STRAIGHT TALK ABOUT BENCHMARKING REGIONAL ROLES. Webinar: June 23, 2016 Presented by Birches Group LLC

STRAIGHT TALK ABOUT BENCHMARKING REGIONAL ROLES Webinar: June 23, 2016 Presented by Birches Group LLC

Introduction Common Challenges A Way Forward A Brief Look at Regional Recruitment Wrap-Up and Q & A

Founded in 2005 by four former UN officials Headquartered in New York, with offices in Manila, Philippines; Umeå, Sweden; and Riga, Latvia We conduct salary and benefits surveys in globally We also manage separate surveys for our NGO and development sector clients in about 85 countries We work with multi-national corporations, regional and local companies, international organizations and NGOs

Joined Birches Group in 2007 following a long career with Colgate-Palmolive, and before that, TPF&C (now Willis Towers Watson) Expert in compensation and benefits, expatriate compensation, and developing markets Works directly with clients and also manages business development for the firm Frequent author on relevant international compensation topics

Organizations are increasingly using regional roles for various aspects of operations, including regional leaders as well as functional roles Examples of regional structures include: Hubbing Establishing a country office which has oversight over a group of neighboring countries; e.g., East Africa or Central America Regional HQ Creation of a regional headquarters to manage business across one or more continents; e.g., Europe, Middle East and Africa, or North America Regional Supply Chain Manufacturing and supply chain resources consolidated to one location, to serve a group of markets in the region (or even outside) Leveraging Trade Pacts ASEAN, NAFTA, EU, etc. are all trade regions with favorable rules for intraregional trade

But when comparing jobs, this approach might not work

Lack of specific matches

Each regional job is defined differently by the employer Surveys capture national data, not regional data In short, regional jobs are poor benchmarks, because they are not consistently defined according to the work outputs

Lack of specific matches Different definitions of region

Each employer defines regions differently Relative importance of markets could also vary Variation in the operations included/excluded in the region, e.g.: Commercial operations included Supply chain excluded (handled at the global level) Certain programs included at the regional level, while others are managed nationally or globally (NGO sector)

Lack of specific matches Different definitions of region How to measure complexity?

Most employers would argue that regional roles are more complex than similar national roles. Why?

Multiple markets 14

Multiple markets Multiple currencies 15

Multiple markets Multiple currencies Multiple cultures 16

Multiple markets Multiple currencies Multiple cultures Multiple customers and clients 17

Multiple markets Multiple currencies Multiple cultures Multiple customers and clients Business results need to analyzed in multiple ways and consolidated across countries 18

Lack of specific matches Different definitions of region How does your region compare to the definition of others? How to measure complexity? e.g., revenue, budget, product mix, etc. Inconsistent approaches

Variable treatment internally, with associated differences in benefits and incentives Salaries set in foreign currency without a business reason to do so Different treatment of regional roles in different parts of the company A mix of local and other types of packages, including expat, expat lite, local plus, and others One area that is usually consistent: Setting targets for incentives, which almost always includes the business results in the defined region

Lack of specific matches Different definitions of region How does your region compare to the definition of others? How to measure complexity? e.g., revenue, budget, product mix, etc. Inconsistent approaches Variations of country, currency and culture ( the three C s )

There are often significant differences between going rates for the same position in different countries, even neighboring ones e.g., the same position in the U.S., Canada and Mexico have different salary levels Aside from the Euro zone, most countries within a region have different currencies How should conversions be done? What if one country s currency devalues or revalues significantly versus the others? Is it OK to use a global benchmark such as USD, GBP or Euros? Each country looks at reward differently This is most obvious when looking at allowances, benefits in-kind and incentive pay There are also cultural differences which influence pay levels, pay progression, etc.

We have good market data for the countries in the region we ll just average it! But What if currencies are different? What if there are large differences between country pay levels? Straight average or weighted? If weighted, what do you use for weighting? What if common benefits are different? And, by their very nature, averages don t usually please anyone

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Wide range of pay across a region Different taxation and social benefits If weighted, the factors used in weighting have no relationship to the market data If candidate comes from a high market, pay will be less attractive If candidate comes from a low market, cost impact could be significant

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Job definitions are inconsistent Region definitions are different Roles are more complex, but there are various ways to measure complexity Pay levels vary a lot in a region Benefits and pay mix are different, too Tax rate differences impact net pay No one wants to be average

Recognize expanded scope of responsibilities for a regional role by using your internal job evaluation process 32

Recognize expanded scope of responsibilities for a regional role by using your internal job evaluation process Use data from your survey, since it s based on solid benchmarks that exist across a large crosssection of the market 33

Recognize expanded scope of responsibilities for a regional role by using your internal job evaluation process Use data from your survey, since it s based on solid benchmarks that exist across a large crosssection of the market Level or roll-up data works best for regional roles, since the benchmarks are not standardized or welldefined 34

Each organization defines regional roles differently, from scope of duties to geography Internal job evaluation is the best way to recognize the added responsibilities of a regional role A benchmark job is one which is common across many organizations A regional role, therefore, is not a good candidate to be a benchmark job National data for standard, common benchmark jobs is a good starting point for regional roles Using level data allows you to reference solid benchmarks with the same contribution level as the regional role according to your own job evaluation standards Not influenced by definition of region or factors over which you have no control, such as exchange rates

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Solid match use 50 th percentile range 37

Stronger match Use 50 th percentile upper range, or 75th 38

Organizations are striving for the best talent in a region Oftentimes, candidates are identified within the region but outside the country where the role is located Returnees from overseas are also targeted Candidates returning from overseas, or those that must relocate to take a regional role may have different expectations Consider: Relocation assistance, including ongoing housing for a few years Education support Trips home Local plus packages often are used to provide extra benefits for international transfers while avoiding the cost of expatriate packages

Regional roles are becoming more and more common, but benchmarking them using a traditional job-based approach is very difficult Evaluating the jobs with broader responsibilities to a higher internal grade provides enough of a difference to acknowledge regional duties and higher level of complexity Using national data and level roll-ups for benchmarking provides a consistent, data-driven way to price roles

Warren Heaps, Partner, Birches Group LLC warren.heaps@birchesgroup.com Online: Birches Group website www.birchesgroup.com NGO Survey website www.ngolocalpay.net Questions and Answers We have compiled questions submitted during the session We will answer as many as we can in the time remaining Others will be answered in writing and summarized for all attendees Join Birches Group on LinkedIn www.linkedin.com/groups/2201013

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