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2014 EMEA EXPATRIATE MANAGEMENT CONFERENCE CONSUMER GOODS, FOOD AND RETAIL BREAKOUT 3-4 APRIL, BUDAPEST, HUNGARY
Kate Fitzpatrick, Principal
London, UK
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 1 1
Agenda What We Will Cover Today
• Proctor & Gamble Case Study: Managing International Mobility in a VUCA
World
• Consumer Goods Industry Future Trends: Impact on Mobility
• Q&A
April 4, 2014
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
Section 1
PROCTOR & GAMBLE CASE STUDY MANAGING INTERNATIONAL MOBILITY IN A VUCA WORLD
April 4, 2014 2
Leonid Davydov
Senior HR Manager
Expatriate Compensation
& Policy EMEA
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 3 3
Agenda The case study will cover:
• P&G (Procter & Gamble) global business and global talent
• International Mobility Programme and its evolution
• Facing the challenges of 2008-2013
• Key learnings and Q&As
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
Our Heritage - More than 175 Years of Growth The Company was founded in Cincinnati in 1837 by William Procter and James Gamble, a candle maker and a soap maker who started a small business that has grown into one of the world’s most admired companies and includes brands that have become household names, used and trusted by consumers every day in nearly every part of the world.
P&G at a Glance
Countries of Operations ~70
Countries Where Our Brands Are Sold 180+
Consumers Served by Our Brands 4.8 billion
(Approximate)
Financial Highlights
NET SALES ($ billions)
09
13
12
11
10
$84.2
$75.3
$83.7
$81.1
$77.6
Fiscal years ended June 30
2013 Net Sales
BY BUSINESS SEGMENT
Beauty
Grooming
Health Care
Fabric Care and Home Care
Baby Care and Family Care
24%
15%
9%
32%
20%
*Results exclude net sales in Corporate, fiscal year ended June 30, 2013
2013 Net Sales
BY GEOGRAPHIC REGION
North America
Western Europe
CEEMEA
Latin America
Asia
39%
18%
18%
10%
15%
2013 Net Sales
BY MARKET MATURITY
Developed
Developing
61% 39%
Leadership Brands
Global Beauty
GLOBAL BUSINESS UNITS CATEGORIES LEADERSHIP BRANDS
Beauty Care Antiperspirant and Deodorant,
Cosmetics, Personal Cleansing,
Skin Care
Cover Girl, Max Factor, Olay,
Old Spice, Safeguard, Secret
Hair Care and Colour Hair Care, Hair Colour Head & Shoulders, Herbal
Essences, Nice ‘n Easy,
Pantene, Rejoice
Prestige Fragrances, Prestige Skin Care Gucci, Hugo Boss, SK-II
Salon Professional Salon Professional Wella
2013 NET SALES
$20 billion*
* This reflects an estimate. Our historical
financial data will be restated to reflect the
new structure in fiscal year 2014.
Global Baby, Feminine
and Family Care
GLOBAL BUSINESS UNITS CATEGORIES LEADERSHIP BRANDS
Baby Care Baby Wipes, Diapers, Pants Luvs, Pampers
Family Care Paper Towels, Tissues,
Toilet Paper
Bounty, Charmin, Puffs
Feminine Care Feminine Care, Incontinence Always, Naturella, Tampax
2013 NET SALES
$22 billion*
* This reflects an estimate. Our historical
financial data will be restated to reflect the
new structure in fiscal year 2014.
Global Fabric and Home Care
GLOBAL BUSINESS UNITS CATEGORIES LEADERSHIP BRANDS
Fabric Care Bleach and Laundry Additives,
Fabric Enhancers, Laundry
Detergents
Ace, Ariel, Bold, Bounce, Dash,
Downy, Gain, Tide
Home Care Air Care, Dish Care,
Surface Care
Cascade, Dawn, Febreze,
Mr. Clean, Swiffer
P&G Professional P&G Professional —
Personal Power Batteries Duracell
2013 NET SALES
$26 billion*
* This reflects an estimate. Our historical
financial data will be restated to reflect the
new structure in fiscal year 2014.
