Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Compensation Insider - February 2012 posts


Published on is a blog focused on Compensation & Benefits. I write 3 times per week, on various C&B, Performance Management, Global Mobility and Governance topics.

Given that I am based in Abu Dhabi I try to give it a Middle East approach from time to time, but trust that the topics and ideas remain relevant no matter what your regional responsibilities are.

You can subscribe to receive it by email or by RSS reader so you don't miss my articles.

Feel free to explore it and send me some comments and feedback !

Published in: Business, Career
  • Be the first to comment

  • Be the first to like this

Compensation Insider - February 2012 posts

  1. 1. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comCompensation InsiderPosts published in February 2012 page 1 / 31
  2. 2. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - Table Of ContentsA few career and life lessons from my last job in Italy ............................. 3Compensation generalist or Compensation specialist ? ............................. 65 traps to avoid for your Compensation projects ................................. 8Two uses of LinkedIn Groups for the Compensation professional .................... 10Should you rely on free compensation data from magazines and recruitment organisations ?.. 12Why the big pay gap between managers on the same grade ? ....................... 14Why the Sales Director has less on-target incentive than the Sales people ............... 16Understanding R-square value in compensation analysis .......................... 19Before you jump into a technical compensation answer... .......................... 21Even pictures have fine print .............................................. 23Compensation provider Birches Group extends its reach in the region - an interview with WarrenHeaps .............................................................. 24Share the knowledge - February 2012 ........................................ 29 page 2 / 31
  3. 3. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comA few career and life lessons from my last job in Italy years ago I was in Italy for my third job in that country in less than 10 years. I love Italy, and reallyenjoyed Turin. Its a great city with beautiful architecture, nice, contrasted weather with cold winters(after all they held Winter Olympics there in 2006) and hot summers. The food is great, there are a lot ofart galleries and museums, and the people are friendly.Yet in February 2007, I was six months into the job, and utterly miserable.You see, when I accepted the role, I thought it would be easy. After all I was ready for a Director job, Iwas an expert in Compensation & Benefits in the EMEA region, and I had alreay worked twice in Italy.So I looked forward to the "International" aspect of my new job, being exposed to countries like India andChina, and having a chance to make a difference into my new organisation.Well, it turned out that I was wrong. It was not easy. My previous experiences were in multinationals, andthere, I was working for an italian company. The culture was very different, much slower indecision-making, with lots of bureaucracy, a heavily hierarchical (and male-dominated) structure, and alot of resistance to any form of change in HR.For example, the companys vision of Compensation & Benefits was focused on 2 aspects : internationalmobility for executives, and "costo del lavoro", which is the italian word for calculating labour costs. Wehad to endlessly compute these costs, on an hourly, daily, weekly, monthly and annual basis - and to behonest, it was a nightmare. We would spend hours producing these labour costs, only to be - each time -told that our numbers did not match those produced by Finance, and we had to find a way to make ournumbers match.I did consistently suggest that, if Finance numbers were the "right" ones, why did we waste our timeduplicating the effort and then manipulate our data in order to come to the same result ? We could simplyuse the Finance results and free a lot of HR time to focus on more value-adding activities. Not that wewere lacking in challenges ! But every time, I was told that we couldnt change anything, because "thingshave always been done that way here".The workload was ridiculously high, with no recognition. Every day, my values were challenged. I wasasked to do things I fundamentally disagreed with. The Group CEO is someone quite famous for gettingresults and engineering a true turnaround in the company. Internally, he was mostly (in)famous forleading by fear, shouting at people, and had a reputation of letting go one top executive at every quarterlymeeting - a reputation that was only slightly overstated.Then one day a few months later, my boss boss did the same to me. He litterally shouted at me : "I havea sh#@ life, and so you must have a sh#@ life too ! Who is the boss here ? I am giving you an order, andyou have to execute it !" and so on.To me, that was the straw that broke the camels back. page 3 / 31
  4. 4. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comI was overworked, tired, conflicted about my values, and not enjoying the work I was doing. And I willNEVER accept someone - anyone - treating me with disrespect in the workplace. I decided enough wasenough, and the next day, I handed over my resignation.It was the most liberating feeling ever. When I left his room, it felt like this massive weight had beentaken off my shoulders. I had no other job lined up, didnt know what or where I would go next. But I feltat peace because I had decided to go with was deep within me. Better the uncertainty than the misery !