Compensation Strategies

Compensation is just one aspect of an integrated HR strategy. We also

believe that a well-designed compensation strategy can be a strong
source of competitive advantage to an organization. A poorly designed
rewards program can cause dissatisfied employees, excessive
employee turnover, and the inability to attract quality candidates.

In a few words, ICR defines compensation strategy as how you choose

to reward your employees relative to your competitors, in
support of your business culture and objectives. Companies
need to determine the purpose of each component of the
compensation package (base salary, short-term incentives, long-term
incentives, benefits, perks, and recognition programs) to position them
in the market.

ICR’s approach to compensation strategy development generally

includes the following steps:

Establish which companies, industries, and

geographical areas constitute your competitive
market.

Conduct a full market analysis using company owned

or ICR surveys, to determine actual position in the
market.

Meet with executive management and HR to discuss

the integration of compensation programs with the
company business and HR strategies.

Review and discuss results of market analysis to

determine how actual position varies from desired
position by each aspect of the compensation
package, and on a “total compensation” basis.

Determine if employee relations and recruitment

activity support indicated findings.

Develop comprehensive plans for addressing areas of

concern - such as functional spend programs,
incentive plan design, program structure, or stock
option awards.

• Variable Compensation, Gain sharing and Team Bonuses

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 • Pay-for-Knowledge and Competency-Based Pay
• Performance-Driven Base Pay Designs
• Removal of Outdated Pay Programs

CHRS holds a unique position in both the original research and

design of gain sharing plans and other forms of variable
compensation. Based upon grants provided by the National
Science Foundation, the US Department of Labor, and the GE
Foundation, Dr. Schuster's original trend-setting work has served
as a base for continued research today. We have installed and/or
evaluated several hundred gain sharing plans. These designs
frequently include the following elements

• Assessment and readiness evaluation

• Financial analysis
• Plan structure and measurement
• Design
• Implementation training
• Audit of existing plans
• Redesign of plans for future effectiveness
• Bonus programs to support fast-cycle completion of major
projects, including new product creation

Pay-for-knowledge, skill-based pay, and competency-based pay

programs reward employees for increasing the depth and
breadth of knowledge and skill and the utilization of those skills.
Pay-for-knowledge is often an extension of work redesign efforts.

• Assessment and readiness

• Task analysis
• Design of knowledge and skill blocks
• Development of technical, administrative and team training to
support plans
• Audit of existing plans
• Redesign of plans for future effectiveness
• Development of training and certification procedures

CHRS senior consultants have extensive experience establishing and

revising base pay structures to make them more flexible, to increase
their impact in driving critical business objectives, and to make them
more cost effective.

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POWERFUL COMPENSATION STRATEGIES
“The greatest benefit is the one last remembered.”

One of the biggest questions employers ask themselves today is what

compensation strategy will have the greatest impact on their bottom
line. Do we use pay for performance strategies? Team incentives?
Individual incentives? Non-monetary compensation? That fact is, there
is no pat answer. Your company’s compensation strategy, as with any
other system, has to relate to the specific needs of your employees
and other stakeholders.
What follows are some factors you should consider when
designing your compensation strategies. Our advice is to not rely on a
canned approach. Rely on strategies that work best for you, your
employees and your stakeholders. Focus on strategies that will
increase productivity while maintaining stable, long-term relationships.

New Compensation System Generate Trust or

Mistrust
On numerous occasions, the Dilbert cartoon strip has poked fun at
performance-based compensation systems. This is because employees
(not just in the cartoon, but in the real world) do not trust the company
motives attached to such programs. Trust is the single most powerful
factor in the workplace. Ask yourself whether your system will foster or
diminish trust. It can raise the level of trust if you get employee input,
feedback and commitment.

Whatever Your Program Is, You Must Be Willing to

Commit to It

We have been involved in numerous lawsuits over the design or

implementation of a compensation plan. Many times, compensation
plan issues arise after employee termination. When designing any
compensation plan, you must keep in mind compliance with laws,
including wage and hour obligations, commission payment obligations,
ERISA (Employee Retirement Income Security Act) fiduciary duties,
equal pay laws, etc.

It Must Be Tied Into Open-Book Management

If we want to create learning organizations, we must share the
financials. This means that anyone’s compensation plan is open book
for the rest of the company. If an employee or manager can’t justify
their value, then he or she shouldn’t be getting the big bucks. To have
an effective open-book management program, financial education is a

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must. We suggest you read Jack Stack’s Great Game of Business, the
ultimate guide on open-book management.