Global Health and Grooming
GLOBAL BUSINESS UNITS CATEGORIES LEADERSHIP BRANDS
Braun and Appliances Beauty Electronics Braun
Oral Care Toothbrush, Toothpaste, Other Oral
Care
Crest, Fixodent, Oral-B
Personal Health Care Gastrointestinal, Other Personal Care,
Rapid Diagnostics, Respiratory,
Vitamins/Minerals/Supplements
Prilosec, Vicks
Pet Care Pet Care Eukanuba, Iams
Shave Care Blades and Razors, Pre- and Post-
Shave Products
Fusion, Gillette, Mach3,
Prestobarba, Venus
2013 NET SALES
$17 billion*
* This reflects an estimate. Our historical
financial data will be restated to reflect the
new structure in fiscal year 2014.
Worldwide Operations Developed Markets
MARKET DEVELOPMENT ORGANISATION (MDO)
North America
Western Europe
Japan
SALES % OF TOTAL P&G
61% VOLUME % OF TOTAL P&G
55%
North America Japan
Western Europe
Worldwide Operations Developing Markets
MARKET DEVELOPMENT ORGANISATION (MDO)
Asia (excluding Japan)
Central & Eastern Europe, Middle East & Africa
Latin America
SALES % OF TOTAL P&G
39% VOLUME % OF TOTAL P&G
45%
Latin America
Central & Eastern Europe
Africa Asia
Middle
East
Procter & Gamble Case Study Managing International Mobility in VUCA world
INTERNATIONAL MOBILITY PROGRAMME AND ITS EVOLUTION
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 18 April 4, 2014
P&G International Mobility Programme Journey from1990s to 2010+
• RIM/IM 14 types of transfers Differentiation of transfer
packages
• Basic Comprehensive
Evolution and fine tuning of Policy
• Multiple sources One vendor Compensation Data
• Basic processes Integrated solutions Technology
• In-house BP Outsourcing Relo Vendor
Relo & Expat Services Operations
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 19 April 4, 2014
International Mobility Programme and its Evolution Talent Mobility Drivers
• Grow/promote From Within
– Recruit from Universities
– 95% of Management from within P&G (or acquisitions)
• Top Talent / High Potential
– Strategic Expat assignments, 3-5 y., Director/GM/VP career path, across
sectors/business units/regions
• Early Career Development
– HQ assignments, 2-3 y., return to home country to bigger jobs
• Developing/Emerging Markets Expansion
– China, India, Africa, Russia, Latin America – project assignments (short term
expats, extended business trips), startups, critical skills and knowledge transfer
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 20 April 4, 2014
International Mobility Programme and its Evolution Talent Mobility Drivers
• Co-location with key global customers
– e.g. METRO, CARREFOUR – rotational assignments focused on capability
building
• Evolving Geographic Footprint
– New regional/global centers (e.g., Geneva, Singapore) and hubs – temporary
assignments to foster collaboration/organisation
– Shifting manufacturing and R&D capabilities – permanent moves with
localisation
• Talent Retention (career/life planning & flexibility)
– Personal request temporary transfers (dual careers)
– Personally initiated localisations
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 21 21
P&G Globally Mobile Talent 3,000+ Temporary Transfers/Assignments
EXPAT 58%
Early Career 27%
Personal Request 1%
Temp Training 1%
Net Salary Package 5%
Dual Career 7%
Like-Location Package
1%
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 22 22
P&G Globally Mobile Talent 600+ Permanent Transfers/Localisations
Local to Local 50%
Expat to Local 27%
Personal Request 23%
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
Procter & Gamble Case Study Managing International Mobility in VUCA world
FACING THE CHALLENGES OF 2008-2013
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 24 24
Facing the challenges of 2008-2013 P&G business in VUCA world
• VOLATILE
– Commodities prices
– Currency ex rates
– Political/social instability
• UNCERTAIN
– Economic recession (US, Western Europe)
– Hard-to-predict emerging markets
• COMPLEX
– Local/regional laws and regulations
– Product customisation requirements