(By the way, a few weeks later, I had 3 confirmed, interesting leadership roles in C&B and had to make achoice which one I would pick - not too bad an outcome for something totallu unplanned).Five years on, what remains from this experience ?I learned that you have to listen to your heart and your guts. I was not the right fit for that company andits culture. I was not happy. My values were being challenged all the time. Yet, even though I wasmiserable, I was not thinking of leaving. There were all sorts of "good reasons", from "I need to try a bitharder", to "Its not even one year, what will people think and what kind of message will that give topotential employers?". But in the end I was simply letting fear of the unknown take over my life.I learned as well that this turned out to be one of the best decisions I ever made. I eventually took on aglobal leadership role for a company in Dubai, and had a blast. Knowing that I had the strength to followmy convictions and live up to my values gave me a great foundation, a level of confidence that I thinkanyone who meets me can identify. It is also a great support in any negotiation with senior managementon Compensation & Benefits projects, because they know I will only go for something I am fullycomfortable with.I learned that, just because youve already lived in a country, you wont necessarily blend in into anotherjob in that same country again - company culture is very important. Actually, I believe that the moresenior you get, the more important the company culture is - because if you are not aligned, but your roleentails making decisions that impact the lives of others, then you will feel at odds all the time and wontbe able to produce your best work.Finally, I learned that there is truth in the old saying that when one door closes, another one opens. Younever know where you will be in 5 years, and whatever your plans were, life will most likely force you tomodify them. As long as you keep your sense of direction, you will be fine. And that applies not just toyour career (in Compensation & Benefits or any field), but also to your personal life. Remain true toyourself, and the rest will take care of itself.Liked this post ? Why don’t you share it on LinkedIn or Facebook ? Simply click on the link below andhelp your friends and connections benefit from it too !Related posts : Fresh professional goals for 2012 as a Compensation leader page 4 / 31
  5. 5. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - 4 skills to master for influential Compensation & Benefits Compensation generalist or Compensation specialist ? _______________________________________________ page 5 / 31
  6. 6. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comCompensation generalist or Compensation specialist ? you ever think that Compensation & Benefits can be a generalist role, not necessarily a specialist one?Of course, in the GCC most companies dont have a massive HR team, and even having one C&B personon board is not always a given. Often, mid-size companies have an HR Generalist or the HR Directortaking on the C&B hat at the time of salary reviews and bonuses, and thats it.But once the organisation reaches a certain size or complexity, a Compensation person is needed toaddress all the questions related to job descriptions and evaluations, salary ranges, promotions,international assignments, benefits, bonuses and incentives, recognition, performance management,setting up in new countries, due diligence for M&A, hiring salaries for new roles, retention strategies etc.Now, in the very large organisations such as multinationals, sometimes the C&B people are becomingmore specialised. For example, experts on pensions, on global mobility/tax, on Mergers & Acquisitions,on sales incentives and the like. But given that these roles are relatively rare in the GCC (except maybein the larger airlines), thats not the kind of specialisation I have in mind when comparing to the"Compensation & Benefits generalist".Most GCC compensation experts are in fact generalists of C&B, with experience in multiple aspects ofthe role, but not necessarily the deep functional and technical expertise acquired through years ofdesigning sales incentives, managing retirement arrangements or implementing performance managementsystems. And thats perfectly fine - the market in general does not need many of these super-deep expertswho are focused on a very specific functional niche within C&B.But for the rest of the C&B experts in the region, how much of a generalist are you really ? I am talkingof the generalist view that you can gain from working, as a C&B person, in multiple industries and/ormultiple countries.For example, you work in high tech, then Oil & Gas, then real estate, then pharma. And even better, youcombine that with being based in the UK, then UAE, then Singapore, then KSA. This kind of experienceis, in many ways, much better than if you start as a Compensation Analyst in a bank in Bahrain, thenmove up the ladder to another bank still in Manama, and end up, a few years later, being theCompensation Manager yet in another bahraini bank.Of course, building experience in a given industry is a good thing. It gives you depth of thinking, a goodreference system, and a specialist network to tap into when you have questions.However, there is a lot to be said for the Compensation professional who has had exposure to differentindustries and geographic areas. This person demonstrates a sense of adaptation, the capacity to putherself out of her comfort zone, a sense of curiosity, an extensive network and, as a result, is much morelikely to come up with innovative solutions when confronted with issues in her organisation. page 6 / 31
  7. 7. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comIndeed, as a true generalist C&B with experience in diverse companies and countries, when you get a newjob then you really know that you need to learn about your business. You cant be set in your ways,thinking like every other Compensation professional from the industry - because you are not influencedonly by that industry. You have seen other things. You have been confronted to other ways of thinking.You have friends and peers who implement different solutions and can tell you about their approaches.As a result the true generalist Compensation person will have a better chance to design truly uniquesolutions and systems for the challenges faced by his or her business. This gives the company a real edge,a differentiating factor.So think about it for your next career move. Will you remain in the same industry and country, buildingdeeper expertise in your niche, or will you expand your horizons and get confronted to new situations, butwith a lighter touch ? Both have their advantages. What matters is that you make a decision based onwhat you want to achieve.Related posts :How to get started in your new Compensation jobFresh professional goals for 2012 as a Compensation leaderWhy every word counts in Compensation & Benefits4 skills to master for influential Compensation and Benefits _______________________________________________ page 7 / 31
