Asian cities reshuffle in Mercer's Cost of Living Survey

· Five Asian cities are in this year’s top 10: Hong Kong (No. 2), Tokyo, Japan (No. 3), Singapore (No. 5), Seoul, Korea (No. 6) and Shanghai, China (No. 8)

· Rankings of most Asian cities changed – currency is the key contributing factor

· All mainland Chinese cities surveyed fell in the ranking except Tianjin (No. 12) which climbed 18 places

· Mumbai, India leaped 25 places this year due to rapid economic growth, inflation and stable currency


Mercer’s annual Cost of Living Survey* has five Asian cities in the list of most expensive locations for working abroad:

To support the growing number of international assignees working in an increased number of locations, organisations are evaluating assignments from a cultural perspective, preparing for regional and lateral moves, and modifying compensation approaches to stay competitive.

According to Mercer’s 2017 Global Talent Trends Study, fair and competitive pay as well as opportunities for promotion are top priorities for employees this year. As a result, multinational organisations are assessing the cost of expatriate packages for their international assignees.

Mercer’s 23rd annual Cost of Living Survey finds that factors like instability of housing markets and inflation for goods and services contribute to the overall cost of doing business in today’s global environment. “Globalisation of the marketplace is well documented with many companies operating in multiple locations around the world and promoting international assignments to enhance the experience of future managers,” said Ilya Bonic, Senior Partner and President of Mercer’s Career business.

“There are numerous personal and organisational advantages for sending employees overseas, whether for long- or short-term assignments, including career development by obtaining global experience, the creation and transfer of skills, and the reallocation of resources.”

Mercer’s 2017 Cost of Living Survey finds Asian and European cities – particularly Hong Kong (2), Tokyo (3), Zurich, Switzerland (4), and Singapore (5) – top the list of most expensive cities for expatriates. The costliest city, driven by cost of goods and security, is however in Africa - Luanda, the capital of Angola. Other Asian cities appearing in the top 10 of Mercer’s costliest cities for expatriates are Seoul (6) and Shanghai (8).

“While historically mobility, talent management, and rewards have been managed independently of one another, organisations are now using a more holistic approach to enhance their mobility strategies. Compensation is important to be competitive and must be determined appropriately based on the cost of living, currency, and location,” said Bonic.

Asia Pacific

Five of the top 10 cities in this year’s ranking are in Asia. Hong Kong (2), which dropped from the top spot, is the most expensive city in Asia as a result of its currency pegged to the US dollar, which drove up the cost of accommodations locally. This global financial centre is followed by Tokyo (3), Singapore (5), Seoul (6), and Shanghai (8).

Mario Ferraro, Global Mobility Leader for Asia, Middle East and Africa (AMEA), Mercer, said, “Although a number of Asian cities remain amongst the world’s most expensive cities, key financial hubs such as Hong Kong and Singapore still continue to attract talent and remain a top choice for relocation. Although this year’s movements were due mainly to currency fluctuations, in particular against the US dollar, we did see cities – such as Mumbai – move up the ranks due to their strengthening economy and growing opportunities.”

Nathalie Constantin-Métral, Principal at Mercer with responsibility for compiling the survey ranking said, “The majority of Chinese cities fell in the ranking due to the weakening of the Chinese yuan against the US dollar. And, the strengthening of the Japanese yen along with the high costs of expatriate consumer goods and a dynamic housing market pushed Japanese cities up in the ranking.”

India’s most expensive city, Mumbai (57), climbed twenty-five places in the ranking due to its rapid economic growth, inflation on the goods and services basket and a stable currency against the US dollar. This most populous city in India is followed by New Delhi (99) and Chennai (135) which rose in the ranking by thirty-one and twenty-three spots, respectively. Bengaluru (166) and Kolkata (184), the least expensive Indian cities, climbed in the ranking as well.

Elsewhere in Asia, Bangkok, Thailand (67) jumped seven places from last year. Jakarta, Indonesia (88) and Hanoi, Vietnam (100) also rose in the ranking, up five and six places, respectively. Karachi, Pakistan (201) and Bishkek, Kyrgyzstan (208) remain the region’s least expensive cities for expatriates.

Australian cities have all experienced further jumps up the global ranking since last year due to the strengthening of the Australian dollar. Sydney (25), Australia’s most expensive city for expatriates, gained 17 places in the ranking along with Melbourne (46) and Perth (50) which went up 25 and 19 spots, respectively.

In the Middle East Dubai, UAE ranked 20th, followed by Abu Dhabi, UAE (23), and Riyadh, KSA (52), all of which climbed in this year’s ranking. Jeddah, KSA (117), Muscat, Oman (92), and Doha, Qatar (81) are among the least expensive cities in the region.

Interested?

Mercer also produces individual cost of living and rental accommodation cost reports for each city surveyed.

Check out Mercer's city rankings

Buy individual Mercer city reports

*Mercer's survey is designed to help multinational companies and governments determine compensation allowances for their expatriate employees. New York is used as the base city and all cities are compared against it. Currency movements are measured against the US dollar. The survey includes over 400 cities across five continents and measures the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment. The figures for Mercer’s cost of living and rental accommodation costs comparisons are derived from a survey conducted in March 2017. Exchange rates from that time and Mercer’s international basket of goods and services have been used as base measurements.

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Raise employee productivity to improve profits: Workforce Analytics Institute

With decreased productivity seen across Asia, organisations need to focus on raising employee productivity to improve competitiveness, says a new report from the Workforce Analytics Institute (WAI), a partnership between The Conference Board and Mercer.

