Tag Archives: OECD

Are US managers really the best in the world?

Well they are according to the World Management Survey.

A research team from Harvard, the LSE, McKinsey and Stanford surveyed over 10,000 companies in 20 countries about management practices including operational and people management.

They ranked the US managers as the best in the world followed by those in Japan, Germany and Sweden. Great Britain, Italy, France and Australia came next with India, Brazil and China propping up the list.

The study reports that American managers are the best at managing and motivating staff. “American firms are ruthless at rapidly rewarding and promoting good employees and retraining or firing bad employees”

The authors think it’s because there is more competition with large and open markets which allow only the best-managed firms to survive. They also state that America traditionally gets far more of its population into college than other nations. And (perhaps more importantly) it is easier to hire and fire employees in America.

They contract the USA with China where companies often employ managers who don’t speak the same language as the workers and have to rely on interpreters or sign language to communicate with them.

So how true is this?

The American College Board report (on education in the USA) shows that in terms of the percentage of 15-24 year olds with Associate degrees or higher America, with 40%, ranks 12th just ahead of Sweden but just behind Australia. Canada. Korea, and Russia top the list, Japan comes 4th, the UK 17th and Germany well down the list. Of the bottom three in the best-managed survey only Brazil is included in the college board report and they come last.

When it comes to older employees aged 55 – 64 America comes 4th behind Russia, Israel, and Canada. So not quite as good as the survey suggests in terms of education.

When it comes to employment flexibility it’s hard to identify data about employment protection. The USA came bottom of the list of OECD countries based on 2003 data ie it was the least strict/most flexible.

If we look at holiday entitlement it appears that America is the only country in the OECD which doesn’t require employers to grant any paid vacation/holidays and so 25% of all employees get no paid holidays at all. For others 9 days with 8 national holidays is the average. Some companies provide 2 or 3 weeks but usually insist that employees take only 1 week at a time and keep in contact. (Military service employees get 30 days plus national days).

The EU stipulates 2o days or 4 weeks as the minimum for paid holidays whilst Canada and Japan only legislate for 10 days. And not every country legislates for paid public holidays including the UK, the USA, Sweden, Japan, the Netherlands and Switzerland.

When it comes to sick pay most countries provide some relief for short-term sickness but again America is the exception with no national guaranteed scheme. 40% of US workers receive no paid sick leave and for lower paid workers that figure reached 80%. Apparently three-quarters of Americans don’t think it’s important although 1 in 6 say they would be punished for taking short-term sick leave.

And what about the American economy? It’s all about jobs at the moment with an unemployment rate of 9.2% compared with 7.7% in the UK (although comparisons are not straightforward because of definitions and people on JSA here in the UK). With a potential US workforce of 155 million there were only 18,000 jobs created in June. Unemployment rates are up, job creation is down, so whichever way you look at it it’s not good news.

So it seems that the cards are stacked against employees in the USA with very little employment protection, minimal holidays, and little or no sick pay. Cynics might argue that it’s the economic situation and the culture that makes US companies successful and managers have very little to do with it. So is it really true that American managers are better motivators?

Do you want a good work-life balance?

Then go and live in Denmark

That’s the place to work if you want to achieve work-life-balance (WLB) according to the OECD which has recently included it as a factor in its Better Life Initiative.

The OECD has used 3 indicators: the amount of time devoted to personal activities, the employment rate of women with children age 6 to 14, and the number of employees working over 50 hours a week. FYI research shows that 50 hours seems to be the point when work impacts on your health.

People working in Northern European countries seem to manage their work hours the best with extremely few (0.001%) regularly working over 50 hours.

Denmark is best for working mothers with 78% returning to the workforce when their children reach school age (Turkey is the worst on this indicator with only 24%).

Belgians, those monastic beer and chocolate lovers, have more time off per day on average – 16.61 hours – than anyone else.

