Compensation plays an important role in global, complex organizations, is used to differentiate an organization from its competitors, to drive performance of the organization during economic downturns, compensation’s role will continue to evolve and expand.
Some Global Compensation Practices reveals that companies are evenly split between a centralized and decentralized approach to their companies’ global compensation structure.
For those respondents with a centralized compensation structure, the primary objectives for having this type of structure are: 1) to have a consistent link between rewards and results, and 2) to have a consistent position vis a vis market and internal equity.
Those with a centralized global compensation structure reported much higher levels of satisfaction and effectiveness than organizations with a decentralized structure.
Half of survey respondents believe their organization will change its global compensation management structure in the near future.
The vast majority of organizations with a centralized global compensation structure also have a global compensation strategy. However, only about one-third of those organizations have communicated the strategy to all line managers.
Now Asia presents the most challenges in developing a global compensation system.
Although there can be differences between a centralized management structure and a centralized management strategy, the vast majority of organizations with a centralized global compensation structure also have a global compensation strategy. As might be expected, a much smaller percentage of organizations with a decentralized management structure reported having a global compensation strategy.
To decide which components of compensation to globalize, organizations are balancing the ability to attract and retain talent in various geographies/cultures with consistency in the organization's approach to conducting business. To that end, compensation also underscores an organization's culture and strategy to drive business.