Archive for year: 2023

The References: MUST BE THIS BOOK AND WHATEVER SOURCE YOU WANT TO SITE.

Harvey, C. and Allard, J. (2014). Understanding and Managing Diversity (6th ed.) NJ: Pearson-Prentice Hall. ISBN: 9780133548198

MUST BE AT LEAST 300 WORDS WITH TWO CITED SOURCES EACH!

1.  Discussion Board Three

Individual Perspectives on Diversity II

Briefly summarize Chapter 8 and discuss how you can develop the skills needed to increase your emotional intelligence.

2.  Discussion Board Four

Group Perspectives on Diversity I

How do gender differences impact how we communicate in the workplace? What strategies can be employed to improve communication? Discuss one example of intentional information use in the context of your organization (could be something that you witnessed or something that happened to you) (focus on Ch. 20, 27–28)

3.  Discussion Board Five

Group Perspectives on Diversity II

Identify a belief, value, or attitude of yours that you can attribute to your religion and examine its impact on your work and career. Discuss how your religion could affect your role and performance in a multicultural workplace.

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Chapter 8

The Emotional Connection of Distinguishing Differences and Conflict

Carole G. Parker
In recent years, diversity in organizations has been an exciting, stimulating, frustrating, and intriguing topic. Some organizations continue to struggle for diversity, whereas others have a fully integrated, diverse workforce. The challenge to increase and manage diversity continues to be critical to organizational goals, particularly as more organizations, large and small, transact business internationally. Some organizations work to appreciate diversity and value differences, whereas others continue to discount differences and diversity. Smart managers today realize the importance of balance in work groups. Attempts to incorporate differences in age, gender, race, culture, sexual preference, and styles of being in their organizations to capitalize on the incredible potential diversity offers are occurring. Managing differences requires energy, commitment, tolerance, and finally, appreciation among all parties involved. Differences among people are not inherently good or bad; there is no one “right” way to deal with differences. Learning to manage and ultimately appreciate differences requires learning, emotional growth, and stretching the boundaries of all participants. Although differences can be challenging, they also lead to very important benefits, both to individuals, groups, and organizations.

How Differences Are Often Managed

What actions and factors must be considered in selecting the most appropriate approach to addressing differences? Often, avoidance or repression is used to manage differences. The avoidance of differences often takes the form of associating with individuals of similar backgrounds, experiences, beliefs, and values. This strategy enables an environment of mutual support and predictability. Those who are adverse to risk or challenges are apt to select this strategy. Another avoidance strategy is to separate individuals who create sparks between each other. Although this strategy may reduce tension, it minimizes the opportunity for individuals and the organization to learn and grow.

The repression of differences occurs when an individual or organization refuses to allow disagreements to emerge. Top management often influences the culture by stressing conformity, which naturally affects diversity. Statements by managers such as “We must work on this project in a professional and collegial manner” or “By working together cooperatively, we will succeed during these difficult times” create the boundaries for behavior limited to cooperation, collaboration, and loyalty and limit the opportunity for challenging assumptions, testing new ideas, and developing strategies for success. Repression is quite costly. Resistances develop that have both organizational and individual consequences. Blocking strong feelings and repressing differences may result in desensitization and a loss of productivity. When individual differences come together, managers exert control to reduce conflict.

Both appropriate times and dangers are associated with the use of avoidance and repression in managing differences. Teams or work groups faced with tight deadlines may want to limit the number and type of ideas generated. Avoidance may be an appropriate interim strategy for dealing with differences by enabling an individual to learn more about a person or situation before advancing a stance. The challenge to management is to decide when it is most appropriate to use these approaches. The skill level of the manager, rather than an overt choice, may also influence the decision. Avoidance can lead to groupthink, which occurs when everyone in a group agrees with everyone else, even though there are differences among group members. Groupthink is the result of not challenging ideas, opinions, values, or beliefs. Individuals may not believe it is safe (concerns about advancing or retaining one’s job) to challenge, particularly if management does not model this behavior.

