Designing multinational benefits programs: the role of national culture.
Corporate culture, political factors, and economic factors are all important. In fact, employee benefits are an important tool in helping to shape and reinforce corporate culture. Yet it is national culture that helps determine how easy it is to meld workers into the desired corporate culture, and the examples presented later in this paper show that it is national culture which has a strong role in influencing the political factors and regulations that dictate many of the observed differences in benefits across countries.
Deciding upon a clear definition of "employee benefit" is a difficult task when operating in a global context. For example, what is a voluntarily provided benefit in one country might be mandated by the government in another country, and a social benefit provided by the government in yet another country. Given the wide variation in benefits across countries, it is necessary to first clearly state what the term benefit will mean in this paper. A benefit will be taken to be any form of non-pecuniary payment or right that is employment related in a substantial number of countries. One such benefit is a pension, which is provided by the government in some countries and voluntarily provided by employers in other countries. Similarly, health care will be considered a benefit, since a large number of countries that mandate health coverage restrict the mandate to covering employed persons only, while other countries like the U.S. do not have any form of mandated health coverage. Given this broad definition, the term social and workplace benefits is probably the most accurate title to use.
It is true that a large number of multinational corporations will hire local consultants to design a purely local benefits package, but this is likely to prove satisfactory only in a corporation with its international subsidiaries operating in a truly independent fashion. More often, corporations would desire to use their benefits and employment policies as a means of reinforcing their own corporate culture (Shimer, 1996). Experience has often shown that blindly transplanting the policies from the headquarters into international subsidiaries can create difficulties if those policies are not commensurate with employee expectations.
Benefits lie at the heart of the employment relationship, and when broadly defined cover a wide range of a firm's employment policies. For example, Japan's system of lifetime employment, which is a cornerstone of the employment relationship in large Japanese corporations, can be thought of as an employee benefit. It has been recognized for a long time that employee benefits must reflect a society's general value system (Gross, 1968), and so in an international context the benefits offered are naturally highly influenced by values and national culture. By understanding how social values influence social and workplace benefits, a better understanding of a broad range of employment related relationships can be obtained.
This article will begin with a brief introduction to national culture. The article will then present some examples that illustrate how national culture can help understand differences in social and workplace benefits across different countries. This is done by examining how broad characteristics--describing a number of (primarily social) benefits vary across different countries, and explanations based upon culture are offered to help understand the observed differences. Finally, the article concludes by considering how a multinational company can use information about national culture when considering its employment relationship with employees in general, and in specific when designing a benefits system.
CULTURE AND MANAGEMENT
The most widely cited definition and measures of culture are from Hofstede (1984). Hofstede provides a set of simple measures of different dimensions that can be used to describe all cultures. As a complete cultural taxonomy, Hofstede's measures identify different aspects of culture than can help explain the vast differences in benefits observed. Due to the widespread familiarity of Hofstede's measures of culture, only an abbreviated discussion of the individual dimensions will be presented.(1) Hofstede has identified four different work-related dimensions: Power Distance, Uncertainty Avoidance, Individualism, and Masculinity. The power of Hofstede's measures of culture is that they provide a very general set of dimensions that can be used to examine all cultures. However, this generality is also a great limitation of Hofstede's measures, since there are many specific aspects of individual cultures that are not taken into account. Even taking this particular limitation into account, Hofstede's work provides a popular and powerful way of looking at differences across a large number of different cultures.
The Power Distance dimension is a measure of how hierarchical or egalitarian a society is. Societies that are very egalitarian will have low Power Distance scores, while hierarchical societies have high Power Distance scores. High Power Distance societies tend to reserve many privileges for high status or ranking individuals, while low Power Distance societies tend to try to minimize status differentials. Uncertainty Avoidance measures how much a society values explicit rules governing social interactions or other behaviors. Uncertainty Avoidance isn't equivalent to risk aversion, but this is a distinction that is sometimes confusing. One way to keep this distinction straight is to keep in mind that individuals from high Uncertainty Avoidance societies can tolerate a high degree of risk, as long as there are specific rules detailing the nature of the risk involved. High Uncertainty Avoidance societies tend to have a large number of explicit and/or implicit rules governing social interactions, while low Uncertainty Avoidance societies are more comfortable with rules that are vague or nonexistent.
