Cultural dimensions and reward systems in multinational enterprises

Performance Management and Rewards in IHRM

IHRM has been an issue of great concern many managers serving in multinational enterprises. This paper presents distinct approaches used in managing, recruiting, evaluating, and rewarding employees by companies operating in the global business environment. Most companies have established alternate points of sale in different countries. Further, the paper turns the audience's attention towards basic functions for international human resource management including selection and of recruitment new employees, employee training and development, work efficiency assessment, and employee remuneration.

The elements of femininity vs. masculinity and high vs. low avoidance of uncertainty are substantive elements in the decision-making process. For instance, Swedish employees score high within their femininity sides and, for this reason, have a high desire for non-financial rewards including interpersonal relations, time off, and autonomy. On the contrary, nations such as the U.S. scores higher on masculinity scales place a higher value reference to financial status, incentives, and the extent of job challenge (Zheng, 2013). Reward systems are carefully tailored to address development, equity, as well as cross-cultural elements of the MNC. The needs are discussed in detail in subsequent sections in meeting career needs for expatriates as well as other host country nationals.

IHRM practices support the principles of inclusiveness and rewarding based on employee participation levels. The implication is that it promotes democratic governance across the organization (Zheng, 2013). Complex international firms cultivate increment of returns through creation of positive reinforcement. MNEs develop informal databases for employee recognition as a way of supporting the principle. Each employee is granted access to the databases to support spontaneous and informal recognition at all organizational levels. The goal of growing by chunking allows MNEs to promote local innovation through build learning capacity across immediate organizations.

The decentralized organization structures focus on information sharing even though firms create electronic forums for knowledge-sharing while promoting learning. The employees document the solutions and ideas to problems in the databases while eliminating redundancy. MNEs embrace experimentation and debate in line with maximizing the fringes. IHRM practices support the principle through including training processes for employees and determination of risk-taking for process orientation and knowledge marketplaces creation. The employees have a visual display of the innovative solutions to immediate problems. Managers consider the designs of monetary bonus systems as rewards of cost saving and innovative projects (Cooke, 2012).

Like other organizational functions, the performance evaluation approach depends on the HRM strategy adopted by the organization. Companies with ethnocentric approaches are likely to utilize performance evaluation process like those used by the subsidiaries' headquarters. Various companies establish translation and evaluation forms within the local languages in which others formulate original language. Companies using polycentric approaches develop local procedures in all respective countries. Finally, companies that have geocentric approaches utilize similar performance evaluation systems across the world. However, there is a universal applicability (Van Vuuren, de Jong & Seydel, 2008). The development of global systems can be most challenging. Issues of remuneration coupled with benefits have a close link to the local labor market conditions especially where organizations take geocentric or ethnocentric decisions.

Availability of more qualified local people aimed at filling the positions at prevailing wage rates is reputed to the application of expatriates as well as local laws interacting to develop remuneration and benefits levels (Goldstein, 2009). For instance, in case there are applicants availed for the positions, remuneration for such positions will increase. The focus, of reducing expenses, leads to international human resources managers considering bringing in expatriates (Mamman, Baydoun & Adeoye, 2009). Companies usually develop policies that have global application in offering salaries and benefits that represent specific market levels. For instance, large successful multinational companies emphasizing on quality of products and employees have differential global policies in paying highest wages in its operating points. The other companies offering top salaries within the country make measures through research and development. However, they pay average wages as per the country of manufacturing. The development of international systems for benefits and compensation, organizations have certain primary concerns (Gu, 2009).

The initial element is that of comparability. Good compensation systems assign salaries to various employees through internally competitive and comparable market standards. For instance, salaries of senior managers are usually higher in comparison to those offered by supervisors. The positions are liable for receiving higher amounts in local market range. International organizations should consider salaries of people transferring from other geographical locations (Cooke, 2012). The other major issue is cost where organizations focus on minimizing expenses and developing payroll systems that have a large capacity. Labor relations operate on functionalities that identify and define roles for workers and management within the workplace. The labor relations concept varies with great liability based on different global regions. For the U.S., labor relations are inclined towards formal relationships that are antagonistic, between management and labor as established in the union contracts (Service & Loudon, 2010).

