This MOOC explores different aspects of intercultural management, including teams, leadership, Human Resource Management, marketing and negotiations. When you complete this MOOC, you will have a richer understanding of the concept of culture, and how culture influences the way that individuals behave. You will also get a deeper knowledge about how culture shapes management practices in international organizations. We will introduce you to a number of experts in the field of intercultural management who will discuss the challenges and the benefits of dealing with employees on a global level. Moreover, we will share with you insights from our own research to illustrate recent developments in the field of intercultural management. During the MOOC we will provide you with a variety of concepts and tools that empower you to successfully interact with people from other cultures to achieve your desired personal and business-related goals. Please have a look at the teaser available at : https://www.youtube.com/watch?v=LVze_O6vjKI
Intercultural Rewards
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Из курса от партнера ESCP Europe
Intercultural Management
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Kerstin AlfesProfessor of Organisation and Human Resource Management
Berlin Campus
Robert WilkenProfessor of International Marketing
Berlin Campus
Chiara SucciProfessor of Organizational Behavior
Turin Campus
Marion FestingProfessor of Human Resource Management and Intercultural Leadership
Berlin Campus
[MUSIC]
Welcome back to the final unit on intercultural human resource management.
Today we deal with global reward management.
I am Marion Festing, professor of Human Resource Management and
Intercultural Leadership at the Berlin campus of ESCP Europe.
Let Professor Xavier Beaten, a well known reward expert from one of our research
partners, which is Vierick Business School in Belgium,
explain to you the importance and definition of global rewards.
[SOUND] >> Well, globally,
once in fact is more than just remuneration.
Rewards is about financial rewards, which is about fixed and variable rewards.
It's about the benefits, like the pension plans, the cars, care, and so on.
And it's about the non financial rewards, like flexible working, holidays, training,
and development.
So that is what total rewards is about.
Now what is very important in the field of global rewards, is to link
this whole thing with the strategy and the culture of the organization.
So it's extremely important to really translate strategy and
culture into reward systems.
And that way you have strategically aligned reward systems.
>> The complexity of global rewards in an intercultural context is high.
In the section on recruitment and selection,
we introduced the differentiation between parent country nationals,
host country nationals, and third country nationals.
Wherever they are located, whether they are on an assignment or locally employed.
They represent the global reward management target group, and
need to be treated in a fair and interculturally competent way.
In order to attract the right people, in the right location.
Within this short film the major learning objectives are how
culture influences rewards.
The balance between global standardization and localization of rewards.
And last but not least, the compensation of expatriates.
Depending on the country's culture,
expectations of employees concerning their compensation,
performance management, motivational processes, and leadership style may vary.
To outline the impact of culture on compensation and benefits,
we can revisit Some of the cultural dimensions suggested by
Hofstead that were presented at the very beginning of our MOOC.
Here are three examples.
First, the emphasis on individual versus group
performance based pay can vary according to Hofstead's,
individualism/collectivism dimension.
As employees in high individualism countries tend to be self oriented and
favor independence, individual attributes and internal loci of control.
Individual based performance pay schemes may meet these attitudes.
In contrast, countries with low scores on the individualism index
emphasize team accomplishments, dependence on the social unit,
group attributions and an external locus of control.
Both individual performance based pay as well as group performance based pay
may be used in combination, and may be closely linked to corporate goals.
However, once again, the proportion of each may vary
according to the specific local environment.
Rebecca Steinhage, Senior Vice President, Corporate Human Resources and
Corporate Investments of Bertelsmann will share her experience.
>> So what we've seen at Bertelsmann concerning global reward management is
that a successful design strongly depends on five key factors.
The first is the organizational leadership.
So is it a decentralized or centralized led organization?
The second thing is the life cycle position of your business.
Are we talking about a startup situation?
Is it a mature or even declining business?
The third thing is about the value creation of your business.
And this is not the business model, this is really just about are you good at
integrated efficiency, are you good at innovation and truthful seeking.
The fourth factor is the maturity of the local health care systems.
So you might need to include some benefits into the reward system,
depending on the country you're going in to.
And the fifth is very important,
it's about values of the country you're entering.
Maybe seniority or hierarchy being very mentionable,
should be reflected in the bonus being done.
>> Another example that we have seen in our research in the German pharmaceutical
industry builds on the uncertainty avoidance dimension.
Which differentiates between risk averse and risk taking cultures.
Risk averse cultures managers from countries such as Japan or
Germany are not prepared to accept high income variability, but favor fixed pay.
