Employee Reward Strategy

Rewarding Employee Performance & Non-financial

rewards Professor Roberta Aguzzoli

What we will do today

In this session:

• Understand no-financial rewards

• International Rewards

Total Rewards

Base pay

Benefits

Variable pay

Non-financial rewards

The costs of incentive pay

• Even if incentive pay works (e.g., increased productivity and performance), we need to look at the implementation costs and at the “fit” with the culture

• Investment in other management interventions may be more worthwhile (Beer & Cannon, 2004)

– Leadership, employee training, etc. See: Beer, Michael, & Cannon, Mark D. (2004).

https://www.youtube.com/watch?v=KB2RVkTr vog

https://www.youtube.com/watch?v=fBtr5Wb6 7Vo

• Career and Development

• Recognition

• Work and life balance

• Flexible hours

• Employee discounts

• Workplace environment

Source: Glassdor

Source: https://mcdonalds.torstamp.com/products/em-101-employee-of-the-month-plaque

Source: https://twitter.com/walmart/status/938547664022573056

Source: https://www.workstars.com/recognition-and-engagement- blog/2017/08/18/10-knockout-employee-recognition-statistics-for-hr-infographic/

Source: https://sproutsocial.com/insights/what-is-employee-advocacy/

Director of Human Resources, Technology EMEA • The ideal candidate will bring creative and effective people and organizational solutions to cultivate an

amazing and innovative culture, enabling the growth of FB as it scales in size. •

Director of Human Resources, Technology EMEA Responsibilities • Together with business leaders create a culture which is open and connected and which expects the

highest standard of behaviour and ethical conduct throughout our company. Provide expertise in development, execution and facilitation of employee relations efforts.

• Lead the EMEA HR Business Partner team, developing market leading HR capability and careers by creating an environment that stimulates creativity and supports their ongoing development.

• About the Facebook company • Facebook's mission is to give people the power to build community and bring the world closer

together. Through our family of apps and services, we're building a different kind of company that connects billions of people around the world, gives them ways to share what matters most to them, and helps bring people closer together. Whether we're creating new products or helping a small business expand its reach, people at Facebook are builders at heart. Our global teams are constantly iterating, solving problems, and working together to empower people around the world to build community and connect in meaningful ways. Together, we can help people build stronger communities — we're just getting started.

Source: https://www.metacareers.com/locations

Business Manager London

Description Role: Business Manager Location: London Paddington

The Business Manager is responsible for the provision of excellent knowledge and acts as a trusted advisor to the Director for whom they work, enabling the success of the leadership team. They deliver advice and counsel to leaders, create and maintain effective cross-functional working and assume responsibility for day to day projects and tasks.

What’s in it for you? -28 days holiday (with the option to buy or sell 5 days) plus public holidays -Flexible working -Pension matching scheme of up to 10% -5 paid days leave for charity projects -MyChoices portal - cycle to work scheme, 100’sof retail discounts, shares and salary sacrifice schemes -Vodafone family and friends discount -Interest free commuter loan -Global parental leave policy for all new parents coming in 2020 which includes 16 weeks fully paid leave and upon returning to work, new parents can work part-time hours for 6 months whilst being paid their full-time salary -Access to Vodafone University and LinkedIn Learning

Ready?

Source https://careers.vodafone.co.uk/

Rewards

• Base pay

• Benefits (legislation (paternity leave, pension, annual leave) – discretionary (gym, childcare, health care, dental service, private pension))

• Variable pay - Pay for performance

• Non-financial rewards (flexible time, career and development, training opportunities, recognition)

Conclusions

• Pay systems may go beyond simply paying for time, to pay for individual contribution or performance

• Several approaches, depending mainly on how contribution is defined and measured

• Controversy over whether incentive pay really works…

• … be very careful with the design of incentives and to recognise the costs and the available alternatives

International Rewards

Professor Roberta Aguzzoli

What we will do today

In this session:

• Identify the types of organizational forms used for competing internationally.

• Explain how domestic and international compensation differ.

• Identify the characteristics of a good international compensation plan.

Domestic versus International HRM

• Issues in international HRM in helping employees adapt to a new and different environment outside their own country:

– Relocation

– Orientation

– Translation services

Snell and Bohlander, 2010

Influences on International Rewards

• Market: size, dominance, industry

• Institutions: home X host X dominant countries

• Culture: home X host countries

19

Variables that moderate differences between domestic and international HRM

Source: Edwards and Rees, 2006

Institutional Influence

• Portugal

– 13 salary payed in July and 14 paid in December

• Mexico

– 13 salary payed in December

• Bolivia

– 13 salary payed in December

• Brazil

– 13 salary payed in half in July and half in December

Source: https://www.economist.com/graphic-detail/2019/03/19/the- worlds-most-expensive-cities

Source: https://blog.seedly.sg/cost-of-living- singapore-compared-world/

Hofstede Dimensions of Culture

Source: Peng, M. (2014) Global Business

• How does culture impact on pay structure, pay for performance, gender gap, benefits, meritocracy?

