Compare and contrast appraisal and compensation system in the US and more collective cultures. Discuss legal and cultural problems multinational managers might fact using a collective approach to these systems in the US and using a US approach in more collective cultures.

Response submitted by Kari:

(In the international version pages:585-595)

Appraisal systems in the US link individual rights, duties and rewards as well as the legal system, so the system must be highly rational, logical and legal. It should include four elements: performance standards ( management goals regarding acceptable quality and quantity of work); performance measures (for objective and comparative assessment of standards); performance feedback (one of three usual methods: tell-and-sell;tell-and-listen; and problem-solving); and human resource decisions (renumeration, promotion, termination). In the US everyone must be treated equally and fairly. The advantages of who you are and who you know may cause legal issues in the US. (appraisals must relate to job and performance; standards must be provided in writing; behaviors being evaluated must be measurable; appraisal must be discussed openly and an appeals process must be in place.)

Compensation in the US is determined by external (national/local wage, legislation, and unions) and internal (job importance, company’s ability to pay and employee’s worth to the company) factors. There are formal policies to determine wages and salaries which are generally determined through benchmarking. Advancement and higher wages are often reasons to leave a company. Raises are generally due to merit. Benefits: pension plans, health care, insurance coverage, vacation pay, sick leave and paid holidays.

In more collective cultures (China, Japan, Korea, Indonesia) the employer and employee accept as fair and correct that HR decisions take into account personal background characteristics more than achievement. How old you are and who you are count more than how you perform. Information on performance is not communicated. In Korea the performance-appraisal is focused on evaluating and developing the “whole man” including: loyalty, sincerity, and attitude along with job performance.

Compensation in collective cultures: Findings showed that there were no major differences among collective and individual countries concerning compensation determinations. In Japan, positions have education and skill requirements. As an employee gains seniority he is more eligible to move up to the more highly paid and respected positions. Also, seniority counts more for pay raises earlier in a career and lessens after the age of 45.

In the US, collective approach would be illegal. Only job performance based on standards and defined expectations can be evaluated. If someone is getting raises (based on strictly age or marital status) and performing less, discrimination is happening.
In a collective culture, the success of the whole is what is important so individual performance is not rewarded. You are expected to perform your best so that everyone benefits.

Response submitted by Jorge & Habib:

The US performance appraisal system represents cultural values that espouse links among individual rights, duties, and rewards, as well as legal system that promotes equal opportunity. The US performance appraisal system is rooted in an individualistic culture.

In the US, conditions external and internal to the company affect the wages and salaries of workers and mangers. External factors include local and national wage rates, government legislation, and collective bargaining. Internal factors include the importance of the job to the organization, the affluence of the organization or its ability to pay, and the employee’s relative worth to the business.

Collectivist societies are unlikely to use performance-appraisal. This suggests that performance appraisals may not be seen as important in such societies. In collectivist cultures, age and in-group membership provide a large component of the psychological contract with the organization; that is the employer and employee accept as correct and fair that human resource decisions should take into account personal background characteristics more than achievement.

A country’s economic development, cultural traditions, legal institutions, and the role of labor unions all affect compensation. In collectivist societies, compensation is tied to seniority, age, loyalty and the less extent performance.

Since age plays a significant role in compensation for collectivist societies; in US it may pose legal issue due to age discrimination laws. In US performance plays a significant role in compensation. The use of pay per performance in collectivist societies will negatively affect the long-term team orientation. Loyalty and attitude play a stronger role in collective societies. However, this perspective has started to change in collective societies in favor of pay per performance.