Remuneration Issues of Wage Compression and Symbolic Egalitarianism

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The goal of this essay is to discuss the importance of culture, the job, and organisational context in determining whether wage compression and symbolic egalitarianism are best. Pfeffer (2005) argues for wage compression and symbolic egalitarianism as two of thirteen management practices that lead to superior organisational performance, and the rationale and validity of his argument will be assessed in line with the work of Hofstede as applied to studies of multinational corporations. Pfeiffer’s arguments will be shown to be of limited application contingent on the context they are being applied to.

Symbolic egalitarianism is a conscious strategic decision within the organisation to remove symbols of hierarchy and the differential valuing of employees. This can include decisions such as moving managers from their offices to open plan areas, reducing or removing tiers of titular status, or status symbols attached to seniority or role. Pfeffer argues symbolic egalitarianism signals equality and improves communications, it “diminishes ‘us’ versus ‘them’ thinking” [ (Pfeffer, 2005, p. 101) ] which he believes creates a more collaborative environment with better information flow and cooperation due to the hierarchical barriers between employees and managers being removed.

Organisations make a strategic choice in their remuneration and reward programs to enforce either hierarchical or egalitarian culture. Egalitarian systems allow earnings to increase without employees having to move up to more senior roles. This allows for a more flexible workforce that can be moved across jobs without moving up tiers, allowing for greater responsiveness to “new areas, projects or positions” [ (Gomez-Mejia & Balkin, 1992, p. 46) ]. This system can, however, lessen the longevity of the employment relationship. Organisations with a more mature and stable place in their market reject symbolic egalitarianism, as the baubles of status incentivise tenure in the workforce, reinforce organisational stability in a more “’clan’ type culture” [ (Gomez-Mejia & Balkin, 1992, pp. 46-47) ]. Hofstede’s theory can shed light on how and when symbolic egalitarianism may be effective, dependant on cultural context. A study of motivational theories argues that in societies with a traditionally high power distance, such as France and much of Asia, symbolic egalitarianism is often rejected by both managers and employees [ (Morden, 1995, p. 17) ]. Grenness (2011) agrees, arguing that “national cultural values that do not reinforce human resources ... [strategic decisions].... are more likely to yield unpredictable behaviour and poorer performance” [ (Grennes, 2011, p. 100) ] Multinational organisations, seeking to be successful in subsidiary countries, should therefore seek to design performance management and remuneration systems in a decentralised fashion, making allowances for best-fit at a business-unit level ( [ (Milkovich, Newman, & Gerhart, 2011) ] rather than immediately imposing the ‘home office’ approach to the application or non-application of symbolic egalitarianism. As business units mature in their relationship with the influence of globalisation, this initial heterogeneous method of remuneration can be enhanced or adapted. In France, for example, there is a strong tradition of ascribed status, with elite groups of university-educated civil servants being referred to as “pantouflieurs – the wearers of golden slippers” [ (Morden, 1995, p. 16) ] Wage compression is a model for encouraging cooperation by distributing salary and rewards fairly between employees and shifting employee’s focus from their relative remuneration to their cooperation with their colleagues. Pfeffer argues that “when tasks are somewhat interdependent and cooperation is helpful for accomplishing work, pay compression, by reducing interpersonal competition and enhancing cooperation, can lead to efficiency gains” [ (Pfeffer, 2005, p. 102) ]. This can,...
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