§ Rising wage pressure, lack of skills to leverage technology, ineffective leadership and low engagement levels are making it difficult for firms to deliver productivity gains

§ Singapore and South Korea showed the largest drops in productivity per person with 3.12% and 2.34% respectively, compared to India, which had the highest gain at 2.71%, followed by Indonesia at 0.68%

§ Developing more effective leaders; leveraging technology; and enhancing employee engagement will enhance productivity

According to the report, raising employee productivity remains one of the key levers organisations can use to improve their competitiveness. Employing Analytics to Enhance Workplace Productivity states that the 'catchup' phase in which productivity gains were easy to achieve with the introduction of any technology, is gone in the Asia Pacific region and offers other solutions that organisations can use to enhance productivity: developing more effective leaders; leveraging technology in specific ways; and enhancing employee engagement.

Siddarth Mehta, Leader, Workforce Planning & Analytics, Mercer, commented, “Across Asia we are riddled with economies showing weak or slowing growth. Against this backdrop, productivity combined with rising wage pressure poses a serious threat to organisations’ profitability. Additionally, in Asia, where the demand for skilled labour far exceeds supply, companies in the region are encountering substantial difficulties: they are realising that the link between productivity and business performance is one of an organisation’s key resources and if effectively managed can lead to significant payoffs. Gone are the days when productivity could spike simply with the introduction of technology. Going forward, companies need to be more innovative.”

The Conference Board’s research shows that the global decline in productivity growth is a serious threat to competiveness and profitability – from 2007 to 2014 productivity growth dropped about a quarter of what it was from 1999 to 2006 and is expected to make little recovery before 2025. In Asia, most markets have seen a slump in labour productivity with nearly all markets, with the exception of India, Indonesia and Philippines, showing decreasing productivity between 2008 and 2016 when compared to 1999 and 2007.

The Conference Board’s research illustrates that higher productivity growth can be associated with larger real net operation surplus (NOS) growth.

Source: The Workforce Analytics Institute. Total factor productivity growth can drive profits. There is a positive relationship between average real net operation surplus (NOS) growth and average total factor productivity.

With insights from interviews and surveys with over 50 HR professionals in Asia, three main themes emerged:

Developing leadership to drive productivity
Where significant changes to the work environment are planned, as is the case for most productivity interventions, communication, preparation and transparency are key.

Enhancing employee engagement
Designing incentive schemes to motivate employees, or creating physical and virtual workplaces that promote teamwork, collaboration and engagement are ways to provide a healthy environment for high performance.

Leveraging technology to raise productivity
Technology is best utilised for communications, equipment upgrades, self-service systems and training.

According to Dr Caitlin Pan, Senior Researcher, Asia Region of The Conference Board and an author of the report, “To foster a culture in which consistent productivity growth is possible; organisations need to develop a systematic approach toward tracking and analysing the quality of their productivity interventions. We often see companies start a number of initiatives and continue to pursue them without a clear understanding of which, if any, has a positive impact on organisational outcomes including profitability. Feedback is useful, but measuring and qualifying the quality of the interventions will lead to enhanced productivity. Before designing and implementing an intervention, it is imperative to determine the current productivity levels so as to effectively evaluate the changes in productivity.”

Interested?

Read Employing Analytics to Enhance Workplace Productivity 

Financial services firms increase focus on building sound risk culture

• Financial services firms increase focus on building sound risk culture
• Majority of banks are planning changes to performance management programmes
• Many are changing employee value propositions to attract a new breed of graduates and retain millennials

Mercer’s latest Global Financial Services Executive Compensation Snapshot Survey* found that most financial services companies are taking significant steps towards fostering a sound risk culture amongst their staff. Of the companies surveyed, 62% have carried out initiatives to penalise misconduct and non-compliance to a ‘great degree’; 60% can show evidence of setting the right tone at the top and 58% are communicating clear (risk) culture objectives.

“It’s encouraging to see companies engaging senior leaders to set an example when it comes to risk taking and compliance behaviours,” said Vicki Elliott, Senior Partner and Financial Services Talent Leader at Mercer. ”The best way to foster a sound risk culture and combat excessive risk taking is with strong, authentic leadership who are willing to manage consequences for good and bad behaviour.”

Mercer research showed that rewarding positive risk behavior continues to be challenging with only a few organisations having taken these steps “to a great degree” (only 11%). “Proactively rewarding positive risk behaviour can be tricky but it is likely to have a more positive impact on culture in the long term compared to punitive measures,” said Elliott.

Mercer’s survey reviewed the practices of 68 financial services companies globally – banks, insurers and other financial services companies – based in 20 countries in Europe, North America, and Asia. The report provides an update on key changes in talent management and rewards practices in financial services

Experience with bonus malus**

Over 90% of banks and 72% of insurance organisations have malus policies in place largely due to regulation which requires that all or a portion of deferred or unvested awards can be reduced or wiped out. Such policies are mostly triggered by individual misconduct (89%), individual breach in compliance (89%) and negative business performance (74%). About half of banks have applied malus for individual performance reasons. However, approximately 60% of them do not retain individuals involved in malus cases, which may call into question their overall effectiveness.

Performance management changes

“Establishing an effective employee performance management system continues to be a highly challenging task for financial services organisations,” said Dirk Vink, Principal in Mercer’s Talent business. “However when done right it can have a greater impact on behaviour and performance than just changing compensation plans. Performance management reform is a key lever to help manage toward desired culture change.”

