GLOBAL REWARD MANAGEMENT IN MULTINATIONAL ...opus.escpeurope.de/opus4/files/35/Dissertation_Michael...resource management (IHRM) has received a lot of attention in the recent decade

GLOBAL REWARD MANAGEMENT IN MULTINATIONAL ENTERPRISES

Antecedents and Consequences of Practice Centralization

Inaugural dissertation

submitted to attain the academic degree

doctor rerum politicarum

(Doktor der Wirtschaftswissenschaften)

at the

ESCP Europe Business School Berlin

by

Dipl.-Psych. Michael Tekieli

born on March 22nd, 1987 in Jastrzębie-Zdrój, Poland

Berlin

2018

Global reward management in MNEs

DOCTORAL EXAMINATION COMMITTEE

Head: Prof. Dr. Christian Durach, ESCP Europe Berlin

Examiner: Prof. Dr. Marion Festing, ESCP Europe Berlin

Examiner: Prof. Dr. Xavier Baeten, Professor of Management Practice, Vlerick Business School

Day of disputation: October 29, 2018


TABLE OF CONTENTS

List of figures .......................................................................................................................................................... I List of tables .......................................................................................................................................................... II List of abbreviations ............................................................................................................................................. III 1 Introduction .................................................................................................................................................. 1 2 Overview on global reward management research ................................................................................... 4

2.1 Global reward management from a theoretical perspective ................................................................... 4 2.1.1 Firm-internal theories ........................................................................................................................ 5

2.1.1.1 Resource-based view ................................................................................................................................ 5 2.1.1.2 Resource dependence theory .................................................................................................................... 6

2.1.2 Firm-external theories ....................................................................................................................... 7 2.1.2.1 Cultural perspective .................................................................................................................................. 7 2.1.2.2 Institutional perspective ............................................................................................................................ 7

2.2 Current state of research in global reward management and research gaps ........................................... 8 3 Dissertation Structure ................................................................................................................................ 10

3.1 Overview of the manuscripts ............................................................................................................... 10 3.2 Data collection and data basis .............................................................................................................. 15

4 Introductory Insights on the Global Reward Management of the Sample ........................................... 16 5 Research Manuscripts ................................................................................................................................ 18

5.1 Global Alignment or Localization? An Empirical Examination of Global Reward Management

in MNEs from a Subsidiary Perspective ............................................................................................. 18 5.2 Global reward management – a power perspective on the decision-making centralization in

multinational enterprises ...................................................................................................................... 19 5.3 Centralization and Effectiveness of Reward Management in Multinational Enterprises:

Perceptions of HQ and Subsidiary Reward Managers......................................................................... 20 6 Discussion and Conclusion......................................................................................................................... 21

6.1 Summary of key findings .................................................................................................................... 21 6.2 Further analyses ................................................................................................................................... 23

6.2.1 Further analyses linking manuscript 1 and 2 ................................................................................... 23

6.2.2 Further analyses related to manuscript 2 ......................................................................................... 27 6.3 Contributions ....................................................................................................................................... 29 6.4 Limitations and future research implications ....................................................................................... 30 6.5 Practical Implications .......................................................................................................................... 32 6.6 Closing Remarks.................................................................................................................................. 33

7 References ................................................................................................................................................... 34


I

LIST OF FIGURES

Figure 1. Underlying total rewards perspective of this dissertation. .............................................. 11

Figure 2. Underlying framework of this dissertation. .................................................................. 13

Figure 3. Reward management centralization of MNEs provided by the headquarters subsample. .... 16

Figure 4. Influences of foreign subsidiaries on MNE’s development of reward programs provided

of the headquarters subsample. ................................................................................... 17


II

LIST OF TABLES

Table 1. Overview of the manuscripts included in the thesis. ....................................................... 14

Table 2. Centralization of decision-making for the different employee groups and reward

practices. .................................................................................................................. 24

Table 3. Multiple regression analyses predicting for three different employee groups centralization

of decision-making by alignment and localization pressures. ........................................... 25

Table 4. Centralization of decision-making for the different employee groups and reward

procedure. ................................................................................................................. 28


III

LIST OF ABBREVIATIONS

ANCOVA Analysis of covariance

Ed(s). Editor(s)

ed. Edition

e.g. Exempli gratia (for example)

et al. Et alii (and others)

GLOBE Global Leadership and Organizational Behavior Effectiveness Program

GRM Global reward management

HQ Headquarters

i.e. Id est (that is)

(I)HRM (International) Human resource management

IT Information technology

LTI Long-term incentives

MNE(s) Multinational enterprise(s)

p./pp. Page/s

PFP Pay for performance

PMS Performance management systems

SE Standard error

SIT Social identity theory

STI Short-term incentives

UNCTAD United Nations Conference on Trade and Development

UK United Kingdom

USA United States of America

Vol. Volume


1

1 INTRODUCTION

Due to the increasing prevalence of globalization, multinational enterprises (MNEs) have

become central players in the world economy. The number of MNEs worldwide increased

from 3,000 in 1990 to 100,000 in 2012 (Javidan & Bowen, 2013), and they account through

their value chains for 80 percent of global trade (UNCTAD, 2013) and employ a major part of

the worldwide workforce (Budhwar & Sparrow, 2002). Consequently, international human

resource management (IHRM) has received a lot of attention in the recent decade from

researchers as well as practitioners (Kroeck & Von Glinow, 2015).

Global reward management (GRM) is a crucial issue for MNEs, since it affects employee

behavior and is therefore able to improve global firm performance (Graham & Trevor, 2000;

Gross & Friedman, 2004). With ongoing globalization, GRM comprises so much more than

expatriate pay, consisting of the following core tasks: a) The consideration of local and global

data when setting up total reward packages for a global workforce, b) the decision whether to

use centralized or decentralized reward systems, and c) the linkage of global outcomes with

geographically dispersed costs. This broad spectrum of tasks has the aim of addressing several

MNE objectives (Kroeck & Von Glinow, 2015):

x To attract and retain critical talent in all locations

x To attract and retain employees suitable for international assignments

x The worldwide exchange and transfer of employees from different locations

x The creation of a consistent and accepted relationship between rewards at HQ and

international subsidiaries

x Implementing reward management that is competitive and simultaneously keeps costs

at a reasonable level


2

In the past, one focus of IHRM research was to examine the extent to which MNEs

standardize or localize their worldwide HRM practices (Brewster, Mayrhofer, & Smale,

2016). MNEs face two opposing pressures: “They are pulled to achieve isomorphism with the

local institutional environment, and they also face an imperative for consistency within the

organization” (Rosenzweig & Singh, 1991, p. 340). This duality has also been found in the

area of GRM: “We see evidence both of international convergence around best practice

coupled with an increasingly sophisticated awareness of the distinctive nature of rewards

policies and behavior across countries” (Sparrow, 2004, p.102). HRM is supposed to be the

management function under the highest pressure to adapt to local standards instead of being

standardized across national boundaries, as it is highly sensitive to local conditions, especially

due to its high dependence on the local labor market (Farndale & Paauwe, 2005; Ferner,

Quintanilla, & Varul, 2001). With regard to GRM, the local environment has also been

assumed as a crucial reference point (McGraw, 2015), especially due to governmental

regulations (Chapman & Kelliher, 2011). However, research on GRM is still scarce and lacks

a clear and comprehensive understanding of when and why MNEs adapt their GRM to the

local environment, and when and why they do not do so (Festing & Tekieli, 2018).