The top 10 countries with the best work-life balance are:

  1. Denmark
  2. Norway
  3. Netherlands
  4. Finland
  5. Belgium
  6. Switzerland
  7. Sweden
  8. Germany
  9. Portugal
  10. France

Denmark has come top of the list in other surveys for having more people satisfied with life and Finland was voted the best country to live in although Australia came top in the OECD survey for where to live for a better quality of life overall.

You’ll notice the UK is not on this list and neither is the USA. The UK came 17th and the USA 23rd. Worst for WLB were Turkey, Mexico , and Japan (which interestingly has a word for “death by overworking”).

Working Long Hours amigo?

Jeremy Clarkson and co got it wrong. Far from Mexicans being feckless it turns out they are the hardest working nation in the West according to the latest data from the OECD.

For years the Brits have been claiming that they work the longest hours in Europe but in fact only Belgium and France work fewer hours than us in the EU. Belgium’s working day averages 7 hours compared to Mexico’s 10 hours a day (these figures include both paid and unpaid work including studying).

And despite working the longest hours the Mexicans rank as the 3rd happiest nation (Iceland was the happiest and Ireland was the second most charitable). These figures are part of the OECD publication “Society at a glance” which gives an overview of social trends.

And here’s the same data in an infographic

Why are we worrying about gender pay differentials?

When we should probably be asking why CEOs are being paid astronomical amounts compared to the shop floor?

The Observer (28/11/2010) printed a fascinating analysis by Professor Danny Dorling in advance of the publication of the government’s Fair Pay Review.

The headline figures are staggering. Bart Becht, of Reckitt Benckiser, and the highest paid FTSE100 CEO, is paid £93 million (I can’t bring myself to write that someone, leaving aside the fact that he sounds like a cartoon character, actually earns that much).

Pay differentials are almost back to 1918 levels when 1% of earners received almost 20% of income. This inequality declined steadily until the mid 70s but since then the position has reversed and inequality has increased close to where it was almost 100 years ago.

Salaries in most jobs have increased between 3 and seven times since 1980 but for executives they have increased fifty-fold. Nurses earned £5,000 in 1980, now they earn over £29,000; teachers earned £6,500 then and earn £35,000 now; GPs earned £12,500 then and earn £78,000 now. The PM earned £34,500 then and earns £150,000 now.

But CEOs of  FTSE100 companies who earned £85,000 then now receive on average almost £5 million according to Income Data Services which also showed that this 2009 figure had increased 50% in the previous year (recession? What recession you might ask as average boardroom pay in top companies increased by 45%). This is 200 times the average wage of £23,360 including bonuses, an increase of 1.5% over the previous year. CEOs basic pay rose by 3.6% but they received bonuses averaging over £700,000!

To put this in perspective, if you are paid the minimum 21-year-old wage of £5.93 per hour you are typical of the poorest 20% of employees. Double that to £10 an hour and you are typical of the average earner, and if you earn £14 an hour that puts you in the top 20% of earners. Hard to believe when you see the stratospheric sums paid to these executives (and let’s not even go to “Rooney-world” – fantasy football indeed). Perhaps not surprisingly a recent poll showed that only 1% of people think CEOs should be paid so much and 2 out of 3 think they should be paid no more than £500,000.

Britain has one of the highest pay differentials in the world. Higher than Australia, New Zealand, Canada and Japan. And in the OECD only Italy, Poland, USA and Portugal have higher inequality. And it’s not as if these are generally the entrepreneurs, the inventors, the innovators or people who have invested in the company. So how did we get to this position? Don’t forget things were improving ie less inequality up to the mid-late 1970s when it did a U-turn under Margaret Thatcher’s tenure.

First, I think the privatisation of public companies such as the GPO, British Gas and water companies played a part. Suddenly public service managers who were either civil servants or local government employees, and therefore not the highest paid but with a good pension plan, wanted to have pay parity with their competitors in the private sector because of the assets they had inherited. The fact they were often in monopolistic positions and had no real competitors didn’t matter. It suited the government and the soon-to-be public sector fat-cats to pretend otherwise. The BBC is another example. They were set up as a public service broadcaster yet manage to reward their top people with extravagant salaries and pension packages.