In Mercer’s study, more than half responded that their performance management approach works well, though only a small proportion indicated that it delivers exceptional value. Mercer’s survey finds that change is on the horizon, with half of all banks planning to make changes to their performance management processes in the next 12 months, this compares to just 16% of insurers. However, 32% of insurers want to change their processes but are unsure when. Almost half of respondents indicate that their feedback process and performance management linkage to development needs work. Most banks are increasingly involving their risk management function in selecting performance measures, goal setting and performance evaluation, which is a significant development for aligning performance with sound risk-taking.

Employee value proposition beyond pay

Mercer’s report found that many financial services companies have made or are making changes to their employee value proposition (EVP) beyond pay in order to better attract and retain talent who might otherwise choose not to work for them. The most prevalent initiatives planned, or already in place, are learning and development programmes (47%) and remote working programmes (43%). Other popular changes include implementing career frameworks (37%), introducing flexible working (37%) and non-monetary recognition programmes (34%).

“Following the financial crisis, the reputation of traditional financial services firms suffered badly. Esteem turned to stigma as a new generation of graduates started rejecting a culture they viewed as aggressive and lacking in integrity,” said Mark Quinn, Partner and Head of Mercer’s UK Talent business. “Banks, in particular, who have since been struggling to attract and retain the best new talent, are realising that these so-called millennials are not just in it for the money. They look for a sense of pride and purpose in their work, as well as flexibility and career support. To attract them, companies need to develop a strong and genuine purpose-led employee value proposition.”

Source: Mercer. Steps taken towards fostering a strong risk culture.

*This edition of the survey looks at changes in annual, deferred and long-term incentives, pay mix and role-based allowances. Forty-seven percent of companies are based in Europe, 32% in North America and 21% in Asia. Fifty percent of companies are in banking, 28% in insurance and 22% in other financial sectors (asset managers, for example).

***Bonus Malus refers to the part of the deferred bonus that has not yet been paid out and can be ‘reclaimed’ because, for example, an acquisition’s due diligence is not carried out thoroughly.

Singapore still popular as a regional hub, fourth-most expensive city globally

• Hong Kong is the most expensive city globally, with four other Asian cities in the global top 10 
• With a weaker RMB, all Chinese cities surveyed dropped in the rankings – Shanghai (7) and Beijing (10) 
• Singapore remains in fourth place, followed by Tokyo, which climbed from 11 to fifth 

Mercer Cost of Living Survey – Worldwide Rankings 2016 (The Mercer international basket, including rental accommodation costs)
Rank as of March		City	Country
2015	2016
2	1	HONG KONG	Hong Kong
1	2	LUANDA	Angola
3	3	ZURICH	Switzerland
4	4	SINGAPORE	Singapore
11	5	TOKYO	Japan
13	6	KINSHASA	Dem. Rep. of the Congo
6	7	SHANGHAI	China
5	8	GENEVA	Switzerland
10	9	NDJAMENA	Chad
7	10	BEIJING	China

Mercer’s 22nd annual Cost of Living Survey* finds that factors including currency fluctuations, cost inflation for goods and services, and instability of accommodation prices, contribute to the cost of expatriate packages for employees on international assignments.

“Despite technology advances and the rise of a globally-connected workforce, deploying expatriate employees remains an increasingly important aspect of a competitive multinational company’s business strategy,” said Ilya Bonic, Senior Partner and President of Mercer’s Talent business. “However, with volatile markets and stunted economic growth in many parts of the world, a keen eye on cost efficiency is essential, including a focus on expatriate remuneration packages. As organisations’ appetite to rapidly grow and scale globally continues, it is necessary to have accurate and transparent data to compensate fairly for all types of assignments, including short-term and local plus status.”

According to Mercer’s 2016 Cost of Living Survey, Hong Kong tops the list of most expensive cities for expatriates, pushing Luanda, Angola to second position. Zurich in Switzerland and Singapore remain in third and fourth positions, respectively, whereas Tokyo, Japan is fifth, up six places from last year. Other Asian cities appearing in the top 10 of Mercer’s costliest cities for expatriates are Shanghai (7) and Beijing (10).

Mercer's survey is one of the world’s most comprehensive, and is designed to help multinational companies and governments determine compensation strategies for their expatriate employees. New York City is used as the base city for all comparisons and currency movements are measured against the US dollar. The survey includes over 375 cities throughout the world; this year’s ranking includes 209 cities across five continents and measures the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment.

“Maximising return on investment with fewer resources and talent shortages worldwide makes growth initiatives more difficult for multinationals,” said Bonic. “Organisations must ensure they can facilitate the moves they need to drive business results by offering fair and competitive compensation packages.”

Bonic added that costs of goods and services shift with inflation and currency volatility making overseas assignment costs sometimes greater and sometimes smaller. Low levels of inflation have translated into fairly steady cost increases around the world.

Asia Pacific

This year, Hong Kong (1) emerged as the most expensive city for expatriates both in Asia and globally, as a consequence of Luanda’s drop in the ranking due to the weakening of its local currency. Singapore (4) remained steady, while Tokyo (5) climbed six places. Shanghai (7) and Beijing (10) follow. Shenzhen, China (12) is up two places, while Seoul, Korea (15) and Guangzhou, China (18) dropped seven and three spots, respectively.