Still another danger in avoiding differences is over compatibility. When over compatibility exists in an organization, it may be due to a strong need for support, reassurance, or security or a need to eliminate perceived threats. In an organization, this can severely hamper the development of new ideas, productivity, growth, and development. Avoidance and repression of differences are not viable solutions. When differences are present, they must be expressed and worked through. If not, unnecessary conflict will result.

Positive Aspects of Differences

Differences are opportunities. The old adage “Two heads are better than one” has merit. When combining multiple perspectives, one gains a richer set of experiences, and the variability of these often leads to a more creative approach than could be achieved independently.
Differences are tests to the strength of a position. One needs to be sure all the perspectives, opinions, and perceptions enhance the final product.
A healthy interaction among differences (gender, age, race, culture, etc.) could address the preceding concerns. Two factors influence the treatment of differences: first, the needs, wants, and goals of the individual; and second, the value placed on the relationship. People are often motivated by the desire to meet their needs and satisfy their wants and desires. The stronger the motivation, the greater the likelihood of addressing differences. Furthermore, when the parties involved are important to each other or valued, the tendency to manage the difference increases to preserve the relationship. The reverse is likely when there is no value in the relationship. Once these factors are assessed, it becomes necessary to recognize behaviors and attitudes that will be helpful in managing the differences.

Differences are not problems to be solved; they are dilemmas to be managed. Successful managers of difference reduce their judgments and accept the difference as legitimate. Clear boundaries between oneself and others, a willingness and interest in being influenced, and an awareness of choice with the ability to make choices are also helpful. Using strong language such as ought to, cannot, necessary, impossible, requirement, or mandate will diminish success.

Differences are experienced through contact with others who are dissimilar. A range of life experiences and success in interpersonal relationships support the ability to deal with differences. Individuals who have travelled nationally and internationally or who have had unusual experiences beyond the normal scope of their daily activities tend to develop an appreciation for differences, even though at the time of initial contact there may have been challenges, fear, and longing for what is familiar. Managing differences is not an individual process; it is interactive among individuals. When only one individual is attempting to deal with the difference, the result is coping behavior. Dealing with differences evokes emotion. A range of emotions for human interaction that leads to awareness of differences is necessary. These emotions can lead to conflict, but conflict is not a prerequisite to managing differences. Differences evoke emotions, ranging from small or minor to large and major. An inverted triangle graphically shows the escalating intensity of each level of emotion as differences are encountered (see Figure 1.2).

Figure 1-2 The Escalation of Differences into Conflict
This model is based on the assumption that difficulties will likely result from contact with differences. The first level involves an awareness of the difference. Here the parties are exploring and learning about each other—what is similar, what is not, what is discomforting—and the second level may result. One becomes uncomfortable with boundaries being pushed while values or beliefs are challenged. When the differences appear to be greater than the similarities, annoyance occurs. The parties are not able to appreciate how their differences may be beneficial to each other. Irritation, on the next level, may result from continued exploration, possibly through a dialectic process. Tension is heightening as more contact occurs; there is possibly an overlay of fear. The boundaries of self are threatened (What will happen to me if I continue with this encounter?) and frustration leading to open disagreement develops.

Anger, often a protective strategy, shifts the emotions to the next level, and hostility erupts while the dispute solidifies. Each party has a firm stance reflecting their position. The final level is conflict or war, where each party works hard to repress, neutralize, or destroy the other.

Chapter 20

The Paradox of Male Privilege: Toward a Gender Democracy & Democratic Manhood

Steven D. Farough
Assumption College
How could it be that men continue to have such economic success in an era where women now outnumber men in college and have substantial achievements in the business world? How could it be that despite their continued success, men wind up with a shorter life span and a higher rate of depression than women? In short, it is the paradox of male privilege. Men maintain their advantages in an era where women appear to be outpacing men, but men ultimately lose from a system that has allowed them to win unparalleled wealth, power, and prestige. Of course, paradoxes are confusing. They leave people baffled at the appearance of two seemingly irreconcilable trends. In the absence of an explanation, paradoxes often polarize us into one camp or the other, creating a dynamic where people angrily talk past one another with no hope of resolution: “Men are privileged! Men are victims, too!” However, when one can understand the underlying logic of this paradox it can lead to not only greater insight but to new ways of living our lives as men and women. It is the goal of this article to highlight the paradox of male privilege and offer men (and women) a different way to approach gender, work, and identity in the 21st century. Despite the advantages men generally possess, it is in their best interests to give them up.

