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September 20, 2006
More Multinationals Look to Centralized Compensation Approach

A growing number of multinational companies are shifting to more centralized compensation and benefits structures, according to a survey by Watson Wyatt Worldwide and WorldatWork.

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The survey included 275 companies with operations in two or more global regions.

The survey found that 56 percent of respondents said they planned to shift to a more centralized structure over the next two years, up from 42 percent in 2004. In addition, two-thirds of multinational companies (66 percent) said they have adopted a human resources strategy that is consistent across offices worldwide.

"A centralized global approach to compensation and benefits is necessary for consistency and alignment with company goals, although multinationals should watch how much emphasis they place on consistency," says Bob Wesselkamper, director of international consulting at Watson Wyatt. "Local cultures and the availability of resources play a big role, too. The key is finding the right balance, as some programs are best managed globally, while others are best managed locally."

The survey found that the programs that respondents were more likely to manage globally included executive compensation (92 percent) and long-term incentives for non-executives (79 percent). Forty-eight percent of companies said they manage their performance-management program globally.

The programs that multinationals were more likely to manage regionally or locally included perquisites (89 percent), health and welfare (87 percent), and retirement (83 percent)

"Companies are fully centralizing programs that drive strategic performance," says Don Lindner, compensation practice leader at WorldatWork. "Centrally managing executive compensation programs allows multinationals to strongly link rewards for executives to the results of the total enterprise."

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