Mario Ferraro, Global Mobility Leader for Asia, Middle East and Africa (AMEA) at Mercer, said, “Many Asian cities remain amongst the world’s most expensive places to deploy expatriates. However, this has not hindered companies from relocating talent here, as the region continues to offer growth potential and the demand for top talent remains high. With the ASEAN Economic Community (AEC) becoming official on January 1 this year, the region represents a US$2.6 trillion market and this continues to attract companies to Southeast Asia. Companies tend to choose Singapore as the regional hub for this huge collective market, because of its talent pool and established infrastructure.”

“The strengthening of the Japanese yen pushed Japanese cities up in the ranking,” said Nathalie Constantin-Métral, Principal at Mercer with responsibility for compiling the survey ranking. “However, Chinese cities fell in the ranking due to the weakening of the Chinese yuan against the US dollar.”

Mumbai (82) is India’s most expensive city, followed by New Delhi (130) and Chennai (158). Kolkata (194) and Bangalore (180) are the least expensive Indian cities ranked. Elsewhere in Asia, Bangkok, Thailand (74), Kuala Lumpur, Malaysia (151) and Hanoi, Vietnam (106) plummeted twenty-nine, thirty-eight, and twenty places, respectively. Baku, Azerbaijan (172) had the most drastic fall in the ranking, plummeting more than one hundred places. The city of Ashkhabad in Turkmenistan climbed sixty-one spots to rank 66 globally.

Australian cities have witnessed some of the most dramatic falls in the ranking this year as the local currency has depreciated against the US dollar. Brisbane (96) and Canberra (98) dropped thirty and thirty-three spots, respectively, while Sydney (42), Australia’s most expensive ranked city for expatriates, experienced a relatively moderate drop of eleven places. Melbourne fell twenty-four spots to rank 71.

The Middle East

For the Middle East, Dubai, UAE was ranked 21st, while Abu Dhabi, UAE (25), and Beirut, Lebanon (50) were also in the top 50. Jeddah, KSA (121) remains the least expensive city in the region despite rising thirty places. “Several cities in the Middle East experienced a jump in the ranking, as they are being pushed up by other locations’ decline, as well as the strong increase for expatriate rental accommodation costs, particularly in Abu Dhabi and Jeddah,” said Constantin-Métral.

Interested?

Mercer produces individual cost of living and rental accommodation cost reports for each city surveyed. Get more information on city rankings. 

Buy individual city reports

*The figures for Mercer’s cost of living and rental accommodation costs comparisons are derived from a survey conducted in March 2016. Exchange rates from that time and Mercer’s international basket of goods and services from its Cost of Living survey have been used as base measurements.

New HERO Scorecard targets companies outside US

HERO and Mercer have launched the HERO Health and Well-being Best Practices Scorecard in Collaboration with Mercer – International Version. Modelled after the US version, the HERO International Scorecard is designed for use by employers in any country*. Available online and free of charge, the new framework allows employers to evaluate their health and well-being efforts by using a comprehensive inventory of current best practices compiled by industry thought leaders.

“Social and workplace norms can differ greatly from office to office within large companies and from community to community within the US. Companies with an international presence face additional challenges because workplace health and well-being best practices that have been tested and proven in America might not be relevant in the other countries,” said Dr Paul Terry, President and CEO of HERO. “Business leaders need comparative data, but that can be quite costly and difficult to secure without the help of a resource like the HERO Scorecard.”

In the US, where the domestic version of the Scorecard has been available since 2008, employers can benchmark their program and outcomes against companies of similar sizes and industries. As employers begin completing the new HERO International Scorecard, benchmarks will become available that allow employers to compare their programmes to others in their own country and in other countries where the Scorecard is used.

The HERO International Scorecard asks employers to provide information about organisational and cultural support for employee health and well-being, specific programme offerings, integration of health and well-being programmes with other areas of the company, strategies to encourage participation (such as communications and rewards), programme costs, and outcomes. After submitting the online scorecard, the employer immediately receives an email showing their best practice scores in six areas that contribute to employee well-being. When available, benchmarks will also be added.

“Companies benefit in multiple ways by completing the HERO Scorecard: from access to information about best practices and comparative benchmarking, to planning for future program enhancements and building internal consensus for improvements,” said Dr Steven Noeldner, Mercer partner and chair of the HERO Research Study Subcommittee. “Providing this breadth of analysis and comparison for domestic and international business will streamline efforts for employers and give them a competitive advantage in building a healthy workforce now, and in the future.”

“With continuous, double-digit growth in health costs, ageing populations and ever-increasing health consciousness, companies in Asia take workplace health and wellness very seriously. Most employers are looking for the right solution to address health issues and related decreases in engagement and productivity,” said Cecilia Deasy, Partner, Regional Consultant, Mercer, Asia. “Unfortunately, too many organisations are implementing programmes that are passive in nature, with limited experience or guidance. As a result, most programmes fail to generate the material impact that organisations are looking for.

“Workplace health and wellness cannot be effectively managed with band aid solutions. Engagement, motivation, support andstrategy are critical to ensure success. With the best practice framework and achievable results, the HERO scorecard offers the evidence and navigational tools required for employers in this region to implement successful workplace health and wellness programmes and generate real results.”

Interested?

The International Scorecard is currently available in English only. Learn more about the HERO International Scorecard (PDF)

Take the International Scorecard

*The initial HERO Scorecard was intended for use in the US only.

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Asian financial institutions to average 4% pay increments for 2016

• Ratio caps driving more guaranteed fixed pay
• Asia and Latin America average 4.3% for projected 2016 base pay increases, against 2% to 2.7% in Europe and North America
• Overall, 2016 pay to be static: lower variable pay matched by fixed pay increases

Source: Mercer.

