tools & resources

Global Benefits Governance Toolkit

Defining Governance

Governance Best Practices

  • Have central access to data and market information on their global benefits programs.
  • Develop well-defined risk management policies including an operating model with roles and responsibilities defined at the local, regional and corporate level.
  • Establish global centers of expertise manage benefit programs worldwide
  • Conduct formal audits to ensure that local benefits are aligned with global policies
  • Align their benefit programs with their overall workforce strategy.

2016 Aon Hewitt Global Benefits Governance and Operations Study

What is governance in the context of the needs of the Global Business Group on Health? Governance is not easy to define. The GBGH working definition resulting from a member survey defines it as the following: The action of developing and managing consistent, cohesive policies, processes and decision rights for a given area of responsibility. Although this definition may seem all-encompassing, some of the survey responses sought to qualify it even further.

For example, one responder suggested that the use of the word "policies" in the definition should be understood as strictly referring to governance, and not to the benefit plans themselves. Being clear and consistent about the kind of governance that guides benefits decisions across the range of operations in various countries, the responder said, does not necessarily mean that benefit design will be the same from one operation to the next. Two other responses suggested incorporating into the definition wording about meeting business needs and legal requirements. Another response related governance to the importance of having benefits that reflect company policy, implying that this trumps regional or cultural circumstances.

It is important, too, that a governance structure for benefits be in sync with the overall mission and goals of a company. What is at stake, among other things, is a company's fiscal health. Benefits are expensive, and both over-providing benefits and under-providing them have their down sides. Companies want to secure the health and well-being of their workers, but they want to do it with some consistency across the spectrum of their operations in different local markets. At the same time, they want to be able to factor in and allow for the peculiar cultural customs and socioeconomic realities of each location.

Governance Effectiveness Hindrances

  • Continued challenges to obtain data and insights into risk and market practice
  • Absence of global technology platform for knowledge management
  • Resource constraints and lack of benefits expertise in the local markets
  • Corporate control and approval requests becoming a ‘rubber stamping' exercise
  • Informal governance protocols are not followed

2016 Aon Hewitt Global Benefits Governance and Operations Study

Certainly, benefits play a competitive role in markets around the world; strong benefits package may mean the difference between having highly skilled workers on the payroll versus having workers who require training and are slow to carry out their job tasks. This, in turn, may diminish a company's financial edge in a particular region. But while it is important that a company's governance structure have a built-in elasticity, and that a company have the ability to respond to each unique situation, it is equally important that a company understand in what areas it requires conformity and where it will not bend to local circumstances.

On a daily basis, companies are coming face-to-face with the consequences of an inadequate governance philosophy—or none at all—and with the absence of policies and procedures that can guide them in their decision making from one country or region to the next. Are the pension needs of employees who work for company X the same in Bengal as they are in Boston? Can maternity coverage in company Y be uniform across 11 different countries? If not, does company Y have in place a procedure for defining what coverage should be? Does approval come from the local manager or does it have to go through the CEO at the corporate HQ office? How often is an audit done, and what does it look like? What other business controls are in place? These are just a few of the questions that member companies have in this area.

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