Managing a potential misalignment of interests
Watson Wyatt’s world class Investment Practice has recently published a paper arguing that private equity management fees form too high a share of a general partners’ (GPs) compensation.
Negotiating private equity terms has previously been challenging due to limited capacity in high quality GPs and the restricted ability of limited partners (LPs) to pool their bargaining power. The former has clearly contributed significantly to the latter.
In this paper, Watson Wyatt:
Highlights how it thinks about fees across asset classes and explains how it is applying this thinking to private equity
Discusses currently accepted fees and terms in order to encourage debate in the LP community, with the ultimate purpose of eliminating some of the more egregious terms seen in private equity
Discusses additional features of terms that are not yet common in the private equity community but would represent significant progress in improving alignment for LPs.
To receive a free copy of the paper, please contact:
Robert Richter
Compensation Consultant
Watson Wyatt Middle East
Premises No.1, 8th Floor, Block 10
Dubai International Academic City
00971 44363513 (direct)
00971 43640096 (office)
00971 501895816 (mobile)
Robert.Richter@watsonwyatt.com
www.watsonwyatt.com
In response to the numerous and varied queries that Watson Wyatt has continued to receive concerning the HR market reaction to cost fluctuations across the Gulf, this year we again conducted our popular survey on allowances across the region.
The main changes to the report versus previous years include the collection of data pertaining to consolidated allowances practices as well as the differentiation of married and unmarried employees in the collection of housing allowances data. As in previous years we have provided a high level of granularity in publishing dedicated ranges for each major GCC city wherever we have received sufficient data to do so.
The final report is the product of over 60 companies’ input, spanning a variety of industry sectors.
If you are interested in the survey and would like to receive a copy please contact:
Robert Richter
Compensation Consultant
Watson Wyatt Middle East
Premises No.1, 8th Floor, Block 10
Dubai International Academic City
00971 44363513 (direct)
00971 43640096 (office)
00971 501895816 (mobile)
Robert.Richter@watsonwyatt.com
www.watsonwyatt.com
We are pleased to inform you that Watson Wyatt is launching an autumn flash survey looking at how companies have, and are looking to adapt their strategies and policies in the context of the current economic environment. The survey will cover more than 60 countries across EMEA.
Our commitment is to provide regular updates on reward and talent policies and issues.
This edition of the survey also contains a short questionnaire on how organisations have restructured to survive the economic turmoil, and how this may evolve in the future to keep pace with changes in the economy.
If you would like to participate for a single or multiple countries/a region within EMEA please contact:
Robert Richter
Compensation Consultant
Watson Wyatt Middle East
Premises No.1, 8th Floor, Block 10
Dubai International Academic City
00971 44363513 (direct)
00971 43640096 (office)
00971 501895816 (mobile)
Robert.Richter@watsonwyatt.com
www.watsonwyatt.com
The deadline for responses is Friday 9 October. We will endeavour to ensure all participants receive a summary report of the results, free of charge, within ten working days of the survey closing.
UK – July 3, 2009 – European companies are currently so focused on cutting costs through layoffs, salary and hiring freezes, that they may be setting themselves up for problems in the medium term, according to research from consultants Watson Wyatt.
The firm’s survey of 200 companies from across Europe and the Middle East found that 43 per cent (52 per cent of UK companies) have taken action to reduce permanent workers. Most have also sought to hold down pay, with over 70 per cent looking to reduce their budgeted pay increases in response to the current economic climate.
“These are clearly sensible measures in these uncertain times but our concern is around how companies appear to be using their limited pay budgets,” said Carole Hathaway, European head of strategic reward consulting at Watson Wyatt.
The Watson Wyatt survey found that less than a third of companies are targeting their reward budget on key employees. Moreover, where this is happening, the focus appears to target only high performers rather than those with business-critical skills.
“Despite a majority of companies claiming to have a greater focus on their key talent, few are supporting this by actually targeting their reward spend on them,” said Carole Hathaway. “Top performers are not necessarily the same as those with business-critical skills. Few companies appear to have the reward and performance programmes that enable them to make this important distinction. But failure to reward adequately those with business critical skills – as well as high performers – can have implications on retaining these key workers when the economy recovers.”
The Watson Wyatt survey, which was conducted in mid-June, found that companies are taking a range of actions to engage their workforce:
• Increased communication on changes in the business – 75%
• Increased communication on business results – 74%
• Increased visibility of senior managers – 45%
• Increased communication on pay/reward – 41%
• Introduced/increased focus on mentoring programmes –35%
“While companies are stepping up their communication on the wider business situation, they should put more specific attention on communicating changes made to pay policies, even if that’s not going to be good news,” said Carole Hathaway.
