As companies become global enterprises, they face common challenges sparked by their growing aspirations and operations and the need to leverage resources and control costs across geographies. These shared experiences have led to a number of global business priorities that now dominate corporate agendas.

Mercer identified these global business challenges through a review of business, academic and governmental research in 2006. Mercer then conducted a survey of nearly 400 global organizations to learn how they are prioritizing these challenges and what implications the challenges have for HR and the management of their organizations’ workforces. In particular, the research probed the impact on total rewards programs, which are critical to attracting and motivating the talent that is essential for global business success.

Mercer’s research shows that, in order of importance, the top global business challenges include:

1. Generating top-line revenue growth
2. Globalizing business operations
3. Responding to emerging skill shortages
4. Continuously improving processes
5. Controlling costs and managing risks
6. Engaging employees
7. Changing working demographics

These challenges are discussed in more detail below, with related challenges – such as top-line growth and bottom-line cost improvements – addressed together.

Revenue growth and costs

Mercer’s research indicates that the No. 1 priority, by far, for most companies is generating top-line revenue growth. This business imperative is affecting HR agendas as companies seek to both increase revenues and control cost and risk. Survey participants told us that to meet the challenge of revenue growth, HR is focused on increased recruitment of key talent and sales effectiveness, which both translate to bottom-line improvements in the short term. Over the long term, their priority is compensation and benefit programs. On the cost-control side, HR’s priorities include managing health care costs, other benefits costs, and variable costs including variable pay programs, as well as outsourcing noncore business activities.

Leading companies are using a total rewards approach to meet this global business challenge. For example, total rewards to help drive revenue growth by focusing rewards on key performance drivers, aligning rewards with business design and profit models, rewarding sales performance and innovation, and providing training to key contributors.

In terms of reducing cost and risk – the other side of the profitable growth equation – total rewards strategies contribute when they reduce or eliminate long-term benefit liabilities and reduce fixed costs for employees who are not performance drivers. The governance practices inherent in a total rewards approach are designed to control risk and cost around the world. Overall, the total rewards approach ensures that HR investments are spent wisely to deliver the best return to the organization.

Demographics and skills

A second major global theme relates to demographic changes in the workforce. Organizations are grappling with the implications of a workforce that is aging and in which there is a shortage of key highdemand and technical skills. Given these realities, companies report a focus on succession planning, flexible work schedules, global sourcing of talent, and compensation and benefits plans for a diverse workforce.

Total rewards strategies can help by reflecting the differing priorities of employees at different stages of their lives and careers. Examples include enhancing work-life balance and employee diversity programs and introducing flexible retirement programs. Training and development programs designed to support succession planning also help companies retain key institutional knowledge that is critical to continued performance.

Companies can actively manage skill shortages with total rewards programs that not only focus rewards to motivate and retain key talent pools and to develop existing talent, but also to recruit aggressively from new talent pools. To compete successfully, HR will need to understand the company’s employment brand value and clearly communicate it, along with career progression and financial reward opportunities, to potential new hires.

Globalizing business operations

Companies report that globalization continues to be a major factor affecting their businesses and their HR strategies, fueling interest in global HR information systems, organization restructuring and leadership development.

When companies structure rewards to support their particular global business model, whether it relies on serving local markets locally, leveraging common suppliers to gain global economies of scale, or sourcing work where talent is cheapest and most productive, they operate more effectively and efficiently. Total rewards strategies should be designed to reflect different global, regional and country priorities and should include comprehensive, integrated employee mobility programs and rewards for global and cross-border collaboration. The success of these strategies will require global rewards management processes and decision frameworks that support the global business strategy.

Engaging employees

Employers recognize that people no longer expect to have a one-employer career and instead will likely change jobs numerous times in their professional lifetimes. This poses a major challenge for organizations, which are responding by surveying employees to learn more about their preferences and by emphasizing incentive and recognition programs, flexible benefits, and better communication around business and personal results. 

A total rewards approach that is aligned with employee preferences and offers choice and diversity across the spectrum of rewards – including flexible benefits, work-life balance and investment choice – can enhance employee engagement. In addition, it is important to communicate effectively with employees in ways that support and strengthen the employment brand and clarify opportunities for advancement.

Continuous process improvement

The final global theme that emerged from Mercer’s research is the interest companies have in continuous process improvement. Organizations are asking, “How can we do things better, faster and cheaper?” To meet this business challenge they are turning to integrated HRIS, payroll and benefits systems; employee self-service; and the outsourcing of transactional functions.

Total rewards strategies can make these priorities concrete through the outsourcing or offshoring of benefit administration, the co-sourcing of compensation management and the use of global vendors. Global companies should also embed into their total rewards approach sound policies and processes for executive remuneration governance, integrated global information flow and governance, M&A due diligence and integration, and other decision making.

Meeting the global challenges

When designed with today’s major business challenges in mind, a total rewards approach – one that holistically combines compensation, benefits and careers into a package that is compelling to the employee and strategically sound and sustainable for the employer – is one of the most powerful tools available to global companies as they compete for the right talent and, ultimately, business success.

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