In Japan, relationships between unions and management are rather cooperative, and management appoints the union leaders. In many nations, governments regulate all labor relations practices. In the end, the function triumphs other human resources management approach where organizations have to focus on polycentric concepts. In the end, the labor relations focus on a local level issues that are good corporate strategies in coordinating labor relations policies for their across subsidiaries. MNEs utilize heuristics in creating performance evaluation parameters (Mamman, Baydoun & Adeoye, 2009).

The management uses corresponding HR principles for purposes of supporting the heuristics. The MNEs' IHRM practices will result from such guiding principles. The scope is based on organizations' use of cross-functional models in its IHRM practices. The implication is a translation of flexibility and diversity recruiting objectives for purposes of rewarding employees of cross-functional experience. The focus creates career maps to be used by employees while including assignments on cross-functional work. The MNEs decentralize with the aim of developing closer relationships with immediate consumers within their local levels while promoting control from the bottom towards the top. MNEs foster improved information communication channels using organizational structures.

International HRM practices differ from the domestic HRM techniques in various ways. A critical influence is that the focus of IHRM involves management of complexities of operations within employment of people from various countries and cultures. Major reasons for international venture failure are based on lack of understanding about differences among management of employees and the domestic environments. Management styles are successful in establishing domestic environments through application of foreign environments without having appropriate modifications. Reasons for the complexity of IHRM include dependency on the strategy descriptors (Schuler, Budhwar & Florkowski, 2012).

International HRM focuses on the broader scope of activities as compared to domestic HRM. The elements in line include international taxation, international relocation, coordination of exchange rates and foreign currencies, and international orientation for the abroad employee postings.

The human resource managers focus on international environment facing problems of establishing HR issues for employees who belong to diverse nationalities (Fenton-O'Creevy, Gooderham, & Nordhaug, 2012). The HR managers require focus in setting up differential HRM systems within respective locations. The human resource managers within domestic environments administer immediate HR programs to the employees who belong to a single nationality. Appraisal systems have critical roles in the determination of compensation in countries such as the U.S. The international firms focus on ensuring that performance links to the corporate strategy while making the employees responsive to appropriate reward levels. Intricate and complicated financial compensation packages presented to expatriates are developed within the financial provisions of many MNCs. The formulas go beyond the focus of the human resource schemes. In such case, the extensive discussion involves compensation over time and the way different features and problems relate to contingency models.

International HRM calls for increased involvement within the employees' personal life. The MNCs' HR managers are focused on ensuring that executives are posted to foreign countries with an understanding of all compensation package aspects provided for a foreign assignment. The elements to be highlighted include cost of taxes, and living (Zhang & Edwards, 2009). HR managers assess the employee's family readiness to relocate while supporting such families adjusts to foreign cultures based on cross-cultural training. The instruments of admission include HR strategy to take responsibility for persons left behind in schools in home country. Employees on foreign assignments require closer attention and nurturing (Cooke, 2011). The domestic environments enhance the involvement of HR managers and departments where an employee's families are limited to the benefits of family insurance programs and transport facilities like domestic transfers.

The heightened exposure to foreign risks within international assignments includes the safety and health of an employee and immediate family. Other aspects of risks relevant to the issue of IHRM today include terrorism (Warner, 2010). Various MNCs are considering the factor in deciding on any international assignment for employees. Financial and human consequences of IHRM mistakes are more severe as compared to domestic business. For instance, in case executives are posted abroad prematurely, it may result in high direct and indirect costs (Cooke, 2009).