For more information please contact:
Robert Richter
Compensation Consultant
Watson Wyatt Middle East
Premises No.1, 8th Floor, Block 10
Dubai International Academic City
00971 44363513 (direct)
00971 43640096 (office)
00971 501895816 (mobile)
Robert.Richter@watsonwyatt.com
www.watsonwyatt.com
The survey focused on the changes companies were planning to implement in 2009 in the context of the economic climate. Nearly 200 organisations participated in the surey which was conducted in June this year.
In general, companies have employed cost cutting actions, including pay freezes, hiring freezes and headcount reduction of temporary employees, and are planning to emphasise their EVPs (employee value proposition) and step up their focus on engaging key talent (although few have targeted reward spend on key talent).
The survey results are presented by region (and sector) and show some interesting variations between each. For example:
If you want to learn more about the survey and/or would like to receive a free copy please contact:
Robert Richter
Compensation Consultant
Watson Wyatt Middle East
Premises No.1, 8th Floor, Block 10
Dubai International Academic City
00971 44363513 (direct)
00971 43640096 (office)
00971 501895816 (mobile)
The current spotlight on executive pay has caused many companies to take a step back and think about the long-term implications of their executive pay policies. In early March 2009, Watson Wyatt surveyed HR and compensation executive’s at large U.S.-based companies to understand the effect the economy is having on their executive pay programs. Recognising the significance of recession and financial markets’ decline, the survey analysis provides insight on the measures adopted by companies to reduce excessive risk as well as address public criticism and shareholder concern.
The Board View
A majority of outside directors believe that the US executive pay model should be changed and adjusted to be more performance based. With the ongoing economic turbulence, most directors are of the opinion that legislation and public pressures will not lead to improved pay for performance. During March and April 2009, Watson Wyatt surveyed outside directors of large U.S.-based companies. They expressed their views on executive pay in the future and the effect the economy is having on the executive pay programs of companies where they sit on the board of directors.
If you like to learn more about the topic or to receive the survey please contact:
Since 2001, Watson Wyatt Data Services has been surveying the Oil & Gas sector with success in markets such as Kazakhstan, the Netherlands, Saudi Arabia and more recently Egypt, Russia, UAE and Libya.
Based on the feedback and interest collected from the sector, Watson Wyatt is aiming to publish dedicated O&G reports in the following countries:
| Middle-East | North-Africa | West Equatorial Africa |
| Bahrain Kuwait Oman Qatar Saudi Arabia UAE |
Algeria Egypt Libya |
Angola Cameroun Congo Gabon Ghana Nigeria |
Pay practices in the Oil and Gas sector are often more influenced by industry than geography therefore Watson Wyatt will publish a regional report. In Sub-Saharan Africa Watson Wyatt is going to provide information for every country where sufficient data will be available.
In order for you to get an inside view of Watson Wyatt’s current Oil & Gas sector capabilities as well as our survey intentions for 2009, please refer to the attached O&G EMEA presentation as well as the presentation on our offerings in the Sub-Saharan region:
2009 WWDS Oil & Gas EMEA (PDF)
SSA O&G 2009 Overview (PDF)
For further information please contact:
Robert Richter
Compensation Consultant
Watson Wyatt Middle East
Premises No.1, 8th Floor, Block 10
Dubai International Academic City
00971 44363513 (direct)
00971 43640096 (office)
00971 501895816 (mobile)
Robert.Richter@watsonwyatt.com
http://www.watsonwyatt.com/
http://www.watsonwyatt.com/uae
DUBAI – June 9, 2009 – Organisations in the Middle East are managing costs tightly in response to the economic climate, but cost cutting efforts are changing focus in the second quarter of 2009, according to consultants Watson Wyatt.
A survey of participants at a recent Watson Wyatt Middle East seminar found that most organisations have already implemented cost cutting ‘quick wins’, such as reduced international travel budgets (69 per cent), recruitment freezes (56 per cent) and reduced salary and bonus budgets (52 per cent). Other plans include altering overall HR strategy (69 per cent), improving HR focus on internal customers (56 per cent) and reducing the HR department budget (52 per cent).
The new focus is on differentiation in pay – with 44 per cent of organizations looking to introduce greater differentiation in pay schemes to retain and motivate key employees.
“At the end of 2008, organisations were reducing their costs by laying off staff and delaying the roll out of HR programs and initiatives,” said Billy Turriff, a senior consultant at Watson Wyatt Middle East. “However, now a key focus area for organisations is to maximize what small pay budgets or bonuses they have so that any increases or bonuses are directed towards top performers. While average bonus payouts will have decreased, higher performers may receive a proportionately higher award.