Individualism measures the extent to which individuals within a society tend to define themselves in terms of individual identity or based upon group membership. High Individualism societies are called individualistic, and individuals tend to interact based upon their roles as individuals. Low Individualism societies are called collectivistic, and individuals tend to interact based upon their identity as a group member, either as a family member, alumni of a particular school, employee of a particular employer, and so on. Masculinity is the trickiest factor, and Hofstede has admitted that he should have selected an alternative title. Masculinity (and the polar opposite Femininity) does touch upon gender roles, but within the employment context Masculinity has a different definition. Members of a low Masculinity society are very concerned with quality of life, while members of a high Masculinity society tend to base their self identity upon their work. Work, competition, and success are all important to members of high Masculinity societies.
These four cultural dimensions at first appear to be a gross oversimplification of the complexities of cultural differences across different countries, but a great body of research has shown that these are a surprisingly powerful tool. The usefulness arises from the fact that these cultural dimensions describe general characteristics that apply to all cultures, and are thus ideal for helping to understand the differences between cultures.
To date, international studies of social and workplace benefits have not focused on the role that cultural values take, but a number of articles have appeared that explore the relationship between national culture and compensation system design (Kim, Park, & Suzuki, 1990; Gomez-Mejia & Welbourne, 1991; Hodgetts & Luthans, 1993). Thus far, only one international study of total compensation has also included an examination of benefits (Schuler & Rogovsky, in press). Since benefits are a component of a total compensation system, the provision of benefits will have an influence on direct compensation.
CULTURE AND BENEFITS
In the one international study of total compensation that also included an examination of benefits (Schuler & Rogovsky, in press), it was found that the high Masculinity scores were associated with lower usage of flexible benefits, workplace based child care programs, career break schemes, and maternity leave. These results had been predicted since feminine societies would have a greater emphasis upon quality of life considerations than would masculine societies. While a number of predictions relating other cultural dimensions to benefits did not show much supporting evidence, it is clear that national culture is potentially an important factor to consider when designing a global benefits program.
There are many ways in which national culture could influence benefits, but it is also important to keep in mind that there are a large number of alternative factors that influence the provision of benefits. Factors that are also responsible for international differences in benefits include: wealth, demographics, historical developments, and the industrial mix within an economy, among other factors. What makes culture such an important factor to take into account is that it is not as easy to change as are these other factors. In fact, culture, and what people think is the right (or "moral") thing to do, influences these other factors as well as how people respond to these other factors.
Examining data sources on international benefits will yield an incredible amount of information that can be quite confusing. In order to simplify matters, and to make sense of these differences across countries, the discussion will concentrate upon a few specific categories of benefits. These categories are:
* pensions and capital accumulation plans,
* job and income protections, and
* health care.
A discussion of how national culture will influence each of these categories of benefits will be discussed, and examples will be given in order to illustrate the effect of culture.
There are a large number of sources that provide information on international benefits, and the examples used to illustrate the effect of culture on social and workplace benefits are drawn from the sources listed below. One of the best sources of information on mandated and socially provided benefit programs is a biannual publication called Social Security Programs Throughout the World, published by United States Social Security Administration. A number of firms also collect and market summary information on both international benefits rules and typical practices. Examples include an international benefits newsletter called the International Employee Relations Service from Organization Resource Counselors, and the monthly update service called the IBIS (International Benefits Information Service) Briefing Service from Charles D. Spencer & Associates. Annual guides that contain information about social and workplace benefits are also published by consulting companies (e.g., William M. Mercer), insurance companies (e.g., Aetna/Generali), and accounting companies (e.g., Price Waterhouse).
Pensions and Capital Accumulation Plans
One of the primary capital accumulation programs is the pension system, and the variation across nations in pension systems is one of the most difficult barriers to overcome with this topic. The difference in sources and covered groups for pension programs is one of the most immediately striking variations across countries. Programs range from those which are run completely by the government, as with Singapore's Central Provident Fund, to those which are completely voluntary, as was the case of pensions in Hong Kong.(2) More often, pension programs are a mix of different programs. The United States provides one example, where the Social Security program provides for some pension payments for all workers, but supplemental occupational pensions are common, and individual savings are also expected.