Being caught between advantage and disadvantage often leaves men unsure what to think. Although less pervasive, there still is an expectation that men should be the primary breadwinners for their families and climb up the occupational ladder. On the other hand, women continue to succeed in high-powered jobs that challenge the belief that men should be the primary income earner. For some men, it might feel like the tables have finally tipped in favor of women. During the Great Recession, men were at first hit harder than women, where from 2007 to 2009 men lost almost 75% of the total number of jobs (Cauchon, 2009). In fact, at one point the front page of USA Today read, “Women Gain in Historic Job Shift.”

This trend has motivated intellectual Reihan Salam (2009) to call the economic downturn a “he-cession” and make the bold proclamation that we are now going through an epochal shift in gender relations where men will no longer dominate the US economy in the 21st century. As Salam (2009) points out, the greatest areas of job loss in the recession lie in finance and home construction, two occupations where men have been dominant. However, it goes deeper than that, according to Salam: characteristics like risk and overconfidence were keys to driving the success and massive failure of Wall Street and the housing bubble—and these attributes are strongly embedded into the identity of masculinity. Risk and overconfidence have sent the economy into the worst recession since the Great Depression. Many of us now look back at the brazen use of sub-prime mortgages and seemingly endless leveraging by brokers and financiers with contempt and bewilderment. Have the implicit macho ethics of risk and overconfidence left men in the dust of wild, laissez-faire capitalism as our economy continues to trend toward a more feminized service economy and a more careful, regulated system? For some, like Salam, the answer is yes.

As many of us know, women are just as capable as men of taking risks and being overconfident, but such practices are so strongly associated with masculinity that they create a palpable feel that these are things only men do. If both men and women can engage in such behaviors, then why are these behaviors so strongly linked to men in the work world? The answer to this question lies in how gender impacts our occupational structure.

Dominant Masculinity

Although in every culture there is a variety of ways one can be a man, some forms of manhood are perceived as more legitimate or “real” than others. Sociologists who study masculinity would argue that culturally legitimate forms of masculinity should be seen as dominant masculinity, a gender identity that allows those men who abide by its behaviors to have greater access to power and wealth. In the United States, dominant masculinity is defined by its ability to excel at competition and risk, be self-assured, withhold emotions, possess physical strength, have control over the situations men inhabit, be the breadwinners of families, and not act feminine or be gay (Connell, 1995; Kimmel, 2006; Messner, 1997). Embedded in all of these characteristics lies the expectation that in the US, masculinity needs to be consistently proven, which, according to sociologist Michael Kimmel (2006) is rooted in the competitive, capitalist ethos and frontier mentality of the nation in the 18th and 19th centuries. Whether in the emerging industrial economy or on the frontier, manhood was deemed successful in the US when men could master tough terrain and accumulate wealth. Anything less than that left men grasping for this masculine ideal. Of course, the idealization of American masculinity in this nascent country was only for white men. African American men were either enslaved or oppressed through Jim Crow segregation; Native American men were killed or concentrated into reservations; and Mexican American and Asian American men were segregated into menial labor.

What is particularly striking is how the history of a competitive, frontier-based masculinity plays out even today. Indeed, it correlates strongly with some of the key strategies for success in American enterprise today: competition, risk, confidence, and withholding of emotions are all practices that many in the business world expect of their employees. The outcome of this widespread use of masculinity results in the gendering of work, where the key jobs and strategies for success are deeply linked to manhood (Hochshield, 2003; Pierce, 1995; U.S. Department of Labor, 2006). For instance, to achieve financial and professional success, lawyers are expected to be intimidating and aggressive (Pierce, 1995). Bill collectors are expected to deflate the status of truant clients through intimidation (Hochschild, 2003). Car salesmen are supposed to use their wits to get customers to purchase an automobile for more than it is really worth. Stockbrokers’ confident and assertive sales pitches are designed to hide the reality of substantial risk to clients and are imbued with a culture of dominant masculinity. This dominant form of masculinity has provided untold wealth, power, and prestige for men as a group, and it is clearly woven into their identities. Men prove their masculinity by acting competitively and forcefully in the business world, just as they did on the frontier and in industry.

