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Global compensation

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Global compensation

  1. 1. Global Compensation Empirical Evidences! ! By: Gualdi Miriam, Raduan muhi Samar, Sbarra Stefano, Tolkacheva Irina, Vagin Andrey ! 12th March 2014
  2. 2. In MNCs managerial compensation strategy there is a conflicting pressures for adaptation 
 to local norms and institutions 
 and for congruence with international 
 corporate strategy - strategic alignment Getting a competitive advantage Source: Anthony Ferner and Phil Almond, Performance and reward practices in foreign multinational in the UK Human Resource Management Journal, Vol 23, no 3, 2013, pages 241–261 !2
  3. 3. Different Local Approaches
  4. 4. Pay Incentives Individualistic • low application • it should not comprise too much of the total pay Collectivistic • higher application • it should not comprise too much of the total pay Source: Kevin B. Lowe, John Milliman, Helen De Cieri,and Peter J. Dowling, International (2002)Compensation practices: a ten country comparative analysis; Human Resource Management, Vol. 41, No. 1, Pp. 45–66 !4 China, Indonesia, Japan, Korea,
 Mexico, Taiwan, Latin America Australia, Canada, USA
  5. 5. Seniority Collectivistic countries emphasize more seniority in regards 
 to human resource decisions Source: Kevin B. Lowe, John Milliman, Helen De Cieri,and Peter J. Dowling, International (2002)Compensation practices: a ten country comparative analysis; Human Resource Management, Vol. 41, No. 1, Pp. 45–66 !5
  6. 6. Long Term Focus in Pay Individualistic • short term results • pay system with less futuristic orientation Collectivistic • long term results • pay system with higher futuristic orientation Source: Kevin B. Lowe, John Milliman, Helen De Cieri,and Peter J. Dowling, International (2002)Compensation practices: a ten country comparative analysis; Human Resource Management, Vol. 41, No. 1, Pp. 45–66 !6
  7. 7. Trade Unions • trade Unions have only minor impact 
 on performance based payments • collective bargaining decreases the influence of pay and performance management system • with trade unions less support of variable pay Source: Anthony Ferner and Phil Almond, Performance and reward practices in foreign multinational in the UK Human Resource Management Journal, Vol 23, no 3, 2013, pages 241–261 !7
  8. 8. Implications ethnocentric exportation of compensation practices by enhancing understanding 
 of best practices in other countries understanding what employees want rather than what they have in compensation policies; it may help motivate employees 
 to engage high performance behaviors 
 that are consistent with business direction and goals Source: Kevin B. Lowe, John Milliman, Helen De Cieri,and Peter J. Dowling, International (2002)Compensation practices: a ten country comparative analysis; Human Resource Management, Vol. 41, No. 1, Pp. 45–66 !8
  9. 9. Ethnocentric Approach
  10. 10. Expatriate Compensation ! wages & salaries incentives (e.g. bonuses) benefits (e.g. retirements) Inequity Source: Ashish Mahajan, Host country national’s reations to expatriate pay policies: making a case for a cultural alignment pay model; The International Journal of Human Resource Management, Vol. 22, No. 1, January 2011, 121–137 !10
  11. 11. Feedback from HCNs Managers refuse social and technical support towards expatriate perceive belonging to a low-status group hold back local knowledge show lack of cooperation with expatriate make adjustment of expatriate in local environment difficult Source: Ashish Mahajan, Host country national’s reations to expatriate pay policies: making a case for a cultural alignment pay model; The International Journal of Human Resource Management, Vol. 22, No. 1, January 2011, 121–137 !11
  12. 12. Outcomes • anger • dissatisfaction • absence from work • stealing • quitting work Source: Ashish Mahajan, Host country national’s reations to expatriate pay policies: making a case for a cultural alignment pay model; The International Journal of Human Resource Management, Vol. 22, No. 1, January 2011, 121–137 !12
  13. 13. Cultural Alignment Pay Model Perception of fairness and social equity Source: Ashish Mahajan, Host country national’s reations to expatriate pay policies: making a case for a cultural alignment pay model; The International Journal of Human Resource Management, Vol. 22, No. 1, January 2011, 121–137 !13
  14. 14. HCNs Managers more motivated to be cooperative and share knowledge with expatriates do not perceive status differentials and perceives more similarities between local managers and expatriates are psychologically more healthy Source: Ashish Mahajan, Host country national’s reations to expatriate pay policies: making a case for a cultural alignment pay model; The International Journal of Human Resource Management, Vol. 22, No. 1, January 2011, 121–137 !14
  15. 15. Implications Ethnocentric compensation Geocentric compensation Short-term
 orientation Long-term
 orientation Source: Ashish Mahajan, Host country national’s reations to expatriate pay policies: making a case for a cultural alignment pay model; The International Journal of Human Resource Management, Vol. 22, No. 1, January 2011, 121–137 !15
  16. 16. Balancing between Localization and Strategic Alignment
  17. 17. The Logic of Compensation Localization Strategic alignment large differences in salaries across subsidiaries small differences across subsidiaries supports a local business strategy, operates unique local context supports a global business strategy, operates global context consider local cultural norms 
 and labor market conditions may violate local cultural norms 
 or labor market conditions good fit between organization compensation systems and host countries’ local contexts leads to improved organization performance good fit between organization compensation systems and business strategy leads to improved organization performance local labor market, national institutions (employment and labor laws, 
 tax laws), national culture  global strategy, internal labour market Source: Yoshio Yanadori, Paying both globally and locally: an examination of the compensation management of a US multinational finance firm in the Asia Pacific Region; The international Journal of Human Resource Management, Vol. 22, No 18, November 2011, 3867-3887 !17
  18. 18. Compensation in Subsidiaries pay level differs systematically across subsidiaries • differences in pay mix across subsidiaries varies • cash bonus: different across subsidiaries • stock bonus: highly consistent across subsidiaries greater differences in pay level than in pay mix Source: Yoshio Yanadori, Paying both globally and locally: an examination of the compensation management of a US multinational finance firm in the Asia Pacific Region; The international Journal of Human Resource Management, Vol. 22, No 18, November 2011, 3867-3887 !18
  19. 19. Implications optimal balance between localization or alignment managerial positions
 non-managerial positions localization HR manager strategic alignment consider cultural 
 and institutional peculiarities Source: Yoshio Yanadori, Paying both globally and locally: an examination of the compensation management of a US multinational finance firm in the Asia Pacific Region; The international Journal of Human Resource Management, Vol. 22, No 18, November 2011, 3867-3887 !19
  20. 20. Imagine you are a Swiss manager 
 (high-income country) being send 
 to Vietnam (low-income country) 
 for a leading manager position. 
 Will you be motivated to take 
 this position in case of a localized compensation system?
  21. 21. References Anthony Ferner and Phil Almond, Performance and reward practices in foreign multinational in the UK, Human Resource Management Journal, Vol 23, no 3, 2013, pages 241–261 ! Kevin B. Lowe, John Milliman, Helen De Cieri,and Peter J. Dowling, International (2002)Compensation practices: a ten country comparative analysis; Human Resource Management, Vol. 41, No. 1, Pp. 45–66 ! Ashish Mahajan, Host country national’s reations to expatriate pay policies: making a case for a cultural alignment pay model; The International Journal of Human Resource Management, Vol. 22, No. 1, January 2011, 121–137 ! Yoshio Yanadori, Paying both globally and locally: an examination of the compensation management of a US multinational finance firm in the Asia Pacific Region; The international Journal of Human Resource Management, Vol. 22, No 18, November 2011, 3867-3887

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