The generosity of the social pension system also varies considerably. Australia funds a flat rate social pension out of general tax revenues, and not too surprisingly, 67% of the work force is covered under supplemental occupational pension plans that are primarily defined benefit in form. Italy's social pension provides an 80% income replacement ratio after 40 years of work, and so supplemental employer provided pensions are only common for executives. Singapore mandates a savings plan with employer and employee contributions that equal 40% of the employees' gross earnings, and supplemental occupational pensions are rare.
These examples show that there is considerable variation in how pension systems are implemented, and it is easy to get overwhelmed by all the details involved in the specifics of the programs in different countries. Fortunately, there is a simpler way of expressing the most important characteristics of these pension systems. There are two important characteristics of social pensions (either provided by or mandated by the government) that allow for easy comparison across countries: (1) generosity, and (2) income redistribution. Both pension generosity and income redistribution can be measured using the income replacement ratio, a standard measure of pensions, which is the percentage of working income that is replaced during retirement by the pension.
Income redistribution can come in two general forms. One form of income redistribution is inter-generational redistribution, and this is particularly prevalent upon societies where the social pensions are funded out of current revenues. In this form of income redistribution, assets are transferred from younger to older members of the society. When social pensions are funded from current revenues, a generous social pension will represent a large amount of inter-generational income redistribution. The second form of income redistribution can be thought of as intra-generational income distribution, and is manifested by decreasing income replacement ratios as a function of pre-retirement earnings. When low wage earners receive a relatively more generous social pension than do high wage earners, then assets are being redistributed from the wealthy to the poor.
Culture influences social pensions through the dimension of Power Distance. Power Distance is concerned with egalitarianism vs. social status. In a low Power Distance society, which is eqalitarian in nature, social pensions will be used to minimize income differences for retirees. Low Power Distance will use social pensions in order to redistribute income in both inter-generation and intra-generational directions.
In order to see whether this relationship is true, it is necessary to examine some actual data from social pensions. The calculation, shown in Table 1, which come from the information contained in Social Security Programs Throughout the World, published by the United States Social Security Administration, illustrates this relationship between Power Distance and social pensions. The calculations show that Norway has a more generous social pension (the income replacement ratio for the average worker is 72%) than does Belgium (60%), while Japan's social pension (68%) is somewhere in between.
What is even more interesting is examining the effect of redistribution of income. Consider the case of three workers earning 150%, 100%, and 50% of the average manufacturing wage in their country. In Belgium, all of these workers would receive a pension with the same income replacement ratio of 60% (see Table 1). However, the figures for Norway in Table 1 indicates a great degree of income redistribution. The comparable figures for Japan indicate a moderate amount of income redistribution. It can be seen that in Norway, and to a lesser extent in Japan, the social pension system is relatively more generous for workers with below average earnings levels.
Hofstede's cultural dimension of Power Distance clearly provide a simple explanation for these differences. The Power Distance measures for the three countries are: Belgium (65), Japan (54), and Norway (31). Norway is a low Power Distance country, and seeks to reduce income differences both across generations (i.e., provides a generous social pension) and within generations (i.e., provides relatively more generous pensions for low income groups). Belgium, on the other hand, is a higher Power Distance country, and has less generous pensions that do not serve to redistribute income. Finally, Japan lies somewhere in between on all factors: Power Distance, generosity, and income redistribution.
This pattern is by no means illusory, since careful analysis shows that low Power Distance countries do, on average, tend to have more generous social pensions, as well as tend to redistribute income toward low income earners. Figure 1 shows how Power Distance is related to the social pension income replacement ratio. From the illustration, it can be seen that social pensions for a society of average Power Distance have an income replacement ratio that decreases as pre-retirement income increases. Thus, there is a slight amount of income redistribution.
Table 1 Social Pension Income Replacement Ratios Income Replacement Ratio Income as a Percentage of National Average Power Manufacturing Earnings Country Distance 50% 100% 150% Norway 31 100% 72% 64% Japan 54 83% 68% 64% Belgium 65 60% 60% 60% Note: Numbers are for 1991, and are calculated based upon information in Social Security Programs Throughout the World.
The line for the low Power Distance society is both higher and more steeply sloped. This indicates that social pensions are both more generous over-all, indicating a greater degree of inter-generational income redistribution, as well as more generous for poorer retirees, indicating a greater degree of intra-generational income redistribution. Similarly, the line for the high Power Distance society is lower and flatter, indicating much less income redistribution. Thus, it can be seen that Power Distance does indeed appear to be an important factor in explaining some important characteristics of social pensions, and how these characteristics vary across countries.