The present work contributes new explanations to the standardization vs. localization

debate in GRM by applying new theoretical lenses and assessing empirically a broad set of

reward practices as well as factors that influence global standardization and local adaptation.

The three research manuscripts are the centerpiece of this thesis, with each manuscript having

a distinct research focus; however, in each document, reward practice centralization is a

dominant research object. Even though one central research aim of the present work is to shed

light on the standardization vs. localization debate in GRM, the term ‘centralization’ is used

instead of ‘standardization’, the latter of which refers usually to the alignment of HQ and

subsidiary practices and was in the past operationalized mostly by practice resemblances

between the two entities (Demirbag, Tatoglu, & Wilkinson, 2016). The term ‘centralization’


3

is broader and captures, in addition to practice resemblance, the centralization of decision-

making, which has also been subject to this research. Manuscript 1 seeks to examine from a

subsidiary perspective the influence of several pressures for local adaptation and global

alignment on different reward practices and if the (varying) impact of pressures is reflected in

the extent to which subsidiary reward practices resemble those of HQ and local competitors.

The second manuscript enriches the findings of study 1 by examining from a HQ perspective

power relations between HQ and subsidiaries in the form of decision-making centralization,

as well as another set of external and internal factors regarding their impact on centralization.

While the first two manuscripts focus on practice centralization in the form of practice

resemblance (manuscript 1), respectively decision-making centralization (manuscript 2) and

its antecedents, the third manuscript focuses on the relationship between practice

centralization and its consequences in the guise of the perceived effectiveness of reward

management. Taking into account both the HQ and the subsidiary perspective, manuscript 3

investigates GRM from a psychological perspective, indicating the importance of in-group

favoritism and out-group derogation at HQs, as well as subsidiary managers’ role identities.

In the following, an overview on GRM research is provided, including theoretical

perspectives, the current state of the research, and research gaps. This is followed by Chapter

3, which presents the dissertation structure as well as a short summary of each manuscript.

Chapter 4 provides an introductory overview of GRM in the HQ subsample, which functioned

also as the sample for manuscripts 2 and 3. After presenting the three manuscripts, the results

are discussed and enriched through additional analyses, which link the results of the single

articles and provide in combination with the core findings some interesting additional insights

on GRM, thereby enhancing the coherence of this cumulative dissertation. At the end of the

thesis, limitations, implications, and future avenues are outlined.


4

2 OVERVIEW ON GLOBAL REWARD MANAGEMENT RESEARCH

2.1 Global reward management from a theoretical perspective

Reward theories can be classified in different ways. For example, Bloom and Milkovich

(1996) classify reward theories into those that treat rewards and reward systems as outcomes

(the dependent variable) and those that treat them as causes (the independent variable), while

Werner and Ward (2004) differ between theories that examine organizational level reward

practices and those that examine reward issues concerning individuals. However, when GRM

is considered, theories are usually classified within the convergence vs. divergence debate.

The idea of convergence is defined as the adaptation of management practices across

countries due to increasing global competition, while divergence states that management

practices remain different between countries due to stable, country-specific influencing

factors (Festing, 2012; Pudelko & Harzing, 2007). On the company level, this is reflected in

the standardization vs. localization debate, which centers around an MNE’s tension of global

alignment and local adaptation (Pudelko & Harzing, 2007; Bloom, Milkovich, & Mitra,

2003). In general, two conceptual models can be distinguished. The first one relies heavily on

an organizational perspective, assuming that organizational factors dominate when MNEs

design their international compensation systems. The other model assumes that environmental

factors have a primary influence over the design of MNEs’ GRM and that firm-internal

factors are rather subordinate (Dowling, Festing, & Engle, 2017; Bloom et al., 2003).

According to Dowling et al. (2017) each of these two models is founded on another research

paradigm, with the firm-internal perspective founded on the universalist paradigm, while the

firm-external perspective is founded on the contextual paradigm:


5

“The universalist paradigm […] essentially centres around arguing that research involves

using evidence to test generalisations of an abstract and generalist nature; that the purpose

for SHRM is to improve the way that HR is managed within companies, and that general

rules can be applied generally. The contextual paradigm argues that research is about

drawing understanding from complex data; that explanation of difference is more

important than firm nature of what is being studied, the levels at which it is studied and

the actors included” (Brewster, 1999, p. 45).

Dowling et al. (2017) state that these theories might be implicit and not expressed by reward

practitioners, albeit the basic assumptions of the theories strongly affect their decisions and

behavior. Therefore, even though some of these theories are not explicitly the theoretical

fundament of any of the three articles presented within this dissertation, their basic

assumptions can be also found in many aspects that have been examined with the presented

research. According to Dowling et al. (2017), the basic explanations are explicit on the level

of norms, values, and artefacts, such as corporate culture, organizational structure, or

company size, which are examined within the articles of this dissertation. GRM has been

examined more often through an external macro perspective than by applying firm-level

theories and has been dominated by cultural and institutional perspectives (Festing & Tekieli,

2018). In the following, two firm-internal and two firm-external theories are presented, both

of which are highly relevant with respect to GRM and are to a certain extent represented in

the three research manuscripts.

2.1.1 Firm-internal theories

2.1.1.1 Resource-based view

According to the resource-based view (Barney, 1991), a company is a unique bundle of

resources, all of which lead to sustained competitive advantage if they are valuable, meaning


6

that they exploit opportunities and defend the company from external threats. In addition, they

are rare among firms’ competitors, they are inimitable, meaning that competitors do not

possess the same resources which are furthermore hard to obtain, and they are non-

substitutable with other strategically equivalent resources (VRIN-criteria, Barney, 1991;

Peteraf, 1993; Eisenhardt & Martin, 2000). According to Brewster, Houldsworth, Sparrow, &

Vernon (2016), the resource-based view “presents the clearest argument as to why firms must

transfer capabilities globally” (p. 358), as they possess, due to the multiple environments in

which they operate, significantly large variations in their practices and people. On the other

hand, this can also result in employee groups that have to be managed differently and in

unique ways, since differences in their strategic values might result in different reward

contracts between the company and these employee groups (Bloom, 1999; Holtbruge &

Mohr, 2011; Simon, Hitt, Ireland & Gilbert, 2011; Snell, Lepak & Youndt, 1999).