Secondly, the influence of private sector practices on those areas that remained within the public sector such as the NHS. The government put senior managers on performance related pay (not to be confused with bankers on minimum 50-100% bonuses but a miserly 1 -3% if you were lucky) which allowed them to use Job Evaluation to set salary levels. I have nothing against Job Evaluation and when I was in HR was happy to use it. But at some point you have to decide who your comparators are and at what percentile.

So public sector organisations which said they “valued staff” wouldn’t want to be seen to compare their senior managers with just the median rates because they didn’t want to be seen employing averagely paid people. Upper quartile (top 25%) sounded significantly better without seeming profligate with tax-payers’ money. And in the beginning there weren’t other NHS or local authority comparisons but there were the newly privatised utilities. And we know they had already ramped up their pay rates.

And now we have private sector remuneration committees who do exactly the same – comparing their own salary levels with their competitors without regard to internal differentials and increasing inequality.

So why is it a bad thing? Research suggests that where societies are more equal there are better indicators of mental health and social mobility. And of course there is a profound sense of unfairness. It’s been predicted that the Fair Pay Review might recommend a pay multiple of 20:1. So a minimum wage earner working 38 hours earns £11,700 a year. Twenty times that would be £234,000 a year, almost twice the Prime Minister’s pay and what most people would consider more than adequate. Given what I said earlier about public/private sector pay comparisons this ratio would have to apply across the board.

And if David Cameron is serious about a well-being index what better place to start?

Updated 16 May 2011:  Interesting report in Saturday’s Observer by its business editor, Andrew Clark, on the Institute of Directors (IoD) event at the O2 arena.

Brendan Barber from the TUC was there encouraging companies to pay their workers more to increase economic demand and get the economy working again. Partly he was arguing for a fairer economy but he also quoted various economists to support his argument. Even Boris Johnson has said it is “morally right” to pay workers in London a “living wage” of £8.30 an hour compared to the current adult minimum wage of £5.93 an hour.

Perhaps not surprisingly the IoD delegates were unimpressed and denied that workers were being exploited – at a time when pay for the top 350 board members jumped 45% last year.

But as Clark commented, loyalty works both ways and when the good times return workers won’t necessarily stay with their present employers if they are not looked after when times are hard.

Of course there are gender pay differentialsbut probably not as wide-spread as some people claim. Public sector has had equal pay for years but the financial institutions are probably the bad boys here (literally).

The Department for Business, Innovation and Skills found that FTSE100  CEO’s pay rose by 14% annually between 2000 and 2010. The FTSE100 index rose by 1% annually over the same period.

In 2000 bosses’ pay was 59 times that of their average employee. In 2010 that had increased to 119 times.

Updated 7 September 2011: And it’s not just the pay but the pension pots for top directors. For a FTSE100 company director it averages almost £4 M, enough to provide a pension of over £220,000 a year according to the TUC.

The average private sector pension is £9,568 and £6,497 in the public sector. The TUC points out that these company directors are paying themselves high salaries and bonuses and making sure they have these gold-plated pensions whilst closing pension schemes for their employees.

Updated 12 September 2011: Who would have guessed that FTSE bosses have had their pay frozen for two years! Even IF they did they are making up for it with basic pay up between 4 and 10%, regardless it seems of company performance. The 4% raises amongst FTSE350  executives is twice as much as the average worker according to Deloitte.

Deloitte also say bonuses have increased. For FTSE100 directors from 71% to 87% and for FTSE250 directors up from 54% to 86%.

Some companies have built in payback clauses in the case of poor performance and some are offering deferred bonuses.

Nevertheless remuneration committees could do more to reign in excessive pay awards way ahead of inflation and of the average worker.