  8. 8. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.com5 traps to avoid for your Compensation projects have to manage one or more Compensation & Benefits projects and want to achieve success as theyform part of your objectives for the year.Before you rush into implementation mode, here are 5 fundamental traps to avoid :1 - Lack of executive buy-inAll projects require a clear sponsor. This is especially true for Compensation-related projects, as theyinvolve very personally sensitive matters that affect directly all employees. Everyone cares about howthey are compensated, and everyone has an opinion what should be the end result of your project.Sometimes, they even want to tell you how you should go about it, even if the employee has never hadany exposure to C&B matters ! The right sponsorship is paramount to achieving success as it will help getthe right decisions made and will untangle any sticky political situation you will, for sure, encounterduring the lifetime of your project.2 - Wrong, unskilled or not dedicated resourcesThis one is pretty self-explanatory. Yet, especially in emerging markets where there is a real scarcity ofactual, proven C&B talent, very often you end up having to work on your project with people who are notknowledgeable enough. This is often compounded by the fact that those resources are short of time toallocate to your assignment. Compensation & Benefits projects often require a lot of cooperation in orderto be effective and propose solutions that are realistic and easy to implement. You need to work withFinance, Marketing, IT, employees, Sales, management, HRBPs.... If the representatives from eachstakeholder are not really involved in the project due to lack of time or lack of skills, your end-result willbe thoroughly impacted and it could derail your whole work.3 - No communication on progress throughout the projectIt is easy to get caught up in all the activities related to the project. The to-do list is long, there are a lot ofnecessary interactions, multiple strands of work to handle at the same time... As project leader, you focusyour attention on ensuring that things are under control and progressing as planned. There are so manythings to do, that you dont take the time to maintain the communication channels open with all theconstituents of your project : your executive sponsors, your natural supporters in the business (the oneswho were loudly requesting you to work on the topic), the representatives of employees.... sometimeseven your own boss ! Well, this is a major oversight. Keeping the communication line open throughoutthe life of the project is one of the best ways to spend your time as it ensures that you are staying alignedwith the needs of your internal customers, you get feedback on regular checkpoints, and you build buy-infor the end-result before even announcing it officially.4 - Inappropriate project management processes page 8 / 31
  9. 9. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comWhen you dont manage your Compensation project properly, obviously you end up missing deadlines,not delivering or delivering something which does not fit the requirements. One aspect of projectmanagement which is often overlooked at the beginning of the assignment is the clear establishment ofdecision-making rules. Governance is crucial in projects. If you dont set the rules at the beginning,confusion will reign, you will lose time, and may end up having to re-do whole sections of the work,because decisions were made at the wrong level and are being overturned by the actual owner of thedecision. So take the time to get agreement on who decides what and when, ensure that you have accessto the decision-makers, and your project will not be delayed or derailed because of wrong decisions.5 - No change management before and during implementationCompensation & Benefits projects tend to be highly technical in content. You have to understand legal,fiscal, financial, mathematical/statistical aspects of HR and the impacts and limitations of HRIS and otherIT systems in the development of the solution. A lot of people who specialise in Compensation &Benefits are actually the "geeks" of HR. They love these specialised aspects of the job, and naturallygravitate towards them. So the risk is relatively high that other sides of the project may be slightlyneglected. For instance, psychological aspects of the changes introduced through the project could beunder-estimated. If change management actions are not introduced early enough before the project comeslive to the organisation, and during the deployment, the whole thing could fail. The organisation willreject the most beautifully designed and technically perfect solution if its launch and implementation arenot supportive of the company culture and presented in a manner that is acceptable for the populationimpacted.Keep in mind these 5 traps and you will greatly increase the chances of your project being a success, wellaccepted by your organisation and adapted to its needs.Liked this post ? Why don’t you share it on LinkedIn or Facebook ? Simply click on the link below andhelp your friends and connections benefit from it too !Related postsAre you benchmarking... or copying ?7 steps to compensation programme design - the basicsWhy every word counts in Compensation & BenefitsCompensation Data vs Compensation IntelligenceSocialize your Compensation & Benefits annual business plan _______________________________________________ page 9 / 31
  10. 10. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comTwo uses of LinkedIn Groups for the Compensation professional todays edition of Sunday Skills I want to cover a little-used source of information for Compensation &Benefits professionals.With over 150 million members, LinkedIn is a great repository of knowledge and goodwill. An obvioussource of information and expertise is to browse the Answers section and look if anyone has asked aquestion relevant to your needs today. Or simply use your 10 questions per month to see what your peershave to say on your request.There is another source of good information for you, though a bit less direct.Once you have completed your profile and connected with relevant people, you have surely joined one ormore Groups, related to HR, Compensation & Benefits, Emiratisation, Employee Engagement, GlobalMobility, Performance Management, the country you are in, the countries you cover or will enter into etc.Once you are a member, you can see and search all discussions, or create one if you wish. The advantageof Groups over Answers is that yes, they are smaller and