Job and Income Protection
While pensions are the primary forms of income security for individuals after they retire, there are other forms of income security for individuals of working age. These forms of security can be categorized into two broad groupings: (1) job protections, and (2) income protections. Job protections act to protect the source of income for employees. Layoff or severance notices represent forms of job protections, as well as do restrictions on the ability of employers to discharge employees. Income protections seek to replace lost income rather than protecting the source of the income. The primary forms of income protection include sick pay, severance payments, and unemployment insurance.
In countries that have high Uncertainty Avoidance scores, it would be expected to find that there are more laws governing job and income protections, and these protections would likely be more generous. Through clear and generous rules governing these protections, social desires for greater certainty can be satisfied. The decision of whether to use job protections, income protections, or both, depends upon a different cultural dimension.
The Masculinity factor was concerned with employment as a component of self identity (a "masculine" trait), as opposed to a greater concern with quality of life (a "feminine" trait). It is therefore likely to expect that Masculine societies would favor job protections over income protections. In fact, societies with high Masculinity scores should have very low levels of income protection, since being on unemployment insurance would be viewed as a stigma, and unemployment insurance levels would tend to be correspondingly lower. Feminine societies would tend to concentrate much more upon the income protections, and job protections would be rather weak. The income from a job is what allows a particular standard of living, and thus in a Feminine society, the income will be valued more than the job.
Evidence for this effect can be seen by considering the case of Mexico, where discharge can only occur for just cause, or Greece, where permission of the labor authorities is needed to discharge an employee. Alternatively, consider the case of Norway, where only a two week notice period is required. Hofstede's cultural dimensions offers an explanation for these differences as just discussed. Norway is a country with both low Uncertainty Avoidance and Masculinity scores, while both Mexico and Greece have high Uncertainty Avoidance and Masculinity scores.
Table 2 shows four countries that have been chosen from the four possible combinations of high and low Uncertainty Avoidance and Masculinity scores. The two countries (Spain and Greece) with high Uncertainty Avoidance scores provide greater levels of job protection and income protection. However, it can also be seen that Greece, which has a high Masculinity score, provides more generous job protections and less generous income protection than does Spain, which has a lower Masculinity score. Denmark and Ireland, which have lower Uncertainty Avoidance scores, still have fairly generous protections, although less generous that the other two cases. Denmark is [TABULAR DATA FOR TABLE 2 OMITTED] a very Feminine society, and it can be seen that unemployment insurance is extremely generous (despite the low Uncertainty Avoidance score). Finally, Ireland has very low unemployment insurance provisions and moderate job protections, which is consistent with the country's Masculinity and Uncertainty Avoidance scores.
What these examples show is that job and income protections are more valued in countries with high Uncertainty Avoidance levels. Meanwhile, it is the Masculinity factor that determines the preference for job or income protections. The more "feminine" countries, where quality of life considerations are typically very important, exhibit a tendency to prefer to protect income rather than jobs. By way of contrast, "masculine" countries, where the job plays an important role in self identity, tend to favor the use of job protection methods.
Health programs have been mandated or provided by the governments of many countries, but there remain a number of countries that have no form of health care requirement. Further, the coverage and quality of the coverage can vary considerably across countries that require some form of health care. A close examination of the differences in health coverage across countries turns up some interesting details.
One such detail is the fact that employment based supplemental health care is widespread in some countries, while in other countries the provision of supplemental coverage is uncommon. This indicates that even when health care is required, the quality of the health care provided is not uniformly high in all countries. Thus, supplemental coverage as an employment related benefit is necessary in these countries in order to bring the health care provided up to an acceptable level.
Another interesting observation is that among the countries where supplemental health insurance is commonly provided to employees, there are differences in the employee groups covered. Of the countries where supplemental health insurance is commonly provided, there is a subset where the supplemental health insurance is only provided to higher level employees. In these countries, lower level workers must rely upon the government provided health care system.
The likelihood that supplemental health care insurance is commonly provided is related to the Power Distance of the country. Low Power Distance (or egalitarian) countries emphasize equal treatment for all individuals, and so would tend to have highly effective social health programs. As a result, these countries would have low incidences of supplemental insurance. High Power Distance countries would not be as likely to have a highly effective social health care system, and the result of this would be an increased likelihood that supplemental insurance is a common voluntary benefit.