2.1.1.2 Resource dependence theory

Resource dependence theory (Pfeffer & Salancik, 2003) claims that organizations strive for a

reduction of their dependency on others, in order to have as much power over their own

decisions. Dependence on certain employees or employee groups results in more power of

these employees to mold the quality and quantity of their reward package (Tremblay, Cote, &

Balkin, 2003). With respect to MNEs, resource dependence theory is highly relevant when

examining dependencies among organizational subunits—and in particular the dependencies

between HQ and foreign subsidiaries. An organizational entity has more power the more this

entity controls scarce and highly valued resources.


7

2.1.2 Firm-external theories

2.1.2.1 Cultural perspective

The influence of national culture on IHRM has been examined mainly using the GLOBE

(House et al., 2004), or Hofstede, framework, which defines culture as “[…] collective

programming of the mind” (Hofstede, 1991, p. 5) that is shared by people of the same

nationality, resulting in common values, attitudes, and behaviors of these people (Adler &

Gundersen, 2008), which is in turn reflected in all HRM practices, including reward

management (Grenness, 2011; Rogovsky, Schuler, & Reynolds, 2000). Most of the studies

that examined the relationship between national culture and reward management emphasized

pay for performance (PFP), such as the relationship between uncertainty avoidance and the

design of pay plans and bonus schemes (Schuler & Rogovsky, 1998; Prince, Prince, Skousen,

& Kabst, 2016), or the relationship between power distance and variable pay (Schuler &

Rogovsky, 1998, Berber, Morley, Slavić, & Poór, 2017). The other reward practice groups are

also supposed to be related with culture, which paper 1 elucidates further in more detail.

2.1.2.2 Institutional perspective

The second perspective that has a strong contextual approach is the institutional perspective

(DiMaggio & Powell, 1983; Whitley, 1992). According to Whitley (1992), management

practices vary between countries not only due to country-specific proximate institutions like

financial or labor systems, but also due to country-specific background institutions like the

educational system. According to DiMaggio & Powell (1983), organizations become similar

in their management approaches, in order to strive for legitimacy within the society in which

they operate. This similarity can be driven by three different mechanisms of isomorphism:


8

Coercive, mimetic, and normative, all three of which are relevant with respect to reward

management (Chapman & Kelliher, 2011; De Cieri & Dowling, 1999), a notion outlined

further in paper 2.

2.2 Current state of research in global reward management and research gaps

According to Pudelko and Harzing (2007), the small amount of empirical research that has

been conducted on GRM to date has focused on cross-national differences in compensation

and benefits (reflecting the convergence vs. divergence debate), or on an organizational level

by examining the transfer of practices from HQ to MNE international subsidiaries (reflecting

the standardization vs. localization debate), focusing mostly on pay level and pay mix

(Yanadori, 2014; Fay, 2008). Research thereby indicates that pay level is dominated by

localization logic, with most studies showing significant cross-national differences regarding

base pay respectively on an organizational level a strong adaption of MNEs towards local pay

rates. On the other hand, empirical evidence suggests a tendency towards convergence in

terms of standardizing the pay mix (Yanadori, 2014).

Closely linked to this notion is interest in the antecedents of MNEs’ GRM approaches

(Yanadori, 2011) with the aim of identifying firm-internal and firm-external factors that

influence MNEs towards centralization respectively decentralization regarding their GRM

(Kang & Shen, 2015; Bloom et al., 2003). With respect to pay level, the local labor market is

acknowledged by research as one of the most important antecedents (Yanadori, 2011), since

too much deviation from local rates implies strong disadvantages in attracting and retaining

employees (Leonard, 1987). MNEs’ strategic considerations, on the other hand, are

acknowledged as the central determinant with respect to the extent of pay mix standardization

(Yanadori, 2011), which is due to the fact that this reward instrument has an influence on

employee behavior (Jenkins, Mitra, Gupta, & Shaw, 1998; Montemayor, 1996). However,

research suggests that there are more factors affecting an MNE’s GRM besides culture,


9

institutions, and strategic considerations (Bloom et al., 2003; Festing, Eidems, & Royer,

2007).

Bloom et al. (2003) identified in their qualitative study four factors in the local environment

and three intra-organizational factors that influence the extent to which MNEs standardize

reward management. A qualitative study by Festing et al. (2007) showed that the extent to

which subsidiaries control several resources (e.g. strategically important management skills)

has an impact to which extend MNE’s transnational strategy includes local adaptions. The

authors suggest taking a closer look at firm-level aspects when examining MNEs’ GRM

approaches, which is also supported by other scholars (e.g. Chapman & Kelliher, 2011), who

even go one step further and suggest examining the macro-level context in combination with

organizational factors such as inter-firm political processes (Edwards, Colling, & Ferner,

2007; Chapman & Kelliher, 2011). Furthermore, research has focused on describing the

extent to which GRM elements are standardized or localized. However, studies that examine

the effectiveness of different approaches are missing (Festing & Tekieli, 2018). Baeten (2010)

suggests that HQ and subsidiary representatives might have different perceptions regarding

their satisfaction regarding the GRM approach of their parent MNE.

To summarize, most of the research on GRM has examined the transfer of HQ reward

practices to international subsidiaries, with an emphasis on pay level and pay mix, as well as

the effect of predominantly macro-level antecedents on this practice transfer. The local

embeddedness literature, dominated in the past by neo-institutional theory, definitely has its

merits; however, consistent answers about whether HRM practices are converging or not, are

still missing (Farndale, Brewster, Ligthart, & Poutsma, 2017), and in particular, this research

does not explain sufficiently reward managers’ decisions regarding standardization or

localization (Chapman & Kelliher, 2011; Festing et al., 2007). Consequently, research calls

for further investigations with alternative theoretical explanations, the examination of

influencing factors other than the dominating institutional and cultural perspective, as well as


10

a broader perspective on the rewards spectrum, including benefits and non-financial rewards

(Baeten, 2014; Festing & Tekieli, 2018). Particularly, Festing and Tekieli (2018) call for more

studies that examine GRM, with a stronger focus on organizational and individual level

factors that affect the extent to which MNEs standardize or localize their GRM. More

particularly, they accentuate a stronger focus on psychological processes such as in-group

favoritism toward HQ representatives, or subsidiary managers’ role identification. Related to

this point, they also ask for studies that examine power distribution and decision-making

centralization in GRM research. The next section provides an overview of the three research

manuscripts aiming to fill each of these research gaps.

