WITH COMPANIES becoming more global, two-thirds of multinational companies have adopted a HR strategy that is consistent across offices worldwide
WITH COMPANIES becoming more global, two-thirds of multinational companies have adopted a HR strategy that is consistent across offices worldwide.
Furthermore, a growing number of multinationals are shifting to more centralised compensation and benefits structures to help ensure that employees and executives around the world share the same incentives.
A recent Watson Wyatt Worldwide survey found that more than half (56 per cent) plan to shift to a more centralised structure over the next two years, up from 42 per cent in 2004. “A centralised global approach to compensation and benefits is necessary for consistency and alignment with company goals, although multinationals should watch how much emphasis they place on consistency,” said Bob Wesselkamper, director of international consulting at Watson Wyatt.
“Local cultures and the availability of resources play a big role, too. The key is finding the right balance, as some programs are best managed globally, while others are best managed locally.”
The Watson Wyatt WorldatWork survey of 275 companies also found most multinational companies manage executive compensation, long- and short-term incentives and performance management globally, largely because these programs are linked to a company’s rewards and performance measures.
“Companies are fully centralising programs that drive strategic performance,” said Don Lindner, compensation practice leader at WorldatWork.
“Centrally managing executive compensation programs allows multinationals to strongly link rewards for executives to the results of the total enterprise.”
Part of the push for more centralisation has come from regulatory reporting requirements, such as those in the Sarbanes-Oxley Act in the United States. Forty-five per cent of multinationals now have a formal approach to global corporate governance in place, including requiring benefit changes to be approved by global or regional management.
The programs that most frequently require global or regional approval before changes can be implemented are executive compensation (92 per cent) and long-term incentives (73 per cent).
Additionally, 80 per cent of companies are developing clear global policies, and 64 per cent are implementing consistent global tools, processes and technology to strengthen governance procedures for total rewards design and administration around the world.
“Instituting clear policies to support the design and delivery of new rewards programs globally generates benefits beyond simple compliance with regulations,” said Laura Sejen, Watson Wyatt’s global practice director for strategic rewards.
“It can help companies uncover and address inconsistencies and help them communicate to employees worldwide the value of their total rewards packages.”
