Number of multinational companies with centralised reward structures is growing

REWARD MANAGEMENT

Number of multinational companies with centralised reward structures is growing

The number of multinational companies with centralised reward structures is increasing, according to a survey conducted jointly by consulting firm Watson Wyatt Worldwide and WorldatWork, the US reward association.

Multinationals with centralised systems responding to the survey tended to report "higher effectiveness levels" than those with decentralised structures. "A strategic compensation strategy can help differentiate a company from its competitors, promote overall internal consistency from country to country and, most importantly, drive performance," said Robert Wesselkamper, director of international consulting at Watson Wyatt. "It's therefore critical for a global organisation to oversee the design and evaluation of its compensation plans around the world from a centralised, all-encompassing perspective."

Plans to centralise structures

The survey found nearly six out of ten companies (59%) with decentralised reward structures expect to centralise their structures in the next two years. Additionally, 23% of companies with centralised structures already in place plan to become even more centralised in the near future. Just under half of the respondents (49%) currently have centralised reward structures.

"Companies that want to use compensation to their strategic advantage need to look at the big picture," said Anne Ruddy, executive director at WorldatWork. "Having the most competitive compensation practices in a given country or region does not guarantee success. The good news is that more companies are making these practices part of a larger, global strategy."

Why centralise?

When asked why they have centralised reward structures, employers most often responded that it was to maintain a consistent link between rewards and results. Maintaining the organisation's position in the marketplace and promoting internal equity among employees ranked second and third, respectively.

Other key survey findings:

• Over half (55%) of respondents reported that, regionally, Asia presents the most challenges in developing a global compensation system, followed by Western Europe (33%) and South America (24%).
• Organisations with a centralised global compensation approach are twice as likely to have a global approach to sales compensation as organisations that are decentralised in their compensation management structure (44% versus 22%). However, only 34% of all respondents have a global approach to sales compensation.
• Among organisations with equity vehicles, stock options are the most commonly implemented globally (90%). The second most common (55%) are employee stock purchase plans, followed by restricted stock. And only 38% of organisations have implemented performance share plans globally.

Want to know more?

Title: Global Compensation Survey, Watson Wyatt and WorldatWork.

Survey sample: A total of 230 companies with operations outside of the United States participated. The survey focused on three key areas of global compensation practices: structure and strategy tools and systems and compensation targets and vehicles.

Availability: To order a copy of this report, visit the WorldatWork web site at www.worldatwork.org
Watson Wyatt Worldwide is a global human capital consulting firm that provides services in the areas of employee benefits, human capital strategies and related technology solutions. It has more than 6,000 associates in 88 offices in 30 countries. To find out more go to www.watsonwyatt.com

WorldatWork is the "world's leading not-for-profit professional association dedicated to knowledge leadership in compensation, benefits and total rewards". Founded in 1955, WorldatWork focuses on human resources disciplines associated with attracting, retaining and motivating employees. For more details visit www.worldatwork.org

Posted 7 October 2004