The 11th edition of Mercer's Global Financial Services Executive Compensation Snapshot Survey highlights that 2015 saw the world’s financial services organisations continue to respond to regulatory developments by increasing fixed pay, decreasing variable pay (bonuses) and increasing the emphasis on non-financial performance. While processes to penalise misconduct and non-compliance are widespread, rewarding positive risk behaviours continues to be a challenge, says the consultancy.

The survey, which was conducted in October and November 2015, reviews the pay practices of 71 global financial services companies — banks, insurers, and other financial services — based in 20 countries in Asia, Europe, North America, and South America.

According to Vicki Elliott, Senior Partner and leader of the Global Financial Services Talent Network at Mercer, "The focus for financial services firms is firmly on trying to set the right tone from the top with strong governance and high involvement of risk management. Overall, total compensation levels remain broadly the same compared to levels prior to regulated bonus caps. However, banks, particularly in Europe, have significantly increased fixed pay levels improving the certainty of pay delivered to key risk-takers."

The report found that 61% of organisations had increased their employees’ fixed pay by more than 5% while 58% had reduced variable pay by more than 5%, marking a shift in pay mix. Total compensation levels are expected to remain relatively unchanged in 2016 — within plus or minus 5% (92%) — and most organisations are not planning further changes to their pay mix. Dr Hans Kothuis, Partner and Executive Rewards Practice Leader, Asia & Middle East at Mercer said, “We are at a tipping point in Asia, as companies prioritise business critical functions and share resources across their businesses to increase overall productivity. Financial institutions in Asia are adopting a cautious outlook towards compensation for 2016.”

Overall, 2016 projected base salary increases for the sector are modest with average forecasts globally expected to be between 2% and 2.7%. The banking industry is generally projecting slightly lower salary increases than the insurance industry. The majority of organisations predict 2016 annual incentive levels to be similar to those in 2015; those expecting change predict that levels will decrease.

“There continues to be a concern that increasing the focus on fixed guaranteed pay breaks the link between pay and performance and may actually be counter-productive for aligning pay with risk,” says Dirk Vink, Mercer principal and Financial Services Project Manager. “We have concluded that the most positive impact on sound risk-taking behaviours and decision-making has come from significantly improved governance and increased involvement of risk management in the performance management and compensation process.”

Fostering a risk culture 

When asked how their organisation is fostering a strong risk culture, the most prevalent response was penalising misconduct and non-compliant behaviours (93%) followed by the role of risk management in performance expectation setting and evaluation (89%). Setting the right tone at the top of the organisation, for example, through top management leadership, communications and real consequences, was also highly cited (88%), as was training and coaching managers on sound risk culture (87%).

Intriguingly, with all parts of the business impacted by these risk management efforts, the report highlights that some organisations, particularly in North America, are finding it more difficult to attract and retain staff in the crucial functions that oversee these processes, the control functions (risk, legal and compliance).

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Mercer sounds alarm over under-representation of women in the workforce globally

Source: Mercer When Women Thrive global report.

Women are under-represented in the workforce globally, and if organisations maintain the current rate of progress, female representation will only account for 40% of the professional and managerial ranks in 2025, according to Mercer’s second annual When Women Thrive global report.

Among the key trends revealed in the report is that women’s representation within organisations actually declines as career levels rise – from support staff through the executive level.

“The traditional methods of advancing women aren’t moving the needle, and under-representation of women around the world has become an economic and social travesty,” said Pat Milligan, Mercer’s Global Leader of When Women Thrive. “While leaders have been focusing on women at the top, they’re largely ignoring the female talent pipelines so critical to maintaining progress.

“This is a call-to-action - every organisation has a choice to stay with the status quo or drive their growth, communities and economies through the power of women.”

Mercer’s report finds that although women are 1.5 times more likely than men to be hired at the executive level, they are also leaving organisations from the highest rank at 1.3 times the rate of men, undermining gains at the top.

Source: Mercer When Women Thrive global report. Current and projected female representation in 2025 at 2015 attrition rates around the world.

According to the When Women Thrive report, women make up 40% of the average company’s workforce. Globally, they represent 33% of managers, 26% of senior managers, and 20% of executives. In terms of regional rankings, Australia and New Zealand is projected to move from 35% in 2015 to 40% in 2025; and Asia ranks last at 28%, up from just 25% in 2015.

“In 10 years, organisations won’t even be close to gender equality in most regions of the world,” said Milligan. “If CEOs want to drive their growth tomorrow through diversity, they need to take action today.”

The research – the most comprehensive of its kind featuring input from nearly 600 organisations around the world, employing 3.2 million people, including 1.3 million women – identifies a host of key drivers known to improve diversity and inclusion (D&I) efforts.

“It’s not enough to create a band-aid programme,” said Brian Levine, Mercer’s Innovation Leader, Global Workforce Analytics. “Most companies aren’t focused on the complete talent pipeline nor are they focused on the supporting practices and cultural change critical to ensure that women will be successful in their organisations.”

Only 9% of organisations surveyed globally offer women-focused retirement and savings programmes, despite Mercer’s research proving that such efforts lead to greater representation of women.