Reward Team Play

It’s been said that the word team can stand for “together each
achieves more.” To foster teams, you must foster trust, and vice versa.
When we survey organizations, those having a low level of trust have a
high desire for

Individual incentives
You must design team-based compensation programs

Statistically, one-third of all teams fail because of poor compensation

design. Superstar performers, focused on individual performance in
place of team performance, will never create sustainable growth.

Do Not Create a Compensation System That Creates

More Losers Than It Does Winners

This often happens in the sales area. The “salesman of the year gets a
trip to anywhere. What do you think the chances are that salesperson
will share the information that has made him or her so successful? Do
you really think he or she will risk sacrificing next year’s trip to Hawaii?
The fact is, you should design a compensation plan, which encourages
the sharing of powerful information—not one that stymies it by design.

Watch How You Establish Quotas and Benchmarks

It is a statistical fact that the last two weeks of most quarters bring in
unprofitable sales. This is because the compensation program is
wrapped around gross numbers, not those tied into profitability. This
goes for anyone’s compensation plan. If you’re going to have
performance-based compensation, make sure the performance
standards have a clearly defined purpose. Are you tying compensation
into information that is relevant? Is the benchmark directly related to
the company’s vision, mission and goals? Does it directly impact the
bottom line?

Don’t Cut Off Your Nose to Spite Your Face

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Sometimes, compensation plans seem to work too well. A top
salesperson will end up earning a six-figure income that is greater than
the salary of the managers. The natural tendency is to reduce the
commission structure or territory. What a fatal mistake! People with
this type of talent should be rewarded, not constrained. Give them a
down-line sales force they can educate and provide them with
commission overrides. Reward excellence, do not restrict it! When it
comes to commissions, it’s not how much you have to pay its how
much you get to keep.

Incorporate Learning and Innovation Incentives. You want to reward

what you want to reinforce and have repeated. In today’s information
age, you must reward continuous self-improvement. You must provide
incentives for learning and innovation. Self-study bonus programs and
corporate suggestion programs should reward handsomely.

Don’t Forget About E.Q.

There has been a great deal of literature written in the past few years
that emphasizes the value of one’s “emotional quotient.” People with
high E.Q.s, not people with high I.Q.s, tend to be the most valuable
people in an organization. You must reward the “soft stuff.” As
attorneys, we have met many “million dollar executives” who earned
their nickname not by virtue of the size of their salaries, but rather by
the amount of damage they did to an organization. When you design
compensation plans, you have to reward people who are good at
establishing internal and external relationships. They often provide
bottom line benefits that are “invisible” to most benchmarks.

A compensation system that does not allow people to take at least

three to four weeks of vacation every year does not address the whole
person. A compensation system that does not acknowledge a person’s
highest and greatest needs will not keep them from skipping to your
competitor at a moment’s notice.

Let us explain further. According to a nationwide poll of CEOs, the

biggest issue is attracting and retaining quality employees. Most
competitors have similar compensation packages and benefit
programs. For most of them, the only issue is whether they have
employee ownership or not. Some of them are smart enough to realize
it is very seldom the compensation package that allows them to attract
or retain great employees. It’s generally the corporate culture that
does that.
Look at Southwest Airlines. Their salaries are below those of their
competitors, yet they have less than one-quarter of the employee

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turnover of the industry, have the highest quality of services in the
industry and the greatest profitability in the industry. The last time we
looked, their planes looked like everybody else’s planes, and their
people had two arms and two legs. People work at Southwest Airlines
because they enjoy working there! Herb Kelleher appeals to the whole
person. If you get that, you’ll be light years ahead of your competition.

You Must Create a Flexible Compensation Plan. Things are changing so

fast you cannot create a compensation plan which restricts your
company’s flexibility. If you do, you’ll be tempted to break it, or even
worse, not conduct business the way you should. Companies that do
not commit to their compensation plans get sued. So don’t lock
yourself in to what may be a losing proposition.

Check Out the Competition

Check out the Non-Competition and Go beyond Geographical Borders.
While it’s important to know what your successful competitors are
doing, also look for successful stories in non-competing industries. The
examination of compensation practices cannot be restricted to
geographical borders. Success stories are based on sound principles
and strategies—no matter what industry or what location.

