A SERIES OF ARTICLES FRoM THE 2011 EMEA CoMPENSATIoN ...

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<strong>THE</strong> BOMBARDIER TRANSPORTATION GLOBAL JOURNEY Between 1985 and 2005 Bombardier, the Canada-based aerospace and transportation company, grew rapidly as a result of a flurry of acquisitions around the world, each of them a company with its own distinct culture and history. It was – and remains – important to keep local names and culture, particularly in the transportation side of the business, because Bombardier’s train company customers are local and want to preserve local jobs and service. But in order to service the increasing demand from developing economies, particularly China and India, for mass transit railway (MTR) systems, Bombardier needed to address the siloed thinking and divisional focus that tend to go hand in hand with the local approach. As part of this, it embarked on a global job levelling and grading exercise five years ago to get consistency across different divisions and countries. The company’s genesis lies in the inventive genius and entrepreneurial spirit of a young mechanic, Joseph- Armand Bombardier, who, in 1922 at the tender age of 15, built his first “snow vehicle” (an engine attached to a sledge) to help people travel the snow-covered roads of rural Quebec. Fifteen years later, in 1937, he achieved his first commercial success with the launch of the seven-passenger “snowmobile”. Snowmobiles became the mainstay of the business for the next 30 years until the energy crisis caused the market to collapse in 1973. Three years later, Bombardier put its factories and expertise to use in building an MTR to service the 1976 Olympics in Montreal. The rest, as they say, is history. Today, the business is split equally (in terms of both employees and revenue) between MTRs and aerospace. It employs 65,400 people worldwide and made revenues in the year ending 31 January <strong>2011</strong> of US$17.7 billion. However, while it is still based in Canada, it earns 94% of its revenue outside the country, 75% of it in Europe – a split reflected in its employee base. The macro trends are very favourable to Bombardier – particularly to its transportation business. Climate change, oil scarcity end the price of energy, urbanisation and population growth, congestion, and ageing societies are combining to increase the demand for “greener” transport alternatives such as trains – and the company’s “green” credentials help to attract talent, too. What’s more, the company takes a famously long-term approach, partly out of necessity (building trains is a lengthy process) and partly out of choice (Bombardier remains family-owned and has had only three chief executives – the founder, his son-in-law and his son-in-law’s son – throughout its 80-year history). Currently, Bombardier is one of the big three transportation companies: along with competitors Siemens and Alstom, it accounts for half the global market, a picture that has remained largely constant for many years. However, all this is about to change. Chinese competitors CNR and CSR have overtaken Siemens’ and Alstom’s respective 14% and 15% market shares this year simply as a result of meeting demand from its domestic market. And it is the vast, developing economies of China and India that offer the most potential for Bombardier. It is currently setting up a joint venture in China, with five thousand employees, and is bidding for several more contracts. So, just as it moved its headquarters from Montreal to Berlin to be nearer to its big European markets, it is likely to shift it to India in the not-too-distant future, says Lars Timmerman, Director, Global Compensation, at 30
Bombardier Transportation. Servicing these big new customers requires a step change in management strategy. But striking the right balance between global consistency and the local approach that has sustained Bombardier thus far is not easy, as Timmerman found. The HR challenges in the raft of different countries where Bombardier operates are as diverse as the countries themselves. • The main consideration in Europe, for example, is the shortage of engineering talent, with rising pension demands a close second. • The aerospace business, which is still headquartered in Montreal, is characterised by aggressive sales people who are motivated by individual targets rather than team spirit and want to be aligned to the sector rather than the company. • South America is a growing market, but security issues loom large. • Russia and China, while offering valuable joint venture opportunities, are tricky countries to operate in, not least because of the difficulty of accessing data. • In Asia Pacific one of the big current preoccupations is how best to transfer expatriates onto local packages. • Bombardier has established shared service centres for finance in Romania and the Philippines and is now setting one up in Romania for HR too. • In Thailand and Indonesia the prices of rice, other food and rent is a big issue, and this has to be factored into employees’ reward packages. • And India is a veritable melting pot of pay practices. “They have everything, but there are no market benchmarks and it is all very diverse”, says Timmerman. “One company managing director even had a newspaper allowance written into his contract – but it had no value attached to it”. Trying to rationalise this diversity, harness the growing demand for the company’s products and services, and take account of both the long-term nature of the transportation business and the egalitarian and long-term culture of the company, and to come up with a job and pay framework that takes account of them all, was no mean feat. But Timmerman and his team have done it. “We now have a reward framework of global and regional processes and programmes, which serves as a blueprint for how we organise ourselves”, he says. The system essentially comprises four “global processes and programmes”, which are globally designed and fully globally governed, and four “regional processes and programmes”, which are locally designed and partly globally governed. Under the first there are four buckets of reward – base pay, short-term incentives, medium- and long-term incentives, and benefits and pensions. Under the second are another four buckets – “other direct pay and allowances”, which includes things like rice, food and fuel allowances; “benefits and pensions”, which covers things like health care and insurances; “work-time related issues”, which includes things like overtime, sick pay and maternity leave; and “other programmes”, which covers things like mobile phone policy and loan programmes. “The things we have included under our ‘regional processes and programmes’ are highly dependent on local rules and culture, and we can’t force alternatives on them from a global perspective”, says Timmerman. In order to allocate reward within that framework, Bombardier did a job levelling and global grading exercise, analysed individual countries’ data against that to determine whether or not discrepancies were valid, and from that built salary scales for more than 35 different countries. “It took us two years to centralise and harmonise for one global review date – May 1 each year”, recalls 33 31
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A SERIES OF ARTICLES FRoM THE 2011 EMEA CoMPENSATIoN ...

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