3 DISSERTATION STRUCTURE

3.1 Overview of the manuscripts

The present thesis aims at analyzing three broad aspects of GRM, first by identifying

antecedents of reward management centralization, second by examining the actual extent

regarding centralization of a broad set of reward practices and with respect to different

employee groups, including senior managers, middle managers, and operational employees,

and third by exploring the consequences of reward management centralization in the form of

the perceived effectiveness of reward management. Each manuscript in this thesis focuses on

another aspect of GRM and addresses the different gaps outlined in the previous chapter. One

feature that all of the manuscripts have in common is that they all take a total rewards

perspective based on the “Total Returns” framework provided by Newman, Gerhart, and

Milkovich (2016), including the following five core reward practice groups: Base Pay, Short-

Term Incentives (STIs), Long-Term Incentives (LTIs), Benefits, and Noncash Rewards.

Figure 1 provides on overview of the reward practice groups, including details presented in


11

the boxes below the respective practice group. Please note at this point that “PFP” throughout

the whole work includes both STI and LTI.

Figure 1. Underlying total rewards perspective of this dissertation.

Manuscript 1 (“Global Alignment or Localization? An Empirical Examination of Global

Reward Management in MNEs from a Subsidiary Perspective”) focuses on the antecedents as

well as the extent of reward management centralization and examines the influence of a broad

set of firm-external localization and firm-internal alignment pressures on the design of

different reward practices at international subsidiaries of MNEs. Furthermore, the study

examines whether the extent of alignment and localization pressures is reflected in subsidiary

practice similarities with HQ and local competitors’ practices. Thus, manuscript 1 contributes

to the research by addressing several research gaps. First is the impact of other factors on

GRM, which were identified in a previous qualitative work (Bloom et al., 2003), and second


12

is the examination of reward management standardization, respectively localization, in a very

detailed manner and the inclusion of reward management practices which have not been

examined to date.

Manuscript 2 (“Global reward management – a power perspective on the decision-making

centralization in multinational enterprises”) concentrates also on the antecedents and the

extent of centralization, albeit this time with an emphasis on power relations between HQ and

foreign subsidiaries. MNEs can be seen as location- and goal-disparate organizations with

different goals of managers and workers (Ghoshal & Bartlett, 1990), with HQ assuming that

their home-based approach should be applied across all foreign subsidiaries (Chung, 2014;

Quintanilla & Ferner, 2003). Bloom et al. (2003) found this phenomenon also in the field of

GRM:

“Managers across the firms consistently expressed a strong preference for aligning the

design of compensation systems with the MNE’s organizational context rather than

conforming to local host contexts. This preference seemed to emanate from a strategic HRM

mindset: the assumption that conformance would, at best create competitive parity and that

only through strategic alignment competitive advantage can be obtained” (p. 1359).

However, MNEs’ transfer of HQ management practices to subsidiaries depends on social,

political, and economic institutions, all of which are important power sources to local actors

within the MNE (Ferner & Edwards, 1995). Subsidiary representatives are supposed to have a

great deal of power within an MNE if they possess exclusively the competences and resources

required to handle institutional constraints and demands properly (Ferner & Edwards, 1995;

Geppert, Williams, & Matten, 2003). Study 2 examines whether decision-making

centralization differs between reward practices, thereby reflecting that the institutional

constraints and subsidiary resources to handle these constraints differ between the various


13

reward practices. Including the combination of institutional and power-related explanations,

this study addresses explicitly a call to explore power distribution and decision-making

centralization within MNEs in the field of GRM (see above). Furthermore, this study also

tests a broad set of factors that have been identified in a previous qualitative study and which

are supposed to have an impact on the power basis of subsidiary reward managers (Festing et

al., 2007).

Figure 2. Underlying framework of this dissertation.

Manuscript 3 (“Centralization and Effectiveness of Reward Management in Multinational

Enterprises: Perceptions of HQ and Subsidiary Reward Managers”) focuses on the

relationship between the extent of centralization and its consequences and examines

GRM in MNEs from a psychological perspective. One central assumption is that HQ and

subsidiary managers have different perspectives regarding the preferred balance of

centralizing or decentralizing an MNE’s reward management program. As the central

theoretical lens, the research team in this study chose social identity theory (SIT, Tajfel &

Turner, 1979) to explain intergroup bias between the reward managers of various MNE

units, as well as to highlight its effects on global reward management. While HQ

representatives across several management areas prefer a centralized approach, due to


14

their “sense of superiority” (Chung, 2014, p.229), the relationship examined herein

between reward management centralization and the perceived effectiveness of reward

management is supposed to be more complex within the group of subsidiary reward

managers, as they can identify with one entity stronger than with the other one. The three

manuscripts are depicted in a conceptual framework (Figure 2).

Table 1. Overview of the manuscripts included in the thesis.

No. 1 2 3

Title Global Alignment or

Localization? An

Empirical Examination of

Global Reward

Management in MNEs

from a Subsidiary

Perspective

Global reward management

– a power perspective on the

decision-making

centralization in

multinational enterprises

Centralization and

Effectiveness of Reward

Management in

Multinational Enterprises:

Perceptions of HQ and

Subsidiary Reward

Managers

Co-authors Marion Festing

Marion Festing Marion Festing

Xavier Baeten

Journal International Journal of

Human Resource

Management (IJHRM)

International Journal of

Human Resource

Management (IJHRM)

Journal of Personnel

Psychology (JPP)

VHB Ranking

position

B B C

Publication status Accepted for publication

(June, 2018)

Under review Published (April, 2018)

Points 1 1 0,5

Focus Examination of a broad set

of alignment and

localization pressures on

reward practice

resemblance with HQ &

local competitors

Analysis of power-relations

between HQ and subsidiary

within GRM by combining

neo-institutional theory with

micro-political perspectives

Examination of the

relationship between

reward management

centralization and

effectiveness from a social

identity perspective

In order to keep the framework simple, I only include the moderation tested in manuscript

3 (moderation of the HQ-subsidiary-identification). However, it should be noted that it

differed in terms of employee hierarchies and reward practices with regard to all variables


15

measuring the extent of centralization as well the consequences of centralization. In study

1, a differentiation between reward practice groups was also made regarding the impact

of the antecedents of centralization. Table 1 provides an overview of the three

manuscripts regarding their contributions as well publication status.

