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Strategic and International HRM > Global Reward Management > Flashcards

Global Reward Management Flashcards

1
Q

Why does reward matter?

A

It matters for

  1. Attraction: good fit for organization?
  2. Retention: Good salary is helpful for retaining human capital in organizations?
  3. Motivation: Rewards can be a source of extrinsic and intrinsic motivation for individuals.
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2
Q

Top attractive drivers for employees

A
  1. Base pay/salary
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3
Q

Top retention drivers for employees

A
  1. Base pay/salary
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4
Q

The Global Brain trade

A

Based on the Global Brain trade, some people tend to leave their country (for e.g. India) yet some people enter another country (e.g. the USA) based on the pay offered.

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5
Q

Aspects of pay

A
  1. Level
  2. Structure
  3. Basis
  4. Benefits
  5. Administration
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6
Q
  1. Level of Pay
A

How much should we pay people?

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7
Q
  1. Structure of Pay
A

How is the pay structured across levels?
How do people move up?
Is pay relative between departments?

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8
Q
  1. Basis of pay
A

Is pay based on: seniority, performance, profits, or something else?

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9
Q
  1. Benefits
A

How much benefits are there which are on a non-cash basis?

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10
Q
  1. Administration
A

How do we communicate pay? Who makes all the decisions?

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11
Q

1st aspect of pay: Pay level

- Should pay package be more “home-based” or more “host-based”?

A

Choices in expat reward design.

  1. “No worse off” than in home country?
  2. Maintain a similar standard of living as in home country?
  3. Consistent with peers in the host country?
  4. Simplicity of administration?
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12
Q

What factors should we account for informing expat reward design?

A

Based on:

  1. Localize or repatriate?
    - So do we want to keep them for a long time, or a short period of time?
  2. Desirability of the assignment?
    - Did employer initiate it, or did the employee initiate it?
    - What’s in it for them?
    - Do we need to compensate for hardship or danger?
  3. Financial costs for the employee?
    - Costs of living at home (how long is the assignment for? Long or short term?)
    - Costs relating to their personal situation? (e.g. family)
  4. Factors discussed in class:
    - Standard of living in the host country (e.g. costs for food, rent etc..)
    - Strategy of the company (e.g. individual based pay or group based incentive)
    - Additional compensation (e.g. healthcare in the USA)
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13
Q

Net Minimum wages

A

Australia has the highest minimum wages per hour after taxes.

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14
Q

National Salary comparison for middle management position

A

For Switzerland & Hong Kong, gross pay and net pay is very high as compared to other countries.

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15
Q

Determining the pay level of expats

A
  1. Budget system: Aims to assess the costs incurred in home and host countries combined.
  2. Market rate: Companies pay the market rate for nationals in the host country.
  3. The Balance Sheet Approach: The difference between the two locations is assessed so employee has the same purchasing power as at home.
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16
Q

Example: Global Foreign Exchange changes in UK and EU pre-&post Brexit

A
  1. There was a 13,000 pounds increase from the pre-Brexit (2015) to post-Brexit (2016) when moving from the UK to the EU.
  2. Yet while moving from EU to UK, there is a drop of 20,000 pound sterlings from the pre-Brexit phases to post-Brexit phase (2016).
17
Q

2nd & 3rd aspect of pay: Structure and Basis of Pay

A

For these aspects of pay (structure & basis), Hofstede’s cultural dimensions are used. They are:

  • Power distance
  • Individual vs Collectivism
  • Masculist vs Feminism
  • Uncertainty avoidance
  • Short-term vs Long-term orientation
  • Indulgence
18
Q

Example: Manufacturing facilities in same MNE

A
  • Pay basis: In the US, it maybe more performance-based pay system (individualism) as compared to Germany.
  • There is greater pay inequality due to performance in the US, than Germany.
  • In Germany, pay basis may be based on the length of service.
19
Q

Example: Manufacturing facilities in same MNE

A

Broadband system:
US (less pay scales) → more flexible and individualistic
Germany (many more pay bands) → more uncertainty avoidance, hierarchical approach and clear, structured career promotion process.

20
Q

Example: Manufacturing facilities in same MNE

A 
Downside of US: 
- Less clear guidelines and lack of transparency.
- Open to bias and unfairness.
Downside of Germany:
- Cannot negotiate your pay
- Less flexibility
21
Q

Chiang & Birtch paper (HK & Finland example)

A
  • Studied bankers in Hong Kong and Finland
  • In HK, there is a higher preference for financial incentives in general.
  • In Finland, there is more preference for intrinsic rewards and competency-based incentives.
  • Main takeaway: We shouldn’t overstate cultural differences because there might be more similarities in cultures than differences in the financial sector.
22
Q

4th aspect of pay: Benefits

A

How much in non-cash benefits do you receive?