– Increasing organisation complexity
• AMBIGUOUS
– New trends – consumers, customers & distributor channels, online vs offline
– Competition, traditional and new (private labels)
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 25 25
Facing the challenges of 2008-2013 P&G business in UCA world
• Challenge for HR
– Innovation
– Productivity
– Workforce flexibility
– Engagement
• Challenge for Talent and Global Mobility Management
– Right people, assigned to a right job, at a right time, at a right cost
– Balance of short/mid term needs for Talent with long term career development
– Drive out unnecessary costs of expatriation/relocation, reinvest in key areas
with maximum ROI
– Deliver Expatriate/Relocation programme with excellence, maximise
employees engagement
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 26 26
Facing the challenges of 2008-2013 Cost Saving Opportunities
• One-time Relocation Support – Top 10
COSTS TO BE REDUCED/OPTIMISED % of total Cost Saving Opportunity
1 HOUSEHOLD GOODS MOVE 26% limited
2 TEMPORARY LIVING (TEMP ACCOMODATION, RENTAL CAR) 17% yes
3 DESTINATION SERVICES 7% limited
4 IMMIGRATION SERVICES/COSTS 7% no
5 MISCELLANEOUS RELO ALLOWANCE 6% yes
6 CAR AND TRANSPORTATION SUPPORT 6% limited
7 LANGUAGE TRAINING 5% yes
8 EN-ROUTE TRIP 5% no
9 HOME FINDING 4% no
10 FAMILY RELO RESOURCE PROGRAMME (SPOUSAL ASSISTANCE) 2% yes
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 27 27
Facing the challenges of 2008-2013 Cost Saving Opportunities
• Ongoing Compensation & Support -Top 10
COSTS TO BE REDUCED/OPTIMISED % of total Cost Saving Opportunity
1 HOUSING ALLOWANCE 38% limited
2 COLA 19% limited
3 SUPPLEMENTAL ALLOWANCE 7% limited
4 INTERNATIONAL HEALTHCARE INSURANCE 7% no
5 UTILITY COST 6% no
6 LOCATION (HARDSHIP) PREMIUM ALLOWANCE 5% limited
7 DUPLICATE HOUSING 4% limited
8 HOME LEAVE 3% no
9 BELOW HOUSING MAXIMUM INCENTIVE 3% limited
10 HOST DIFFERENTIAL ALLOWANCE 2% limited
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 28 28
Facing the challenges of 2008-2013 Key Interventions
• Expatriate Compensation
– Tight control of host housing maximums (esp. in regional centers e.g. Dubai,
Singapore, Geneva)
– Host Housing Norms adjusted/increased (more realistic)
– Caps on certain expatriate allowances, e.g. hardship premiums, miscellaneous relocation
allowance
– More conservative assumptions behind COLI
• Relocation and on-assignment support ( Singapore / Asia )
– Replace air shipment by excess baggage support
– Replace car rental support with transportation allowance (temp living in Singapore)
– No home sale / re-purchase support for expats
– Deliver cross cultural training via a web-based programme
– Lower cost temporary living accommodation
– Discontinue off-site language lessons
– Differentiated international schooling support based on home country
language/curriculum
- Savings: current $ 1.4 MM
- 2015: $ 4.0 MM
- 2017: $ 5.5 MM
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 29 29
Facing the challenges of 2008-2013 Key Interventions Operational Excellence in Running Relocation Services
P&G Expatriate Comp & Policy COE
Cartus – Relocation Services Vendor
Third Party
Service Suppliers
P&G Human
Resources
• Policy Design • Governance • Exceptions
• Talent Strategy • Employee Communication • Sensing and Feedback
• Programme Administration • Cost Management • Service Quality
• Ownership of service and results in immigration, destination services, tax, shipping, etc.
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
Procter & Gamble Case Study Managing International Mobility in VUCA world
KEY LEARNINGS
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 31 April 4, 2014
Facing the challenges of 2008-2013 What did we learn …
• It is all about balance …
– Changing too much might be as risky as changing too little
• Managing transition is key …
– Which policy changes to apply to various groups of mobile employees,
how quickly, who is grandfathered, etc ?