Think Systemically
If you’re building a “learning organization” dependent on “human
intellectual capital,” then you must think how your compensation
strategies will affect the entirety of your product or service delivery
system. How will stakeholders, such as shareholders, customers,
vendors and distributors, be affected? How can one department affect
another department based on compensation systems? Will your
compensation system generate internal competitiveness or
information sharing? How would Deming, Drucker, Peters or Senge
view your compensation system?

Be Careful About How You Define Core Competencies. Many companies

are still in the “job-based” view of the workplace as opposed to a
“competency-based” model. Today’s focus should be on paying for the
acquisition, demonstration and improvement of core competencies. In
addressing

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Performance-based pay, don’t get confused between yesterday’s job-
based models and today’s competency-based models.

Faster, Better, Cheaper. Any compensation model should be based on

today’s mantra: If it’s not helping you to produce faster, better and
cheaper, then what is it doing?

Focus on Leadership, Not Micromanagement

In a learning organization, employees must “own” their performance.
This means you can’t tell them what to do, or have systems designed
to tell them what to do. Rather, you must lead them, so that they can
find out for themselves how to best improve their performance. This
means you also have to restructure performance management,
including performance appraisal systems, promotional systems, and
compensation systems.

Your Compensation Plan Must Be Sustainable

Sustainability is the issue for the next millennium. How can we
continue to do more with less? How can we continue to enrich people’s
lives without producing more stuff? Ask “How can we provide this
person with greater benefit using less money?” You’ll be surprised by
the answers you get.

Don’t Forget About Bad Boys and Girls

A perfect example of this issue was reported by a fellow attorney. As it
turns out, one of his clients was preparing to go public, and an
engineer who worked for them thought he could do better by taking
the work he created to a competitor. When the company found out, it
not only fired him, but informed him that there was a “Bad Boy Clause”
(pardon the sexism) in his stock option agreement forcing him to lose
his option rights. That clause indicated that where an employee acts in
an illegal, fraudulent or bad faith manner that they forfeit rights under
the terms of the stock option agreement. This type of clause should be
considered in any form of bonus or incentive payment plan.
Remember, the law does not allow the forfeiture of “wages,” so the
clause can only be used with bonus or incentive-based compensation.

Watch Out For the Widening Income Gap

There’s a growing gap between executive compensation and rank and
file compensation. In good times, companies may be able to get away
with this. However, as soon as the economy slows—and eventually it
will—the compensation gap will be viewed as another form of
exploitation. A worker who feels exploited will not have the loyalty,
motivation and sharing skills necessary for your company to thrive in
today’s economy.

Remember, Compensation Is Only One Way to Reward

Employees

As author Bob Nelson says, there are a 1001 Ways to Reward

Employees. The most important one is the one that rewards employees
today. Don’t be limited in your approach to compensation. Thank you
notes, surprise gifts and time off can go a long way to motivating
employees.

In today’s whirlwind of mergers and acquisitions (M&As), everyday HR

issues such as employee compensation may get blown aside as
countless financial and legal priorities take center stage. However,
recent research suggests that HR could play a greater role in
successful M&As, and, the earlier HR gets involved, the better.

Depending on the circumstances of the deal -- and the compensation

policies of the merging companies -- HR may be called on to splice
disparate payment plans into a program that fits the new organization,
or HR may have to discard the original plans and then create a
program from scratch that complements the merged entities. Either
way, old and new employees will be concerned about what is
happening with their pay, so HR also must develop an effective
communications plan to inform and reassure them.

More organizations and HR professionals are likely to face this

challenge as the economy improves. A handful of industry-changing
newsmakers drove the market last year, but M & A’s among mid-size
companies also saw increased activity in 2003, according to Fact Set
Mergerstat LLC, a global mergers and acquisitions research firm in
Santa Monica, Calif. The company’s data predicts M&A volume will
continue to rise this year.

Behind the headlines that such corporate marriages generate are

rough tactical and strategic waters that HR and compensation
professionals must navigate. The journey is by no means simple, but
the destination is worthy: the union of two sets of employees and pay
structures that can ultimately influence the success of the merger and
its return on investment (ROI).

The more capable an HR department is, the greater the chances of

M&A success, studies show. Yet too many employers involve their HR
professionals too little or too late in the M&A process.

The most common responsibility given to HR during M&As is to provide

ad hoc advice to senior managers, rather than carrying out a
structured and formal role, according to a 2003 survey of 132 senior
executives worldwide by professional services firm Towers Perrin of
Stamford, Conn., called “The Role of Human Capital in M&A, 2003.