the discussions are not visible to all LinkedInmembers, but they are more targeted and a good question therefore has an increased chance of receivingrelevant answers - or for you to browse these relevant discussions.The one section which is widely under-used though is not the Discussions, as these are the prominentfeature of any Group.It is the options you find under the More tab of the Group. There, you can see all recent updates in theGroup, or those only of people you follow. You can also go to Your Activity and get an update on all theDiscussions that you follow, have participated to, or initiated. Or you can get to the people you followthrough this path as well.Why do I focus on this ? Following specific Group members is a great way of getting a passive flux ofinformation about what your selected peers are involved in, and can open the door to a deeper relationshiponce you get to connect with them directly.So who could you decide to follow ? By default, all your first degree connections (you can decide tounfollow them, its a simple as the click of a button - and they wont be notified). But also, from theGroups you belong to, you could decide to follow a whole range of people : Influencers, the ones that participate actively to the Group The people asking questions on topics of specific interest to you Journalists, writers etc Providers Peers in your industry or your country Your competitors if you are a provider…. page 10 / 31
  11. 11. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - They are not notified that you follow (or unfollow) them. But what you get can prove to be a superbsource of information, which you control : You see their activities displayed on the stream of Updates on your LinkedIn home page (and can decide to hide them if you want) You can choose to receive an email for all their activity (not recommended if they are very active or if you follow a lot of people). You can see their recent activity from your list of all people you follow.I have included a quick Powerpoint to show you the visuals.In short, as a complement to Alerts and RSS feeds, use the Discussions and More sections of the Groupson LinkedIn. You will get information on topics relevant to you, be able to establish relationship, ask foradvice and get invaluable free support.Liked this post ? Why don’t you share it on LinkedIn or Facebook ? Simply click on the link below andhelp your friends and connections benefit from it too !Related posts : Get laser-focused Compensation information with Alerts How RSS Feeds and News Readers can help Compensation & Benefits Create the best rules in Outlook to boost your productivity _______________________________________________ page 11 / 31
  12. 12. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comShould you rely on free compensation data from magazines andrecruitment organisations ? a few recruitment organisations have issued free "salary guides" for certain countries orindustries. Magazines, whether business oriented or focused to the individual consumer, also run regularreports and guides with exciting titles like "Are you paid enough ?". There are even websites where youcan get free pay information (say, regarding a position that youre interviewing for) provided you give thesame information about your salary in your current role.Often, hiring managers, employees or even other HR people will show me these numbers and ask mesome variation of "how come our salaries are not the same as the ones mentioned in here ?".I have nothing against these guides and reports. Actually, in the odd case where you are setting up in anew country and cant access professional data from legit survey providers or through informalconversations with peers, they can be a useful first source of information to get you started on your costof employment simulations.I do however have some reservations when it comes to these guides.The ones sponsored by recruitment agencies tend to have high salaries because, well, ultimately,agencies are often paid a percentage of the salary they negotiate for the candidate they get hired for you -so the higher the pay, the higher the fee for them. And it makes the positions they advertise moreattractive to candidates. So it is in their advantage to indicate salaries that tend to be, not false, but on thehigh side.The websites providing salary information based on visitors feedback have little to no qualitycontrol. The data is based on goodwill and the assumption that people will provide exact information ontheir current pay. The idea is, 1 - that people know exactly their current package (which in my experienceis often not true) and 2 - that they will tell the truth and not inflate their stated compensation in a bid toappear more "important" or "senior" than what they really are. And, well, people are people... so withoutthese built-in control mechanisms, the data they provide cant be trusted fully.I described in an earlier post what kind of safeguards and quality control processes are put in place bycompensation survey providers. They are based on anti-trust and privacy laws, but also on statistical aswell as methodology controls - and the size of the data sample also matters.One of these important points is the job matching approach. There are job descriptions as well asreference points (based on the provider methodology) to make sure that the data provided for each job issimilar. This way, the companies participating in the survey are sure that the results are comparable :salary information is relevant.Most of the surveys provided by recruitment agencies or self-submitted information, are not as rigorous in page 12 / 31
  13. 13. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comtheir approach to job descriptions and job matching. Often the matching is based on job titles only, andthis is where a lot of the discrepancies can come from. A Director in a company may be the equivalent ofa Vice-President in another, some organisations may call Manager someone who holds an individualcontributor role, an Assistant in an organisation may be a deputy department head while it is may be asecretary in another organisation....Similarly the size of the population being used for producing the results indicated in these guides, isnever really explained. Is an average based on 3 employees data points really relevant ? What if therecruiting company takes into account the salaries they have gotten for candidates in only 2 organisations? Do they really represent "the market" ?Salary guides issued by recruiting companies, magazines and websites can be useful at times, when youhave no other data point and are looking for a rough idea of what market trends are. However, you needto use them carefully as the job matching method as well as the statistical controls are not always asthorough as the ones used in compensation surveys designed and developed by specialist providers.Ultimately, relevant data comes at a price, and cant always be found for free.Liked this post ? Why don’t you share it on LinkedIn or Facebook ? Simply click on the link below andhelp your friends and connections benefit from it too !Related posts : The safeguards in salary benchmarking Compensation Surveys - the ultimate buyer checklist _______________________________________________ page 13 / 31