3.2 Data collection and data basis

All All three manuscripts are based on data assessed in cooperation with the Vlerick Centre

for Excellence in Strategic Rewards, and AON Hewitt Consulting, between April and October

2015, covering data for 158 MNEs operating across Europe. The quantitative data used in the

three manuscripts are based on two complementary surveys, with one version for HQs and the

other one for local country representatives. This approach helped in taking a more holistic

perspective on GRM—a notion also supported by international management research (Smale,

Björkman, & Sumelius, 2013, Bayo-Moriones & Galdon-Sanchez, 2010). Furthermore,

research suggests that the extent of centralization is related with the position of the respective

employee group in the MNE hierarchy (McGraw, 2015). Consequently, data were assessed

and examined separately for each of three employee groups ‘senior managers’, ‘middle

managers’, and ‘operational employees’.1 Manuscript 3 is based on both subsamples, while

manuscript 2 examines explicitly GRM from a HQ perspective, and manuscript 1 from an

explicit subsidiary perspective. Surveys were sent via an online link to 44,056 HR managers,

and 434 followed the invitation mail. In total, 107 HQ representatives and 51 subsidiary

representatives completed the survey.2 Reporting a valid response rate is not possible here, as

it is not clear how many recipients recognized the mail and were reward managers working

within an MNE. However, as outlined by the manuscripts, tests for non-response bias showed

1 Senior managers: > 899 Hay points, middle managers: 300-899 Hay points, operational employees: <300 Hay points. 2 The subsidiary sample size was 49 in manuscript 1 due to missing data.


16

no indication of a non-response bias within the examined data. In total, 44 participating

MNEs had their HQ in the USA, followed by 26 MNEs with Germany as their country of

origin and 25 MNEs with their HQ located in the UK.

4 INTRODUCTORY INSIGHTS ON THE GLOBAL REWARD

MANAGEMENT OF THE SAMPLE

In In addition to the findings provided by the three manuscripts, the present chapter provides a

first hint as to whether GRM is a centralized or a decentralized management discipline and is

based on the answers of the HQ subsample. Almost all HQ representatives reported that their

reward management is centralized with respect to senior managers, while reward management

for middle managers was almost balanced with 55%, thus indicating a centralized approach.

Around two-thirds of respondents reported that their MNE has a decentralized reward

management approach (see Figure 3).

Figure 3. Reward management centralization of MNEs provided by the headquarters subsample.

SeniorManagers

MiddleManagers

OperationalEmployees

Rather centralized 91,7 55,1 37,4Rather decentralized 6,5 44,9 62,6

0

20

40

60

80

100

Perc

enta

ge


17

These results correspond with the findings regarding the subsidiary influence on the

development of reward programs, indicating a small respectively no influence regarding

senior managers and a moderate-to-strong influence of subsidiaries on the development of

reward programs for middle managers and operational employees (see Figure 4).

Figure 4. Influences of foreign subsidiaries on MNE’s development of reward programs provided of the headquarters subsample.

Furthermore, data show that around three-quarters have a global evaluation job system with

respect to senior managers (76.6%), whereas 69.2 % stated having a global job evaluation

system for middle managers, and 52.3% for operational employees in this respect. The results

for global market positioning strategy are similar, with 74.8% having one for senior

managers, 63.6% for middle managers, and 51.4% for operational employees. Overall, these

results show that reward management centralization differs between the respective employee

groups, hence supporting the chosen approach of examining GRM separately for these

employee groups.

SeniorManagers

MiddleManagers

OperationalEmployees

No influence 49,5 7,5 3,7Weak influence 21,5 15,0 11,2Some influence 16,8 49,5 35,5Strong influence 6,5 24,3 43,0

0

10

20

30

40

50

60

Perc

enta

ge


18

5 RESEARCH MANUSCRIPTS

5.1 Global Alignment or Localization? An Empirical Examination of Global

Reward Management in MNEs from a Subsidiary Perspective

Manuscript No. 1 This manuscript was accepted for publication with the International Journal of Human

Resource Management on June 29, 2018.

Festing, M., & Tekieli, M. (in press). Global Alignment or Localization? An Empirical

Examination of Global Reward Management in MNEs from a Subsidiary Perspective.

International Journal of Human Resource Management.

Manuscript available from the author upon request.


19

5.2 Global reward management – a power perspective on the decision-making

centralization in multinational enterprises

Manuscript No. 2 This manuscript is under review with the International Journal of Human Resource

Management as:

Festing, M., & Tekieli, M. (under review). Global reward management – a power perspective

on the decision-making centralization in multinational enterprises. International Journal of

Human Resource Management.



20

5.3 Centralization and Effectiveness of Reward Management in Multinational

Enterprises: Perceptions of HQ and Subsidiary Reward Managers

Manuscript No. 3 This manuscript is published as:

Tekieli, M., Festing, M., & Baeten, X. (2018). Centralization and Effectiveness of Reward

Management in Multinational Enterprises: Perceptions of HQ and Subsidiary Reward

Managers. Journal of Personnel Psychology, 17, 55-65.



21

6 DISCUSSION AND CONCLUSION

6.1 Summary of key findings

The first key finding of manuscript 1 is that MNEs differentiate strongly between practices

and employee levels regarding the standardization, respectively localization, of their GRM.

PFP resembled HQ practices strongly, indicating the standardization of incentives. However,

since similarities with local competitors were also at a high level, this might suggest not only

the standardization of PFP, but also a worldwide convergence thereof. As discussed within

manuscript 2, normative isomorphism has a strong impact on the management of PFP

(Chapman & Kelliher, 2011). A typical example is Lawler’s new pay theory (Lawler III,

1995), which recommends the usage of PFP and has been spread worldwide by consulting

firms (Chapman & Kelliher, 2011). In this vein, Von Glinow, Drost, and Teagarden (2002)

declared 15 years ago the emphasis on individual PFP as a “universal trend for the future” (p.

128)—a notion supported by more recent studies showing that PFP is one of the core high-

performance practices across different industries and regions globally (Chapman, Sisk,

Schatten, & Miles, 2016; Posthuma, Campion, Masimova, & Campion, 2013). From a

strategic HRM perspective, PFP is acknowledged as high-performance work system, meaning

that its application results universally in a performance increase (see also Chênevert &

Tremblay, 2011; Demirbag et al., 2016). As these theories, and in particular theories

promoting PFP, have been developed mainly in the US-American context, the literature also

speaks about “Americanization” or adaption to an “Anglo-Saxon model” (Edwards et al.,

2013). A further finding of study 1 was that alignment and localization pressures differed

between reward practice groups when designing their GRM practices. Localization pressures

were strongest regarding benefits, and alignment pressures were strongest with respect to

PFP, which reflected the results on practice resemblance.