• Communication and service delivery …
– This is part of the Mobility Strategy for expats because communication
and service delivery influence how the expats experience the policy.
Section 2
CONSUMER GOODS INDUSTRY FUTURE TRENDS IMPACT ON GLOBAL MOBILITY
April 4, 2014 32
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
Consumer Goods Industry Future Trends – Research
33 April 4, 2014
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
Convergence with Divergence EIU/Mintel Research – Indexed Spending Growth
34 April 4, 2014
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
Convergence with Divergence EIU/Mintel Research – Fastest Growth Areas by Country
35 April 4, 2014
• Prepared Food China
• Household products India
• Beverages Mexico
• Household products South Africa
• Beauty products Turkey
• Non-alcoholic drinks UK
• Beauty products
• Food service USA
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
Convergence with Divergence EIU/Mintel Research – Specific Growth Items and Rationale
36 April 4, 2014
• Growth in laundry detergent due to growth in washing machines (from 1-16% of rural households between 2010-2016) China
• Growth in prepared foods has more than doubled with cereal consumption increasing. India
• Pet food sales doubled in last 5 years as pet owners shift from feeding their animals scraps to packaged food. Mexico
• Previously a tea-drinking market, coffee has started to gain ground in middle class households, with expected annual growth of 8.8%. South Africa
• Rise in sun cream sales – people want to be tanned, but are increasingly taking into consideration health concerns. Turkey
• Chocolate sales resilient during the recession, particularly individually wrapped sweets which feel indulgent but are inexpensive. UK
• Sparking wine sales have contributed to strong growth in alcoholic drinks sector, and carbonated non-alcoholic drinks expected to bounce back. USA
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
What does this mean for Global Mobility? Expatriate Destinations
37 April 4, 2014
40.3
11.3
38.5
9.8
19.6
29.6 31.5
27.5
0
5
10
15
20
25
30
35
40
45
China India Mexico Turkey South Africa Russia Brazil UAE
Where do you expect the highest increase in the number of assignees (% of Consumer Goods respondents)?
Source: Mercer Worldwide Survey of International Assignment Policies and Practices, 2012
EIU/Mintel Research Locations
Other Next Highest Assignee Growth
Locations
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 38 April 4, 2014
What does this mean for Global Mobility? Expatriate Destinations – What We’re Seeing
• Larger consumer goods companies (like Proctor & Gamble) are already established in many emerging markets, but will need to keep up their ‘continuous improvement approach’ to continue to succeed.
• Smaller consumer goods companies are actively and aggressively seeking new markets.
• Even the large consumer goods players have ‘greenfield’ sites so will continue to face expansion challenges.
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 39 April 4, 2014
1.5
9.4
1.5
3.1
6.2
47.7
22.1
44.8
59.4
59.7
61.5
46.2
66.2
52.2
77.9
53.7
31.3
38.8
35.4
53.8
27.7
0 20 40 60 80 100 120
Career/leadership development
Business expansion
Know-how transfer
Corporate values transfer
Technical skills not available locally
Managerial skills not available locally
Fulfilling a specific project need
For training purposes
Decrease
No change
Increase
What is the current trend for each assignment purpose listed below (% of Consumer Goods respondents)?
What does this mean for Global Mobility? Assignment Purpose
Source: Mercer Worldwide Survey of International Assignment Policies and Practices, 2012
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 40 April 4, 2014
What does this mean for Global Mobility? Questions for Discussion
• How do you manage new location set ups, particularly in challenging locations?
• How do you identify and incentivise the right talent to take postings to open up new markets and share knowledge with new local teams?
• As local markets mature, how do you use global mobility to develop and retain local hires, and deal with the retention of internationally experienced staff?
