Trends in Global Benefits Governance. Carl Redondo, Aon Peter Robotham, HSBC

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2 Trends in Global Benefits Governance Carl Redondo, Aon Peter Robotham, HSBC 2

3 Agenda Introductions and key themes Defining best practice Conclusions 3

4 Peter Robotham Head of Group Employee Benefit Policy, HSBC Peter has been an HR professional for his whole career - specialising in Reward Management. His career has developed through experiences with the Prudential, Chase Manhattan Bank, Schroders and HSBC Since February 2014 he has been based in HSBC headquarters in London providing governance and oversight of HSBC s employee benefit policies worldwide His current priorities include: improving global pension risk management; seeking ways to enhance DC member engagement; enhancing the management of global healthcare obligations; and influencing global well-being initiatives HR professional specialising in Reward Management Sat on steering committee for Aon s global governance study Based at HSBC headquarters, London Peter sat on the steering committee to set strategy and objectives for Aon s global governance study. He also completed the study on behalf of HSBC 4

5 Aon s Global Governance Study About the study Second of an ongoing study conducted by American Benefits Institute and Aon Hewitt. In-depth analysis of how companies make and execute strategic benefits design, financial and operational decisions. Focused on following key areas of corporate benefits governance and operations: Drivers of corporate oversight and control Effectiveness of governance and operations Correlation between business outcomes and best practice Participant profile 205 participants headquartered in: North America: 58% Europe: 35% Rest of the world: 7% Worldwide employees: 100,000 or more: 23% 25, ,000: 31% Less than 25,000: 37% Operational complexity: 40% with more than 7 business lines 44% operate in more than 50 countries Almost all have 50% or more employees outside HQ country Most respondents are HR leaders with responsibilities for managing benefits in HQ country and international locations 5

6 Key themes from the study Lack of data and insight The vast majority of companies still reporting a lack of data in regard to their own benefit plans and costs This lack of data makes setting and implementing global strategy near to impossible Poor execution strategy Companies often don t employ appropriate protocols and processes to allow them to manage programs effectively The matrix nature of many global organizations makes change and execution difficult Organisation design impact The Centre of Excellence (COE) model is evolving as the most common organizational structure to manage benefits globally The overall organizational design often has subject matter expertise spread thinly at a global level Without appropriate resource locally the COE will often get too involved in day to day issues Overall organizations have not progressed as far as they had hoped in

7 Agenda Introductions and key themes Defining best practice Conclusions 7

8 Defining Global Benefits best practice Responses for non best practice companies 20% Agreed with all 5 statements Current 18% 39% 2% 54% 1 Corporate HR and finance functions have the requisite data and market information on their global benefit programs. Current 24% 6% 48% 44% 2 Companies have insights into benefit costs and risks, and the opportunities to manage them Current 41% 41% 11% 53% 3 Companies have defined specific policies to manage risks that they believe are important to manage Current 38% 39% 9% 52% 4 There is an operating model with roles and responsibilities allocated at corporate, regional and local levels to execute the company s risk strategies Current 18% 8% 48% 41% 5 Companies monitor risks on an ongoing basis and report to corporate functions % of companies that somewhat agree % of companies that fully agree 8

9 Comparing the strategic approach to global benefits management Locally maintained Other companies -49% -28% 19% Best Practice companies How is data on benefit plans maintained? 4% -19% -10% 35% 35% A web-based common technology platform for local countries and corporate Local management/hr has complete autonomy -18% -34% Who is responsible for making strategic benefits decisions? 32% 16% -7% 28% 66% Corporate provides specific and prescriptive guidelines Locals do not seek approvals when making decisions What is the approval process for making employee benefits related decisions? -12% -25% 40% 22% -3% 10% 83% Corporate provides clear guidelines on when and how to seek approvals for decisions Local country benefits department -32% -34% 20% 14% What is the current staffing model? -7% -31% 17% 45% Shared services or Centre of Excellence (COE) approach Locals make all purchasing decisions -33% How are purchasing decisions made for employee benefits service providers? -42% 16% 9% -7% -30% 43% 20% Global providers with global master service agreements (where available) Local responsibility for compliance -43% -32% How is the management of employee benefit plans audited? 19% 6% -10%-3% 50% 37% Corporate audits are performed periodically to ensure compliance with company policies Defined only by fiduciary requirements -23% -46% 23% 7% What is the governance model? -3% -17% 23% 57% Formal governance is established with corporate and local committees Very much like A Somewhat like A 9 Somewhat like B Very much like B