22

Including the combination of institutional and power-related explanations in the

standardization vs. localization debate in GRM, study 2 shows that decision-making

centralization differs between the various GRM practices. This supports research stating that

even though there are systematic differences between countries regarding the extent of

regulations (showing that coordinated market economies such as Germany or Sweden have

overall stronger institutional constraints than typical liberal market economies such as the

USA or the UK (Gooderham, Nordhaug, & Ringdal, 1999; Poutsma, Ligthart, & Veersma,

2006)), even countries with highly regulated institutional systems leave “open institutional

spaces” (Tempel & Walgenbach, 2012, p. 235) for some management practices (Colling,

Gunnigle, Quintanilla, & Tempel, 2006; Edwards et al., 2013; Weber, Kabst, & Gramley,

2000). Consequently, Tempel and Walgenbach (2012) conclude that “focusing on the level of

employment practices helps to highlight that such differences in the constraining or open

nature of institutions within national systems may be found not only between, but also within,

institutional spheres” (p. 236). Furthermore, the parent MNE’s decision to cede power from

HQ to international subsidiaries has been identified as being influenced by firm-internal and

firm-external factors. Moreover, the study showed that contact between HQ and subsidiary

representatives has an impact on HQ managers’ cognition, in that the higher the amount of

contact between HQ and subsidiary managers, the stronger the reported influence of firm-

internal reasons for the decentralization of decision-making. Enhanced contact might result in

HQ managers putting more trust in their subsidiary managers and, in consequence, greater

willingness to cede decision-making power to subsidiary managers.

The findings of manuscript 3 do indeed support this interpretation by showing that

social identity processes (Tajfel & Turner, 1979) play a relevant role regarding the perceived

effectiveness of decision-making centralization. HQ managers across all reward practices and

employee hierarchies preferred a centralized GRM approach, which was interpreted as being

due to their in-group favoritism. With respect to subsidiary managers, the extent of their


23

identification with HQ and the subsidiary moderated the relationship between centralization

and perceived effectiveness, which also supports scholars who suggest considering also

cognitive aspects such as MNE managers’ mindsets (Ferner, Edwards, & Tempel, 2012; Zhu

& Jack, 2016).

6.2 Further analyses

Since all of the manuscripts were based on one dataset, I applied two additional analyses with

the aim of linking the individual articles as well as providing additional insights on data that

were not integrated within the three manuscripts, thus enriching the standardization vs.

localization debate as well as GRM research in general.

6.2.1 Further analyses linking Manuscript 1 and 2

Considering the results of studies 1 and 2, the aim of these analyses is to check whether

alignment and localization pressures are also reflected in the decision-making centralization

of GRM practices (and not only reflected in practice resemblance, as shown by the findings in

study 1). Thus, I examined within the subsidiary sample of manuscript 1 the extent of the

decision-making centralization of 22 reward practices for each of the three employee groups

(senior managers, middle managers, and operational employees). Reward practices were

classified into five categories: Base pay, STI, LTI, benefits, and noncash rewards. Exploratory

factor analysis with VARIMAX rotation suggested also a five-factor solution, with

satisfactory factor loadings (>.74) and all items loading on their intended factors. For each

reward group, an average centralization score was created, resulting in five (reward group) x

three (employee level) centralization scores per respondent. All scales showed good

Cronbach’s alpha values between .78 and .96. Control variables were also identical with the

ones from Study 1 (autonomy of the subsidiary, HQ and subsidiary location, subsidiary size,


24

industry sector). Furthermore, I used for the additional analyses the overall scores for

alignment pressures and localization pressures, which were already used in study 1. With the

additional analysis, I tested via multiple regression analyses whether or not localization and

alignment pressures predict decision-making distribution within the MNE. Tolerance scores in

all models were above 0.2, and the variance inflation factor was never greater than 10 and on

average not substantially greater than 1, thereby indicating no concerns with multicollinearity

(Bowerman & O’Connell, 1990; Menard, 1995). Table 2 provides descriptive information

about the extent of decision-making centralization, differentiated by reward practice groups

and employee levels, thus suggesting the strongest decision-making centralization for LTI and

STI and the lowest centralization for benefits, as well as the strongest decision-making

centralization for the group of senior managers and the lowest centralization for operational

employees. In order to test whether alignment pressures strengthen the centralization of

decision-making, and if localization pressures reduce the centralization of decision-making, I

ran for each employee level a multiple linear regression analysis to predict the centralization

of decision-making based on overall alignment pressures, overall localization pressures, and

the four control variables.

Table 2. Centralization of decision-making for the different employee groups and reward practices.

Senior Management Middle Management Operational EmployeesBase pay 3.75 (1.20) 2.88 (1.32) 2.57 (1.33)STI 4.22 (1.06) 3.60 (1.43) 2.99 (1.57)LTI 4.96 (0.18) 4.36 (1.39) 4.06 (1.64)Benefits 1.95 (1.13) 1.68 (0.97) 1.69 (1.01)Noncash rewards 2.75 (1.08) 2.31 (1.01) 2.27 (1.02)

Notes . Means and standard deviations (in parantheses) with 1= completely decentralized (decisionsare completely taken by subsidiary and 5 = completely centralized (decisions are completely taken by headquarters). STI= short-term incentives, LTI=long-term incentives.


25

As presented in Table 3, results show for all employee levels, that alignment as well as

localization pressures significantly predict the centralization of decision-making in the

following directions: The stronger localization pressures on a reward practice exist, the more

decision-making upon this reward practice is decentralized and the stronger alignment

pressures on a reward practice exist, the more decision-making upon this reward practice is

centralized.

Table 3. Multiple regression analyses predicting for three different employee groups centralization of decision-making by alignment and localization pressures.

In addition, I conducted another three multiple regression analyses with the centralization of

decision-making as the criterion, but this time I added as predictors, instead of overall

alignment and overall localization pressures, each (sub)dimension (please see study 1 for each

subdimension) of both pressure types. For all three employee groups, a significant regression

equation was found, with (F (12, 168) = 5.23, p = .000) and an R² of .29 for senior managers,

(F (12, 161) = 6.365) = 10.35, p = .000) and an R² of .34 for middle managers, and F (12,

153) = 4.53, p = .000) and an R² of .28 for operational employees. Interestingly, local culture

was the strongest predictor among the localization pressures, with ß =-.359 (p = .000) for

senior managers, ß = -.183 (p = .024) for middle managers, and ß = -.136 (p = .12) for

Variable B SE B ß B SE B ß B SE B ß

Alignment Pressures ,60 ,10 .37*** ,72 ,11 .41*** ,47 ,11 .28***Home Country ,13 ,19 ,04 ,59 ,19 .18** ,61 ,20 .20**

