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Global vs. Local—striking the right balance

18 February, 2016

“It’s easier to ask for forgiveness than to ask for permission” the saying goes.

You’re in charge of compensation & benefits for a country, for a region, or for the entire company and you want to be effective in your job which requires a balancing act: building trust and customer focus, yet ensuring control and compliance. This applies whether C&B support is set up under the Center of Excellence (COE) model, the shared services model, a decentralized model or a policy-driven model. So which of these models is right for your organization? How much control is needed, versus flexibility? What level of resources do you need to establish the best model?

These questions matter. A lot.

Imagine you have a Country GM in Thailand (an expat) ready to hire a British citizen as VP of Marketing for the country. The GM submits a job description emphasizing the position as part of the management team, fully responsible for all aspects of marketing (product/brand management, pricing/revenue management, distribution/channel management and promotions, marketing communications, etc.). Although there are global heads of product management, distribution marketing, etc. the GM assures his local C&B the role is very autonomous, etc. Words like “strategic” and “solely accountable” are found throughout the job description. It even says he manages 12 people who are actually reporting to others as well, claiming there is a dual solid line reporting relationship.

What to do?

If C&B is decentralized, the local C&B manager will evaluate it to please the GM which is fully justified by supporting “business needs”. He is ready to defend the VP title on the basis of local practice and the external relationships managed by the role (even though sales actually manages those relationships…)

If C&B is set up as a global COE and all VP positions and above must be evaluated at HQ, it will be evaluated as a director-level position since it is not as autonomous and as big a role as claimed. The GM will be unhappy with this, and shift his focus to the comp package and will assure the individual that, while their “internal” level will be director, he will still be positioned as a VP externally and on his business cards. The GM will then fight with corporate to get a package suitable to attract this candidate (and there are no backups as this is the GMs “must have” candidate.) The GM loses the battle for a VP level incentive target, so he gets only approval for a high base salary, a signing bonus and a one-time share grant as advised by C&B (over the course of 40 emails and 6 weeks) as an alternative that supports business needs and maintains internal equity.

If C&B is set up as a shared service center, it’s ever worse for the business, because unlike the COE which seeks to support business needs, the SSC only knows and applies the policies. They are faster and more efficient than the COE, but there is no appeals process, no business partnering of any sort. It’s pretty much black and white.

Under a policy-driven model, there are no local, regional or service center C&B staff. Just a lean C&B function at HQ who maintains a vast array of policies that are posted on the company intranet. There is no provision for advising the business. Only principles, policies, procedures and rules.

Which one of the above best describes your organization? How should you decide on the right model, so as to establish the proper balance between centralized/decentralized, global/local, rigid/flexible, etc? Here are three principles to help you establish and maintain balance:

  1. Follow the principle of Subsidiarity which states that decisions should be made at the lowest level at which they can be made effectively. This is the most important principle when striking the balance between global and local, and central control versus local flexibility.
  2. Balance relationship building with task/process orientation. In a global role, some cultures are process oriented while others are relationship oriented. Get to know which is which. Generally more developed countries have a process orientation, while developing countries are more relationship oriented. In China, they say you must build the relationship before doing business, and this has been my experience. At IHG, I needed to offer our hotel General Managers a choice of being paid in US dollars or Renminbi. To do this, I needed to establish a fair currency exchange rate for the initial conversion. Emails to the Chinese hotel owners association chairman were unsuccessful. Finally we had lunch, a glass of wine and we were able to reach a fair agreement.
  3. Maintain two-way trust between global and local. If you pull too hard towards central control, the business leaders will see little value added by the function and may even “go dark” with their local practices to avoid corporate. “It’s easier to ask for forgiveness than to ask for permission” the saying goes.

Other practical considerations include:

  • compensation must be locally competitive
  • compensation must be internally equitable, mainly on a local basis, but also on a regional and global basis, if you have similar roles in multiple locations and especially if these people communicate on a regular basis or travel to collaborate with each other
  • benefits is mainly a local issue. It is not true that a benefit offered in one country should be offered in every country. Benefits are much more location-specific, starting with what the government provides or mandates, then looking at what industry norms are, and finally what best supports the company’s business needs (i.e. what talent are you looking for, what it the demographic profile of the needed talent, where is the location in terms of business life cycle, i.e. start-up, new market, growth, mature, decline, etc.).
  • global benefits strategy starts with compliance, and may also include guiding principles such as embracing diversity (i.e. how you define a dependent in this age of LGBT, etc.), safety net (all ees must have life insurance, for example), choice and flexibilty, tax effectiveness, use of selected global brokers or multinational pools, use of selected global vendors for mobility, primary benchmark sources (like mercer, etc.) and governance/controls in terms of who recommends, who approves changes to benefits. May want to set up a global benefits committee.

As you consider the various options (COE, shared services, decentralized C&B or policy focus), there are trade-offs in terms of:

  • Attracting talent—cost control and rigidity save cost, but this can undermine ability to attract talent
  • Affordability—too little control and the business/locations may be too generous with pay to fill vacancies quickly with preferred candidates and neglect a sincere talent sourcing effort
  • Agility—decentralised or policy approach is the fastest
  • Alignment—too little control and internal equity will suffer

Regional C&B roles can help to bridge the gap effectively between global and local. These roles must walk a fine line between corporate rigidity and customer accommodation. Regional C&B positions require individuals who are technically competent, relationship builders, problem solvers and can consult the business. They must be able to say no, but they cannot stop at no; they must suggest alternatives that actually address the business needs. Regional roles require competency in the areas of influence and impact. They cannot simply be administrators or managers.

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