renaissance in rewards a historical preface and comparative analysis of contemporary reward...
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![Page 1: Renaissance in Rewards A Historical Preface and Comparative Analysis of Contemporary Reward Practices Marion Festing ESCP-EAP Berlin Allen D. Engle, Sr](https://reader030.vdocuments.net/reader030/viewer/2022032521/56649d575503460f94a36333/html5/thumbnails/1.jpg)
Renaissance in RewardsA Historical Preface and Comparative Analysis
of Contemporary Reward Practices
Marion Festing ESCP-EAP Berlin
Allen D. Engle, Sr. Eastern Kentucky University USA
Peter J. Dowling Victoria University of Wellington New Zealand
Ihar SahakiantsESCP-EAP Berlin
EURAM 2009
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European Pay Practices
• A Tri-Part Historical Preface• A Descriptive Overview• Trends and Directions for Future Research• A Composite Approach to Pay Contexts
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A Historical Preface
A Closed Arcadia
Universalism and Dogma
A Renaissance
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A Closed Arcadia• Postwar-1970’s
• The Forest: Closed, complex, historically grown, variance across nations, industries and firms
• Pay decisions delimited by legislation, tradition, industrial context
• Emphasis on “Local Customization”
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Challenges to Arcadia• U.S. based multinational enterprises seek uniformity
• Tayloristic logic and “Best Practices” from global consulting firms
• Global competitive pressures, reduced tariffs
• Perceived failure of state planning to provide standard of living and capacity for global competitiveness
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The Dogma
• 1970’s to 2000’s
• Open fields and rows of crops:Universal pay practices, emphasizing individually focused, strategically-linked total rewards
• Thatcherite and Reaganesque policy
• Accelerated globalization and interdependence
• The public economic failure of state socialism, the superiority of competitive markets
• Heavy on Global Standardization
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Challenges to the Dogma• Pan European consolidation
• Euro-management?
• The social tally resulting from unfettered markets
• Protecting valued local institutions and longstanding social contracts
• Contextual Institutionalism vs. Universalism
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Renaissance• Mid 1990’s until today
• Hybrid Systems
• Balancing institutional realities with the dynamics of free markets
• Not a return to arcadia, but a renaissance;a new and unique composite system
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Synthesis of Standardization & Customization
• Globally standardized market focused, more transparent. Accountability, connecting pay practice to firm and societal outcomes, moving beyond wages to total rewards
• Locally customized maintaining national or regional institutional heritage, collective wage negotiations, coordinated pay practices across an industry, nation or across the EU
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Imagery of a Patchwork of Fields• Rows of institutionalized hedges or
windbreaks to reduce the harsh effects of unconstrained market winds
• These fields are more open to:– efficiencies of standardization– contours and ecology of local or regional
historical or institutional terrain– develop a more sustainable reward system
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Balancing
Long term social, political, ecological and economic development
with
Short term market efficiencies and growth results
Sustainable Rewards:
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An Analysis – Yet no Charts
• Empirical results from a variety of primary and secondary academic and practitioner sources
• Patterns and trends presented as follows:
– Total rewards– Transparency and access to pay practices– Contextualism at the individual, organizational
and environmental (institutional) levels– Describing the elements of total rewards
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Total Rewards• Use of a wider range of pay practices,
seeing pay as some combination of:
– Base– Short term variable– Long term variable– Perquisites– Other Rewards
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This approach is
• Flexible enough to encompass a variety of institutional, regulatory and social frameworks
and
• Standardized enough to integrate into domestic corporate, multinational and supranational government (e.g. EU) requirements
Total rewards
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Individual Contextualism• Preferences and expectations of individuals
• Social comparison processes, referent others
• Transparency and media allow extensive assessment of pay equity acrosshistorical barriers
• Labor mobility in Europe
• Standardization of monetary unit and EU labor legislation
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Organizational Contextualism• Corporate Strategy
• Need for and capacity to integrate value chain activities across nations and regions of the world
• Functional area(marketing vs. production for incentive schemes)
• Ownership form of firm
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Institutional Contextualism• Local/regional economic conditions (labour demand),
demographic trends (labour supply)
• Socio-cultural trends, political trends(Obama-esque executive pay philosophy for GM)
• Sustainability and wealth maximizationas opposed to a “lighter footprint”
• Benefits are the most institutionally sensitiveelement of pay
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Institutional Pay Individualism/Collectivism
Competitive/Cooperative
Masculinity/Femininity, . . .
• Such typologies are criticized as overly simplistic and rudimentary at this time
• Sheer complexity of the potential number of institutionally-linked pay elements
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National Differences and Pay Practices
• Working hours and paid leave• Total cash compensation• Variable pay• Long term incentives• Benefits• Perquisites
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Working Hours and Paid Leave
• Maximum hours per week (40-35)
• Mandatory minimum or customary days of paid time off (30 to 11)
• Annual working hours per year (1900+ to 1600)
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Total Cash Compensation• Some things never change:
U.S. executive compensation as“oversexed, overpaid, and over here”
• U.S., Western Europe, and Mexico globally lead in pay costs for all levels of employees
• Several interesting countries (Brazil)lead in executive total rewards overCEE and Asian executives
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Variable Pay• Problems in defining variable pay by context-
allowances as variable pay in India
• Pay for Performance schemes lead in the U.S., nations vary in how far down the hierarchy employee groups are bonus eligible
• Performance attribution in individualistic as opposed to collectivistic societies?
• More complex institutional controls? (regulations, tax treatment, etc.)
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Variable Pay• The interaction of cultural values and historically
derived, yet dynamic institutional artifacts (regulatory legislation)
• Long term values vs. immediate economic conditions
• Interest in:– more sophisticated– culturally and institutionally flexible performance
management models processes and systems
to support and justify variable pay practices
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Long Term Incentives, Benefits, and Perquisites• Large variances, limited evidence of pattern
• Due to tax practices, varying social security legislation, government position on dual pension funding (public and private) vs. single (public) pension funding
• Profit sharing:Yes in UK, not so much in Germany
• Stock option plans vary nationally:by frequency and by who is eligible
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Executive Rewards Reevaluated
• Perquisites on the auction block(Anyone need a Lear jet?)
• Long-term variable component evaporated
• Base pay under review
• Corporate governance:agency in the cross-hairs
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Convergence and Divergence in Pay
• Convergence from:– multinational enterprise practices– protean value chains– transparency and regional or global talent wars in
emerging markets
• Divergence due to:– compulsory national or regional pay legislation– resurgent institutional support to protect the
unique nature of a society
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Future Research• Balance pay for performance (incentives)
research with research on other pay forms;e.g. non-monetary rewards such as paid time off, pension plans or medical insurance
• Revisit the logic of executive pay
• Mechanisms and processes of global pay transparency and pay equity
• Broaden research base beyond the US
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Discretion in Pay Decisions
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Renaissance in Rewards
Thank you for your attention
Any questions?
Presentation by Yoder and TosianiEURAM 2009