Localization Pressures -,38 ,12 -.20** -,30 ,12 -.14* -,31 ,13 -.16*

Host Country ,19 ,19 ,06 -,08 ,20 -,02 -,26 ,21 -,08Size ,00 ,00 ,00 ,00 ,00 ,00 ,00 ,00 ,00Autonomy -,08 ,13 -,04 -,16 ,13 -,07 -,06 ,14 -,03Industry -,23 ,20 -,08 -,41 ,20 -.13* -,25 ,21 -,08

R .19*** .30*** .19***

Notes. *p < .05. **p < .01. ***p < .001

Senior Management Middle Management Operational Employees


26

operational employees. This means that the more culture is acknowledged as an influencing

factor, the more decision-making regarding a certain reward practice will relocate to a

subsidiary (decisions taken by the subsidiary). Besides local culture, dominant management

practices were the second strongest predictor among localization pressures for decision-

making distribution, with ß=.108 (p =.197) for senior managers, ß =.182 (p = .034) for middle

managers, and ß =.235 (p = .01) for operational employees. Thus, dominant management

practices predict the centralization of decision-making in the opposite direction, i.e. the more

dominant management practices are acknowledged as an influencing factor, the more

decision-making will be centralized (decisions taken at HQ).

This is especially interesting when considering that within study 1 local culture had

only a small influence on the design of reward practices, whereby within the additional

analyses it was the strongest predictor with respect to the centralization of decision-making.

Furthermore, these results support the assumptions of study 2, where it was suggested that

normative pressures in the form of dominant management practices are reflected in the

stronger centralization of decision-making. The stronger participants rated local culture as

relevant with respect to the execution of reward practices, the stronger decision-making was

decentralized for the respective reward practice, meaning decisions were taken rather at the

subsidiary level when local culture was stated as a strong influencing factor. According to

Dowling et al. (2017), successful GRM requires knowledge about law, customs, and

management practices, as well as economic, political, and social contexts. While knowledge

regarding dominant management practices can be gained easily with the help of consulting

companies, gaining knowledge about the local environment might be more difficult. Since

culture might differ within a country, depending on the region, consulting companies might

not be helpful in depicting the appropriate peculiarities of the local culture in which the

individual subsidiary is located. Therefore, when recognizing that culture is a very relevant

issue, HQs might decentralize decision-making and leave it in the hands of subsidiary


27

managers, since they are locally embedded and therefore have a sense for local peculiarities.

Again, these additional findings and their interpretation support the assumptions of study 2,

where it is argued that management areas where local knowledge is very context-bound and

dependent on the embeddedness of the local managers result in a stronger decentralization of

decision-making power.

6.2.2 Further analyses related to manuscript 2

In line with most of the research within the standardization vs. localization debate, the three

manuscripts herein focused on practices and neglected processes “that balance requirements

for global standardization and local adaption” (Festing & Eidems, 2011, p. 162). MNEs’

ability to implement practices and policies in subsidiaries depends on “what might be termed

an HR technology of control” (Ferner et al., 2011, p.485). According to Baeten (2010), the

five central global reward management processes and procedures are “External

benchmarking”, “Performance management systems (PMS)”, “Reward IT tools and systems”,

“Reward communication”, and “Employee satisfaction surveys” (p.395).

An additional analysis was conducted, and it examined (as in study 2) the extent of

decision-making centralization, albeit this time regarding the five GRM processes and

procedures identified by Baeten (2010). As within manuscript 2, respondents rated the extent

of decision-making centralization regarding the five procedures separately for each employee

group (senior managers, middle managers, and operational employees). Table 4 presents the

extent of decision-making centralization for each reward procedure, differed by the respective

employee group. For each employee group, an ANCOVA with the three covariates home

country location, company size, and industry was calculated, revealing significant differences

between the five reward procedures (PMS vs. External benchmarking vs. Reward IT tools vs.


28

Reward communication vs. Employee satisfaction surveys) with respect to senior managers

(F (4,482) = 4.62, p < .01), middle managers (F (4, 424) = 8.16, p < .001), and operational

employees (F (4, 422) = 6.11, p < .001). PMS showed the highest amount of centralization.

Post-hoc one-tailed t-tests revealed for the case of senior managers that PMS was significantly

more strongly centralized than Reward communication (p < .001), Employee Satisfaction

Surveys (p < .01), and marginally significant with Reward IT tools (p = .053), while the

difference to External benchmarking (p = .123) was not significant. With respect to middle

managers, PMS was significantly more strongly centralized than Reward communication (p <

.001), Employee Satisfaction Surveys (p < .001), External benchmarking (p < .001) as well as

with Reward IT tools (p < .05). PMS for operational employees was more strongly centralized

than Reward communication (p < .001), Employee satisfaction surveys (p < .001), and

External benchmarking (p < .001), while the difference with Reward IT tools was not

significant (p = .287).

Table 4. Centralization of decision-making for the different employee groups and reward procedures.

Overall, the additional analyses provided two key insights which are interesting, especially

when considering the results of the three manuscripts. Firstly, opposed to reward practices the

results show that with respect to procedures there is in general a strong to moderate

centralization of decision-making. According to Farndale and Paauwe (2005) “the actual

transfer of HRM systems can only occur when sufficient mechanism are put in place” (p. 13).

Senior Management Middle Management Operational EmployeesPerformance management systems 4.72 (1.05) 4.13 (1.54) 3.54 (1.48)Reward IT tools 4.48 (1.27) 3.74 (1.72) 3.39 (1.72)Employee satisfaction surveys 4.27 (1.45) 3.35 (1.43) 2.83 (1.43)External benchmarking 4.6 (1.41) 3.35 (1.55) 2.74 (1.59)Reward communication 4.23 (1.36) 3.06 (1.29) 2.53 (1.19)

Notes . Means and standard deviations (in parantheses) with 1 = completely decentralized (decisions are completelytaken by subsidiary) and 5 = completely centralized (decisions are completely taken by headquarters).


29

This means that in order to standardize certain reward practices, HQ needs the decision-

making power in order to set the ground with certain procedures that enable practice

standardization. The second finding refers to PMS which has been identified as the reward

procedures with the strongest extent of decision-making centralization. From an international

perspective, PMS enable the MNE to improve the performance of the whole company, its

subsidiary units as well as individual employees by applying different performance indicators

like customer satisfaction, costs, or quality (Dowling et al., 2017, Aguinis, 2013). One key

component of PMS is goal-setting which is strongly linked to organizational business strategy

(Claus & Hand, 2009; Varma, Budhwar, & Singh, 2015). Management has to ensure that

individual goals are aligned with the business unit’s objectives which are determined by

organization’s business strategy (Aguinis, 2013). Consequently, PMS and PFP are closely

interlinked with each other (Bartram et al., 2015; Ferner & Almond, 2012; Ferner et al., 2001)

even though there is no clarity to what degree performance management processes impact the

effectiveness of PFP (Baeten, 2014). Consequently, this finding is in line with study 1 and 2

which show that PFP is the reward practice group with the strongest extent of centralization.

