What is the best approach to reward in a multinational?

Citation

Trevor, J. (2011), "What is the best approach to reward in a multinational?", Strategic HR Review, Vol. 10 No. 5. https://doi.org/10.1108/shr.2011.37210eaa.006

What is the best approach to reward in a multinational?

Article Type: Q&A From: Strategic HR Review, Volume 10, Issue 5

Leading industry experts answer your strategic questions

What is the best approach to reward in a multinational? It depends. The operating environment of most multinationals is one of bewildering complexity. Ever shortening business cycles, geographic dispersal, multiple regulatory regimes, dissimilar cultures and the bureaucracy necessary to ensure effective governance of global operations, all serve to make choosing and implementing reward strategy extremely difficult. As a consequence, there is no one best way of rewarding employees in multinational fast paced companies. Beware the advocates of “best practice,” it is little more than hype.

Context and alignment are key

Context matters clearly. Decision makers within the best companies keep an eye on what other firms are doing, of course, but they scrutinize their own organizations even more and are prepared to be courageous in their choices of reward approach. Bucking the market trend is tough, especially in uncertain times – there is comfort in following the herd. But it is only through the close alignment between reward practice, the wider HR architecture and its links to the overall strategy, that employee reward can become a force for good in the organization – promoting productive behaviors and employee effort.

Alignment to strategy necessarily requires a bespoke approach to reward, and inimitability is the name of the game when attempting to secure sustained competitive advantage. The reward “narrative” should represent a golden thread running seamlessly throughout the value chain that is the organization, from strategic conception to operational execution. Approaches to reward should therefore be idiosyncratic, reflecting the unique properties of the organization, and not the generic prescriptions of academics or the off-the-shelf recommendations of consultants.

Widespread conformity prevails

Worryingly, we do not observe this when comparing approaches to reward among firms. What we witness is widespread conformity as firms play it safe and adhere to so-called best practice norms. Despite rhetoric to the contrary, firms are not embracing strategic alignment with conviction, but mimicking one another to mitigate a profound lack of confidence in the outcomes of their decision making. After all, how wrong can you get it when you do the same as everybody else?

In reality, reward systems are often ineffective precisely because of the lack of sensitivity to the unique needs of their businesses. How many times have you heard the gripe from line managers that HR is out of touch? More than merely ineffective, misaligned reward systems can be destructive by producing employee demotivation, disengagement and disenfranchisement.

How to develop a bespoke approach

But securing alignment is hard. It requires that reward and HR professionals move beyond the technical and bureaucratic comfort zone, and engage widely and deeply with an array of stakeholders in their businesses, at all levels and in all capacities. So, here are some practical considerations when developing a bespoke approach to reward:

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  Consult widely on what is really important. The view from the top of the organizational hierarchy can look markedly different to that from the front lines, and yet any reward strategy must align closely with the overall strategic direction of the firm and the immediate operational needs of the business to ensure that reward is an accelerator on the path to value creation and not a break.

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  Internal stakeholders matter the most. Consultants, academics and professional associations have built an industry out of furnishing reward decision makers with research, market data and solutions to, at best, challenge and inform thinking and, at worst, rubber stamp whatever is expedient. But they matter far less than internal stakeholders – principally, line managers, the group that is going to manage performance and reward day-to-day, and employees, for whom the reward proposition is intended, and whose reaction in terms of effort, behaviors and emotional commitment is the most important outcome organizationally.

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  Reward is politics with a small “p”. When it comes to valuing a reward package, perception is reality – and everybody has an opinion on reward. There are often widely varying views on approaches to reward, and reward professionals need to work hard to generate the consensus needed to ensure that stakeholders perceive their reward positively. Employees and line managers alike need to be engaged in the process of reward determination as much as the techies in the HR department to make reward work for the organization.

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  All things being equal, simple is best. Reward folk love to get technical and there is professional prestige associated with being “leading edge.” Such technical sophistication is often unnecessary in the context of the business need and, more importantly, beyond the understanding of executives, line managers and employees. Simple is best because, simply, there is less to go wrong and less for the uninitiated to misinterpret or misunderstand.

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  Finally, be realistic. A reward system, no matter how well designed or managed, is no substitute for plain good old people management. Without good managers, securing employee performance is next to impossible. While difficult to accurately measure, investing in management development is a more powerful path to value creation than spend on reward – appealing primarily to financial self-interest to secure employee engagement, commitment and performance is as ineffective as it is reckless.

Jonathan TrevorCo-director of the Center for International Human Resource Management, Cambridge Judge Business School.

About the author

Jonathan Trevor BA, MA, PhD (University of Cambridge) is Co-director of the Center for International Human Resource Management and lecturer in the HR and Organizations subject group at Cambridge Judge Business School, University of Cambridge. He previously spent three years as a consultant with Mercer Human Resource Consulting and has published in internationally recognized scholarly journals. He teaches regularly on executive education programs as well as the Cambridge MBA and continues to consult widely to organizations in the public and private sectors. Jonathan Trevor can be contacted at: trevor@jbs.cam.ac.uk