In defining masculinity so strongly with work, this cultural norm also did something else: it created an environment that is hostile to women entering the workplace, as masculinity in the US is defined in strict opposition to femininity. The growth of the industrial economy and the development of the frontier organized the ideal family structure in a new way. Prior to industrialization, the US economy was largely agricultural, where both men and women were involved in economic production. As industrialization emerged, economic production left the family farm for the factory, and masculinity followed. Men were expected to work outside the home while women were expected to work within it (Coontz, 1992). The net result is a cultural definition of manhood that links it to work, and views women’s progress in the work world as an attack against masculinity itself. The ideological rationale is simple: women entering a space so strongly associated with masculinity threatens manhood itself. Although the anti-women attitude is changing and many individual men are not threatened by the progress made by women, this ideology of dominant American manhood creates a situation where men continue to receive both economic and psychological advantages. Dominant masculinity may be a stereotype, but it is a very powerful one that has perpetuated the history of American manhood.

Despite some who have called the emerging era one where women will have greater power than men, there are three key structural issues that continue to benefit men in the Great Recession and into the forseeable future: workplace segregation, continued discrimination against women, and the structure of the American family.

Privileges of Dominant Masculinity

The success of women in education and the economy has not prevented men—particularly white men—from maintaining disproportionate access to power and resources. Men continue to earn more than women, whether they have a high school degree or graduate degree (U.S. Department of Labor, 2007). Men are also overrepresented in the decision-making processes of business and government. Men constitute over 75 percent of chief executives, 70 percent of surgeons, and 73 percent of computer and math occupations (US Department of Labor, 2006). The same holds true with elected officials. In 2008, 84 percent of Congress and the Senate were men, and almost 77 percent of state legislatures were men (Center for American Women and Politics, 2008). The data clearly demonstrate that men are disproportionately represented in key positions of power. As for the “he-cession,” men are faring far better than women during the recovery (Kochhar, 2012). Still, these data tell us nothing about why men are overrepresented in high-ranking positions.

Upon closer examination of these generalized patterns, the data unequivocally demonstrate that men, particularly white men, possess a whole set of advantages when compared with equally qualified white women and people of color. Research shows that people envision successful managers as men (Willemsen, 2002). Men experience greater upward mobility than women (Glass Ceiling Commission, 1995). Men have greater access to and control over networks for employment, and they also have better access to mentoring relationships (Lorber, 1994). Federal government data on employment discrimination note that white men are the least likely to experience discrimination in the workplace (Reskin, 1998). In higher education, where it is noted that women now earn the majority of bachelor’s degrees, men continue to earn more after graduation, in part because of this continued discrimination.

The inequality in earnings of men and women also has to do with the structure of the American family and sex segregation in the workplace (Cohen, 2004; Cohen & Huffman, 2004; Rhode, 1997). Although changing, men’s family roles continue to place men in positions as the

CHAPTER 27-28
Social Class: The Fiction of American Meritocracy

Colleen A. Fahy
Assumption College
Introduction

Oprah Winfrey, the nation’s wealthiest African American, overcame impoverished beginnings in rural Mississippi to accumulate an estimated net worth of $2.7 billion.1 High school friends Steve Jobs and Steve Wozniak founded the Apple Computer Company in Job’s garage with $1300 in start-up money.2 Sonia Sotomayor rose from a South Bronx housing project to become a U.S. Supreme Court justice. Such stories of self-made men and women help fuel the perception of America as the land of opportunity, a place where anyone can achieve almost anything with a combination of hard work, intelligence, and determination.