6.3 Contributions

Overall, the present research contributes not only to GRM, but also to general international

management research in several ways. GRM was investigated in a very differentiated way by

examining a broad set of reward practices, including benefits and non-financial rewards, as

well as differing between several employee levels. This differentiation delivers one main

finding, namely that GRM is a complex field and cannot be managed by a dichotomous

choice between worldwide standardization and local adaptation (Pudelko & Harzing, 2007;

Yanadori, 2011). Each reward element has been found to differ in its extent of centralization

regarding both dimensions: Decision-making and practice resemblance with HQs respectively


30

local competitors. Reasons for these differences between reward practices are based on the

fact that each reward practice is influenced by different firm-internal and firm-external

factors, and to varying degrees. Related to this idea, the present work showed that there are

more influencing factors than institutions, culture, and MNE strategy, which dominated

previous research.

Furthermore, by taking a stronger firm-level perspective and combining this with an

examination of the macro-level environment, as well as an examination of power allocation

across MNEs, this approach provides new insights for the standardization vs. localization

debate. Moreover, manuscript 3 enriches the standardization vs. localization debate by taking

into account individual MNE actors, including their mindsets and other psychological aspects.

In addition, the present work contributes to theory development in several ways. First, studies

1 and 2 establish that the factors identified by the qualitative work of Festing et al. (2007) and

Bloom et al. (2003) have been helpful in gaining new insights for the standardization vs.

localization debate. Second, perceptions gained by combining institutional and micro-political

perspectives supports the call for more multi-theoretical perspectives (Chapman & Kelliher,

2011). Third, study 3 showed that applying SIT (Tajfel & Turner, 1979) might be a fruitful

approach, not only within the GRM field, but also for the broader field of HRM or perhaps

even other management areas. A recent work by Festing, Schäfer, and Tiihonen (2017) was

inspired by study 3 and applied SIT within the talent management field, which supports the

theoretical impact of this study.

6.4 Limitations and future research implications

Each of the three manuscripts has some limitations, two of which are the subject of each

manuscript and will therefore be presented briefly in this chapter, whereas the other

limitations can be found in each individual article. First, the perception of only one reward


31

manager per MNE was assessed, which increases the risk of a common method bias

(Podsakoff, MacKenzie, Jeong-Yeon, & Podsakoff, 2003). However, Harman’s single-factor

test did not show any severe common method variance in our data. Nevertheless, future

research studies should assess data from more than one respondent per MNE, ideally in HQ

and subsidiaries. Secondly, the small sample size within both subsamples did not allow for

employing more comprehensive tools, and so future research studies should test through a

larger sample all variables and relationships of the underlying framework simultaneously with

the usage of structural equation analysis. Another limitation, which was not mentioned within

the respective article, is related to the issue of how subsidiary practices resemble HQ practices

(manuscript 2). It was assumed that a high resemblance implied an alignment of subsidiary

practices in accordance with HQ standards, thus suggesting practice transfer from HQ to the

subsidiary. However, according to Edwards et al. (2007), the simple existence of similar

practices in different parts of a company cannot be used as proof of transfer, since similar

approaches in both entities could have emerged independently. Qualitative studies would

allow one “to trace the path of a practice from its inception to implementation” (Edwards et

al., 2007, p. 205). The same logic can be applied with respect to any similarities found

amongst local competitors. MNEs are acknowledged as “effective vehicles for the diffusion of

HRM practices” (Doving & Nordhaug, 2013, p. 6), so a high resemblance with local

competitors is not proof of the subsidiary adapting to local standards; in fact, the resemblance

might have emerged because domestic firms adapted to the foreign role model (Mayrhofer &

Brewster, 2005). In general, qualitative research would significantly enrich the present

findings, as this approach allows for more in-depth insights, which in turn could address other

shortcomings of the present study, such as the examination of causal relationships, e.g. the

causal direction between HQ-subsidiary contact and decision-making centralization. Even

though two studies take a more holistic view by examining the subject on the firm-level and

the macro-level, as well as examining the various reward practices, Chiang, Lemanski, and


32

Birtch (2017) suggest that it might improve our understanding about global HRM when we

examine individual HRM practices not in isolation but rather in combination with other HRM

practices that are related with each other. For the case of reward management, it might thus be

beneficial to examine this topic alongside global performance management, since these two

HRM fields are linked closely with each other (Bartram et al., 2015; Ferner & Almond, 2012).

6.5 Practical Implications

As already mentioned in the discussion part of study 1, none of the results provides universal

recommendations regarding the ideal amount of power distribution or reward practice

transfer. However, the present work provides several insights that might be beneficial not only

for global reward managers, but also for practitioners in other management areas. The

potential benefits for global reward managers have already been outlined within the three

manuscripts and will therefore be summarized here in one sentence: Due to the differing

extent of firm-external and firm-internal pressures for local adaptation respectively global

standardization, it might make sense to differentiate between reward practices and procedures

when setting the extent of centralization, i.e. the extent of HQ-subsidiary practice

resemblance, as well as decision-making distribution between HQ and foreign subsidiaries.

The present findings might also be of interest to other MNE representatives. The results of

study 3 suggest that managers should be aware of the impact of psychological processes,

particularly social identity processes, as they result in biased cognitions and behaviors of

organizational members. However, study 2 suggests that contact between HQ and subsidiary

reward managers has an impact on the cognition of respective members and that enhanced

contact might be a way to soften the boundaries between HQ and subsidiary managers. For

example, before implementing several subsidiary practices, it might be useful to execute a


33

team-building workshop together with both HQ and subsidiary representatives, in order to

reduce social categorization processes.

6.6 Closing Remarks

The aim of the present work was to shed some light on GRM by analyzing the centralization

of reward practices and procedures, as well as related antecedents and consequences.

Therefore, several theoretical lenses were chosen, while data were assessed and examined

from different perspectives. The results provide new insights into GRM research and practice,

including the identification of influencing factors on a broad set of reward elements.

Furthermore, the findings reveal the relevance of firm-level as well as psychological aspects

when analyzing MNE behavior within the standardization vs. localization debate.


34

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Documents

GLOBAL REWARD MANAGEMENT IN MULTINATIONAL ...opus.escpeurope.de/opus4/files/35/Dissertation_Michael...resource management (IHRM) has received a lot of attention in the recent decade