Rewarding performance in an international environment

Rewarding performance is a challenge in a domestic setting but can present an even greater conundrum in an international one. Sue Shortland explores the tensions between local and global approaches in the management of performance.

Rewarding performance is a challenge in a domestic setting but can present an even greater conundrum in an international one. Sue Shortland explores the tensions between local and global approaches in the management of performance.Given the economic climate, the quickening pace of globalisation, mergers and acquisitions and the emphasis on competition, reward and performance management are changing. People are working harder than ever before as the squeeze to increase productivity, while cutting costs, increases.The mantra of performance management is strengthening. Yet the time-honoured problems of how to link performance to pay, and of minimising the global/local tensions in rewarding performance across a worldwide spread of operations, remain at the forefront.BenchmarkingOrganisations with international operations need to consider how best to reward local staff and those with global responsibility (with or without global mobility) in such a way as to enhance and sustain motivation, engagement and commitment from all employees while rewarding performance in an equitable and transparent manner. This presents a number of tensions that need to be addressed.As every organisation will have its own ways of working and rewarding employees, there can be no one-size-fits-all solution; nevertheless, certain considerations should be taken into account when drawing up a policy to address performance management and associated reward criteria.It can be helpful to benchmark practice with other organisations in the same, or similar, industries and/or locations/regions. However, it is important to adapt any potentially helpful practices to suit the organisation concerned. In essence, in designing (or adapting) a reward/performance policy, it is critical to ensure that it will support the organisation’s business strategy across the world and be of a suitable organisational cultural fit. It must also provide a balance between cost control and employee engagement.Global, local or glocal?One of the first considerations to take into account is the degree of global-versus-local emphasis that is maintained within the organisation. To what degree do the organisation’s subsidiaries act as independent entities (a very local approach) or as interdependent operations (a more global one)? Combined with these approaches is the degree of centralisation and decentralisation with respect to policy and practice. So, for example, in an organisation which is strongly decentralised, with independent subsidiaries, a local approach to reward and performance management is likely. At the other extreme, a highly centralised and interdependent organisational stance will result in a global approach.Care needs to be taken at these extremes. For instance, a highly globalised approach is likely to use similar measures for performance measurement and associated reward implementation world wide, taking little account of local practice and sensitivities. This is problematic when particular cultural issues are ignored. For instance, individual performance-related pay (linked closely to individual goals and targets) can work well in individualistic and personal-performance-driven cultures, but is less effective in cultures where group dynamics and norms are prioritised over individual work effort.Locally set reward schemes and performance measures can function effectively where international subsidiaries work in relative isolation from other operations. They are less effective (appearing less equitable) when there are strong interrelationships between subsidiaries all working towards an organisational group goal.Managing this global/local tension is, therefore, critical to success. To address this issue, the starting point is always identifying the strategic context. At this stage of policy design, the business strategy must be identified and aligned with the talent management and reward strategies. If there is a business case for change to the current reward/performance policy, this must be fully developed and articulated. If the performance policy is to be more closely aligned to the global reward model, the key global requirements for performance must be identified, global programmes to address them clarified, any constraints identified and addressed, and worldwide reporting, monitoring and review processes devised.Any cultural considerations should be built in such that the approach to be taken does not end up being so global as to be inappropriate at a local level. If, on the other hand, a more local approach to rewarding performance is to be taken, the framework needed for local adaptation of performance measures must be developed, with the specific way in which the policy will operate at local level identified and any potential consequences clearly articulated, taking into account local regulatory frameworks.Consideration also has to be given to how performance will be rewarded when internationally mobile employees are working in local performance reward régimes. Should performance bonuses be aligned with similar performance scores in the home or the host country? If local host-country performance rewards are to be applied, it is critical to consider the potential impact of this practice on expatriates who are relocated abroad on home-based pay systems. (How, for example, will their base salaries be managed in line with home-based peers when they return home if any performance rewards received abroad have been consolidated?)Whether the performance reward policy will be global, local or glocal (a mix of both), policies mean little unless they are put into practice. As with any policy design, implementation procedures need to be clarified, local blockages identified and solutions worked through, with global and local approaches aligned, to ensure there is no conflict.It is helpful to consider elements of the policy that might typically be considered as being addressed at global or local level. For example, for top and senior levels of management, job descriptions, grading, reward strategy, base salaries and performance measures/management are likely to be set at the global level. By contrast, for administration and blue-collar workers, a local approach is more likely to be applied to job descriptions and grading, base salaries, salary reviews and performance management. For middle management and professional grades, there is likely to be a greater mix of global and local approaches, depending upon their roles and degree of global involvement.To examine employee engagement and obtain feedback on performance and reward from all levels, a global approach is needed.Tips for successAn important starting point is to ensure that any reward and performance management policy is simply and clearly written.Reward aims to motivate – it cannot do so if employees find the performance-management process so complex as to be incomprehensible. Any performance rewards received must also not be so over-engineered, in terms of their complexity, that the message that links pay to performance is lost. It may be better to sacrifice some degree of precision in linking reward to performance to ensure employee understanding and buy-in.The global/local paradox must also be addressed.Global alignment has to be managed at the very top of the organisation, with buy-in from senior management world wide, so that any policy drawn up is not undermined. However, local buy-in is also of immense importance – particularly in countries where collective bargaining is required.In order to determine the rewards that are aligned to performance measures at a global/local level, it is critical to ensure that data systems are managed effectively, and that data used are robust. Any HR involvement in determining the pool of financials for distribution must accord with budgets and reporting used by finance departments. In essence, you cannot promise money that is not in the pot!Another key issue is communication. It is critical that, if performance management and associated reward processes are to work effectively and achieve their objectives, even simple messages may have to be communicated and re-communicated several times via different and reinforcing media. Altering performance and reward mechanisms can prove difficult, as, typically, there is resistance to change and employees may not be willing to accept adapted systems. It is worth considering the introduction of new performance measures and associated rewards, rather than tinkering with existing schemes.Any policy must fulfil the requirements of attraction, motivation and retention of talent. There will not be a perfect solution, but there can still be efficient and effective ones.A planned, strategic course of action is required to ensure that employees receive rewards commensurate with their performance, be that at an individual and/or a team/group level, in an equitable manner around the world.