The restriction of supplemental health care insurance to higher level employees is related to two different cultural dimensions. The first dimension is Power Distance. A country with a moderately high Power Distance (i.e., has a hierarchical society), is likely to have a social health care system that provides adequate but unexceptional coverage. In these countries, if supplemental coverage is provided, then coverage for all employees will be the norm. However, in a country with higher Power Distance, the provision of supplemental insurance for higher level employees signals the status differentials between lower level and higher level employees. Masculinity is another cultural factor that is important, since the provision of supplemental insurance is also a form of reward for success, which is an important element in masculine societies. Thus, the provision of supplemental health insurance for higher level employees will be common in both high Power Distance and in high Masculinity countries.
Table 3 shows information for a number of countries on how common supplemental health insurance is, using information drawn from documents published by consulting firms (i.e., Aetna/Generali, William M. Mercer, and Price Waterhouse). From the information presented in the table, it can be seen that this explanation of the effect Power Distance has on supplemental health coverage appears to be true. The countries for which supplemental health coverage is common all have high Power Distance Scores.
Table 3 Prevalence of Supplemental Health Insurance In Countries with Mandated Health Coverage Supplemental Insurance Uncommon PD Austria 11 Costa Rica 35 Denmark 18 Ireland 28 Netherlands 38 New Zealand 22 Sweden 31 Argentina 49 Belgium 65 Brazil 69 Colombia 67 France 68 Italy 50 Portugal 63 Source: Information is drawn from publications by Aetna/Generali, William M. Mercer and Price Waterhouse.
Using the same sources of data as used to construct Table 3, a number of countries that restrict supplemental health care to higher level employees only are listed in Table 4. It can be seen from the table that the countries for which supplemental health care is provided only for higher level employees all have above average Power Distance and/or Masculinity scores.
Another aspect of health care programs that hasn't been directly addressed yet is that of universal health care coverage. In some countries health coverage is guaranteed to all. In other countries health coverage is tied to employment status (usually through a requirement that employers provide a certain level of health insurance coverage). These examples are concerned with whether this required level of coverage is adequate, but do not address the extent of the population covered by the mandated coverage.
Table 4 Supplemental Health Insurance Commonly Provided for Higher Level Employees Only PD MAS Colombia 67 64 Ecuador 78 63 Italy 50 70 Japan 54 95 Mexico 81 69 Panama 95 44 United Kingdom 35 66 Average Scores for All Countries 51 51 Note: Information is drawn from publications Aetna/Generali, William M. Mercer and Price Waterhouse.
It seems natural to assume that Power Distance would also be related to universal health care coverage, since egalitarian (i.e., low Power Distance) societies would want to extend this coverage to all. However, closer examination has shown that universal. coverage does not appear to be related to cultural values at all. Instead, it appears that universal health care coverage is related to a country's wealth, as measured by per capita GDP. Richer countries are much more likely to provide some form of universal health care. A rich country with a high Power Distance score (i.e., hierarchical) is likely to mandate universal coverage, but supplemental coverage will also be common.
DESIGNING MULTINATIONAL BENEFITS PROGRAMS
The examples that have been presented help to illuminate the way in which cultural values have influenced some social and workplace benefits throughout the world. The examples have primarily been concerned with government provided or mandated benefits, but they provide a useful starting point for a discussion of benefits plan design.
Increased global competition as well as movements towards closer economic integration (e.g., the European Union) have prompted a number of countries to reexamine their social benefits programs, and at times behave in ways contradictory to the underlying social values. In some cases, a country will mandate benefits that are unexpected, while at other times will not mandate the expected benefit. The result of this has usually been social discontent.
With the growth in the number of global corporations, there are a number of reasons to use similar benefits systems across different countries. One, is that benefits and other workplace practices are one means by which to help create and reinforce a strong organizational culture (Shimer, 1996). In addition, having similar benefits systems across different countries will help facilitate the international transfer of professional and managerial employees. Impediments towards implementing an identical benefits and employment system in all countries include legal constraints, standard practice within the host countries, and the cultural values.