Do you believe that anyone, regardless of the family and community into which he or she was born, could be where you are today? If you are like most, your answer is yes. In a New York Times poll, 80 percent of Americans answered “yes” to the question, “Is it possible to start out poor, work hard, and become rich?”3 A Chronicle of Higher Education poll found that 78.8 percent of college freshmen agree that “through hard work, everybody can succeed in American society.”4

The U.S. economic system is commonly viewed as a “meritocracy,” where rewards are bestowed upon those who have earned them. If individuals face equality of opportunity, then one’s social class position becomes a reflection of his or her personal qualities. Those who have achieved success must have earned it somehow, and those who have failed to climb the social ladder must simply have not tried hard enough. This common perspective leads to negative stereotyping and discrimination of individuals from lower social classes, or “classism.”

Classism, like many other “isms,” results from prejudices based on false assumptions. Despite widely held perceptions, social class mobility in the United States is far from fluid. Those born with few resources face serious obstacles in their efforts to achieve a higher economic and social status. Those born into privilege are given a head start in life with many extra boosts along the way. Once it is recognized that merit has only a small role in determining one’s place on the social ladder, the foundation of classism crumbles.

Social Class Measurement

The most popular measures of social class are income and wealth. Persons, households or families can be ranked according to their income or wealth and then divided into groups. For example, in 2011, the highest 20 percent of U.S. households had an income exceeding $101,577—while the income of households in the lowest quintile fell below $20,260.5 Because of its cumulative nature, wealth is unevenly distributed among the U.S. population, with the top 10 percent of families having an estimated median net worth of just under $1.2 million and the bottom 20 percent having a median net worth of approximately $6000. The top 10 percent of families own an estimated 75 percent of the total net worth in the United States.6

Social class is also measured by educational achievement and occupational prestige. A National Opinion Research Center survey ranked 447 jobs in terms of their prestige level. Doctors come in first, accountants 35th, elementary school teachers 45th, retail salespersons 366th, and dishwashers 446th.7 A New York Times interactive site allows individuals to enter their occupation, education, income, and wealth in order to determine where they fall in the social class hierarchy. A housekeeper with an eighth grade education making $20,000 per year and holding $5000 in net worth is in the 16th percentile of total social class. A surgeon making $300,000 per year with $1 million net worth is in the 99th percentile. 8

Class In The Workplace

The frequency of workplace interaction between people of different social classes will vary by occupation and industry. For example, in occupations such as construction and education, workers are less likely to have frequent interactions with coworkers from significantly different social classes. In other settings, particularly when there is a hierarchical structure, individuals are more likely to work closely with those from other social classes. In hospitals, for example, doctors, nurses, LNAs, and maintenance workers come into frequent contact with one another (Scully & Blake-Beard, 2006, p. 442).

Defining class in the workplace is complicated by its multidimensional nature. While income, wealth, education, and occupation are undoubtedly correlated, associations are not always perfect. A carpenter may never have finished high school, or he may be a college graduate. A retail salesperson may be a single mother working as the sole breadwinner for her family or a college-educated, married mother working for extra income.

In a meritocracy, those higher on the social ladder have done something to deserve their place and are therefore somehow “better” than those below them. The resulting sense of status can undoubtedly lead to friction in the workplace. According to Bullock (2004),

In the United States, individualistic explanations for poverty (e.g., lack of thrift, laziness) and wealth (e.g., hard work, ability) tend to be favored over structural or societal attributions for poverty (e.g., failure of society to provide strong schools, discrimination) and wealth (e.g., inheritance, political influence, and ‘pull’). (p. 232)
Bullock further argues that these beliefs lead to “classism,” including negative stereotypes such as “lazy, uninterested in self-improvement, and lacking in initiative and intelligence,” and discrimination that includes “behaviors that distance, avoid, and/or exclude poor and working-class people” (p.

result is coping behavior. Dealing with differences evokes emotion. A range of emotions for human interaction that lead to awareness of differences