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
The Decade Ahead McKinsey & Company Research
41 April 4, 2014
• A billion new consumers in emerging markets
• Consumers ‘going green’
• Shifting demographics
• Rise of digital consumers
• Health and wellness concerns
• Modernisation and concentration of trade
• Rise of the value segment
Demand Trends
• Rising trade protectionism
• Changing tax regimes External Factors
• Increasingly volatile input costs
• Labour shortages in emerging markets Supply Trends
Trends that could influence performance over the next decade
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
The Decade Ahead McKinsey & Company Research
42 April 4, 2014
• A billion new consumers in emerging markets
• Consumers ‘going green’
• Shifting demographics
• Rise of digital consumers
• Health and wellness concerns
• Modernisation and concentration of trade
• Rise of the value segment
Demand Trends
• Rising trade protectionism
• Changing tax regimes External Factors
• Increasingly volatile input costs
• Labour shortages in emerging markets Supply Trends
Top five trends that could influence company performance over the next decade
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
What does this mean for Global Mobility? McKinsey & Company Research
43 April 4, 2014
• A billion new consumers in emerging markets
• Consumers ‘going green’
• Shifting demographics
• Rise of digital consumers
• Health and wellness concerns
• Modernisation and concentration of trade
• Rise of the value segment
Demand Trends
• Rising trade protectionism
• Changing tax regimes External Factors
• Increasingly volatile input costs
• Labour shortages in emerging markets Supply Trends
Top five trends that could influence global mobility over the next decade
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 44 April 4, 2014
What does this mean for Global Mobility? Shifting Demographics and Labour Shortages in Emerging Markets
Source: “Talent Mobility Good Practices: Collaboration at the Core of Driving Economic Growth”, World Economic Forum and Mercer
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
HEALTHY EMPLOYEES:
• Are present
• Are less likely to have high claims costs
• Have fewer worksite injuries
• Set a social norm
ENGAGED EMPLOYEES:
• Are more engaged employees
• Are more focused on their customers
• Leave the organization less often
EMPLOYEES WHO ARE BRAND STEWARDS:
• Help business grow
• Get the word out
• Matter more in emerging markets
HIGH- PERFORMANCE
CULTURE
HEALTHY
BRAND STEWARDS
ENGAGED
HIGHER TOP-LINE REVENUE
AND LOWER COGS
HEALTHY, PRODUCTIVE WORKFORCE
ENGAGED WORKFORCE
What does this mean for Global Mobility? Health and Wellness Concerns
April 4, 2014 45
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
Aging
Low birth
rate
War for
talent
Health cost
is increasing
Stress and
engagement problems
Social media and
technologies
4 Generations
Diabetes
epidemic
Managing
renewal risk
People
getting
sicker but
living longer
Growth and
profitability,
especially in
emerging markets
Corporate
social
responsibility
Auto
enrolment
Governance, litigation
and risk management
Potential
increase in
retirement
age
Legislation
Changes
What does this mean for Global Mobility? Health and Wellness Concerns
April 4, 2014 46
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
What does this mean for Global Mobility? Changing Tax Regimes
47 April 4, 2014
Average Income Tax and Social Security Rates as a Percentage of Base Salary: Variance within Africa and the Middle East
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Upper Middle Management
Senior Professional
Skilled Para-Professional
Source: Mercer International Geographic Salary Differentials, 2014 Edition
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 48 April 4, 2014
What does this mean for Global Mobility? Questions for Discussion
• Are shifting workforce demographics and labour shortages impacting workforce planning within your organsiation (eg. aging/retiring experienced workforce versus younger, inexperienced candidates). If so, what talent mobility strategies do you have in place to address them?
• Are Health and Wellness considerations prevalent in your mobility policies or strategy?
• How do you manage health benefits for your assignee population and their families while on assignment? What challenges do you face, and how have you overcome them?
• Do you use policy segmentation to optimise low income tax
jurisdictions? If so, why and how? If not, why not?
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE
QUESTIONS
April 4, 2014 49
MERCER 2014 EXPATRIATE MANAGEMENT CONFERENCE 50
Today’s Speakers
Kate Fitzpatrick
Principal – Senior Mobility Consultant
+44 (0)20 7178 5653
April 4, 2014
April 4, 2014 51