Other key findings:

Only 57% of organisations claim senior leaders are engaged in diversity and inclusion initiatives

Involvement of men has actually dropped since the first report in 2014, when 49% of organisations said they are engaged in D&I efforts

Just 29% of organisations review performance ratings by gender with Australia/New Zealand ranking first

Four in 10 organisations offer formal pay equity remediation processes, compared to 34% globally, and 25% in Asia. But virtually no improvements have been made since 2014

Nearly a third (28%) of women hold P&L (profit and loss) roles with Asia at No. 2 (27%), and Australia/New Zealand in third place (25%)

Women are perceived to have unique skills needed in today’s market including flexibility and adaptability (39% vs. 20% who say men have those strengths); inclusive team management (43% vs. 20%); and emotional intelligence (24% vs. 5%)

About half of organisations in three key regions – Asia, US/Canada and Latin America – agree that supporting women’s health is important to attract and retain women. Yet only 22% conduct analyses to identify gender-specific health needs in the workforce

In a series of separate studies Mercer has found that clients find that building their leadership pipeline is one of their biggest challenges, and included a lack of plans to develop women in their workforce for leadership as one of the problems in talent management strategies. 

Said Kate Bravery, Mercer’s Growth Markets Leadership & Organizational Performance Practice Leader: “To achieve long term success, a more strategic approach to nurturing the pipeline of leaders is required. This starts by translating core business objectives into a leadership strategy that defines the talent pool, competencies and the tactics required to build leaders from within. It continues with an execution plan that helps businesses identify, develop and accelerate the critical talent moves that will help them achieve real competitive advantage.”

Mercer’s Leadership Practices Study comprises a series of research reports based on surveys conducted from 2012 to 2014 that explore and compare current leadership trends in Asia Pacific, Latin America and the Middle East. Using data gathered from nearly 1,000 companies across the three growth market regions, these studies examine how companies approach leadership strategy, assessment, development and succession planning.found that companies in growth market regions are adopting effective practices for nurturing leadership talent, for example:

· Businesses in Asia-Pacific are investing heavily in training and developing senior level and global leaders at the top of their organisations.

· Firms in the Middle East are doing a good job of using global leadership capability models to help with talent development and creating opportunities for international assignments to which any employee can apply.

However, the studies also identified critical gaps in current planning that potentially limit organisations’ ability to produce the multi-skilled leaders required in modern, rapidly-growing businesses, as well as differences in the leadership competencies that are deemed critical for success by companies in each region.

Key findings included:

· Companies can do more to plan and prepare for the next generation of leaders – fewer than half of those companies responding conduct regular pipeline projections, very few have specific plans for developing key segments of their workforce (e.g. women or grooming local talent) and even fewer have metrics for tracking progress on pipeline management.

· Many businesses are not effectively identifying who is ready for the next move or position within their leadership pipeline – 15% of businesses in Asia Pacific and just 6% in the Middle East report that they have strong, “ready-now” successors in place for critical leadership roles.

· Companies are spending less annually per person on training and developing middle level and frontline leaders than they do on global or senior level leaders. Fewer than 20% of companies in the Middle East are spending US$5,000 or more per person each year to develop their youngest future leaders. In Asia-Pacific, under-investment is even starker, with just 5% of companies achieving this level of spending for individuals at the earliest stage of the pipeline – the next generation of leaders.

· Companies view a leader’s ability to ‘create strategy’ as one of the most critical competencies for leadership success – 64% of companies in Middle East and 36% in Asia Pacific prioritise strategic competencies above other operational, people or personal capabilities.

Highlights for Asia Pacific:

· While leadership development strategies are in place in many organisations, execution remains a significant problem as performance management processes are not effectively identifying who is ready for the next move or position within their leadership pipeline.

· Systems and processes for executing talent management processes are extremely inefficient, still relying on paper-based and email resources.

· Organisations are not focusing leadership development efforts on women as a segment, despite women making up a small percentage of senior management in organisations.

· Companies continue to rely on expatriates, rather than local talent, for top leadership roles, calling into question the effectiveness of leadership development and localization strategies.

· Investment in leadership development is concentrated on top-level leaders, organisations need to also reach deeper and earlier into their leadership pipelines to build talent from within.

· Leaders and managers are not being held accountable for grooming future leadership talent.

· People-related competencies are not among those seen as most critical by organisations for leadership success.

· There is a disconnect between the development methods rated most effective by respondents (“stretch” assignments) and those methods that are most widely used such as classroom training and individual development plans.

Highlights for Middle East

· Half of the companies have defined leadership development strategies in place, although this is more likely in larger organisations.

· Those organisations without a defined leadership development strategy are often reliant on buy/borrow talent strategies.

· The short-term focus of companies jeopardises their ability to build strong leadership pipelines.

· Organisations are missing some critical infrastructure to support leadership development.

· Many companies recognise the lack of attention paid by organisations and top executives to leadership development.

· Companies are relying on traditional methods such as classroom training to develop talent and leadership expertise and these are not proving to be effective in nurturing future leaders.

· Key talent pools are under-represented in leadership positions and often overlooked in talent development programmes, including local staff and women.

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Mercer charts changing profile of expat assignments

The majority of multinational companies (56%) expect to increase their use of short-term assignments in 2015/16, according to a report on expatriate policies and practices by Mercer - a global consulting player in advancing health, wealth and careers.

The research highlighted an ongoing diversification in the type of assignments used by companies. Notably, over the next year or so, around half of companies anticipate an increase in the use of permanent transfers (54%), developmental and training assignments (50%) and locally hired foreigners (47%). A smaller proportion of respondents (44%) expect to see an increase in more traditional long-term assignments.