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HRIS Data Breach (Incident 1)”  Please respond to the following:Advise how the human resource director of Sweets, Inc. should proceed in this situation.Identify the sensitive data practices that Sweets, Inc. needs to address. Then, recommend how to improve these sensitive data practices so that information breaches do not occur in the future.Shifting Demographics”  Please respond to the following:Select three of the 10 trends listed in Exercise 1, and create a plan to address each in your organization.Evaluate the various options that the HR manager could take to ensure that each of the trends you have selected is adequately addressed in the HR plan to ensure proper work designSelecting from Imperfect Applicants”  Please respond to the following:From Exercise 2, evaluate the merits of each of the applicants and summarize each applicant’s attributes in a table.Select one of the applicants from the pool, and develop a rationale that justifies your decision about this applicant’s selection.

Eight Obstacles and Opportunities -read the article titled “Work Redesign: Eight Obstacles and Opportunities,” located athttp://www.shrm.org/Education/hreducation/Documents/44-4%20Campion%20et%20al.pdf., Please respond to the following:select two of the eight obstacles mentioned in the article. Propose a method to overcome the obstacles with a focus on increasing employee job satisfaction.Select one of the eight opportunities mentioned in the article. Apply the opportunity to your current or former workplace and indicate how opportunity would enhance the workplace. Then, determine if the effort is justified. Is This Job Exempt?”  Please respond to the following: From Skill Builder 2, analyze one of the three cases stated to determine its exempt status for executive, professional, or administrative categories.If you were the judge, state how you would rule in this case and explain your positionSocial Media and HR (Case 1)”  Please respond to the following: In terms of recruitment and selection, determine the best uses of social media for an employer to attract high-caliber employees.Take a position on the following and provide your rationale: HR departments should focus more of their resources in using social media in staffing activities.

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Objectives of international compensation

When developing international compensation policies, an MNE seeks to satisfy several objectives. First, the policy should be consistent with the overall strategy, structure and business needs of the multinational. Second, the policy must work to attract and retain staff in the areas where the MNE has the greatest needs and opportunities. Thus, the policy must be competitive and recognize factors such as incentive for foreign service, tax equalization and reimbursement for reasonable costs. Third, the policy should facilitate the transfer of international employees in the most cost-effective manner for the firm. Fourth, the policy must give due consideration to equity and ease of administration.

The international employee will also have a number of objectives that need to be achieved from the firm’s compensation policy. First, the employee will expect the policy to offer financial protection in terms of benefits, social security and living costs in the foreign location. Second, the employee will expect a foreign assignment to offer opportunities for financial advancement through income and/or savings. Third, the employee will expect issues such as the cost of housing, education of children, and home leave to be addressed in the policy.

If we contrast the objectives of the MNE and the employee, we of course see the potential for many complexities and possible problems, as some of these objectives cannot be maximized on both sides. The ‘war stories’ about problems in international compensation that we see in HR practitioner magazines is testimony to these complexities and problems. McNulty et al. also allude to these problems in their studies of expatriation, particularly in the Asia Pacific region.16

However, if we take away the specialist jargon and allow for the international context, are the competing objectives of the firm and the employee fundamentally different from that which exists in a domestic environment? We think not. We agree with the broad thrust of an influential article by Milkovich and Bloom17 which argues that firms must rethink the traditional view that local conditions dominate international compensation strategy. This is again another application of the ongoing balancing act between global standardization and local customization. We will return to these issues at the end of the chapter after we have covered some of the technical aspects and complexities of compensation in an international context.

KEY COMPONENTS OF AN INTERNATIONAL COMPENSATION PROGRAM FOR EXPATRIATES

The area of international compensation is complex primarily because multinationals must cater to three categories of employees: PCNs, TCNs and HCNs. In this section, we discuss key components of international compensation as follows.

Base salary

The term base salary acquires a somewhat different meaning when employees go abroad. In a domestic context, base salary denotes the amount of cash compensation serving as a benchmark for other compensation elements (such as bonuses and benefits). For expatriates, it is the primary component of a package of allowances, many of which are directly related to base salary (e.g. foreign service premium, cost-of-living allowance, housing allowance) as well as the basis for in-service benefits and pension contributions. It may be paid in home or local country currency or a combination of both. The base salary is the foundation block for international compensation whether the employee is a PCN or TCN. Major differences can occur in the employee’s package depending on whether the base salary is linked to the home country of the PCN or TCN, or whether an international rate is paid. (We will return to this issue later in the chapter.)