“Organisations are now also starting to plan what they will need their employees to do differently when the recovery starts and also what initiatives they need to put in place currently, to ensure that employees remain engaged and motivated in what are still difficult and uncertain times.”
All organisations surveyed had issued an immediate communication to their employees in response to the economic conditions and the potential impact on business. However, there was a split between those that had increased their level of internal communication (44 per cent) and those that had done nothing different (54 per cent).
The survey, which including 98 organisations from across the region, found less than 60 per cent of participants’ internal communication focus on tactical areas such as training and development or the non-tangible elements of total reward. According to Watson Wyatt, it is important in a downturn to take the emphasis away from compensation, and refocus on other elements of an employee’s reward package or experience at work. This is why the Employee Value Proposition (EVP) is a growing area of focus for a number of organisations. It helps take the pressure off monetary reward, and when communicated through a strong employer brand can facilitate engaging communication at the tactical level which subliminally reinforces EVP messages.
“Our survey shows that responses to the financial crisis by HR in the Middle East can be broadly split into two phases,” said Billy Turriff. “The quick wins implemented at the end of 2008 are now being complemented by a greater focus on rewarding key talent and developing new people initiatives in order to retain and motivate employees them in readiness for a recovery in the financial climate.’’
For more information please contact:
Asia Pacific, 4 June 2009 – Pay rises are down by half what they were nine months ago. Salary increase rates budgeted for 2009 across Asia Pacific have been cut by an average of 52 percent, according to a recent survey conducted by Watson Wyatt, a leading global consulting firm.
Many companies have chosen to freeze pay in 2009, particularly in locations where businesses are much more exposed to the slowdown in global trade – Hong Kong, Japan, Singapore, South Korea and Taiwan.
|
Locations
|
2009 Salary Increase Budget(%) |
GDP projections as of May 2009 Source: EIU |
||
|
July 2008 |
March 2009 (all employers) |
March 2009 (excluding employers with salary freeze) |
||
| China |
9.8 |
5.0 |
7.1 |
6.5% |
| Hong Kong |
5.0 |
1.9 |
2.8 |
-5.9% |
| India |
14.1 |
6.9 |
8.9 |
5.0% |
| Indonesia |
12.8 |
8.6 |
8.6 |
-1.4% |
| Japan |
3.9 |
1.0 |
1.9 |
-6.4% |
| Malaysia |
6.6 |
3.9 |
5.1 |
-3.0% |
| Philippines |
9.5 |
5.4 |
7.0 |
-1.9% |
| Singapore |
5.3 |
2.1 |
3.4 |
-8.8% |
| South Korea |
6.2 |
2.1 |
4.9 |
-10.1% |
| Taiwan |
4.2 |
1.6 |
3.0 |
-9.3% |
| Thailand |
7.0 |
5.2 |
5.4 |
-4.4% |
The budget for salary increases dropped sharply in India from 14.1 percent in July 2008 to 6.9 percent in March 2009. Similar significant reductions were seen in China, Indonesia and Philippines.
The decision to freeze salaries is most often made in global headquarters, as shown in the table below:
|
Decision to Freeze Salaries in 2009 |
|||||
|
Locations |
Number of Companies |
Number of Companies Freezing Salaries |
Global |
Regional |
Local |
| China |
240 |
47 |
17% |
6% |
77% |
| Hong Kong |
220 |
54 |
34% |
21% |
45% |
| India |
171 |
32 |
84% |
5% |
11% |
| Indonesia |
62 |
0 |
0% |
0% |
0% |
| Japan |
36 |
19 |
58% |
17% |
25% |
| Malaysia |
86 |
18 |
67% |
6% |
28% |
| Philippines |
178 |
39 |
100% |
|
|
| Singapore |
85 |
25 |
56% |
8% |
36% |
| South Korea |
50 |
23 |
91% |
9% |
|
| Taiwan |
389 |
173 |
49% |
8% |
43% |
| Thailand |
164 |
19 |
80% |
20% |
|
Russell Huntington, Asia Pacific Director of Watson Wyatt’s Human Capital Group, believes the sudden change in the salary scenario is not surprising. According to Russell, ”The labour market has changed considerably, reflecting the rapid deterioration of Asian economic growth. In this environment, the skill shortages which have plagued Asian employers over the past year have given way to an employers’ market. Companies now see no need to increase salaries aggressively. Indeed many take the opportunity to freeze salary costs. The drop in inflation rates has further eased pressures for salary increases.”
The Regional HR Pulse Survey was conducted from 1 February to 15 March 2009 in 11 Asia Pacific countries by Watson Wyatt Data Services. More than 1,600 organisations in various industries participated in the study.
The survey can be aquired at the cost of 800 USD, for more information please contact:
