Rewards in the Human Resources Management Practice - Literature review Example

Reward is often portrayed as an HRM practice that is relatively immune to cultural influences. Why is this? Discuss the challenges involved in developing reward strategies in IHRM

Introduction

The reward system is an imperative corporate strategy, which helps in the achievement of business objectives. Human resource management (HRM) practice faces significant difficulties in establishing a reward program that can befit diverse programs due to institutional, job related, and cultural factors (Crawley, Swailes, and Walsh, 2013). Designing an appropriate system becomes important due to the correlation between employee satisfaction and rewards. Despite the increase in multinational and regional activity, there has been a consistent adoption of rewards, which are relatively immune to cultural differences. On the other hand, finding the right reward strategy for an organization presents significant challenges in IHRM. Employee relations strategies require effective compensation management as means of recognizing and appreciating the efforts of the employees. The aim of the following paper is to address the reasons that explain the relative immunity of rewards to cultural influences and the challenges in developing rewarding strategies in IHRM.

The Immunity of Rewards to Cultural Influences

Culture shapes HRM practice and policies within an organization such as succession but does not influence the structure of rewards. Reward systems reflect the norms as well as accepted behaviours of employees from diverse culture (Myerson, Bichard, and Erlich, 2010). The compilation of values and ideologies are integral components of multinational companies (MNCs), which affect the way the people get compensation for delivering their services and executing responsibilities within the limit of their skills. Currently, HRM practices envisage rewards as means of increasing desirability in different communities across the globe (Carroll, 2008, p.56). MNCs are considering reward systems that align with the cultural needs of the natives to improve acceptability and reduce the negative social influence on the business operations. Companies aim at protecting the consumer attitudes and behaviours by presenting products that align with their societal values.

On the other hand, businesses understand that culture is a business risk in the increasingly global market. HR managers develop culturally competent rewards to mitigate the challenges and risks associated with accommodating diverse societal values (Carroll, 2008). A study of Saudi Airlines by Mellahi (2007) established that changing economy and globalization requires private as well as public sector to consider elements intrinsic elements of the employees as integral components of global reward systems. Companies are averse with the inevitable merits that come with positioning business strategy with culture, but they come up with a uniform reward system all the time (Myerson, Bichard, and Erlich, 2010). Cultural complexities and risks exist but organizations focus on the immaterial elements that increase the motivation of the employees towards the job.

Rewards are predominantly personal factors, which vary from one employee to another irrespective of their cultural origins. The Confucian cultural context on China and South Korea acknowledges the individualistic achievements of workers (Huang, Kim, and Yang, 2006). The Confucian setting implies that companies in such regions are likely to adopt rewards systems that promote individual achievement rather than reflecting the norms or beliefs of the society. Conversely, Asian cultures insist on individual mastery and competence before pursuing a rewarding practice that aligns with the input of the employees. According to Huang, Kim, and Yang (2006, p.165), Singapore recognizes rewards as motivation factors, but the cultural region emphasizes on the completeness of the individual skills, which determines how companies structure work for the employees. HRM practice in such countries focuses on the personal or special elements, which define individual workers other than the will of the communities.

Additionally, reward practices differ from one culture to another, but organizations focus on the performance to adjust the existing rewarding structures. The adaptation practice of the multinational enterprises is to sustain cultural values that shape employee behavior (Crawley, Swailes, and Walsh, 2013). Hence, the culture will have an effect on HRM practices but not in all aspects. The rewards systems in Chinese and UK companies vary, but they show significant consistency because the managers base decisions on performance other than the national values (Myerson, Bichard, and Erlich, 2010). Some of the companies view cultural alignment as a way of maintaining business ethics considering the likelihood of inconsistent values affecting the self-efficacy of the business. Performance determines the profitability of the company, which shapes the rewards for the interest groups upon regular work appraisal. The introduction of high rewards is in response to retaining and motivating high-performing employees. Kanan (2014, p.32) acknowledges the link between employee performance appraisal and budget other than cultures in an empirical study that compares Anglo-American and Libyan oil companies. The study shows that companies consider performance and budgets irrespective of the employees’ cultural orientation.

Moreover, the convergence between HRM practice of rewards and the existing national culture takes time (Crawley, Swailes, and Walsh, 2013, p.165). The complexity of the cultural differences for example, in terms of age, sex, differs by the country of origin, which may present difficulties constituting the right rewarding fit for the employees. Currently, multinational companies are not altering their payment systems too fast despite the pressure from the global market. Hofstede measures of equality and inequality using power distance index, which may demand diverse rewards for individuals according to the power ranks (Kanan, 2014). High equality countries such as Nordic nations hardly acknowledge cultural influence on rewards because the companies must implement the same strategies all levels (Anderson and Ericsson, 2008).Therefore, culture may be an important element in the rewards programs of MNCs, but the substantial differences in power and equality issues limit the alteration of the reward practices.

On the other hand, companies in different countries must establish the direct exchange between the reward policy and the cultural environment. HR managers avoid culture in designing reward strategies because it introduces ethnocentrism (Cooke, 2012). The direct effect of the cultural similarities or differences among workers may have a negative effect on the mode of conducting business. Companies consider the cultural values that are deep-rooted in various nations, but they consider effective transference of reward policies that retain business culture irrespective of the cultural orientation. Furthermore, crises related to rewards arise when employees from different cultural backgrounds perceive compensation or allowances differently, which may demand uniform criteria to contain the chaos (Crawley, Swailes, and Walsh, 2013, p.165). MNCs consider local practices that reinforce corporate performance positively. Additionally, developing reward strategies in IHRM is challenging.

Challenges in Developing Reward Strategies in IHRM

Incorporating the right, rewarding policy to retain talent is a challenge for the IHRM (Al Ariss, Cascio, and Paauwe, 2014). Organizations consider the labor costs associated with hiring new talents in different parts of the globe to maximize shareholding value. Talent management is a significant source of stellar performance for global organizations but employees with special skills demand proper compensation. HR managers have high expectations on the talented employees, which may not inspire constitution of an appropriate or satisfactory rewarding mechanism. Additionally, the retention strategies are significant components, but they vary from region to region. IHRM faces difficulties in establishing congruence between compensation and the retention of the talented workers. Merchant et al. (2011) compares Chinese and Western firms and finds a diversified rewarding formula for the employees with virtually the same talents. The comparison affirms the difficulties that MNCs face in incorporating talents from different parts of the globe.

Additionally, the changing profiles of workers in the globe present adaptation challenges for the HR managers. The demographic changes in developed and developing economies demand quick adjustment of reward strategies in line with emerging gender, legislation, and cultural diversity issues (Ferner, Edwards, and Tempel, 2012). The international public sector faces significant challenges in implementing reward policies for employees with different education, creativity, and skills. On the other hand, the global workforce is accommodating equal numbers of men and women, who are demanding work programs such as flexitime, part-time and temporary shifts at the expense of the traditional permanent fixtures (Cooke, 2012). HR managers must have significant economic intelligence in finding the right, rewarding programs for the employees without increasing labor costs. UK and U.S are experiencing an old working generations that demands social safety nets and pensions among other benefits (Chanda and Shen, 2009). Keeping an appropriate incentive structure for the multi-generational workforce requires care consideration of all pay aspects to achieve equality.

Furthermore, incorporating corporate wide and structural solutions for the rewards programs remains a challenge to a global HR (Child, 2015). The efforts of seeking a simplified and all-inclusive structure require managers look beyond the context of work within their organizations. MNCs operating in different countries must incorporate the pay demands for the host and the third countries while still seeking to retain the costs of other subsidiaries. China and South Korean contexts demand fair treatment and corporate compensation for the locals because of the individualistic norms under Confucian principles (Merchant et al. 2011). While corporate may feel that the reward variance would tally with the contribution of the employees to the business operations, the practices of the host countries demands otherwise. IHRM must consider adjusting the reward strategies based on the prevailing needs of the international community at the expense of the internal corporate demands. However, the corporates retention of HRM practices that save on cost, which presents a dilemma for the managers.

Correspondingly, cultural factors and national values are significant impediments in the constitution of relevant, rewarding strategies (Dowling, Festing, and Engle, 2009). IHRM acknowledges the influence of culture, but a relevant reward policy domain would suffice irrespective of the relative immunity to cultural values. Global HRM demands employee management from the perspective of cultural, religious, and ethnic background, which implies that HR managers cannot interpret rewarding policies considering culture. However, the complexities of the cultural and natural values alongside issues such as ethnocentrism may prove difficult even for managers who acknowledge multidimensional compensation schemes (Bader, Schuster, and Dickmann, 2015). MNCs face difficulties in transferring Western styles of rewarding employees to the non-Western origins. The acceptance of appraisals that determine pay may be difficult when cultural constraints prevail.

Similarly, integration and localization of rewarding strategy from a global context may remain difficult for HR managers (Child, 2015). The legal, political, and economic contexts of reward vary from country to country but dictate aspects that firms should incorporate in the process reward determination. A reward framework must reflect specific institutional demands despite companies having employees with incongruent expectations. According to Child (2015, p.17) China, Indonesia, Japan, and India are among the Asian countries that recognize hierarchies at work, which compels HR managers to consider long-term employment, expected allowances, and benefits. The deep-rooted principles in cultures may conflict the organizations that do not envision such reward programs. The contradictions demand careful evaluation along the localization and uniformity in a global context.

Understanding the rewarding issues in the context of IHRM poses a challenge to organizations. Currently, corporations are practicing HRM in a global platform in the form of HRM (Stahl, Björkman, and Morris, 2012). IHRM requires organizations to consider transferring people and knowledge from a parent firm to a subsidiary. Determining allowances, benefits and pay for the employees in a globalized world becomes difficult particularly when they do not meet the requirements. The complexities and ambiguity of containing as well as incentivizing employees in accordance with IHRM remain difficult (Shaffer et al., 2012). Managers reconsider measuring and using metrics to understand the contribution of the employees to the performance of the organization to justify the use of certain reward policies. Therefore, constructing a universal framework for rewarding employees under HRM and IHRM constructs poses significant challenges to the corporation. Furthermore, performance appraisal determines the rewards that individual employee receive from any corporation.

Conclusion

Rewards are relatively immune to cultural influences because businesses focus on performance, personal factors that define individual employees despite what the culture dictates. HR managers design culturally competent reward schemes to reduce the risk of cultural misalignment. However, the convergence between culture and exchange should occur for it to affect compensation or allowance for the employees. Furthermore, culture has minimal effect on the reward as one of the critical HRM elements. On the other hand, developing the right, rewarding strategy is challenging in IHRM due to unclear talent retention programs, the changing profile of global workers, and the structural needs of the companies. While cultural and national factors dictate what rewards workers should receive, the integration, as well as localization of a uniform reward scheme, is gruelling on an international platform.

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