  14. 14. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comWhy the big pay gap between managers on the same grade ? my career in Compensation & Benefits, I have often heard this question or a variation upon it : I seemanagers getting twice the pay of other managers from the same group and same job grade... Why is this,and how can you explain it ?This is a fair question on the differences in salaries for people in the same grade and salary range.First, if your company has created salary ranges (ie banding jobs together, doing the market research anddesigning a range of salaries considered acceptable for each band), and if these 2 managers both sit withinthe salary range, then you dont have a fundamental flaw with respect to your official company policy.What may be the problem is a salary range which is too wide because it can range from simple to double.Usually at the manager level, the salary range will be wider than at junior staff level. Why ? Because afteryears of work, your individual profile matters more than when you are a young graduate or in your firstyears of working. Your experience, the kind of industries you worked in, the projects you participated in,your managerial capability, even your personality and soft skills, will make a big difference in how muchyou are valued by your organisation at the time of hire.Also, your tenure in the company and proven past performance (resulting in larger salary increases andbonuses if you are a consistent high performer) will have a cumulative influence on your salary and I surehope that, all other things being equal, a great performer should receive a higher pay than an averageperformer.It could also be that one of the 2 managers is in the wrong band. Maybe the one with the lower salaryshould be in a lower band. Or maybe the one with the higher salay is ready to move on to biggerresponsaibilities and be promoted to the next grade up.In any case, without knowing the specifics of each case, and without a proper internal and external equityanalysis performed by your C&B manager, you cant know for sure if this salary difference can beexplained by logical factors.And, lets be honest. In all countries and all companies, you will also see some examples of some peoplebeing underpaid or others being overpaid for no apparent or logical reason... Not always will you be ableto explain differences of salaries based on experience, profile, past performance, tenure and readiness forpromotion.Enjoyed this post ? Why don’t you subscribe by email to make sure you receive my articles 3 times perweek ?Related posts : page 14 / 31
  15. 15. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - From job evaluation to salary scales - the basics New hire vs employees : 3 salary situations and how to handle them _______________________________________________ page 15 / 31
  16. 16. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comWhy the Sales Director has less on-target incentive than the Salespeople previous organisations with a sales force, we had to determine rules regulating the split between fixedand variable pay for the population eligible to the Sales Incentive. Besides benchmarking with othercompanies in our markets, we used an internal logic.We would start from the bottom up ie define, first, what a sales role was for an individual contributor. Wewould use a simple decision-tree approach to Sales Incentive eligibility that I described in a recent post.A SIP-eligible position would be one where the jobholders main accountability is about closing the salesand making the revenue come into the company. The jobholder "owns the account" and owns therelationship with the client(s).So that usually takes out marketing roles, as well as some technical support roles responsible formaintenance etc (these can sell some services too or even some products, but their MAIN responsibility iscustomer service and maintenance ie not sales).Then a Sales Manager is a person whose role is to team lead some Salespeople. He will also be in chargeof closing some deals, especially providing support to the Sales guys. Because his role starts to focus onpeople management and territory management etc, there will be a higher base and lower on-targetearnings as there is less direct involvement in the actual sales process.The Sales VP or Director is the manager of sales managers. His role is mostly about setting the strategyfor the organisation in terms of Sales, managing territory, liaising with marketing, product development,HR etc... so he will have even less focus on actual selling himself. Depending on the company he will orwill not be on SIP and the Fixed/Variable pay ratio will be the same as that of any other top person in theorganisation such as the Finance Director or VP of Manufactiruing.Lastly, I would say that the level of the top role (VP or Director, grade 25 or grade 26 etc) is determinedthrough the same methodology as job leveling / job grading for any position in the organisation. The lessdirect impact on the financials/revenue is usually "compensated" by the focus on strategy anddirection-setting for the organisation etc so that the number of points (Hay or otherwise) is still higherthan that of the sales individual contributor.Overall, job content is the driver of the decision on whether the role should be on the Sales Incentive ornot, and also informs decisions on the on-target bonus and ratio between fixed and variable pay. It isimportant to have some criteria in place so that you can make informed decisions when the organisationchanges, or when an employee challenges the decision.Liked this post ? Why don’t you share it on LinkedIn or Facebook ? Simply click on the link below andhelp your friends and connections benefit from it too ! page 16 / 31