“Companies are using a more varied range of assignments in order to respond to evolving business needs and changing patterns in the global workforce,” said Anne Rossier-Renaud, Principal in Mercer’s global mobility business. “The increased diversification of assignment types adds complexity which can result in potential compliance and policy challenges for HR and mobility directors. However, it also creates opportunities to positively impact the overall business strategy by mobilising key resources in more flexible and cost effective ways.”

Commenting on the Asia Pacific implications of the research, Mario Ferraro, Regional Global Mobility Leader for Asia, Middle East and Africa for Mercer said:  “Many organisations continue to face the challenge of moving talent to pursue strategic expansion, whilst managing the cost of international assignments in an increasingly uncertain economic environment. A significant 57.1% of companies reported an increased number of assignments requiring specific technical skills and just over half of respondents (50.3%) are sending more people overseas to fill vacancies requiring specific managerial skills.”

“In Asia Pacific, most organisations are constrained in terms of the attractiveness of the compensation package offered to their cross-border talent.  Thirty percent of organisations reported that “poor package attractiveness” is a large obstacle to mobility. It is evident that mobility professionals have a difficult equation to balance and need to find creative ways to offer more attractive terms and conditions without increasing the cost. These research results suggest that dual career families pose a significant obstacle to employee mobility, with 33.5% reporting this as a mobility inhibitor,” said Ferraro.  

“It is interesting to note that 54.5% of Asia Pacific respondents opted for short-term assignments in the past two years, whereas 50% reported an increase in the number of 'commuter' assignments. Short-term and commuter assignments are usually undertaken on an unaccompanied basis, circumventing the dual-career family issues, although they imply spending more time away from the family and hence are not without implications,” he added.

Mercer’s Worldwide Survey of International Assignment Policies and Practices report covers 831 multinational companies with approximately 29 million employees combined. It found that over half of companies increased their use of short term (51%) and permanent (50%) assignments over the past two years – whereas only 43% increased the use of long-term assignments. Globally, 85% of companies have a policy or policies in place for international assignments (up from 81% in 2012). The report also noted a marked increase in companies with multiple policies (64%, up from 57%), a consequence of the diversifying trend in assignments.

“One policy is unlikely to fit all, and such an approach can lead to inadequate compensation which again can make it difficult to attract and retain talent. Implementing fit-for-purpose policies, to suit both different assignees and assignments, can be a highly efficient cost-saving initiative for most global mobility functions,” said Rossier-Renaud.

The top five drivers behind international assignments are; to ‘provide specific technical skills not available locally’ (47%), to ensure ‘knowhow transfer’ (43%), to provide ‘specific managerial skills’ (41%), to facilitate ‘career management and leadership development’ (41%) and fulfil ‘specific project needs’ (40%). In the future, 57% of companies expect the number of key or strategic assignments to increase, 51% expect to deploy a higher number of younger assignees and 41% anticipate more assignments to remote locations. Companies reported the highest expected increase in assignments to be deployed to US, China, UK, Singapore and Brazil.

‘Dual career’, i.e. the challenge of effectively helping to manage the career aspirations of the spouse, and ‘family issues’ are cited as the main barriers to employee mobility, with 37% of respondents citing these issues combined as a large or very large obstacle. The ‘cost of current conditions’ ranks as the second highest obstacle (35%), followed by ‘hardship considerations’ (25%) and ‘career management’ (23%). Notably, all obstacles scored as significantly less important than in the previous survey, suggesting companies are implementing proactive measures to overcome these issues.

“With the increased use of alternative assignment types such as commuters and short term assignments, companies are by-passing some of the major obstacles to mobility,” said Rossier-Renaud. ”Employees on these assignments are less likely to bring the family along, allowing the spouse to continue working in the home country and saving the company the cost of relocation. However, these assignment types can come with significant compliance challenges, and it is imperative that companies monitor these assignees carefully for tax, social security and immigration purposes. Failure to do so can expose both the company and employee to serious legal and financial penalties.”

The proportion of female expatriates has increased somewhat, with the worldwide average participation standing at 15%, up from 12% in 2013 and 9% in 2010... Agewise the majority of long-term assignees (66%) are between 35 and 55 years old, whereas short-term assignees are increasingly younger, under 35 years old (48%, up from 45% in 2013). With an average of 10% and 7% representation in long and short term assignments respectively, the over 55s remain very under-represented in a mobility context. Looming skills shortages as a result of an ageing population is likely to change this picture over time.

Kate Fitzpatrick, Senior Mobility Consultant and Mercer, said: “The statistics on female assignee representation are clearly not representative of the workforce at large. Companies would do well to review their candidate identification and selection procedures, as well as the benefits provided under international assignment policies, to ensure there is nothing overt nor implied which is restricting the deployment of female talent.”

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Singapore's CPF retirement savings systems slips in the MMGPI rankings

A slight drop in the index value of Singapore’s retirement savings system, the Central Provident Fund (CPF), has seen it slip from a B grade to C+ grade in the 2015 Melbourne Mercer Global Pension Index (MMGPI). Singapore’s overall score decreased from 65.9 in 2014 to 64.7 in 2015, moving it further away from an ‘A’ grade, which is given to pension systems that score above 80. Denmark and Netherlands are the only countries to achieve an A grade in the history of the index.

The drop in Singapore’s score is attributable to:

1) A change in calculation which reduced the level of pension assets as a percentage of GDP for Singapore. This calculation represents the amount of money set aside for retirement;

2) Most recent data from the Economic Intelligence Unit showing a decrease in the net household savings rate for Singapore;

3) The United Nations’ updated life expectancy figures in its World Population Prospects: The 2015 Revision report, showed a continued decline in mortality rates for Singapore.

