Delivering a successful international benefits strategy

An international benefits strategy requires clear objectives and a focus on common ground rather than on the differences between countries, says Peta Hodge

On paper, the idea of having an international benefits strategy, that delivers consistency to the perks offering of a multinational, seems simple. But when looking to put such a plan in place, there are a number of challenges employers will have to overcome that include legal, tax and cultural issues.

The work involved means that an international benefits strategy is only worth having if it enables multinational organisations to secure outcomes they could not achieve by running benefits at a local level, says Nigel Bateman, principal and head of group global consulting at Towers Perrin. “What you are trying to do is make sure the global whole is better than the sum of the local parts,” he explains.

This means employers must be clear about what they expect the strategy to deliver. Common objectives include: reducing exposure to risk, cutting costs, improving consistency, removing inequities and aligning benefits more closely with corporate strategy.

Fundamental principles

Wherever possible, an international benefits strategy should set out objectives that can be applied in different situations, so local employees understand what the organisation is trying to achieve, and employers have the flexibility to take local conditions into account, says Robert Lockley, a principal at Mercer.

When implementing an international strategy, employers should bear in mind that it would be difficult to replicate identical benefits packages in each country in which they operate. Widely differing legal, tax and social security systems, as well as differences in culture and employee aspirations, all militate against this approach.

Euan Hutchinson, Europe Middle East and Africa (EMEA) rewards director at Hewlett-Packard, says: “Why even bother to look for something you are not going to find? Regardless of how it will look at individual country level, what you are trying to do is establish some fundamental principles.”

One of the key principles established by Hewlett-Packard is to use and manage its suppliers in a consistent way. This standardisation of its procurement procedures has delivered significant savings and weeded out suppliers that were not delivering, says Hutchinson.

When setting out an international benefits strategy, there is a fine line for employers to tread, between making it “so wishy-washy that it is a waste of time and so rigid that it can not be implemented”, says Lockley.

One way for employers to strike the right balance is to ensure they have a system of governance in place, he says. “[For example] the framework might say all new pension schemes must be defined contribution, but [employers] also need to have an approval process. So they need to say ‘all new pension plans have to be approved by X,Y and Z’. Otherwise it is just lofty ambition and no practical use to the business.”

Whatever principles employers decide to adopt, it is essential to obtain support for the process at senior level. An international strategy may be a hard sell because people do not like change, especially if they feel it is being casually imposed from a far-away office.

“When I think back over the companies we have advised that have implemented a global strategy and deemed it a success, what strikes me is that the process needs sufficient buy-in at senior level so that when you go down the organisation, the process is seen to have corporate backing,” says Lockley.

Making an effort to win hearts and minds throughout an organisation, therefore, can be important to a scheme’s success. Benefits practitioners must ensure all the key stakeholders are on board, as well as establishing a track record to support the process. “Do not bite off more than you can chew,” says Hewlett-Packard’s Hutchinson. “Be prepared to compromise, as there can be more than one way of doing things. Communication is, of course, vital. Be pragmatic. When we are dealing with a works council or a union and there are cost savings to be made, we will share a bit. And you have got to be patient, because some pieces of the jigsaw may take three or four years to fit into place. There are not many easy wins.”

An over-emphasis of the differences between countries has long put the brakes on the development of international benefits strategies. Now the market seems to have caught up with the idea that organisations with the most successful strategies are those that concentrate on establishing areas of common ground. “If you set out to find differences, that is what you will find,” says Hutchinson. “If you set out to find areas of common ground, that’s what you will find.”

Common ground

He cites the example of a manager he appointed to deal with an area incorporating Spain, Italy and Portugal, who initially thought the countries were too different to make a strategy work across all three. But nine months after taking on the job, they concluded that they are not as different as initially thought.

Hutchinson adds: “How it looks on an individual country basis may vary, but if you lift the skin, what you see is the same kind of skeleton underneath.”

Some benefits consultancies have been slow to involve themselves in developing international benefits strategies. They have tended to dwell on the problems rather than solutions, and have left the way open for others to carve a niche for themselves in this market. Towers Perrin’s Bateman says: “You encounter it all the time – technicians saying ‘it can’t be done’. What I believe is that where there is a will, there is a way. What it boils down to is that it has not been done, rather than it can’t be done. Some of the things that go under the name of consultancy are just about repeating processes time and time again.”

Providers that have adopted a more positive approach have led to the development of wider benefits schemes that can be offered internationally. For example, flexible benefits plans can now be offered to staff in many more countries than had previously been thought.

Chris Bruce, managing director of Thomsons Online Benefits, says some countries, such as the Netherlands, Germany, Spain, Australia, India, Singapore and, increasingly, China, are more receptive to the introduction of flex than others. But in theory, he says, there is no country that could not be included in some form of flex scheme, as long as employers are flexible in their definition of flex. This would require employers to look at flex as ranging from a full flexible benefits scheme to total reward with the ability to buy benefits using salary.

Forward-thinking employers prepared to challenge the status quo have been credited with pushing the market forward by demanding international solutions.

They have also had to battle to persuade staff in different countries of the benefits of going global, says Hutchinson. “The way we [now] govern, manage and do benefits is here to stay [at Hewlett-Packard]. That in itself is a testimony to its effectiveness. It’s about good governance. It is not rocket science. It is back to fundamentals.”

Ten basic principles for developing an international benefits strategy

1. Be clear about what you are trying to achieve.

2. Be sure that the global whole will deliver more than the sum of the local parts.

3. Make sure that you have senior management support.

4. Establish a clear set of principles that are flexible enough to be adapted to local conditions in each country.

5. Concentrate on the common ground between countries rather than the differences.

6. Communicate thoroughly.

7. Establish a system of governance to ensure principles are followed.

8. Be pragmatic and prepared to compromise.

9. Be patient because some aspects may take a long time to implement.

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10. Make an international benefits strategy flexible enough to evolve over time.

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