  17. 17. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comRelated posts : page 17 / 31
  18. 18. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - Why am I not on the Sales Incentive Plan ? Analyse my SIP ! _______________________________________________ page 18 / 31
  19. 19. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comUnderstanding R-square value in compensation analysis this episode of Sunday Skills, I wanted to explain some statistical concepts used by manycompensation consultants when they produce compensation analyses for their clients.Very often, theresults are presented "raw", with a nice graph and a R2 or R-square value (or a series of values)mentioned on the side.But many HR Generalists, and even Compensation specialists, have not studied statistics, and as a resultthey dont always understand what that really means for their business. So here is a plain English, simpleexplanation of what the data means. Please bear in mind that I am not a statistician, so if you spot amistake, please let me know through the comments or the Contact Me page and I will do my best tocorrect...Now, lets imagine that you are interested in understanding how tenure, education and job grade influencepay. So you perform a regression analysis, which allows you to "predict" the strength of the relationshipbetween the variables : tenure and pay, then job grade and pay, and education and pay. When there is onlyone variable (tenure or job grade), the regression is called simple linear regression and is usuallyrepresented by a line in the middle of the data points. Thats the typical graph that you get from yourcompensation consultants.The R-square value explains the strength of this relationship. The closer it is to 1 (or 100%), the more itexplains the result. But in reality you never get 1. So for example, the R-square value between job gradeand pay is 52%. It means that job grade "explains" 52% of an employees pay.But life is never that simple, is it ? There is not only one factor which influences pay. As mentionedabove, for example you suspect that tenure also influences pay. So you perform another regressionanalysis, and the result is that R-square is, say 29%. So tenure alone "explains" 29% of pay. Less than jobgrade.You then perform a multiple linear regression to understand how the two independent variables (jobgrade and tenure) influence pay. Combined together, the R-square value is now for example 63%.63% - 52% = 11%. It means that tenure explains 11% of pay, on top of job grade.If you do this analysis multiple times, for each criteria that you think influences pay, you will be able tobuild a model "predicting" pay based on these criteria. For instance you can combine, job grade, tenureand education to explain pay.Once you have exhausted all the independent, quantitative criteria, you may get to a total R2 value of,lets say, 76% or 0.76. In our example with 3 variables, job grade explains 52% of pay, with tenureexplaining an extra 11% of pay and education predicting another 13% of pay. The final 24% (100%-73%)are linked to qualitative criteria that drive pay. page 19 / 31
  20. 20. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comI hope you find this explanation of R-square interpretation useful and that it will help you understand theresults of your compensation analyses better so that you can make informed decisions in the future.Liked this post ? Why dont you subscribe by email to receive all my future articles ?Related posts : Percentiles - an easy way to figure it out How to compare average and median salary information _______________________________________________ page 20 / 31
  21. 21. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comBefore you jump into a technical compensation answer... is a recent question on LinkedIn : "How does someone determine the dollar value of a benefitspackage ?". There was no additional explanation or clarification.Many of the answers provided were relatively detailed, covering different types of benefits, talking about"net present value", referring to actuaries and the concept of value vs that of cost.Typical C&B answers ! Technical, complex, a bit dry for most of them.The best answer in my opinion ? A very short one, provided by someone outside of HR : "The annualvalue to the recipient is simply what it would cost to purchase the benefits at retail."Thats it. One sentence.And why is it the best answer for me ? Because the person who wrote it took the time to look at theprofile of the person who asked the question.In that case, the asker is a professional resume writer. Someone who helps others be on the job marketand look for a new role. Most certainly, this person keeps hearing the question he just asked. Because thenew unemployed want to understand how much it will cost them to get an equivalent coverage. Becausethey want to evaluate how much to ask for as a package when interviewing for a new job.So the answer is provided from the angle of the customer of the person asking the question, which is mostprobably what is most relevant to the asker.I have written in the past about the importance of how to communicate in Compensation & Benefits.Simple, direct, adapted and relevant communication is key for the credibility of our function. Neverforget to think about who is asking, and why. When you dont, the image of Compensation specialists aspure "techies" continues.... and it does not help us get buy-in with top management when we want to goahead with projects.Communication is key !Enjoyed this post ? Why don’t you subscribe by email to make sure you receive my articles 3 times perweek ?Related posts : Compensation data vs Compensation intelligence 4 skills to master for influential Compensation & Benefits page 21 / 31
  22. 22. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - Socialize your Compensation & Benefits annual business plan Why every word counts in Compensation & Benefits _______________________________________________ page 22 / 31
  23. 23. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comEven pictures have fine print keep it short today and will share a picture from the always excellent In the post Even pictures have fine print, Stuart makes an excellent point about how presenting data ingraphics can convey a different impression based on the scales you choose to use. Make sure to trydifferent versions of your compensation graphs before distributing them, to make sure the visualimpression supports your point !Liked this post ? Why don’t you share it on LinkedIn or Facebook ? Simply click on the link below andhelp your friends and connections benefit from it too ! _______________________________________________ page 23 / 31