10 Comparing the organisational set-up to manage global benefits Other companies Best practice companies Strategic benefits decisions Local business leaders -17% -30% 27% 26% -6% -6% 19% 68% Corporate level Different leaders for material benefits -22% -24% 28% 27% Corporate benefits leader -18% 18% 64% One corporate leader responsible for all benefits Separate individual manages in international locations -19% -29% Corporate leader for international benefits (if applicable) 29% 23% -11%-15% 11% 63% One corporate leader responsible for home country and international locations Different regional leaders for material benefits -26% -20% 30% Regional leaders (if applicable) 24% -5% 32% 63% One regional responsible for all benefits Concentration of benefits expertise At geographic levels -24% -25% 33% 18% -7% 33% 60% Global centre of expertise HR/finance leaders manage benefits as additional responsibilities -37% -39% 18% Benefits management in local country 6% -28% -34% 24% 14% Dedicated benefits leaders with requisite skills in local countries Not outsourced -63% -23% 10% 4% Outsourcing benefits manager. function -57% -17% 10% 17% Outsourced with exception of countries with large operations Local benefit leaders report into local mgmt. -34% -33% Reporting relationships for benefits mgrs. 20% 14% -11% -25% 18% 46% Solid line reporting into corporate benefits leaders Very much like A Somewhat like A Somewhat like B Very much like B 10

11 Comparing the level of centralisation to manage global benefits Company management Other companies 10% 17% 46% 28% Best practice companies 13% 7% 37% 43% 4% 15% 38% 43% 13% 7% 17% 63% Management of defined benefit plans 10% 19% 7% 7% 44% 41% 26% 46% 13% 3% 10% 3% 29% 23% 55% 65% Management of defined contribution plans 18% 9% 29% 12% 37% 50% 16% 29% 17% 13% 7% 6% 19% 34% 61% 41% Management of health and risk benefits 19% 33% 8% 12% 32% 47% 15% 33% 10% 7% 10% 10% 23% 53% 58% 30% Management of other benefits 30% 12% 37% 23% 25% 8% 47% 19% 14% 14% 11% 7% 25% 38% 34% 57% Management of compensation programs 7% 14% 1% 9% 45% 43% 34% 47% 8% 4% 7% 4% 27% 25% 62% 64% Decentralised Somewhat decentralised 11 Somewhat centralised Centralised

12 Agenda Introductions and key themes Defining best practice Conclusions 12

13 Comparison of confidence in achieving key business outcomes Alignment with workforce/rewards strategy Best practice companies Other companies 56% 6% Alignment with corporate policies/guidelines 61% 12% Improved outcomes for employee (health and financial wellness) Improved employee understanding of value of company benefit 19% 12% 0% 1% 12% Reduced cost of benefits 31% 8% Reduced volatility of costs Reduced balance sheet exposure Reduced operating/administration costs Required and appropriate benefits expertise to support locals Reduced compliance risks Reduced reputation risks 19% 27% 15% 33% 37% 42% 8% 6% 4% 11% 10% 16% 75%+ confident Best Practice Companies More likely to establish specific guidelines for: Compensation programs and all material benefits All countries not just for countries with large operations 13 Best Practice Companies More likely to: Communicate formally documented policies and procedures Require approvals when local decisions don t align with policies

14 Key conclusions Companies still struggling to create a baseline data inventory A lack of formal processes and protocols makes execution difficult The COE model needs to be well designed and resourced to be effective In general, the market has not moved as far as it would have liked in the last 3 years Organizations still very committed to a more centralized approach to managing global benefits Best Practice outcomes Best Practice companies more commonly say They have effective oversight of their compensation and benefits plans in international locations Their Benefit plans support broader organisational workforce and talent management strategies and initiatives Local country benefit plans are aligned with company s design, financial and operational objectives 14 Best Practice Outcomes

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