The Role of Culture in Compensation

Powerful Essays
University of Agder

Master of Science in Business Administration: International Management and Strategy
Term Paper- ORG 409 International Management

The influence of Culture on Reward and Compensation Management practices across subsidiaries of a Multinational Company

By

Kwame Ohene Djan
(Student Nr: 166289)

6th November, 2012

Contents ABSTRACT 3 1.0 INTRODUCTION 4 2.0 REVIEW OF RELEVANT PRIOR LITERATURE 5 Table 1 Summary of Research Findings 11
3.0 A CONCEPTUAL MODEL………………………………………………………………. 12 4. 0 CONCLUSION AND RESEARCH QUESTION 13 REFERENCES 14

ABSTRACT

The positive effects of being able to identify and effectively manage the motivational needs of employees of a company cannot be overemphasized. However this is not an easy task as employees, as human as they are, have complex behavioral responses to different types of motivational schemes. This complexity increases in the case of multinational firms in their quest to identify and manage the motivational needs of employees who are host-country nationals as this requires cultural sensitivity among other factors. Unfortunately, most global firms tend to overlook this important cultural aspect of international human resource management because of the perceived high rate of convergence. This perception puts most expatriate managers at a risk of applying global compensation management practices to employees who are host-country nationals. The purpose of this paper was to explore the effects of cultural values of host country on the reward and compensation management practices of a subsidiary of a multinational company from a theoretical perspective. This was done through a critical review of papers that employed various cultural characteristics and their influence on employees reward preferences.
The study revealed that cultural values still play a critical role in employees’ rewards preferences despite the increased rate of convergence. However owing to the complexity



References: Aycan, Z. 2005. The interplay between cultural and institutional/structural contingencies in human resource management practices. International Journal of Human Resource Management, 16:1083-1119 Aycan, Z., Kanungo, R.N., Mendonca, M., Yu. K., Deller, J., Stahl, G. and Kurshid. A. 2000. Impact of Culture on Human Resource Management Practices: A 10-Country Comparison, Applied Psychology, 49(1)192-222 Chiang, F. 2005. A critical examination of Hofstede’s thesis and its application to international reward management. International Journal of Human Resource Management, 16:1545-1563 Deresky, H., 2012, International Management Managing Across Borders and Cultures (7th Ed). 354-360, Prentice Hall, One Lake Street, Upper Saddle River, New Jersey. Lowe, K.B., Milliman, J., De Cieri, H. and Dowling, P.J. 2002. International Compensation Practices: A Ten-Country Comparative Analysis. Wiley Periodicals, Inc, 41(1): 45–66

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