International HRM practices deal with external factors as compared to the domestic HRM issues. For instance, government regulations regarding staffing practices for foreign locations, codes of conduct, and local influence of religious groups are experienced in the sectors. In the case American organizations are sanctioned to licensing from Indian government, they set up subsidiaries under legal obligations of providing employment for residents (Fan, Zhang & Zhu, 2013). The international HRM practices address distinct HRM activities even as the domestic HRM address issues relating to employees who belong to independent nationalities (Schuler, Budhwar & Florkowski, 2012). Greater risk exposures during international assignments enable IHRM managers to evaluate the employee performance and the human and financial implications of their actions. The aim of developing the functions includes providing well-trained personnel within the company while diversifying on capability of fulfilling the goals and contributing to better growth and performance in their work. Employee development is treated as special human resource management fields that include planned organization development, individual learning, education, career training, and development (Lamond & Zheng, 2010).

While expatriates give special attention towards advancing their work organizations, the paper observes that the description of additional challenges occurs within management of such employees (Brewster, Sparrow, & Harris, 2012). Various factors play important roles in the determination of compensation schemes such as nature of expatriate's job and the differences in the culture of host countries. Other elements include family and spouse considerations coupled with local nationals' salary levels. The challenges include the development of equitable compensation systems for the expatriates, the parent country employees, and local nationals where sufficient incentives motivate, attract, and retain more employees in overseas settings. The centralized compensation administration of systems becomes effective in the development of consistent and equitable systems such as decentralized programs of sensitive local conditions.

In international organizations, staffing and managing approaches strongly influence the scope of employee that the company prefers. Companies using ethnocentric approaches engage parent country nationals to staff important positions within the headquarters and subsidiaries (Zheng, 2013). Polycentric approaches allow host country nationals to work within foreign subsidiaries even as parent country nationals maintain the strategic headquarters positions. Organizations that endorse geocentric approaches choose among the suitable individuals to fit in the respective position despite the type (Van Vuuren, de Jong, & Seydel, 2008).

For companies functioning within global environments, it is important to distinguish different employee types. Initially, there were classifications such as a parent country national where the employee's nationality remains within similar as organization. For instance, Slovenian citizens can work within a Slovenian subsidiary in Macedonia (Kamoche, 2011). For the long-term, sophisticated systems in global compensation are more effective. Global compensation systems involve implementation of similar pay-for-similar jobs in all countries irrespective of whether such positions are staffed with expatriates from the parent country, third country expatriates (from another country) or locals. The compensation differentials have higher addition to basic pay through the country. On the other hand, MNCs do not have current levels of sophistication. Establishing culturally sensitive reward systems has particular relevance to employment for local country nationals while expatriates within other countries are found to have motivation variances with significant influence on work dimensions.

The host country national is an employee whose nationality is similar to the subsidiary's location. For instance, Macedonian citizens who work for Slovenian company based in Macedonia (Ferner, Tregaskis, Edwards, Adam, & Meyer, 2011). However, compensation administration has a general sensitive or geocentric implication on the overseas schedules. Certain compensation aspects that have higher sensitivity to the local environments include financing coupled with delegation of overseas subsidiaries. Overall, the focus presents trends towards increased compensation centralization programs for corporate headquarters. The item also finds the suggestive focus on MNCs in moving towards the ideal HR phases. The third country national is employees whose nationality does not match that of the firm nor does it tally with the subsidiary's location. For instance, Albanian citizen who work within Slovenian firms in Macedonia. Most Japanese MNCs engage centralized compensation structures in administering policies, control, and procedures.

Most companies consider performance evaluation as a frequent undertaking their development or administration intentions is met. For purposes of administration, performance evaluation arises when such decisions of work conditions among promotions, employees, rewards, or layoffs are put in jeopardy. Performance evaluation aligns work improvement among employees besides enhancing the respective abilities with the set targets (Cooke, 2011). Adequacy of training programs advises employees on the best behavior within work environments.