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Foreign service inducement and hardship premium

Parent-country nationals often receive a salary premium as an inducement to accept a foreign assignment, as well as a hardship premium to compensate for challenging locations. Under such circumstances, the definition of hardship, eligibility for the premium, and amount and timing of payment must be addressed. For example, where a host country’s work week may be longer than that of the home country, a differential payment may be made in lieu of overtime, which is not normally paid to PCNs or TCNs. In cases in which hardship is determined, US firms often refer to the US Department of State’s Hardship Post Differentials Guidelines to determine an appropriate level of payment. As a number of researchers in this field have noted over many decades18 making international comparisons of the cost of living is problematic. It is important to note, though, that these payments are more commonly paid to PCNs than TCNs. Foreign service inducements, if used, are usually made in the form of a percentage of salary, usually 5 to 40 per cent of base pay, but are also sometimes offered as a lump-sum incentive (i.e. as a one-off payment made at some point during an assignment). Such payments vary, depending upon the assignment location, tax consequences, and length of assignment.

Allowances

Issues concerning allowances can be very challenging to a firm establishing an overall compensation policy, partly because of the various forms of allowances that exist. In this section we will discuss the six most common allowances.

Cost-of-living allowance. The cost-of-living allowance (COLA), which typically receives the most attention, involves a payment to compensate for differences in expenditures between the home country and the foreign country. COLA payments are intended to compensate for cost differentials between an expatriate’s home and host country, for example, the costs of transportation, furniture and appliances, medical, alcohol and tobacco, automobile maintenance and domestic help. Family size is the predominant method for determining COLA payments, with increments provided for each child. Often this allowance is difficult to determine, so companies may use the services of organizations such as Mercer (a US-based firm)19 or ECA International (based in Britain).20 These firms specialize in providing COLA information on a global basis, regularly updated, to their clients. The COLA may also include payments for housing and utilities, and discretionary items.21 Various COLA indices exist, which, for example, allow an American to live like an American in Paris or which presume that the American will adapt to the assignment location by adjusting to the local life style and international living costs.

Housing allowance. The provision of a housing allowance implies that employees should be entitled to maintain their home-country living standards (or, in some cases, receive accommodation that is equivalent to that provided for similar foreign employees and peers). The amount of housing allowance is determined predominantly by family size, and to some extent job level. Other alternatives include company-provided housing (either mandatory or optional); a fixed housing allowance across a particular job level, with the expatriate ‘topping up’ according to personal preferences; or assessment of a portion of income, out of which actual housing costs are paid. Housing issues are often addressed on a case-by-case basis, but as a firm internationalizes, formal policies become more necessary and efficient. Financial assistance and/or protection in connection with the leasing of an expatriate’s former residence is offered by many MNEs, but less so for selling a house as many MNEs encourage their employees to retain a presence in their home country real estate market. Those in the banking and finance industry tend to be the most generous, offering assistance in sale and leasing, payment of closing costs, payment of leasing management fees, rent protection and equity protection. Generally, TCNs tend to receive these benefits less frequently than PCNs.

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a foreign rider such timing of be longer , which is :ms often

Home leave allowances. Many MNEs also have a provision for home leave allowances

where employers cover the expense of one or more trips back to the home country each year. The primary purpose of paying for such trips is to give expatriates the opportunity to renew family and business ties, thereby helping them to minimize adjustment problems when they are repatriated. Although firms traditionally have restricted the use of leave allowances to travel home, some firms give expatriates the option of applying home leave to foreign travel rather than returning home. Firms allowing use of home leave allowances for foreign travel need to be aware that expatriate employees with limited international experience who opt for foreign travel rather than returning home may become more homesick than other expatriates who return home for a ‘reality check’ with fellow employees and friends. Without the benefit of returning home to mix with employees and friends it is possible to idealize what they remember of their experience at work and home and fail to come to a measured judgment of what is good and bad in both their host and home environments. Overall, it would seem prudent for MNEs to take the view that home leave allowances should normally be used for the purpose they are provided – to give employees and their families the opportunity to renew family and business ties, thereby increasing the probability of reduced adjustment problems when they are repatriated.