Source https://employeebenefits.co.uk/issues/september- 2016-2/infographic-benefits-employees-want/

Internal Influences

Increasing Importance of Understanding Global Human Resources Management

International Mergers and Acquisitions

Global Human Resources

Management

Foreign Human Resources

Global Competition

Market Access Opportunities

Snell and Bohlander, 2010 – Human Resource Management

APPROACHES TO STAFFING

ethnocentric approach – an emphasis on the norms and practices of the parent company (and the parent country of the MNE) by relying on PCNs

polycentric approach – an emphasis on the norms and practices of the host country

geocentric approach – a focus on finding the most suitable managers, who can be PCNs, HCNs, or TCNs

Compensation is increasingly seen as

• Mechanism to develop & reinforce a global corporate culture

• Primary source of corporate control

Objectives of international compensation

The policy …

• should be consistent with overall strategy, structure, & business needs of the MNE

• must attract & retain staff in areas where the MNE has the greatest needs & opportunities

• should facilitate the transfer of international employees in the most cost-effective way for the firm

International Staffing

• Expatriates, or Home-country Nationals

– Employees from the home country who are on international assignment.

• Host-country Nationals

– Employees who are natives of the host country.

• Third-country Nationals

– Employees who are natives of a country other than the home country or the host country.

Changes in International Staffing over Time

Snell and Bohlander, 2010 Human Resource Management

Comparison of Advantages in Sources of Overseas Managers

Snell and Bohlander, 2010 Human Resource Management

35 Source:

https://www.justlanded.com/english/Common/Footer/Expatriates/What-are-

the-biggest-problems-for-expatriates

36

The phases of cultural adjustment

Source: Dowling, P. 2007. International Human Resource Management

Expatriate Compensation Systems

• Home-Based Pay

– Pay based on an expatriate’s home country’s compensation practices

• Balance-Sheet Approach

– A compensation system designed to match the purchasing power in a person’s home country 1. Calculate base pay

2. Figure cost-of-living allowance (COLA)

3. Add incentive premiums

4. Add assistance programs

A Hypothetical Expatriate Compensation Package Using the Balance Sheet Approach

Peng, M. 2014 Global Business

Expatriate Compensation Systems (cont’d)

• Localization

– Adapting pay and other compensation benefits to match that of a particular country

– Reduces resentment among local staff members if they are earning significantly less.

• Other Issues

– Adequacy of medical care

– Personal security

– Compensation policies of competitors

– Taxation

Compensation of Expatriate Managers

• An effective international compensation program must:

1. Provide an incentive to leave the home country

2. Allow for maintaining an home country standard of living

3. Include provisions for good health care

4. Reimburse the foreign taxes the employee is likely to have to pay (in addition to having to pay domestic taxes) and help him or her with tax forms and filing

5. Provide for the education of the employee’s children abroad, if necessary

6. Allow for maintaining relationships with family, friends, and business associates via trips home and other communication technologies

7. Facilitate the expatriate’s reentry home

8. Be in writing

International employee expectations

1. Financial protection in terms of benefits, social security, & living costs in the foreign location

2. Opportunities for financial advancement through income & savings

3. Housing, children’s education, & recreation will be addressed

4. Career will be advanced

• http://www.expat.hsbc.com/1/2/hsbc- expat/expat-experience/expat- finances/global-tax-navigator#!/AR

© 2010 South-Western, a part of Cengage Learning. All rights reserved.

Global Compensation Challenges

• Different countries have different norms for employee compensation:

– Financial (money) incentives versus nonfinancial incentives (prestige, independence, and influence)

– Individual rewards versus collectivist concerns for internal equity and personal needs

– General rule:

• Match the rewards to the values of the local culture—create a pay plan that supports the overall strategic intent of the organization but provides enough flexibility to customize particular policies and programs to meet the needs of employees in specific locations.

Compensation of Host-Country Employees

• Hourly wages can vary dramatically from country to country.

• Pay periods are different.

• Seniority may be an important factor.

• High pay rates can upset local compensation practices.

• Bonuses, profit-sharing, benefits and paid leave may be more extensive and legally required.

COMPENSATION FOR HOST-COUNTRY NATIONALS

• Low-level HCNs are at the bottom of the compensation scale and, thus, have relatively little bargaining power

• On the other hand, HCNs in management and professional positions have increasing bargaining power

– Because of their scarcity in emerging economies, these HCNs can demand more pay

Compensation of Host-Country Managers

• Global Compensation System

– A centralized pay system whereby host-country employees are offered a full range of training programs, benefits, and pay comparable with a firm’s domestic employees but adjusted for local differences

Summary

• Institutional aspects on global rewards

• Cultural aspects on global rewards

• Expatriates

• Global rewards