ihrm healthcare 1
TRANSCRIPT
L/O/G/O
Wolfang’s balancing act:
Rewarding Healthcare executives
in a dispersed yet integrated firm
Wolfang’s balancing act:
Rewarding Healthcare executives
in a dispersed yet integrated firm
Who’s Wolfgang?Who’s Wolfgang?
• Master’s degree in International Management from University of Hamburg (Specialized in Human Resource management and Compensation Strategies)
• Executive MBA Program with a transnational orientation
Who’s Wolfgang?Who’s Wolfgang?
• Worked in the HR department of a medium-sized German Technical company
• Have been HR manager of Healthcare for one year and been in charge of Global Compensation Polices
• His project: Reviewing existing Global Compensation Polices and practices in Healthcare
• Company’s requirement: Recommendation on coordination of Global pay system in Healthcare
Which’s Healthcare?Which’s Healthcare?
• One of the largest European pharmaceutical companies
• A successful global player in the pharmaceutical market (with 200 subsidiaries and 30,000 employees all over the word)
• Key markets: Europe, US/Canada, Latin America, Asia Pacific
Healthcare’s Finance (in 2005)Healthcare’s Finance (in 2005)
Table 1: Key dataTable 1: Key data
Chart 1: Net sales by region (2005)Chart 1: Net sales by region (2005)
42%
35%
5%
11%6%
Europe
USA/Canada
Asia Pacific
Latin America
Other
Healthcare’s PersonnelHealthcare’s Personnel• Chart 2: Employee by region (2005)
Headquaters Europe USA/Canada Asia Pacific Latin America Other Total0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2005
2004
Chart 3: Personnel costs of HealthcareChart 3: Personnel costs of Healthcare
Wages and Salary
Social security and Support Payments
Pensions
Total
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2005
2004
Healthcare’s leadership competenceHealthcare’s leadership competence
Business
related
competencies
People
related
competencies
Personal
competencies
Business
related
competencies
Decision Making
Healthcare’s leadership competenceHealthcare’s leadership competence
Innovation and change
Achievement Orientation
People
related
competencies
Impact and Influence
Team leadership
Capability Development
Relationship Building
Healthcare’s leadership competenceHealthcare’s leadership competence
Personal
competencies
Self-development
Healthcare’s leadership competenceHealthcare’s leadership competence
Analytical thinking
Business understanding
Healthcare’s HR policiesHealthcare’s HR policiesHR
HR area Policy direction
Recruitment of key talents
Management development
Transfer/ mobility
Executive compensation
Pension systemOrganization development
Performance management
Good recruitment practicesStrategic workforce planningCorporate management development system base on corporate leadership competency setEnhanced cross-functional mobilityWell-balanced cross-regional mobilityAttractive and competitive compensationAligned bonus systemMove to define contribution systemsClear structures, efficient processesCorporate announcements on managerial and structural changesBalanced goal settingMeasuring performanceClear feedbackLinkage to variable pay
The global performance system of HealthcareThe global performance system of Healthcare
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The bonus of
managers
The individual
Performance
management
1. Goal setting and appraisal
2. Leadership feedback
3. Link to the compensation policy
- Long-term incentives
- Short-term incentives
1. Individual component
2. My unit component
3. Broader Context component
What’s the trouble in the road to international coordination at Healthcare?What’s the trouble in the road to international coordination at Healthcare?
• Figure 1: Healthcare’s cross-border strategy
What’s the trouble in the road to international coordination at Healthcare?What’s the trouble in the road to international coordination at Healthcare?
• Standardizing the new compensate system: 65% fixed income + 35% variable income depending on individual performance
• The new system was opposed by employees in France, Germany
What did Wolfgang do?What did Wolfgang do?
• 1st step: contact with the HR representative in Japan and USA and visit others subsidiaries.– Realize the difference in culture between
Japan and USA (the Uncertainty avoidance)– Visit some of Healthcare’s subsidiaries and
talk with HR managers
What did Wolfgang do?What did Wolfgang do?
• 2nd step: Present the right mixture of standardization and flexibility– Figure 2: Balancing global integration and
local responsiveness in Healthcare’s compensation strategy
Impact of a transnational strategy on Pay strategies and underlying basic pay decisions
Variable/fixed pay
Utterance avoidanceCountry specific
Employees in USA,
Japan, Taiwan, Mexico
& Latin America prefer
variable pay incentives
Australia & Japan
moderately emphasize
this kind of pay
Risk taking managers
accept large incentive
payments
Risk averse not accept a
high income variability
Individual performance-based pay and group performance-based pay
1. Company specific features
- Individual achievements for motivation
- Group performance-based pay: nature
of work demands close corporation
2. Cultural aspects: individualism/collectivism
- High individualism: tend to value personal
accomplishment, selfishness, independence,
individual attributes, internal locus of control
- Low individualism:
team accomplishment, sacrifice for others,
dependence on the social units
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Short-term and long-term incentives
Frequent reward: tied to desired
behaviors such as bonus system
Short-termShort-term
Long-termLong-term
Share options
More appropriate in countries with
high individualism, low UAI, PDI
The global performance system of HealthcareThe global performance system of Healthcare
The individual performance management
1. Goal setting and appraisal
2. Leadership feedback
Compensation policy
1. Long term incentives: grant share options to its managers
2. Short term incentives
50%
25%
25%
Individual component My unit
Broad context
The bonus of managers at Healthcare
Local adaption & exception
Lie in the cultural and institutional environment
• Legal requirements: Firm do not have a choice whether to adapt to the local
conditions or not
Fringe benefits: determined to a large extent by the legal environment
Ranges for calculating the bonus potential: Cultural preferences
• High uncertainty avoidance: bonus potential would not be fully used while in
countries
• Low uncertainty avoidance: contrary
Currency rules
• Do not follow the pattern of firm external determinants: for the markets
in the US and Japan
QUESTION 2QUESTION 2
Should he add or delete some existing practices from the T account?
No add or delete factors from the T account
• Basic of cultural and institutional determinants
• Integration of political influences of different network
units in the analysis of transnational pay practices
Our solutions
Strategically important function-specific skills
Control of an important market size
Success in a highly competitive market
Strategically important management skills4
1
2
3
Question 1Question 1
• Should he move some of the existing pay elements across the T account, shifting them from globally standardized to locally customized?
Global Standardization
Localization
Driving FactorsDriving Factors
Standardized HR Policy
Costs increasing
Change in Environment
Pressure on Price
Question 1 Question 1
Transnational CompensationTransnational Compensation
Framework explaining transnational compensation strategies
Question 3Question 3
• Should he change the weights or emphases (percentages) of existing elements of the pay system?
Pay System ChangesPay System Changes
Option Condition Fixed Variable
1 > High UAI ( 70% – 75%) (25% - 30%)
2 > Low UAI = / (60% - 65%) = / (35% - 40%)
ImpactImpact
• More safety• Discouraging performance-based
incentives scheme
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Thank You!Thank You!