competitive pay in, say . . . Austria, or Argentina or Thailand, get ourselves a couple of survey sources, flip a few pages and – there we are.

And while we’re at it, the fantasy continues, let’s make sure we focus on data relevant to our industry. Segmenting jobs by revenue size would also help. Then, while we’re at it, let’s consider the geographic location of our operations to make sure we can nail down local information for the lower ranked jobs.

It should be a straightforward process.

But it’s not.

Reality Bites

Instead of a smooth pathway for the compensation answer man, a role you’ve grown accustomed to playing with U.S. surveys, the road ahead is not only bumpy and pitted, but in some sections the upheaval has taken out the entire road. Let’s look at the why.

• Country size: Compared to the U.S. there are simply less companies in the survey database from each reporting country – sometimes not many at all. Most countries are either much smaller or have less developed economies, and the fewer companies who participate in a survey the fewer data points that will be available for analysis.
• National data only: You may want industry data, or a specific size of organization (revenue), but most times what you’ll find available is only national data. Again, this is because there are too few participants to support data segmentation.
• Basic job matches: Another reflection of limited data is that there are fewer benchmark positions available for matching. Specialty jobs may not be included, and even those simply labeled “senior,” “assistant” or other steps within a job family might not be listed.
• Secrecy:  Confidentiality can be an issue, especially among emerging market countries. In some regions a cultural reluctance to share information further restricts survey participation, and a tight labor market for skilled positions can create a fear of employee poaching – so they’re not talking.

You can elect to conduct a custom survey of selected companies, but custom surveys may not be an effective strategy either, as the process is both time consuming and expensive, especially if outsourced.  And this strategy would still have issues of confidentiality and reluctance to participate, as well as a need to provide those participating with at least summary results.

So what you’re left to deal with is an environment of less certainty, less assurance of what the “market” is paying and more reliance on a “feel” for reasonable compensation. That subjective “sense of the marketplace” can be a tough sell to a skeptical management, especially if they don’t understand or even accept the limitations you’re struggling with.

How many compensation practitioners are comfortable with sticking their neck out with recommendations when they don’t have the smoking gun of multiple survey sources handing them the common practice answer?  Would you?

The Struggle To Adapt

Those who experience such scarcity of data struggle to adapt their mindset in order to present a reasonable assessment of diverse, country-specific competitiveness.

• Limited data weakens reliability: Practitioners cannot rely on survey data with the degree of confidence they’re accustomed to with U.S. surveys. The phrase, “survey says” carries less certitude.
• Damaged credibility: Concern over selling so-called “results” to senior management when the data is scarce, job matching is more tentative and the “marketplace” is not well represented.
• Job family gaps: Certain levels (senior, lead, “x” yrs of experience, etc.) may not be reported, leaving one with a choice of making arbitrary adjustments to benchmark jobs or bypassing (ignoring) the job with a “n/a” code.

So, what are you going to do?

Accepting the limitations of what data is available for analysis is not an easy pill to swallow for those accustomed to robust U.S. information sources.

• Adjustments: When your job is not identified in the survey you may need to select a similar role (larger or smaller) and adjust the figures up or down – or you could “pass” on trying to match the job, though non-answers rarely help.
• Get off the median: When revenue brackets are not available (common) and you’re dealing with a small to mid-size company, you should consider using the 25th percentile of available data as a representative market, instead of the higher median or weighted average.
• Educate management: It’s essential that management is led to understand the limitations of international compensation data in determining “the answer.” Your recommendations, while based on sketchy information, are coupled with your professional experience and judgment. You have to sell this.

Determining marketplace values for overseas jobs is not an exact science. While you’re often left to “feel the pulse” of the country-specific environment you’re not telling management how much to pay someone, only what the generalized “market” seems to be paying for similar jobs. They have to take it from there.

Chuck Csizmar is the Founder & Principal of CMC Compensation Group,an independent global compensation consulting firm whose expertise lies in helping companies manage the effective and efficient utilization of financial rewards for their employees. He also maintains a popular blog on compensation at his website www.cmccompensationgroup.com.