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
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. 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. 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. 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. 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
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. 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. 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. 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. 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
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. 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. 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. 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. 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