If a company desires to implement a consistent benefits system across all foreign subsidiaries, then understanding the relationship between cultural values and benefits is helpful in predicting which benefits might be desired by employees, and which benefits might not be valued. An obvious starting point would be to examine mandated social benefits, and to identify whether any expected social benefits are missing. These "missing" benefits would very likely prove to be prime candidates for inclusion in a company's benefits package. In particular, examples can be found where global competition, government fiscal reform, or closer international economic integration has led to reductions in social protections, and companies might choose to replace the lost social protection as part of their benefits package.
The recommendation is that just as mandated benefits vary with national culture, so too should any voluntarily provided benefits. Cultural values will help determine what forms of voluntarily provided benefits will be desired by employees. The implication of this is that in designing the voluntarily provided segment of the benefits system, it is necessary to consider how well those benefits correspond to the prevailing values of the employees. Applying the same reasoning as used in the examples discussed previously, it is possible to decide how to best design voluntary benefits.
When designing pension systems for different countries, one cultural dimension that needs to be considered is Uncertainty Avoidance. In a high Uncertainty Avoidance country, pension plans should offer low risk and high security, with extensive rules and bureaucratic controls governing the pension plan. A defined benefit pension plan, by guaranteeing the amount paid out to the retiree, takes much of the risk away from the individual. A defined contributions plan, or any other savings based pension system, places much of the risk on the individual. As a result of this, in a country with a high Uncertainty Avoidance score, the defined benefits type of pension system should be emphasized. Similarly, a pension plan where the investment risk is placed upon the employees (such as a stock based plan or a defined contributions plan) is more appropriate in a low Uncertainty Avoidance country. A pension plan for a high Uncertainty Avoidance country must offer a high level of security, while a pension plan for a low Uncertainty Avoidance country can offer a higher potential payoff in return for a higher risk level.
In high Power Distance countries, the use of separate pension systems for different classes of employees could be considered, while in low Power Distance countries this would be less well received by employees. The use of separate pension systems will serve to further reinforce status differentials between classes of employees, which is entirely consistent with the culture of a high Power Distance country, but is inconsistent with the culture of a low Power Distance country. Figure 2 summarizes how cultural values will influence pension plan design.
In order to predict how receptive employees would be to various forms of employer provided protections, it is necessary to consider culture. In a high Uncertainty Avoidance country, if there are not already generous mandated protections, then providing some form of employer provided protection would be well received by employees. By the same token, employer provided protections in a low Uncertainty Avoidance country would not have the same appeal as in a high Uncertainty Avoidance country.
The form of voluntarily provided protection should vary according to the Masculinity score of the country. In a feminine country, supplemental unemployment benefits would be highly regarded by employees, while a masculine society with high Uncertainty Avoidance scores would be more receptive to provisions in the employment contract that would provide increased levels of employment security. Figure 3 summarizes how cultural values will influence job and income protection plan design.
The provision of supplemental health insurance is contingent upon both the government social program and on national culture. In a number of countries, the social program is inadequate, and thus supplemental insurance is important. However, it must be decided how the supplemental insurance will be delivered. For example, in a country with a high Power Distance, then it would appropriate to provide different levels of health insurance coverage for different classes of employees. However, such a policy would be ill-advised in a country with lower Power Distance scores, since this policy would violate employees' expectations of egalitarian treatment.
Providing a wide range of choices in coverage would be most appropriate in high Individualism and low Power Distance societies, since these societies would value allowing individual employees making their own decisions. While low Power Distance societies would be comfortable with allowing employees to make these decisions rather than having higher management make these decisions, low Power Distance societies would also want the choices to be essentially equivalent. A good example of this is the United States, where employees often have a wide choice of different health care providers, provided that the cost to the employer is the same. By contrast, low Individualism or high Power Distance societies would not leave the choice of health insurance provider up to the individual employee. In the low Individualism society, there would be pressures for all employees to make the same decision, while in high Power Distance societies the higher levels of management would want to make the decisions on what the best insurance provider would be. Figure 4 summarizes how cultural values will influence health care plan design.
While the discussion thus far has concentrated upon three specific benefits, other benefits also exist. It is important to consider the fit of all benefits and the prevailing culture. One particular example would be the decision whether to implement a flexible benefits programs. Flexible benefits programs would be readily received by the employees in Individualistic societies, while in low Individualism societies such an individual tailoring of benefits is not as important. Further, employers (and personnel administrators) in low Power Distance societies would be more comfortable with the delegation of responsibilities inherent in a flexible benefits program than would employers and administrators in high Power Distance societies. A high Power Distance society, with its concern for management prerogative and decision making, would be more uncomfortable with flexible benefits programs.
