Reward System Choices In Multinational Companies

The reward systems of MNCs in various countries have been extensively researched in the existing literature (see Alpander & Carter, 1991; Chiang, 2005; Chiang & Birtch, 2006; Chiu; et al., 1992; Coates, et al., 1992; Nyambegera et al. , 2000; Schuler & Rogovsky, 1998; Stredwick, 2000; Verburg, et al., 1999). However, detailed studies on the reward systems of European MNCs, particularly Germany, have been limited (for exceptions, see notably Kurdelbusch, 2002; Ferner, et al., 2001), despite their prominence in the global economy (Ferner, et al., 2001).

The existing cross-country studies of reward systems in German MNCs typically evaluate these MNCs against those from another developed country (Alpander & Carter, 1991; Fischer, 2004; Gunkel, 2006), and rarely against a developing country. Stehle & Erwee (2007) was an exception, where the research compared HR policies of a German MNC in three Asian countries (Singapore, Thailand and Indonesia), but the discussion on reward systems in these countries were, at best, brief. Therefore, this paper seeks to extend the existing empirical research and understanding of this research area, with a focus on German MNCs with subsidiaries in a developing Asian country, Malaysia. Recognising that the impact of rewards on employee motivation may differ across cultures, this paper aims to explore the influence of national culture on the impact of rewards on employee motivation.

While it is recognised that the relationship between rewards and motivation may also be affected by a multitude of other factors, including legal-political factors, corporate culture, macroeconomic environment and competition (Appelbaum et al. , 2011; Budhwar & Sparrow, 2002; Triandis & Wasti, 2008), this research is directed towards understanding the impact of national culture. This is guided by the views that the understanding of national cultural idiosyncrasies is essential in designing HRM strategies, particularly in rewarding employees in an internationalised business environment (Đorđević, 2016; Triandis & Wasti, 2008; Trompenaars & Hampden-Turner, 1997), and that national culture influences the motivation of individuals (Gunkel, 2006; Kanfer, et al. , 2008; Mirabela & Madela, 2013).

In order to capture the nuances of national culture, the paper applies Hofstede’s four cultural dimensions in Hofstede (1980). His study is considered an extraordinary contribution to the field of social sciences (Bond, 2002). The two additional dimensions (Confucian dynamism and indulgence vs. self-restraint) that were later introduced by Hofstede in 1991 and 2010 were excluded from this paper, following Chiang (2005), Chiang & Birtch (2006) and Thien, et al. (2014). While it is recognised that Hofstede’s model is highly contentious (see notably Bond, 2002; Jones, 2007; Schmitz & Weber, 2014), his work is used as a guide in this paper as it is the most widely-cited and methodologically rigorous work on culture (Chiang & Birtch, 2006; Bond, 2002; Hempel, 1998; Schmitz & Weber, 2014; Sumacoa, et al., 2014). According to Fontaine & Richardson (2005), Hofstede (1980) has also been used extensively in studies of the Malaysian culture (see notably Asma, 2005; Ken & Cheah, 2012).