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Chapter 16

International Pay Systems. Chapter 16. Exhibit 16.3: Social Contracts and Pay Setting. Culture and Managing International Pay. Assumption that pay systems must be designed to fit different national cultures is based on the belief that most of a country’s inhabitants share a national character

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Chapter 16

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  1. International Pay Systems Chapter 16

  2. Exhibit 16.3: Social Contractsand Pay Setting

  3. Culture and Managing International Pay • Assumption that pay systems must be designed to fit different national cultures is based on the belief that most of a country’s inhabitants share a national character • Job of a global manager • Search for national characteristics whose influence is assumed to be critical in managing international pay systems

  4. Hofstede’s Cultural Dimensions • Power Distance • Uncertainty Avoidance • Individualism – Collectivism • Masculinity – Femininity • Long-term – Short-term

  5. Exhibit 16.5 (8e): Union Density

  6. Exhibit 16.8: Strategic Similarities and Differences: An Illustrated Comparison

  7. Strategic Market Mind-Set Localizer: “Think Global, Act Local” • Designs pay systems to be consistent with local conditions • Business strategy is to seek competitive advantage by providing products and services tailored to local customers • Mngt 443: Multi-domestic strategy • Operate independently of corporate headquarters • Mngt 443: Global Geographic Structure

  8. Strategic Market Mind-Set (cont.) Exporter: “Headquarters Knows Best” • Basic total pay system designed at headquarters and is “exported” world-wide for implementation at all locations • Exporting a basic system makes it easier to move managers and professionals among locations • One plan from headquarters gives all managers around the world a common vocabulary and a clear message what the leadership values • Mngt 443: Global product group structure

  9. Strategic Market Mind-Set (cont.) Globalizer: “Think andAct Globally and Locally” • Seek a common system to be used as part of “glue” to support consistency across all global locations • Headquarters and operating units are heavily networked to shared ideas and knowledge • Performance is measured where it makes sense for the business • Pay structures are designed to support business • Mngt 443: Global matrix structure

  10. Types of Expatriates • Expatriates - Individuals whose citizenship is that of employer’s base country • Third country nationals (TCNs) - Individuals whose citizenship is neither employer’s base country nor location of subsidiary • Local country nationals (LCNs) - Individuals who are citizens of country in which subsidiary is located

  11. Objectives of Compensationand Benefits for Expatriates • Attract and retain employees who are qualified for foreign assignments • Provide an incentive to leave the home country for a foreign assignment • Maintain a given standard of living • Take into consideration expatriates’ career and family needs • Facilitate reentry into the home country at the end of a foreign assignment

  12. Exhibit: 16.10 Common Allowances in Expatriate Pay Packages

  13. Common Allowances in Expatriate Pay Packages Financial Allowances Social Adjustment Assistance Family Support

  14. Balance Sheet Approach • Premise – Employees on overseas assignments should have same spending power as they would in their home country • Home country is standard for all payments • Objectives • Ensure cost effective mobility of people to global assignments • Ensure expatriates neither gain nor lose financially • Minimize adjustments required of expatriates

  15. Exhibit 16.11: Balance Sheet Approach

  16. Pay Comparisons • USI MBA candidates, Engineering undergrad, MNGT 652, Fall 2000 • Crystalline Maintenance Manager, GE Plastics, Lexan Chemical Operations, Mt. Vernon (10 yrs exp, B.S. U of Idaho) • Sourcing Leader, GE Plastics, Mt. Vernon (8 yrs exp, B.S. National University of Colombia, M.S. U of Oklahoma) • Staff Engineer, City of Evansville (7 yrs exp, B.S. U of Illinois) • Engineering Mngr, Ruvan, Evansville (11 yrs exp, B.S. U of Cincinnati) • Lead Process Engineer, Towel Mfg, Kimberly-Clark, Owensboro (3 yrs exp, B.S. Purdue) • Environmental Chemist, Alcan Ingot, Sebree, KY (27 yrs exp, B.S. Universidad Pontifica Bolivariana [Colombia] • Staff Electrical Engineer, Biagi, Chance, Cummins, London, Titzer, Inc., Evansville (2 yrs exp, B.S. USI) • Plant Mechanical Engineer, SIGECO, Newburgh (9 yrs exp, B.S. UE) • Industrial/Process Engineer, DSM Engineering Plastics, Evansville (14 yrs exp, B.S. Ball State) • Engineering Manager, ARC Machine, Evansville (15 yrs exp, B.S. UE)

  17. Borderless World--Borderless Pay? • Corporations attempting to become “globally integrated enterprises,” are creating cadres of globalists: • Managers who operate anywhere in the world in a borderless manner • To support a global flow of ideas and people, companies are also designing borderless, or at least regionalized, pay systems • Testing ground for this approach - European Union

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