And a 2001 survey of more than 440 HR professionals conducted

jointly by Towers Perrin and the Society for Human Resource
Management (SHRM) Foundation found that HR involvement in the
critical early stages of M & A’s is uneven. This study, “How the
Human Resource Function Adds Value during Mergers & Acquisitions,”
formed the basis of a book, Making Mergers Work: the Strategic Role of
People (SHRM Foundation, 2002).

In addition, HR’s involvement often comes too late in the merger

process. Of the four stages in the life of M&A deals -- pre-deal, due
diligence, integration and implementation -- HR tends to have a big
role only in the later stages. However, research suggests that by
getting more involved during the pre-deal and due diligence processes,
HR can better carry out the vital functions it performs, such as:

• Reviewing the target company’s compensation policies to compare

organizational philosophy and cultural fit.
• Educating financial and operating executives about possible risks
and costs.
• Mapping job descriptions at the target company.

Merging Old Plans

The importance of giving HR an early role in mergers was borne out
when Church & Dwight Co. Inc., a Princeton, N.J.-based manufacturer
of household and personal care products, acquired in 2001 the
consumer-goods business of Carter-Wallace, a Cranbury, N.J.,
manufacturer of consumer and pharmaceutical products.

Church & Dwight’s acquisition of Carter-Wallace added significant

product lines and manufacturing capability. The $739 million purchase,
in partnership with a New York-based private equity group, Kelso &
Co., also doubled Church & Dwight’s employee population. As a result,
HR had to migrate the new employees into Church & Dwight’s original
compensation plan.

The target company’s employees brought knowledge and experience

in areas where Church & Dwight was lacking, says Jim Levine, director
of HR and compensation at Church & Dwight. However, combining the
staffs raised some difficult employee compensation issues: Carter-
Wallace paid high base salaries and bonuses with few long-term
incentives, whereas Church & Dwight’s compensation packages placed
much more of an emphasis on long-term incentives.

Employees who were not on a bonus plan had few transition issues: In
general, these positions also were not eligible for bonuses at Church &
Dwight, Levine says. “On average these people tended to be paid more
than their counterparts at Church & Dwight, but not significantly so,
and issues could be addressed through the normal merit review
process.”

There were, however, significant concerns for highly paid employees,

as Carter-Wallace relied on base salary and short-term incentives,
while Church & Dwight uses those programs as well as stock options.

Eventually, “Church & Dwight made the decision to maintain our pay
system and transition Carter-Wallace employees to it,” Levine says.
“We are firmly committed to the philosophy of tying employees’
rewards to the same yardstick that our shareholders have. The process
that we used was to develop a number of possible transition scenarios,
review employees’ compensation on an individual basis, and then use
the appropriate transition plan based upon each employee’s unique
circumstances current base pay against our salary range and extent of
short-term incentives.”

Church & Dwight achieved the business goals it set when the deal was
made, Levine says.

Compensation issues and our ability to retain employees were vitally

important -- and they became a significant consideration in the
language of the deal itself and in the ultimate success of the
transaction,” he says.

Harmonizing the pay systems of merging companies is a complex and

difficult process. But it’s also an opportunity for HR to create new and
improved systems, which in turn can dramatically affect both the
culture of the new firm and retention success.
Barring any legal pacts to the contrary, companies usually have the
freedom to make changes to many elements of the total compensation
package, which comprises base salary, short-term incentives (such as
an annual bonus or profit-sharing), long-term incentives, benefits and
other perks.

Starting from Scratch

Sometimes, the compensation policies of the merging companies are

so different that the best approach is to throw them out and start over.
“It’s unbelievable how frequently you have two companies come
together with so many similarities but totally different compensation
plans,” says Stephanie Penner, senior compensation consultant in the
Philadelphia office of Mercer Human Resource Consulting LLC.

To start the process, a team of compensation professionals, HR and

company executives took a complete inventory of the two companies’
compensation policies, including executive management and general
salary structures, job titles, performance evaluations and incentives.

The goal was to determine guiding principles, says Catherine Beck;

director of compensation policy in the Arlington, Va., office of Verizon
Communications, the telecommunications giant created from Bell
Atlantic’s 2000 merger with GTE Corp. Beck was manager of
compensation planning at Bell Atlantic then. During both mergers she
was merger project manager for general management compensation.

What the team found was a very different set of salary structures and
incentive measures, Beck says. The sheer magnitude of the differences
called for a large-scale change.

