Interview with Carl Sjöström : Reward Philosophy and its application to Global Mobility

Carl Sjöström, Operating Partner at UniMobility is a senior business advisor with over 20 years' experience advising boards and management on Rewards and Corporate Governance.

Didier Hoff, UniMobility's Head of Center of Excellence, sat down with Carl to discuss Reward Philosophy and its application to Global Mobility.

1) Carl, How do you define “Reward Philosophy”?

“Reward philosophy” is a very grand term, conjuring up visions of distinguished Greeks debating the worth of their salary cheques on the steps of the Parthenon. But here we are simply talking about a set of guiding principles and ideas that are fundamental to how people within an organisation should be paid and recognised.

Many companies have come to realise that the way they pay people is unfortunately the result of a string of unrelated decisions rather than conscious intent. This happens for a number of reasons, such as pressures from institutional investors (like changes to a corporate governance code), “we have always done it like this”, or the CEO having negotiated it on his/her appointment. Though there may be nothing wrong with such decisions in themselves, they can turn out to be very unwise when considered as part of the bigger picture. For example, as one client recently told me, to pay a bonus for the Chinese New Year may be a good idea in the Far East but it can cause all sorts of headaches when paying it to expats sent to Europe. The problem is not the bonus, or even the unfairness of having a compensation vehicle not offered to colleagues, but rather that there is no understanding as to why reward is delivered the way it is. On the other hand, if there is a clear set of guidelines as to how pay may be delivered differently to different people, most would likely accept it.

2) In practice, how do you translate an organisation’s vision, strategy and values into a framework that guides the design of remuneration?

In practice it mostly requires some soul searching. The vision, strategy and values of an organisation are probably put under the greatest pressure when tested against reward. We get what we pay for, and if we don’t pay for what furthers the vision, strategy and values, we will struggle to achieve them. For example, if you have a strategy built on innovation you probably want to base reward on principles that promote new ideas and risk taking. Also consider the design of different mobility solutions. These are often derived from tax considerations and to keep the assignee “whole”. But if you have a reward philosophy that people should be recognised and rewarded partly through interesting opportunities and experiences, then much of tax planning and making the assignee “whole” may be a distraction, and money could perhaps be put to better use by facilitating things like rotating responsibilities, training, international gatherings, etc.

Essentially the reward philosophy helps to translate vision, strategy and values into a “value proposition” – this is where you want to get to since the way you pay people says a lot about your organisation.

3) How do you apply “Reward Philosophy” to Global Mobility?

Not only is it essential that the reward philosophy guide reward decisions across the company, but it must also be considered for many global mobility aspects. This ranges from its impact on the design of all reward elements to the selection and package structures of people sent on assignments. For example, if we establish the principle that reward should support the strengthening of corporate values, we will likely want to reward cross-pollination of our culture and should perhaps incentivise key “standard bearers” to take on international assignments.

Similarly, if we have a reward philosophy that reward should support the attraction and building of skills and competence, we will want to ensure skills transfers and should probably structure assignees’ incentives to support their training of local employees - and so on.

4) How can you create a proposition that differentiates yourself from competitors?

The reward philosophy reflects the type of company that you are and through that how you differentiate yourself. It is peculiar how most companies want to be different from their business competitors to gain a competitive advantage but when it comes to how they pay people they try to be as similar as possible. Having a clear view of why and how remuneration should be applied will allow you to differentiate. For example, many companies will say that their policy is to pay at “the median” of the market. It feels comfortable to be there – not too high and not too low. But if you are a company where everybody wants to work, why should you pay top dollar?

Conversely, if you are unheard of in a market, who will join you at an average level of pay if there are strong established competitors paying as much or better? Your competitive positioning is about so much more than benchmarking and we are clearly taught this by international assignees – they don’t look for the same pay and rations if they are being sent to Kabul as they do if they are being sent to Brussels (though for some the Brexit negotiations are beginning to erode those differences).

5) Can you illustrate your methodology with a client example?

I always recommend to first do a set of in-depth interviews with a group people across the organisation, preferably representative of business units, geographies and different levels within the organisation.

The interviews should draw out understanding and perceptions of reward, and also of strategy, structure, culture and values to get a better understanding of how all these fit together and where there are tensions.

With these insights, the reward philosophy can be drafted and management and the board can be challenged to make the calls where contradictions and conflicts need to be resolved. These calls are often a bit uncomfortable but the clarity they provide makes reward strategy, policy and design decisions so much more straight-forward. For example, many of the companies I have worked with struggle to ascertain where on the scale between individual and collective performance they want to focus. You may always have worked with individual discretionary performance but have a strategy and a set of values that are built on teamwork – how you resolve the conundrum will depend on the organisation, its culture and managers’ abilities.

Hence, one rarely sees the same outcome twice, and typically the solutions lie in an evolutionary process rather than a quick fix. It is most important that this is a facilitated process for the company. No consultant should walk into a company and tell it what it should think – it has to come from within.

***

Thank you Carl for your insights.

If you want to know more, visit Carl's website