  24. 24. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comCompensation provider Birches Group extends its reach in theregion - an interview with Warren Heaps friend Warren Heaps is a Partner at Birches Group, an independent consulting firm specialised inproviding compensation information in over 180 emerging and developing countries.Birches Group very recently announced that they have entered into an agreement with Aon Hewitt, one ofthe major global compensation consultancies. Under the partnership, Aon Hewitt will make BirchesGroup surveys in developing country markets available to their clients, expanding their survey coverageto over 170 countries globally.You can find the Press Release here.Warren answered a few of my questions about what the partnership will mean for companies based in theMiddle East and GCC.Warren, thanks for addressing the readers of CompensationInsider. First, can you please explain to usthe kind of services Birches Group provides, and in which countries of the Middle East ?Birches Group is a global salary survey provider. We specialize in surveys in developing countrymarkets (148 countries in all). We have data for all of Africa and the Middle East, in addition to the restof the developing markets in Latin America, Europe (East and Central), Asia and the South Pacific.In the Middle East we have surveys in all countries with the exception of Dubai (our UAE survey is justfor Abu Dhabi). But keep in mind, we also cover Northern Africa, elsewhere in Central Asia such asAfghanistan, Pakistan, Kazakhstan, as well as Iran.We also offer consulting services in the areas of job evaluation, competencies and performancemanagement. Our approach is a good alternative to the complex and heavy approaches that otherconsultants offer.Why did you choose this activity ?Birches Group began as a private company back in 2005. But for 20+ years before, the founding partnerswere responsible for compensation for the United Nations Development Programme across 133countries. This experience was the foundation for our approach and methodology, as well as the idea ofcreating a company to serve the needs of employers throughout the developing world.What does Birches Group offer which is unique ? page 24 / 31
  25. 25. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comThere are several things which make our surveys unique: page 25 / 31
  26. 26. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - 1. We use a single, standardized methodology for all our surveys. 2. Our methodology is build to capture the unique requirements of developing country markets. It works well with smaller sample sizes, and captures all of the extra allowances and in-kind benefits that are common in the region. There is much more, but that gives you a good idea. The other thing that makes us different is our coverage – all the countries in the developing world.Tell us about some of your successes in the region.We have had some good success in all parts of the world! We did a large project in the Middle East a fewyears ago for an organization which has operations in Jordan, Syria, Lebanon, and the PalestinianTerritories. It was a major challenge, since we interviewed staff members in all those locations. Wedeveloped a new job grading system, and a new approach for compensation, which includedcompetency-based broad bands for professionals, as well as performance-based pay for senior executives.We hope to do a lot more work in the Middle East, as we know there are many organizations that couldbenefit from our expertise, especially those which are themselves expanding into nearby countries inNorth Africa and elsewhere.What were the reasons that made you enter in the relationship with Aon Hewitt specifically ?We are so excited about the new collaboration with Aon Hewitt. It’s a marketing partnership – we willcontinue to be a separate company from Aon Hewitt – they did not purchase us or buy an equity stake.There are several reasons why we think it will be a huge success. As you know, Aon Hewitt is one of thelargest human resources consultancies in the world. They have targeted the developing world, especiallyMiddle East and Africa, as one of their priority regions for expansion, much like they have had success inIndia and China over the last several years.We first got to know them while working on a project for a mutual client, who asked us to work togetheron our respective pieces. Through conversations it became clear that we would be a perfectcomplementary fit for them. Aon Hewitt is strong in the more developed countries such as Europe, USand Australia, as well as many of the larger developing markets such as China, India, Brazil, etc. Theywere looking for a way to expand their market coverage dramatically.With the Aon Hewitt TCM survey now in about 45 countries, and with Birches Group surveys in 148, wecan together cover 181 countries (there is some overlap). No other consultant can match that coverage!Another reason for working with Aon Hewitt is their approach to branding. They already have threedistinct brands in the market – Aon Hewitt (multi-sector surveys), McLagan (financial services) andRadford (Tech and Life Sciences). Birches Group is a natural fit into this portfolio of offerings for theirclients as the developing markets option. Other major consultants always seem to combine their offeringsinto a single one. Aon Hewitt has decided specifically NOT to do that – which allows us to maintain astrong brand identity.What, if anything, will change with the partnership ? What are the benefits for organisations in theregion ? page 26 / 31