There was no way to reasonably map employees to a combined salary

structure given the difference in the number of pay grades. And one
company used a team approach to incentives, while the other used an
individual approach,” Beck says. “So we essentially decided to throw
everything out in favor of a completely new compensation system soup
to-nuts revamp.

Completed in 1997, the mega-merger encompassed some 30,000

management employees -- and also a team of union workers who
came on board with existing collective bargaining agreements in place.
Integrating the new compensation plan took about a year, Beck says.

The evaluation and rollout process was repeated just a few years later
when Bell Atlantic announced its merger with GTE in 1998 -- a deal
that involved about 60,000 management employees and made Verizon
the second-largest telecommunications firm behind AT&T. But this
time, there were many more shared similarities between the two
companies’ compensation plans. “The level of change wasn’t as huge
as before, and, overall, it was a smoother transition,” Beck says.

Once the policy decision has been made, the administrative

complexities of implementation can be enormous. For example, in the
Bell Atlantic-GTE merger, the broad parameters of the sign-on bonus
policy were established early, but it took six to eight months to
incorporate and finalize that policy because two separate payroll
systems had to be integrated and there were other administrative
process delays.

You can’t underestimate how long it takes and how complex it can be,
Beck says of the integration and implementation process. “There are
so many things that are touched by compensation matters.

Communicating the Changes

Whether you merge compensation plans or create a new one, big
changes are in store for employees. To ease their uncertainty and fear,
and to squash rumors, consultants and HR professionals agree that a
prompt, straightforward communications strategy is critical.

The problem: Information may be limited, because even after an

announcement -- the sharing of certain data is restricted for antitrust
reasons or until due diligence is completed.

After an M&A announcement, there’s often concern, fear and

trepidation among employees, customers and the public, too, says
Ravin Jesuthasan, principal and practice leader of rewards and
performance management consulting in the Chicago office of Towers
Perrin. Communication is often the most important part of a merger,
yet it often falls between the cracks.

Insecurity over compensation issues such as earnings and benefits can

negatively affect morale and productivity. As a result, companies
experience a loss of momentum that may be difficult and time-
consuming to recoup.

It’s important to manage the messaging right away, agrees Mercer’s

Penner. “If you don’t form the message, it will be formed for you.” That
can fuel the disruptive rumor mill, she says.
When Church & Dwight acquired Carter-Wallace, the company tailored
specific communications to all employees based on their current
compensation and how their transition would be handled.

We communicated with employees as soon as we were able to,” Levine

notes. “We began with presentations at the various facilities conducted
by the CEO and head of HR.” This was followed by written
communications in the form of questions and answers, and more local
and specific meetings conducted by functional vice presidents.

The goal was to show employees that everyone was focused on the
success of the merged companies, Levine says.

“Historically, the big mistake is for companies to say ‘we don’t know’
or ‘we haven’t made any decisions yet,’” says Hewitt’s Kompare. “The
worst thing is to say nothing. Whatever decisions you do know, tell
them as soon as possible. For those you don’t know, describe the
factors involved in the decision-making and give employees a best
estimate for having an answer.”

Once the deal closes and compensation plans are completed, decide
how best to present them to employees, says Penner. “Many
companies use a combination of approaches to get the word out,” she
says. “The important thing is to have a consistent response.”

Commonly used tools include town hall-type meetings, one-on-one

meetings, site presentations and training, written or web-based
question-and-answer explanations and newsletters.

Communicating compensation changes to Bell Atlantic and Nynex

employees involved face-to-face meetings and training sessions,
personal letters and periodic newsletters describing the policies, Beck
says.

Pre-close, we would provide answers to [frequently asked questions] to

the company” being acquired, Sartain says

This information would be general and not detail-oriented. Our

objective would be to let the new employees know we are concerned
about their well-being and to say, ‘We know there will be issues, and
we are working on those and will have answers at the appropriate
time.

After a deal closes, Yahoo! provides letters to employees that explain

their new role and any compensation changes, Sartain says. In
addition, the company also holds meetings for all employees to outline
basic compensation information, she says.

We also hold meetings with managers to explain the Yahoo!

compensation philosophy and our guidelines, she says. Compensation
and reward guidelines are posted on the intranet.

Paying attention to communications during such times of change can

pay off in better acceptance of the terms associated with pay,
according to a recent survey of employee sentiment. Employees tend
to believe their company’s pay policy is fair if HR professionals fully
explain compensation packages to them, according to a 2003 survey,
“SHRM/CNNfn Job Satisfaction Series: Job Compensation and Pay
Survey Report,” conducted jointly by SHRM and CNNfn, the financial
network of the CNN News Group in New York, and released in February.

