RESISTING INERTIA: Auditing and Benchmarking Your Global Mobility Program. By Steve Nurney, Principal at Mercer

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1 RESISTING INERTIA: Auditing and Benchmarking Your Global Mobility Program By Steve Nurney, Principal at Mercer

2 According to Newton s First Law of Motion, a body s motion remains constant unless an external force acts on it. We call that tendency of things not to change direction inertia. And inertia can apply not only to bodies with mass but to corporate programs. We have all seen how, once an HR program gets going in one direction, it tends to persist in that direction unless some outside force interferes. Your company s global mobility program is subject to inertia: For better or worse, it is moving in a specific direction. But is it moving in the right direction? If not, you need to find enough outside force to redirect it.

3 Signs of inertia Your company has been sending employees to work outside their home country for years. But do you have a clearly stated global mobility strategy? Is your expatriate compensation policy documented clearly and communicated well? Do you know all the inputs and calculations that go into your compensation packages? Are you using the right peer companies to benchmark your mobility program s effectiveness? Does your expatriation program have a positive ROI over a meaningful time frame? In short, do you know for sure whether your global mobility program needs fixing? If you cannot answer Yes to all of these questions with confidence, it s time to evaluate your global mobility program and determine whether you need to chart a new course for it. How to get your bearings The most important consideration going into an audit is having a clear understanding of why your company moves employees abroad. Is it to broaden the experience for your best talent? To provide scarce managerial help until local managers can be trained? Is the nature of international assignments the same in all countries and for employees at all career levels? Is it appropriate to have one policy that applies to everyone? Or should you have tiered policies to allow for specific local situations? You should also consider your competitive environment. If you are in financial services, for example, you do not want to compare your global mobility policy to those of energy companies, which often have features peculiar to their need to man remote extraction sites. Some industries and some specific companies have cultures that truly foster mobility. So, if your employees know when they walk in the door that mobility will be expected, your policies may not need to be overly generous. In that case, you should not benchmark against companies whose approach to mobility gives expatriates a lot of customized, exceptional treatment. You need to know who your competitors are and how they are handling expatriation. Do you want to benchmark against your industry, your region, or specific companies? Calibration: What to audit Once you know what to expect, you should analyze your company s compensation packages and review their elements: How do you determine each allowance? What are the assumptions made both implicit and explicit? What is the desired level of compensation resulting from those allowances? At the market? Above the market? Do the answers to these questions align with your desired competitive position and business needs? About the author: Steve Nurney leads Mercer s U.S. Global Mobility Center of Excellence and has extensive experience in managing and consulting on international assignment programs. You can reach Steve at or

4 It is important to conduct a simple yet thorough review of the actual package calculations to ensure that the data source is correct, and that you are using accurate employee and assignment demographics from salary and family size to home and host locations. This is important both in automated environments (where payroll data is uploaded and processed via electronic files) and in those that rely on a high level of manual input (such as homemade Excel files). Then, you should review the actual processes used to determine and provide compensation information. Who provides that information? Internal employees? Are these services outsourced? (Should they be?) What role does each person have? Are they all following the same, correct procedures and using consistent, correct sources of information? At this point, it is important to verify that your global mobility policy is clearly documented, agreed to, and adhered to by everyone involved in administering it. Examine the whole process from start to finish, making sure that what is supposed to be done is being done, that it is done in a timely way, and that it is done consistently and correctly. Charting a new course: Where to look Where are you likely to find opportunities for cost savings and program effectiveness? Your housing policy may be a good place to find cost savings. Reconsider assumptions made for housing costs in the assignment location. Setting reasonable expectations in employees minds before the assignment begins is important in curbing housing allowance expenditures and costly requests for exceptions. Assignments are temporary. Assignees should not expect to duplicate their home country housing standards in the assignment location. The Goods & Services Differential (or, Cost of Living Allowance ) is another area to focus on. When reviewing the way the differential is determined, be sure that no benefits are duplicated. Some employers unknowingly provide separately some of same items that the differential includes. For example, many companies provide transportation assistance in the form of a company car or allowance. If so, the differential should exclude these elements to avoid duplicating benefits. Exchange rates and relative inflation in the home/host locations change over time and recently these conditions have been quite volatile. In some cases, the level of allowances required can be lowered considerably because of those changes. Economic conditions may also turn the other way, and packages should be updated to ensure that you compensate your assignees fairly.

5 Retention is an important yet underused indicator of a mobility program s effectiveness. Consider the number of assignments that end prematurely, the achievement of assignment goals and objectives (to the extent that goals have been clearly established) and, upon repatriation, whether the employee can be redeployed internally. If not, your company is losing the experience that your expatriates gain while on assignment. What measures do you have in place to ensure that returning expatriates will want to stay with the company when the assignment is over? Overcoming inertia Senior HR managers and other stakeholders in expatriation need to remember to periodically step back and determine whether your global mobility program is properly aligned with business goals and meeting expats needs. Pay special attention when changing policies or practices, and when introducing new systems or people to the expatriation process. It takes real discipline to verify whether how it s always been done makes sense in the current environment. Regular auditing and benchmarking help you to take a fresh look at your mobility policy, review mechanics, and make sure that no changes in your company or your business environment warrant an adjustment in policies or processes. Regular realignment of your mobility program can ensure that your overall talent management strategy yields results that benefit both your company and your expatriate workforce. Don t let your mobility program run on inertia alone. About Mercer Mercer is a global leader in human resource consulting, outsourcing and investment services, with more than 25,000 clients worldwide. Mercer consultants help clients design and manage health, retirement and other benefits and optimize human capital. The firm also provides customized administration, technology and total benefit outsourcing solutions. Mercer s investment services include global leadership in investment consulting and multimanager investment management. Mercer s global network of more than 20,000 employees, based in over 40 countries, helps ensure integrated, worldwide solutions. Our consultants work with clients to develop solutions that address global and country-specific challenges and opportunities. Mercer is experienced in assisting both major and growing, midsize companies. Mercer compiles survey information on global mobility from over 1,000 companies so you and your Mercer consultant can cut the information to fit your specific benchmarking needs. See mobilitymetrics for details on Mercer s new report, Global Mobility Metrics: Focus on Retaining Key Talent.

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