Multinational contexts for employee reward management

• Under globalisation, revenue streams from manufacturing and/or trading across the multinational – once limited compared with domestic country operations – have taken on a strategic importance.

• Multinationals face other giant-sized multinational corporations in head-to-head competition for profitable revenues, and have been encouraged to migrate from HQ-led to what Ghoshal and Bartlett (1998) term a ‘trasnational’ organisation structure.

• Thus efforts are directed – including managing fit-for-purpose rewards – towards mobilising knowledge and skills to where they are the most profitable, reflecting a strategic shift from just exploiting ‘cheap labour’ overseen by corporate expatriates.

Global reward consequences• Shifting multinational human resource strategy from one of

exploiting cheap labour sources to developing unique competitive strategies based on securing insider knowledge of local markets (Harvey et al, 2002: 285) means that reward management choices must avoid consequences workforces perceive as unfair, undermining multi-headed team structures working to a common set of aims.

• The position is consistent with Kessler’s (2007) argument that reward designs should not be informed by business strategy in isolation from considerations of internal and external equity. A requirement for purposeful, coordinated and context-sensitive employee reward management is a logical consequence of counting the people to be employed and managed internationally as ‘strategic’ resources, demanding top corporate management attention.

Rewarding expatriation

Source: Festing and Perkin (2008)

Example of an expatriate ‘salary build-up’ or ‘balance sheet’ plan

Strategy, dominant logic, and opportunism

• While highlighting its strategic potential, Vernon (2006) counsels that unthinking ethnocentric application of Western normative reward management principles is to be avoided. Factors applicable across multi-local settings at least need to be systematically appraised and ‘managed’ before applying universalistic reward ‘solutions’.

• Bloom et al (2003) argue that the dominant logic for managing the reward system adopted by multinationals may vary across a number of recognisable types, reflecting competing pressures for consistency of approach in pursuit of global alignment with organisational aims and local conformance pressures.

• At one level, survey data implies a reactive approach to international reward management. But more in-depth interviews indicate less reading off a common template and more a sense of efforts towards increasing co-ordination where policies ‘have legs’ (Perkins, 2006).

Summary• Reward management for the international workforce requires

attention to the nuances of expatriate compensation administration. But that is not the whole story, as earlier implied by the emphasis in international reward literature.

• Policy design is encouraged to be mindful not only of the interaction between expatriates and locals but local-local comparisons too (Chen et al, 2002) .

• And a reported accent on standardisation to support a transnationally networked performance orientation implies that reward architects in the multinational also need to draw on theoretical and empirical knowledge of practices detailed in the generic reward literature, which commentators suggest multinational managers are reflecting on rather than reading off a reward template. ‘Strategic’ attention, accounting for in-country as well as transnational enablers, and constraints to ‘best practice’ have also been recorded in recent empirical research in the field of inquiry (eg Lowe et al, 2002; Bloom et al, 2003; Perkins, 2006; Brown and Perkins, 2007).