Nearly half of the employees who were dissatisfied with the

communications explaining how their pay was determined also
reported dissatisfaction with their total compensation package.
Conversely, when employees understand how compensation is
determined, they tend to be happier with their pay and jobs overall,
the survey concluded.

Whether to facilitate global expansion, emphasize internal equity,

ensure effective governance or better manage labor costs, a significant
number of multinational companies use a worldwide compensation
strategy, a survey by Mercer Human Resource Consulting shows.

Approximately 85 percent of major organizations responding to the

August 2004 survey use such strategies. Respondents were
multinational firms primarily based in the United States and Europe;
more than three-fourths have annual revenues of more than $1 billion.

Global strategies are fairly recent for the Mercer survey respondents,
some of whom have operations in as many as 100 countries. They
represent a range of industries that include chemicals and
pharmaceuticals, information technology and telecommunications,
engineering, and manufacturing.

Forty-two percent have used such a strategy for less than four years,
and 43 percent have done so for more than four years. The remaining
15 percent do not have a global compensation strategy but said they
plan to introduce one in the next three years.

Global expansion was the top reason for introducing global pay
strategies. Cost management, process improvement, and governance
and reporting also were cited as reasons for introducing a worldwide
compensation strategy, according to the findings released in Mercer’s
2004 Research on Practices in Global Compensation Management.

Firms focus their strategies on positioning pay relative to the market,

short- and long-term incentive design, and consistent methodologies
for job grading and leveling, respondents said.

Pay mix, benefits and consistent methodologies for salary structures

were elements of global compensation strategy for 45 percent of
respondents. The variable pay mix for board-level employees is the
highest compared to the other levels of employees, breaking down
50/50 between base pay and bonus, according to a majority of
respondents. Most indicated the base/bonus mix is 80 percent/20
percent or 70 percent/30 percent for global, regional and country
manager roles. The most prevalent base/bonus mix for local country
employees is 95 percent/5 percent.

This raises questions regarding the extent to which organizations are

distinguishing high performers from average to poor performers and to
what extent they are creating a performance-based organization, the
study’s executive summary points out.

Work/life, recognition and career programs; perks; and training and

development were not common strategic elements. However,
attracting and retaining key staff; using rewards to deliver
performance; and strategic alignment of rewards with business
strategy are the most pressing global rewards-related issues now and
in the near future, according to the survey.

Organizations haven’t figured out how to deal with the training and
development and career [programs] and how to deal with that on a
global basis,” said Corinne Carlson, a principal in international practice
at Mercer. “It’s definitely related to the whole staffing issue. I wouldn’t
say it’s being driven by employees themselves but by the business
needs … to attract and retain the right people.” She foresees
organizations taking baby steps toward globalizing those kinds of
programs and including them in reward strategies.

A Watson Wyatt/WorldatWork Global Compensation Survey based on a

2004 polling of U.S. multinational companies on their global
compensation practices suggested that strategic compensation
strategies can give an organization a competitive edge in attracting
and retaining top talent and in increasing productivity, a December
2004 Society for Human Resource Management Global Forum report
said. That survey found that stock options remained a popular element
of global compensation plans, as did employee stock purchase plans.

Firms’ global compensation strategies are fairly detailed, Mercer found;

52 percent said their strategies included fixed guidelines, 22 percent
have detailed policies for all employees, and 16 percent have detailed
policies only for senior employees.

The challenge for human resource professionals is that only about half
of the firms surveyed said their local HR function has a direct reporting
relationship to corporate HR, according to Mercer.

Only 41 percent of firms monitor or govern their strategy primarily

through global HR information systems; 42 percent use the annual
budgeting process; and about one-third conduct regular audits of
country and business practices.

“This can make it extremely difficult to monitor pay strategies on a

global basis to ensure their implementation and effectiveness,” Mercer
international consultant Corinne Carlson said in a press release. She
said she expects employers to devote more attention to this in the
next few years.

Conclusion
Those are some notes about performance-based compensation
programs. We don’t think there’s any big secret as to what makes for a
good compensation program. There are some fundamental questions
you should ask, many of which we explored above. Educate, ask the
right questions and stay focused on building strong relationships and
you’ll have a compensation plan that is built to last.
In closing, here’s a poem that sums it up nicely:
Accelerate the Awareness
Embrace Good Health
Celebrate the Spirit and
Share the Wealth