The term benefit has been broadly applied in this discussion, and can extend to cover topics normally considered to be in the realm of employee relations rather than benefits. The existence of appeals process governing supervisor-subordinate conflicts is one such example. In a high Uncertainty Avoidance society, the use of such formalized policies would be consist with societal desires for rules to resolve ambiguities. In Masculine societies, these policies should be designed to provide job and career protections, and thus should cover dismissal and promotion decisions. In Feminine societies, these policies should cover quality of work life concerns.
Employment policies designed to identify and rapidly promote promising performers, while weeding out low performers, would be consistent with the values of low Uncertainty Avoidance and high Masculinity societies, but would not be appropriate in a high Uncertainty Avoidance and low Masculinity society. In this case, employees would respond better to employment policies emphasizing a stable and congenial working environment, since individuals would not be so highly motivated by rewards. It is important to keep in mind that these individuals do find rewards motivating, it is just that they don't think these rewards are worth having to experience a highly stressful working environment.
The examples illustrating how Hofstede's (1984) measures of national culture are related to a number of mandated benefits programs has hopefully demonstrated that national culture is a factor that deserves greater consideration when designing global benefits programs. Benefits program design an important tool for creating and reinforcing organizational culture and values, but it is necessary to recognize that benefits must also recognize the national cultural values that employees hold as well. It will not be possible (nor entirely desirable) to always use the same benefits program in all countries. When making the decision on whether to voluntarily implement a particular benefits program in another country, it would be useful to consider the following recommendations:
* High Uncertainty Avoidance countries should have a pension system that is centralized and bureaucratized with many controls and protections;
* Low Uncertainty Avoidance countries would be more open to Defined Contributions pensions with flexible plan implementation;
* Separate pension plans for different classes of employees would not be acceptable in low Power Distance countries, but would be consistent with the need for status differentials in high Power Distance countries;
* In Masculine countries with moderate to high Uncertainty Scores, policies (such as appeals procedures or strict seniority rules) designed to protect job security would be welcomed by employees;
* Employees from Feminine countries with moderate to high Uncertainty Scores would prefer policies (such as Supplemental Unemployment Benefits) that were design to provide income security;
* Employees from Feminine countries would want "family friendly" management policies, as well as other policies designed to maximize the quality of their work lives;
* Individualistic, low Power Distance countries would have employees more amenable to flexible benefits programs, while Collectivistic or high Power Distance countries would resist flexible benefits programs;
* Health programs in low Power Distance countries should be uniform across all classes of employees, while employee choice in health insurance providers is important in more Individualistic countries.
It would certainly be possible to design a global benefits program that imposed a common benefits system across all countries, or at least to the extent that host country legislation permitted. However, a more flexible approach to international benefits program(s) that recognized both corporate culture and national culture will prove more effective. Providing benefits that are not consistent with national culture is, at best, a waste of money on undesired benefits, and at worst, alienating to employees. Designing a common global benefits program in all countries to reinforce a common corporate culture unfortunately reduces the ability to use benefits to meet to the unique requirements of the residents of each country the corporation operates in.
1. For readers unfamiliar with the work of Hofstede and other culture researchers, Erez and Earley (1993) provides a good overview of the topic.
2. Hong Kong has passed legislation creating a Mandatory Providence Fund, but implementation details are still being worked out by the government.
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Hofstede, G. (1984). Culture's consequences: International differences in work-related values. Newbury Park, CA: Sage.
Kim, K. I., Park, H., & Suzuki, N. (1990). Reward allocations in the United States, Japan, and Korea: A comparison of individualistic and collectivistic cultures. Academy of Management Journal, 33(1): 188-198.
Schuler, R. S., & Rogovsky, N. (in press). Understanding compensation practice variations across firms: The impact of national culture. Journal of International Business Studies.
Shimer, P.M. (1996). Globalizing employee benefits. Benefits Quarterly, 12(1): 8-11.
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Paul S. Hempel, Department of Management, City University of Hong Kong, Kowloon Tong, Hong Kong <email@example.com>.
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|Author:||Hempel, Paul S.|
|Publication:||Journal of World Business|
|Date:||Sep 22, 1998|
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