How can you design an executive pay program that aligns with your company's global footprint?

Align executive pay globally by analyzing compensation in each region, considering market practices, currency fluctuations, and cost of living. Define performance metrics applicable worldwide, be culturally sensitive in incentive design, comply with local laws, ensure transparent communication, and establish a global governance committee for sustained effectiveness. Regular performance reviews, feedback incorporation, and alignment with long-term sustainability goals maintain a balanced and fair executive pay program.

It's important to customize the pay program based on the legal requirements of the regions where the company operates. A benchmarking study should be conducted to determine competitive executive pay levels in each region. It is needed to balance global consistency in compensation principles and the flexibility to adapt to local market conditions. Executive pay should be linked to the company's financial success. Finally, the executive pay program should be regularly reviewed and updated to keep up with changes in strategy and market conditions.

Before designing an executive pay program, grasp the global context of your company. Understand market size, scope, diversity, and key factors impacting business performance globally. Identify drivers of value creation in various geographies to define global strategic objectives. Align the executive pay program with these objectives and priorities for effective and contextual compensation planning.

Designing an executive pay program that aligns with a company's global footprint involves considering regional economic variations, industry standards, and local regulations. Conducting comprehensive market research, collaborating with compensation consultants, and incorporating performance metrics that reflect diverse market conditions are crucial steps. Balancing consistency across regions with flexibility to adapt to specific local contexts is key for creating an equitable and effective global executive pay strategy.

Begin with market analysis, considering diverse economic landscapes. Embrace standardized benchmarks while allowing for local variations. Incorporate performance metrics that resonate universally, reflecting organizational goals. Engage in open dialogue with executives across regions, ensuring cultural considerations are integral. Implement transparency to foster trust, clarifying how global factors influence compensation. Periodically reassess and adapt, acknowledging the dynamic nature of global markets. This approach ensures an executive pay program that not only reflects global realities but also resonates with diverse talent across the organizational landscape.

A filosofia de remunera??o deve estar diretamente ligada com a estratégia da empresa. N?o funciona copiar e colar filosofias de empresas bem sucedidas se n?o houver conex?o com o contexto e vis?o da empresa.

It is easy to look at market comparisons and what others are paying, but having an idea of your budget ahead of time eliminates a lot of headaches. Firstly it means you reached a salary that your business believes is fair in context, it equalises the candidate request variation based on things that could cause a future problem. For example, you could secure someone at less than what they are worth, or perceive that they are worth, but another company will eventually turn their heads with an improved offering and you lose a member of staff by undervaluing them. This is one of many considerations when talking about your compensation philosophy, but having a clear idea will keep the budget tighter in the long run as retention matters.

After 25+ years in the profession’ I’d say a key point, not always practiced, is to explicitly state in the policy that long-term Compensation / Equity-based Pay, has to be exactly linked to the success and time horizon (normally 3 years) of the Strategic Plan of the organization - if it is delivered, then company pays, but not earlier. Typically, this does not happen, with many companies offering annual grants and consequently annual vestings after a while these days (‘rolling plans’), which may weaken the business focus of the pay program. Pay philosophy should point in a different direction.

Benchmarking works wonderfully for a high percentage of roles, but more niche positions need sepearate conversations. Keep a record of all the salaries on your books as an internal benchmark, and try and keep pay fair withing your existing structure. Ask your recruiters to create salary data based on interview processes and application form data (if shared). High volume roles, this is extremely easy due to high application volumes. Niche roles, the business needs to decide what a fair range is, and trust their talent team to pull in candidates, and tell you if the package is a problem based on data they are gathering during their hiring processes.

Comp and Ben market data have to be provided and curated by Total Rewards professionals, based on a number of sources selected and analyzed in a technically correct way, and with statistics. Internal and external recruiters, employee references, government and trade associations’ info, even HR circles (for example, in developing countries), remuneration reports, can be deployed, each with its own pros and cons. The most important sources, though, continue being today the market surveys by the major / well-reputed consultancy firms, which usually guarantee the needed company participation, data quality and cut. Job offer sites’ scraping, AI-based and self-reported data and web tools are emerging, but are not quite there yet.

The pay mix is one of the most important decisions in Total Rewards, and should be defined consciously at minimum, target achievement and caps for the different collectives. Relatively too much Fixed Compensation or too many Benefits build complacency and rigidity of labor costs to react to adverse business scenarios. Too much short-term variable can bring short-termism and risky decision making. Too much long term variable may make people and specially executives forget about the day to day of the business, and focus on the share value and ways to ‘manage’ it. Depending on industry, geography, business and HR strategy, labor market, regulation, the pay mix needs to be carefully designed across employee groups.

The best companies truly understand the local market - and salary is only one piece of the comp puzzle. Of course you want to be competitive with a base salary, but you also need to understand the benefits expected in that country - not just the regulations, but the market norms which often differ from what is required by law. Understanding this and building a robust benefits package shows candidates you are committed and informed, and will make you an employer of choice.

There are some who think that the true strategy of a company is revealed in the objectives by which its CEO and its executive team are rewarded. It is that important. Measuring the annual business results and the long term value creation of the company has to be done correctly - as well as technically designing the right payout scales for the variable pay components of pay (thresholds, targets, accelerations, caps). Important in evaluation linked to Reward is not to confuse results (the what) with executive behaviors / actions / skills / conduct (the how). The former needs to be rewarded, but also the latter.

Evaluate performance metrics: Identify key performance indicators (KPIs) that align with the company's strategic objectives across its global operations. These metrics should be measurable, specific, and relevant to the business. Ensure KPIs are adaptable to local contexts and can be applied consistently.

Communicate and ensure transparency: Clearly communicate the executive pay program to executives, employees, stakeholders, and regulators. Emphasize its alignment with the company's global footprint and strategic goals. Maintain transparency in the program's design, performance metrics, and accountability. Regularly review and update: Continuously evaluate the effectiveness of the executive pay program. Stay attuned to market trends, regulatory changes, and the company's evolving global presence. Regularly update the program to ensure it remains competitive, compliant, and aligned with the company's goals.

Global Market Analysis: Research executive compensation norms globally. Localization: Tailor pay structures to regional variations. Performance Metrics: Develop globally applicable performance metrics. Benchmarking: Regularly compare pay against global industry standards. Currency Considerations: Factor in currency fluctuations for equitable compensation. Legal Compliance: Ensure adherence to international compensation regulations. Communication: Clearly communicate the program globally. Flexibility: Design a flexible program for diverse business environments. Incentive Alignment: Align incentives with global strategic objectives. Regular Review: Periodically adjust the program for changing global conditions.

Global Market Analysis: Research executive compensation norms globally. Localization: Tailor pay structures to regional variations. Performance Metrics: Develop globally applicable performance metrics. Benchmarking: Regularly compare pay against global industry standards. Currency Considerations: Factor in currency fluctuations for equitable compensation. Legal Compliance: Ensure adherence to international compensation regulations. Communication: Clearly communicate the program globally. Flexibility: Design a flexible program for diverse business environments. Incentive Alignment: Align incentives with global strategic objectives. Regular Review: Periodically adjust the program for changing global conditions.