23
Q

Example: Paid Parental Leave: U.S. vs. the World

A

In the US, there is a very low rate of parental leave as well as state provisions for healthcare. Yet they have many benefits offered which are not taxed and are highly prized.
In Europe, there are better state provision of benefits (e.g. healthcare) than elsewhere in the world).
In Nordic countries, France: Generous childcare means less prized as a benefit. Prefer to receive cash to use as they wish.
In China, Japan, Korea: Tax levied only on base pay, so bonuses and benefits have greater financial value.

24
Q

Bonache & Fernandez, 1997: Expatriate compensation and its link to the subsidiary strategic role: a theoretical analysis.

A
  1. If the knowledge acquired abroad is of high relevance and value, the expat assignment will have a positive impact of their career with low preference of extrinsic reward, and high preference of intrinsic rewards.
  2. If the knowledge acquired abroad is of low relevance and value, the expat assignment will have a repatriation issues, with high preference of extrinsic reward, and low preference of intrinsic rewards.
  3. If the knowledge acquired abroad is of high relevance and low value, the expat assignment will have an uncertainty impact, with medium preference of extrinsic reward, and medium preference of intrinsic rewards.
25
Q

5th aspect of pay: Administration

A

How do we communicate the pay? Who makes the decisions?

26
Q

How do people evaluate their pay?

A
  • Pay satisfaction: more subjective

- Pay Fairness

27
Q

Expats: Sources of pay dissatisfaction

A

Total salary level is one of the most important compensation elements causing pay dissatisfaction among expats.
Then comes travel costs, insurance benefits, repatriation issues, spouse-related issues etc..

28
Q

What informs pay satisfaction? (Williams et al., 2016)

A
  1. Pay raise (<1%, ns)
  2. Discrepancy (expected vs actual) ( ~25%)
  3. Interpersonal comparison (>50%)
    Conclusion: It is not necessary WHAT we pay, but HOW we pay it.
29
Q

Fairness Comparators

How much they get paid- What they get paid- How they get paid

A 
Looking in: 
- Same or similar jobs
- Position within the pay structure
Looking out:
- Same or similar jobs
- In which organisations
30
Q

Should pay be transparent? (from lecture)

A

Pro’s:
1. Gender wage (gender biases) can be removed
2. Forces a fair process
3. Be answerable to any stakeholder
4. Motivational benefits
Cons:
1. Time consuming for justification, fair processes, requiring more effort
2. Can’t throw money at anyone
3. Might not work in all cultures maybe (power distance)
4. Unfairness, hostility.

31
Q

Toh & DeNisi (2003)

Comparison impacts of host-country nationals, too..

A
  1. When expats are more visible, relevant and transparent, host country nationals are more likely to compare their salaries.
  2. RD = relative deprivation. Perceptions of RD –> Feelings of RD.
    Thus, perceptions of RD are important (not only actual RD).
  3. National culture of HCNs: Evidence that “Western” cultures have higher justice sensitivity..so are more likely to perceived relative deprivation. Culture also informs what is seen as important.
32
Q

Benefits of transparency

A
  1. Removes uncertainty/asymmetrical information as basis for perceptions of unfairness/discrimination.
  2. Promotes trust in organization.
  3. Promotes motivation and performance.
33
Q

Benefits of secrecy

A
  1. Organizational control: avoiding conflicts (while being able to use pay dispersion)
  2. Protection of privacy
  3. Decreased labor mobility (of productive workers)
34
Q

Pay should be transparent if..

A
  1. Openness is an ingredient of company culture.
  2. Managers are trained and empowered to have honest performance conversations.
  3. Employees’ preferences are aligned with pay policy (e.g., tolerance for inequity, high sharing/seeking preference).
35
Q

It depends..preference for disclosure (Smit & Montag-Smit, 2018)

A

Highest levels of job satisfaction when preferences matched policy (high/high or low/low).

36
Q

It depends..tolerance for ambiguity. (Bamberger & Belogolovisky, 2010)

A
  1. Low predicted individual performance has a high tolerance for pay inequity.
  2. Medium predicted individual performance has mean tolerance for inequity.
  3. High predicted individual performance has low tolerance for inequity.
37
Q

Repatriation (Black, 1992)

A
  1. Met expectations = higher levels of reintegration and performance.
  2. Higher job demands (for managers) helps reintegration.
  3. Helping to meet move expenses is important.
  4. Work-non spillover.

Strategic and International HRM (6 decks)

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