On the contrary in risk taking societies such as the USA.
Variable pay and even high amounts of bonuses are well appreciated and
even expected.
The German pharmaceutical company we analyzed had to adapt the amount
of variable pay granted to its employees in various countries.
If you would like to read more, we refer you to our paper
summarizing this point in the further readings and resources.
As the last example, indicating the impact of culture rewards,
I would like to mention seniority based pay.
Seniority based pay means that the more senior a person, the higher the salary.
This can be related to both uncertainty avoidance and also to power distance.
While we can find a high correlation between age and compensation and
benefits all over the world.
This relationship is even stronger in countries where these cultural
dimensions score high such as in Japan, in Greece, or in Portugal.
Of course,
it has to be mentioned that it is not only the national culture that is important.
The corporate culture influences the aforementioned preferences as well.
We saw this with the Schein Model in the introduction to culture.
Here the challenge of global standardization and
the local adaptation of global rewards starts.
Why many firms aim at the global standardization of reward practices
due to strategic and cultural reasons.
We have seen that there is also a need to adapt rewards to the local culture and
the local legal environment.
Which is usually strongly interlinked with local cultural values.
These are, among others, the so-called drivers for localization and
global standardization.
Which my colleague Kirsten Alfes has already presented in more detail in
the introduction of the module on intercultural human resource management.
Therefore, multinational corporations face a trade-off
between global pressures and a variety of local conditions.
Including cultural values, legal systems, and other powerful institutions.
These distinct and partly contradictory requirements need to be
balanced according to the strategic needs of the firm, and
supported by appropriate compensation practices.
A one size fits all approach is not appropriate.
As a result, transnational pay systems vary across international organizations,
because every multinational corporation is operating in a particular context.
This means that each multinational has to decide individually
how it balances the various elements of total rewards.
The relevance and importance of the various drivers for
global standardization and local adaptation have
just been confirmed in our recent study on European Reward Governance.
Details can be found in the further readings and resources section.
Let's now come back to the third issue to be addressed.
Rewards of international assignees in international firms.
When living in a new culture,
the expectation of the expatriate are very clear.
The international assignment should not be financially disadvantageous.
The quality of life should be the same as in the home country.
Additional costs or disadvantages should be cleared,
and supplementary incentives should be offered.
The company, however, would like to take a strategic approach to
international compensation by avoiding too many individual exceptions.
Therefore, the expectations of the employee and
the company may be conflicting.
Although there are exceptions, this is best and
most often done by using the, so called, balance sheet approach.
The key objective lies in the maintenance of home country living
standards plus financial inducements.
The principle is no advantages or disadvantages for
the employee which are just due to the international assignment.
Las Tinmonman, who's director of global compensation at Bombadier and a real
expert on international compensation, will explain this approach to you.
[SOUND] >> The approach is based on home country
pay and benefits starting from the net salary.
Have a look at the slide and it's easier for you to understand.
By deducting savings, housing costs, and
others, the spendable income in the home country is calculated.
Consider the cost of living index at the exchange rate if applicable.
Companies calculate the spendable income of the host country and
add additional expenditures in the host country.
At the end, financial incentives, expatriate house premiums for
example, are edit to make the package attractive.
>> From a cultural perspective, the major point is to ensure that
the quality of life is the same as in the home culture.
And this is often reflected in the cost of living allowance.
Which may be generous and allow the expatriate to also buy
well-known products from the home country abroad.
Although they may be comparably very expensive.
One example includes buying dairy products, or
the well known Nutella in Asia for European expatriates.
A more limited cost of living allowance may assume that the expatriate
adjusts to his environment and mainly buys local food.
In this case the western expatriate might prefer soup or noodles for
breakfast in Asia.
However it is at the discretion of the MNE, which policy it wants to apply.
How much money it wants to spend.
And what the expectations are regarding expatriate adjustment.
Again, there is no one size fits all approach.
This was the last part of the module on intercultural human resource management.
If this subject fascinates you in the same way as it fascinates us, and
if you want to learn more, you will find a lot of interesting material in
the further readings and resources section.
Before you take the quiz at the end of this module, my colleague Cassin and
I would like to thank you for your attention and say good-bye to you.
It would be great to see you during some of our future courses at ESCP Europe.
For the next module of our MOOC, our colleague Robert Wilkin,
Professor of International Marketing, is already waiting for you and
will introduce you to the world of international marketing decisions.
Don't miss that.
[MUSIC]
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