A successful international compensation model change from balance sheet approach to local-plus approach: Exploring the perspectives of expatriates and HR Managers in a multinational case company
Seppälä, Iiris (2017-06-14)
A successful international compensation model change from balance sheet approach to local-plus approach: Exploring the perspectives of expatriates and HR Managers in a multinational case company
Seppälä, Iiris
(14.06.2017)
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Turun yliopisto. Turun kauppakorkeakoulu
Kuvaus
siirretty Doriasta
Tiivistelmä
Nowadays multinational organizations have started to look for new innovative, economical and practical solutions to manage their international assignments. In order to be effective, MNCs must find appropriate compensation solutions for their expatriates. Most of the MNCs are still using an expensive traditional balance sheet approach when sending employees abroad. However, the cost-effective local-plus compensation approach has recently gained popularity in the multinational companies’ global mobility processes. The aim of this study is to understand how to change the expatriates’ international compensation model from balance sheet approach to local-plus approach successfully. Furthermore, this study reveals the key issues to consider and avoid when implementing the local-plus compensation model.
In regards to the methodological approach, this study followed qualitative case study analysis. The data has collected by conducting semi-structured interviews with expatriates and HR Managers of a multinational case company. The theoretical framework of this study consisted of the two-factor theory (Herzberg 1959), contingency theory (Chandler 1962) and psychological contract theory (Rousseau 1989) in order to understand the motives of the interviewed expatriates and HR Managers as well as their interrelationship. As a result, this study reveals that there is commonly mutual understanding between the expatriates and HR Managers concerning the process of compensation model change to local-plus.
The empirical findings of this study indicate that multinational companies must consider several issues when changing their international compensation design from balance sheet approach to local-plus approach. The MNCs should determine the local-plus strategy carefully in an organizational context, aim to highlight the individual skills of the assignees and follow location-based features of the host countries. In addition, the MNCs should invest in providing intrinsic rewards, development opportunities and proper host country services for the expatriates. The global mobility processes should be transparent and the involved parties should maintain a good relationship as well as aim for mutual compensation agreement. However, there are several issues that the MNCs must avoid. Expatriate’s basic remuneration level should not be underestimated and completely standardized compensation packages should be avoided. Moreover, there should not be lack of communication, support and progressiveness in the MNCs’ global mobility processes. Finally, expatriate’s opinions should not be disrespected and organizational hierarchy and unequal treatment of the assignees should be avoided.
In regards to the methodological approach, this study followed qualitative case study analysis. The data has collected by conducting semi-structured interviews with expatriates and HR Managers of a multinational case company. The theoretical framework of this study consisted of the two-factor theory (Herzberg 1959), contingency theory (Chandler 1962) and psychological contract theory (Rousseau 1989) in order to understand the motives of the interviewed expatriates and HR Managers as well as their interrelationship. As a result, this study reveals that there is commonly mutual understanding between the expatriates and HR Managers concerning the process of compensation model change to local-plus.
The empirical findings of this study indicate that multinational companies must consider several issues when changing their international compensation design from balance sheet approach to local-plus approach. The MNCs should determine the local-plus strategy carefully in an organizational context, aim to highlight the individual skills of the assignees and follow location-based features of the host countries. In addition, the MNCs should invest in providing intrinsic rewards, development opportunities and proper host country services for the expatriates. The global mobility processes should be transparent and the involved parties should maintain a good relationship as well as aim for mutual compensation agreement. However, there are several issues that the MNCs must avoid. Expatriate’s basic remuneration level should not be underestimated and completely standardized compensation packages should be avoided. Moreover, there should not be lack of communication, support and progressiveness in the MNCs’ global mobility processes. Finally, expatriate’s opinions should not be disrespected and organizational hierarchy and unequal treatment of the assignees should be avoided.