  27. 27. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comThe most obvious benefit for the region is the ability to combine our efforts to expand the surveys to themost important employers in the Gulf region and elsewhere in the Middle East. We are hopeful that wewill be able to expand participation and provide clients with a better product going forward.The partnership also will allow us to work cooperatively to serve clients in new ways. Already we areformulating plans, for example, to work with groups of Aon Hewitt clients in specific sectors, whorequire data in countries they do not cover with their own surveys. Our long-standing expertise withinternational public sector organizations will be helpful for some of the projects they are working on forclients. And, we hope to offer joint conferences and research as well.When is your next upcoming survey in the Middle East going to take place, and where can our readersfind out more about the surveys for 2012 ?Our survey schedule spans the entire year, but we have the ability to accommodate clients at any time.Here is the schedule (subject to change, of course):Lebanon – UAE : FebruaryKazakhstan – Kyrgyzstan – Uzbekistan - Mauritania – Sudan : MarchSaudi Arabia – Syria – Tajikistan : MayEgypt – Tunisia –Turkmenistan : JuneMorocco : JulyAzerbaijan – Bahrain – Yemen : AugustAfghanistan – Pakistan – Algeria : SeptemberOman – Kuwait : NovemberIraq – Qatar : DecemberI would like to thank Warren for taking the time to answer these questions. If anyone wants to know moreabout the surveys or check the schedule, they can reach Warren or visit thecompany website at You are also invited to join Birches Group onLinkedIn (Developing Markets Compensation and Benefits), and check out the blog where Warrencontributes his thoughts on a regular basis at - it is also on my blogroll asone of the blogs I recommend in C&B.Enjoyed this post ? Why dont you share it on LinkedIn or Facebook so that your friends can benefit from page 27 / 31
  28. 28. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comit too ? Simply click on the buttons below ! _______________________________________________ page 28 / 31
  29. 29. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comShare the knowledge - February 2012 every month, here are some of the best or most relevant Compensation & Benefits,performance management, HR and/or global mobility articles that I came across recently :.... But let me start by sharing this job ad for a Manager of International Reward and Benefits for QatarAirways, posted a few days ago. Good luck ! At Davos, bankers resist regulatory restraint on bonuses A Business Week analysis of how HR helped the transformation at IBM in the past decade... ...And the other side of the coin : HR biggest failure comes from over focusing on processes TLNT explains how HR can support a culture of innovation From Forbes, a very interesting (if controversial) take on why "maximising shareholder value" may not be such a great idea Again from TLNT, a great idea about an unusual use of performance appraisals… for recruitment purposes This HR Magazine article highlights different types of employee engagement, and how it can tie with your performance management system Draft white paper details European Commissions plans for pensions Al Gore recently published a white paper on sustainable capitalism through his company Generation Investment Management. During the presentation to the press, there was a lot of focus on long-term investors and especially pension funds. His recommendations are discussed in this Investment & Pensions Europe article. Suzanne Lucas gives some answers to Why does your salary offer stink ?. The one reason I would add is that maybe there is a relatively wide salary difference between her current pay and that that should be associated with the new grade, and the employer could very wll have a cap on salary increases for internal moves.For those of you who are interested in GCC and MENA articles, here are some regional pieces : Saudis who turn down jobs in order to stay on Hafiz nemployment benefits may be penalised The Wall Street Journal on how Saudis push young people, including women, into jobs. The article covers a number of initiatives and provides some insight on salary differentials between Saudis and expats. UAE confirms transfers of salaries. A view of the numbers of UAE Nationals who benefitted from the salary revisions for federal government employees announced in December. An overview of challenges and expectations of managers in the Middle East New income tax regulations in Oman - this one is a bit dry but may be useful. Dont forget to consult with a specialist ! page 29 / 31
  30. 30. Compensation Insider - February 2012 postsCompensation and Benefits with a Middle East flair - http://compensationinsider.comBest of the rest : As usual, great example from Storytelling with data. This time Cole describes what NOT to do when communicating using a table. The example is from a newspaper article, but the advice definitely applies to anything you can present in a table in Compensation & Benefits. In this HBR blog, the authors challenge the notion of an open talent market for CEOs, and the reliance of compensation committees on peer benchmarking to justify high CEO pay. Even if, as a human being and a compensation professional, I like their notion and think that CEO pay should be driven by more factors than simply external benchmarking, I posted a reply to this post as I feel that the idea needs to have more data to substantiate it. Check out the comments to see some of the most immediate questions that came to my mind. This Fistful of Talent post tells a story of how small things can have a big, long-lasting impact - read it and write a note and ask for input today ! This article relates to a new (and still small - but enough for a book to be published) trend of consumers choosing where they eat based not only on the quality of how the food was produced (was it free range chicken ?) but more importantly on how the employees are treated in that restaurant. An interesting concept ! Meeting Smart People, Rejecting Starbucks, and Making Memories : an interesting reminder from Victorio Milian.... And my special for the month : how to change the world with unusual ideas. Interviewed by Wharton,Simon Berry wants "mothers throughout the developing world to be able to buy an anti-diarrhoea kit tostop her child dying of dehydration from diarrhoea in all the places you can buy a bottle of Coke."Enjoy your reading !Liked this post ? Why don’t you share it on LinkedIn or Facebook ? Simply click on the link below andhelp your friends and connections benefit from it too ! _______________________________________________ page 30 / 31
  31. 31. Compensation Insider - February 2012 posts Compensation and Benefits with a Middle East flair - Compensation and Benefits with a Middle East flair PDF generated February 29, 2012 at 4:09 AM by Kalins PDF Creation Station WordPress plugin page 31 / 31Powered by TCPDF (