The Price of Beer in China: Is that Award Worth What You Think it is Worth?

September 17, 2012 Ben Miele

It’s no secret to anyone with a passport that the dollar buys more in some countries than others. Your travelers cheque that bought ten meals in Mexico City may buy only one in Oslo.

As a beer “enthusiast” and  all-too-frequent flyer, I find pintprice.com to be a fun site. The site uses crowd-sourced data to track the price of a glass of local beer everywhere in the world. In the United States—let’s say in Minneapolis—the average price of a pint is $3.76. But in Brazil, that same $3.76 in local currency could buy you two beers. In Pondicherry, India you could get four. In Beijing it could buy you five.

International Beer Prices

Consider how that difference affects global cash rewards. It means if you reward a team that is located around the world with what seems like the same thing, you’re actually not giving your team members an equal award at all. Imagine you give out an award to team members in the US, India and China with the intent that the team members might have enough to take their families out to dinner. That same $50 is a much different level of buying power for your employees in different countries. A decent award in one country might be a major windfall in another.

As another reference point for  buying power around the world, have a look at the Big Mac Index— a set of statistics periodically published by The Economist magazine that shows the relative buying power of the dollar around the world. This infographic shows how many Big Macs $50 would buy around the world.

Big Mac price index

This notion of equitable buying power matters as you build and manage a good recognition program. If you don’t pay attention to it, you run two big risks:

1. You aren’t being fair to employees: By offering the same award with different values you are building inequity into your recognition program and courting discontent among your employees. By adjusting for the local standard of living you can be assured that you’re fairly and equally rewarding all of your team members.

2. You are overspending: If your intent is to reward global employees with a certain value of award, and you’re giving the same award level around the globe, then you are vastly overdoing it in some regions, and paying much more than you need to be paying. Paying more attention to this issue is an opportunity to reduce cost dramatically while still making employees feel adequately, and fairly, rewarded.

What’s the best way to avoid this sort of disconnect? Take the focus off of cash awards and instead use a system such as points that will purchase gift cards or merchandise. Make sure that your system is continually adjusted to the Standard of Living Index (SOLI) to ensure that your employees are equally recognized. And lastly, make sure the SOLI you’re using (there are many stand of living indices) is specific to recognition.

When you take these steps, you can rest assured that the award you give is the award they get.

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