Download Exhibit 16.11: Strategic Similarities and Differences: An Illustrated

16-1
Chapter
16
McGraw-Hill
International
Pay Systems
© 2005 The McGraw-Hill Companies, Inc. All rights reserved.
16-2
Exh. 16.3: Social Contracts
and Pay Setting
SOCIAL
CONTRACT
Highly
Centralized
Localized
McGraw-Hill
Argentina
Brazil
Canada
France
Hong Kong
Mexico
Singapore
U.K.
U.S.A.
Local
Systems
Czech Republic
Germany
India
Israel
Japan
Korea
Slovakia
Slovenia
Sector/Industry
-wide Systems
PAY SETTING SYSTEMS
Austria
Belgium
Cuba
Hungary
Poland
Sweden
Nationwide
Systems
© 2005 The McGraw-Hill Companies, Inc. All rights reserved.
16-3
Hofstede’s Cultural Dimensions
Power
Distance
Uncertainty
Avoidance
Individualism
Masculinity
Long-term
McGraw-Hill
– Collectivism
– Femininity
– Short-term
© 2005 The McGraw-Hill Companies, Inc. All rights reserved.
16-4
Exhibit 16.5: Union Density
McGraw-Hill
© 2005 The McGraw-Hill Companies, Inc. All rights reserved.
Exhibit 16.6: Employment Practices Differ Among
Nations: The Cost of an Employee
The hourly cost of a
production worker in
manufacturing . . .
. . . is made up from
the salary paid
directly to the worker
before deductions . . .
. . . and what an
employer pays in
social insurance and
labor taxes.
What those extra
costs are as a
percentage of salary.
France
$17.97
$12.36
$5.61
45.4%
Germany
$28.28
$20.94
$7.34
35.1%
United States $18.24
$14.34
$3.90
27.2%
Japan
$19.37
$16.52
$2.85
17.3%
Britain
$15.47
$13.47
$2.00
14.8%
McGraw-Hill
16-5
© 2005 The McGraw-Hill Companies, Inc. All rights reserved.
Exhibit 16.11: Strategic Similarities and
Differences: An Illustrated Comparison
Japan
Objectives
Internal
Alignment
McGraw-Hill
United States
16-6
Germany
Long-term focus
High commitment
Egalitarian – internal
fairness
Flexible workforce
Control cash flow with
bonuses
Short / intermediate focus
High commitment
Performance – market –
meritocratic
Flexible workforce
Cost control; varies with
performance
Long term
High commitment
Egalitarian – fairness
Person based: age,
ability, performance
determines base pay
Many levels
Small pay differences
Work based: jobs, skills,
accountabilities
Work based: jobs and
experience
Fewer levels
Larger pay differences
Many levels
Small pay differences
Highly trained
Cost control through
tariff negotiations
© 2005 The McGraw-Hill Companies, Inc. All rights reserved.
Exhibit 16.11: Strategic Similarities and
Differences: An Illustrated Comparison
Japan
External
Competitiveness
Employee
Contribution
McGraw-Hill
United States
16-7
Germany
Monitor age – pay
charts
Consistent with
competitors
Market determined
Tariff based
Compare on variable and
performance-based pay
Same as competitors
Bonuses vary with
performance only at
higher levels in
organization
Performance appraisal
influences promotions
and small portion of
pay increases
Bonuses an increasing
percentage of total pay
Tariff negotiated
bonuses
Increases based on
individual, unit, and
corporate performance
Smaller performance
bonuses for managers
© 2005 The McGraw-Hill Companies, Inc. All rights reserved.
Exhibit 16.11: Strategic Similarities and
Differences: An Illustrated Comparison
Japan
Advantages
Disadvantages
McGraw-Hill
United States
Supports commitment
and security
Greater predictability
for companies and
employees
Flexibility – person
based
Supports performance –
competitor focus
Costs vary with
performance
High cost of aging
work force
Discourages unique
contributors
Discourages women
and younger
employees
Skeptical workers, less
security
Fosters “What’s in it for
me?”
No reward for investing in
long-term projects
Focus on short-term
payoffs (speed to market)
16-8
Germany
Supports commitment
and security
Greater predictability for
companies and
employees
Companies do not
compete with pay
Inflexible; bureaucratic
High social and benefit
costs
Not a strategic tool
© 2005 The McGraw-Hill Companies, Inc. All rights reserved.
16-9
Shift in Strategic Global Focus
Focus
of strategic global approaches –
Avoid matching national systems
Involves aligning the total pay system
with the global business strategy
Challenges
 Managers
must rethink international
compensation in the face of global
competition
 Align global pay with the way business is
aligned
McGraw-Hill
© 2005 The McGraw-Hill Companies, Inc. All rights reserved.
Objectives of Compensation
and Benefits for Expatriates
16-10
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
McGraw-Hill
© 2005 The McGraw-Hill Companies, Inc. All rights reserved.
16-11
Exhibit 16.14: Balance Sheet Approach
Equivalent salary and allowances,
host country
$10,200
Base-country currency
Relocation
Bonus
McGraw-Hill
$1,500
Base-country salary
$7,000
Taxes
$2,000
Housing
$2,000
Taxes
$1,000
Allowances
paid by
company
Housing
$700
Goods and
Services
$2,000
Goods and
Services
Reserve
$1,000
Reserve
© 2005 The McGraw-Hill Companies, Inc. All rights reserved.