Zinnov has built a concept called “Compensation Chains” to best depict the variability in pay levels for the same position in emerging countries. While this variability offers cost advantage in some situations, this can also result in missteps in work allocation. This can result in a situation where wrong tier talent is picked based on cost advantage considerations, without accounting for the impact on work quality and operational efficiency.

1. Compensation Chains
Leveraging Locations with Wide Compensation
Bands for Cost Savings
January, 2012 | A Concept Document
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2. OVERVIEW OF COMPENSATION CHAINS
The depth in compensation chains across Emerging countries provides significant
opportunity to plan for the type of work being executed in these locations
• Emerging locations like china and India have a wide Range of Pay across the various experience levels and domains. For e.g., the
compensation for IT professionals with 0-3 years experience level in Bangalore - India is in the range of USD 4,760 – USD 10,200
• This situation provides a unique opportunity to Global organizations – a realignment of the pyramid structures in these locations
can greatly improve the contribution as well as impact of emerging locations in the location matrix
• Understanding the chain dynamics is therefore extremely crucial in planning the type of work being executed at the emerging
locals
Information Technology (IT) Compensation Chains in Emerging Locations – 0 to 3 Years Experience Level
Variance Variance Variance Variance
25000 114% 119% 88% 75%
Max
$19,600
20000
Max
Compensation (USD)
$16,660
15000 Median
$14,000
Max
$10,200 Max
10000 Median $8,940 Min
$9,520 $11,200
Median
$6,800 Min Median
5000 $7,616 $5,960
Min Min
$4,760 $4,768
0
India - Bangalore China - Beijing Philippines - Quezon Romania - Bucharest
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3. ADVANTAGES OF COMPENSATION CHAIN MANAGEMENT
By having a higher depth in compensation chain, Organizations can afford a pyramid of
multiple levels
Current Scenario Leveraging Compensation Chains
Wide Compensation Chains in Org Pyramid leading to Multiple Sub Pyramids at the Bottom Reduce Costs
Higher Costs of Operations
100% Minimal or No Change in
Leadership Higher Levels
More than 10 Years
90%
0 – 3 Years Tier III
5 – 10 Years
0 – 3 Years Tier II
80% Cost reduction through
higher number of FTEs at
0 – 3 Years Tier I
the bottom of the chain
70% 3 – 5 Years
Pyramid Realigned for Leveraging Comp. Chains
Percentage of FTEs
60%
50%
Type of Work Aligned to FTEs Position in Compensation Chain
to Improve Quality and Efficiency
40% 0 – 3 Years
All Comp Levels Team composition
Minimal or No Change in depending on the
• No planning w.r.t. Higher Levels complexity of work
30%
compensation chains
leading to higher costs
20% • Despite wide range of 0 – 3 Years Tier III
compensation, FTEs in an
experience band working 0 – 3 Years 0 – 3 Years Tier II
10% across similar types of work Tier I Only
0 – 3 Years Tier I
0%
Typical Pyramid Across The Location Lower Complexity Work Higher Complexity Work
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4. EXAMPLES
Examples of Information Technology (IT) Compensation chains in Emerging and Developed
Locations Slide 1 of 2
Ukraine - Kiev Min: 39,550
Ukraine Median: 56,500
Kiev 90000 Max: 84,750
USA
Bay Area 80000
Compensation (USD)
70000
India Min: 22,610
Bangalore 60000 Median: 32,300
Min: 16,665 Max: 48,450
50000 Median: 23,808
40000 Min: 11,000 Max: 35,712
Median: 15,500
30000 Max: 23,250
20000
10000
0
0 to 3 Years 3 to 7 Years 7 to 10 Years Exp > 10 Years
USA - Bay Area India - Bangalore Min: 34,905
Min: 86,700
Median: 145,777 Median: 53,700
300000 100000 Max: 91,290
Max: 260,200
90000
250000
Compensation (USD)
Compensation (USD)
Min: 73,800 80000
Median: 107,384
70000
200000 Min: 62,000 Max: 172,700
Median: 85,090 60000 Min: 18,900
Min: 55,000 Max: 128,800 Median: 27,000
150000 Median: 67,500 50000 Max: 40,500
Max: 95,000 40000 Min: 10,500
Median: 15,000
100000
30000 Min: 4,760 Max: 22,500
Median: 6,800
20000 Max:10,200
50000
10000
0 0
0 to 3 Years 3 to 7 Years 7 to 10 Years Exp > 10 Years 0 to 3 Years 3 to 7 Years 7 to 10 Years Exp > 10 Years
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5. EXAMPLES
Examples of Information Technology (IT) Compensation chains in Emerging and Developed
Locations Slide 2 of 2
China - Dalian Min: 35,649
UK Median: 59,415
London China 100000 Max: 95,064
Dalian 90000
Compensation (USD)
80000
70000
Min: 21,837
Malaysia 60000 Median: 31,196
Penang 50000
Max: 46,795
Min: 13,076
Median: 18,680
40000
Min: 6,702 Max: 28,954
30000 Median: 8,377
20000 Max: 14,660
10000
0
0 to 3 Years 3 to 7 Years 7 to 10 Years Exp > 10 Years
UK - London Malaysia - Penang
Min: 80,677 Min: 41,580
250000 Median: 128,059 140000 Median: 59,400
Max: 217,700 Max: 120,400
120000 Min: 22,365
Compensation (USD)
Compensation (USD)
200000 Median: 31,950
Min: 65,547 100000 Max: 93,150
Median: 93,639 Min: 14,301
150000 Max: 131,095 Median: 20,430
Min: 46,503 80000 Max: 67,300
Median: 63,703
Min: 37,290 Max: 89,184 60000 Min: 8,190
100000 Median: 46,613 Median: 11,700
Max: 65,258 Max: 32,600
40000
50000
20000
0 0
0 to 3 Years 3 to 7 Years 7 to 10 Years Exp > 10 Years 0 to 3 Years 3 to 7 Years 7 to 10 Years Exp > 10 Years
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6. KEY CHALLENGES AND SUGGESTED APPROACH
A careful portfolio evaluation and deeper understanding of the location is critical for
leveraging the location optimally
Key Challenges Suggested Approach
 Having a higher depth in compensation chains in a country  While long compensation chain countries offer
does not necessarily provide an advantage unique and scalable advantages, there is also a tax
on planning. A careful portfolio understanding and
 Locations in such countries will require careful planning and deeper understanding of the location is therefore a
focused execution must for leveraging the location optimally
 Any missteps in work allocation can result in a situation  Average Salary Trends should not be considered
where wrong tier talent is picked based on cost advantage alone for deciding on the type of work suitable for a
considerations, without accounting for the impact on work location
quality and operational efficiency
 The key is in understanding the variability and
 In addition, the misalignment of resources to the type of taking advantage of the same
work can lead to lower employee engagement and higher
turnover situations
Identifying Locations with Ensuring Alignment of Team Portfolio Evaluation to Ensure Alignment of Work with Talent
Deep Compensation Chains composition and Type of Work Quality and Availability at a Location
Meeting Quality of Work and Managing and Maintaining Focusing on Compensation Ongoing Assessment of
Operational Targets Employee Engagement Levels Ranges rather than Averages Pyramids and Maintaining KPIs
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