“While Singapore’s retirement income system remains amongst the best in Asia, we are not the best globally. Improvement will be influenced by the legislative and regulatory environment,” said Neil Narale, Asia Retirement Leader for Mercer.

“However, Singapore is on the right track, having announced improvements to CPF in 2016, including increasing the wage limit, contributions and guaranteed investment returns for older members and introduction of the Silver Support Scheme to help low income retirees."

Now in its seventh year, the MMGPI measured 25 retirement income systems against more than 40 indicators under the sub-indices of adequacy, sustainability and integrity. The MMGPI is the world’s most comprehensive comparison of pension systems. It covers close to 60% of the world’s population and suggests how governments can provide adequate and sustainable benefits that protect their citizens against longevity risk, the risk of their ageing population outliving their savings, potentially one of the biggest economic and social risks facing many retirees today.

Author of the report and Senior Partner at Mercer Dr David Knox said, “Implementing the right reform to improve pension systems and provide financial security in retirement has never been more critical for both individuals and societies.

“The MMGPI is an important reference for policy makers around the world to learn from the most adequate and sustainable systems. We know there is no perfect system that can be applied universally, but there are many common features that can be shared for better outcomes.”

The 2015 MMGPI looked beyond the annual rankings to observe changes over the last seven years and assess which pension systems will continue to deliver and which ones are at risk.

“Our seven-year snapshot highlights the importance of measures such as adjusting the state pension age, increasing workforce participation amongst our ageing population, or funding additional contributions for future retirement income,” said Dr Knox.

All of the 11 countries that have been part of the MMGPI since it began in 2009 have experienced an increase in the expected length of retirement from 2009 to 2015, with the average length rising from 16.6 years to 18.4 years.

Five countries – Australia, Germany, Japan, Singapore and the UK – have increased their pension age to offset the increase in life expectancies, but these are not enough to halt the increasing length of retirement.

The Index also looks at the average expected length of retirement in 20 years, and by this measure, three countries have witnessed a reduction. For Canada and the Netherlands this is due to a projected increase in the state pension age from 65 to 67 during the 20 years, while for the US, life expectancy has reduced slightly. The other eight countries showed an increase.

For the 16 countries that have been part of the MMGPI since the 2011 report, the average labour force participation rate for 55 to 64 year olds has increased from 57.9% to 62.2% between 2011 and 2015, or just over 1% per year.

However, averages can be misleading. The labour force participation rate at older ages actually went backwards in the US. In Brazil, India and China, it increased by less than 4%.

“Extending the years that individuals spend in the workforce is one of the most positive ways of developing sustainable retirement systems when life expectancies are increasing,” Dr Knox said.

“While there is a natural limit to the participation rate at older ages, with most countries still below 70%, the scope for significant increases across the world remains, which would improve the sustainability of many pension systems.”

The sustainability of a pension fund cannot be assessed without reviewing the level of funds set aside today to pay future retirement benefits so that the expected pension are not a financial strain on the next generation.

There is an enormous variety in the level of pension assets held ranging from 1.8% of GDP in Indonesia and 6% of GDP in Austria to 160.6% of GDP in the Netherlands and 168.9% of GDP in Denmark.

“The diversity in pension assets held as a percentage of GDP recognises that some countries have very limited private pension arrangements whereas others have well-developed and mature pension systems. However, it is an important warning for all countries to prepare, prepare, prepare,” said Dr Knox.

The MMGPI notes that there is room for improvement in all countries’ retirement income systems. Suggested measures to improve Singapore’s system include:

· Reducing the barriers to establishing tax-approved group corporate retirement plans;

· Opening CPF to non-residents (who comprise more than one-third of the labour force);

· Increasing the labour force participation rate amongst older workers.

“Employers continue to be interested in either sponsoring a corporate retirement plan, or privately managing parts of the CPF investments. Policies that include employer participation would further increase Singapore’s grade in the future,” said Narale.

The Index looks objectively at both the publicly-funded and private components of a system, as well as personal assets and savings outside the pension system. It is published by the Australian Centre for Financial Studies (ACFS) in conjunction with Mercer and is funded by the Victorian State government of Australia. 

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Mercer and Saville Consulting to provide global leadership solutions

Consulting companies Mercer and Saville Consulting will work together to provide sophisticated leadership assessment and development tools to corporate clients operating in increasingly complex, cross-border markets.
The two companies have signed a formal agreement in response to growing demand from corporates in emerging markets for tools that help them accurately predict the future effectiveness of their senior leaders in a rapidly changing, global context.

For the first time, companies will be able to conduct standardised, global leadership assessment in multiple languages that specifically address the needs of today’s business environment.

Together, Mercer and Saville Consulting will deliver a suite of leadership solutions. In particular, they will launch a Global Leadership Profile Tool, which brings together Saville’s psychometric testing with Mercer’s insight into how companies can develop global leadership capabilities among senior executives.

Mercer predicts that developing a truly global leadership capability will continue to become even more critical in sustaining economic success and competitive advantage across growth markets.

“Mercer’s research and experience with large corporate companies around the world demonstrates an ever-increasing need for leaders with a global mindset and an understanding of cultural and geographical sensitivities. This is now a must have for modern businesses. Traditional leadership competencies are no longer enough,” said Kate Bravery, Partner and Leadership & Organisational Performance Practice Leader, Growth Markets for Mercer.