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Education allowances. The provision of education allowances for the children of expatriates is frequently an integral part of an international compensation policy. Allowances for education can cover items such as tuition (including language classes), application and enrolment fees, books and supplies, meals, transportation, excursions and extra-curricular activities, parent association fees, school uniforms and, if applicable, room and board. Although school uniforms are not common in the USA, it is common practice (and in many countries compulsory) for school children to wear uniforms, particularly in international schools. PCNs and TCNs usually receive similar treatment concerning educational expenses, but the level of education provided for and the adequacy of local public schools versus international schools may present problems for multinationals. International schools (e.g. United World College of South East Asia, British International School Shanghai) are far more expensive than local public schools but are preferred by many expatriates because these schools follow the home-country curriculum and cater to a globally diverse student body more capable of supporting ‘third culture kids’. The cost of local and international schools for dependent children from kindergarten through to high school are typically covered by the employer ORC reports that 95 per cent of MNEs contribute to the educational expenses of expatriate children.22 However, there may be restrictions depending on the age of children (pre-school, day care and university are typically not covered), availability of school places, and their fees. In a number of countries attendance at schools in the host location may be seen as unsuitable and the MNE may cover (or contribute towards) the costs of children attending a private boarding school elsewhere (e.g. the costs of room and board as well as other transportation costs to cover parental visits and school holiday travel).23 The costs of attendance at a university may also be provided for by multinationals, when deemed necessary, but this is rare.

Relocation allowances. Items typically covered by relocation allowances include moving, shipping and storage charges; temporary living expenses; subsidies regarding appliance or car purchases (or sales); and down payments or lease-related charges. Allowances regarding perquisites (cars, drivers, club memberships, servants24 and so on) may also need to be considered (usually for more senior positions, but this varies according to location). These allowances are often contingent upon tax-equalization policies and practices in both the home and the host countries. For example, in most Western countries a driver is considered a luxury, only available to very senior managers. In developing economies a driver is economical in terms of cost, effectiveness and safety. Apart from the expectation that managers use drivers, parking is frequently chaotic in developing countries (especially in large cities) and the driver also performs the function of a parking attendant. In some developing countries it is quite common for the police to

arrest drivers involved in traffic accidents and leave them in detention while responsibility and damages are assessed. Such a risk is unacceptable to many MNEs which do not allow their expatriate employees to drive at all in specific developing countries and provide local drivers for both the expatriate and spouse.

Spouse assistance. Increasingly, many MNEs are also offering spouse assistance to help guard against or offset income lost by an expatriate’s spouse as a result of relocating abroad. Payments, on average, are capped at US$7000 per family but vary according to region. Although some MNEs may pay a one-time allowance to make up for a spouse’s lost income (averaging US$11000 per family according to ORC25), US multinationals are beginning to focus on providing spouses with employment opportunities abroad, either by offering job-search assistance, career counseling, cultural orientation, resume/CV preparation, work permit assistance and language tuition, or in more unusual cases employment in the MNE’s foreign business (subject of course to a work visa being approved by the host country government for this purpose).

To summarize, MNEs generally pay allowances in order to encourage employees to take international assignments and to keep employees ‘whole’ (i.e. relatively comparable) to home standards. We will present more about this concept later in the chapter.

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Benefits

The complexity inherent in international benefits often brings more difficulties than when dealing with compensation. Expatriate ‘benefits’ includes health care, pension plans/social security, life insurance, child allowances and profit sharing/stock option plans.

Pension plans are very difficult to deal with country-to-country as national practices vary considerably. Transportability of pension plans/social security and medical coverage benefits are very difficult to normalize. Therefore, MNEs need to address many issues when considering benefits, including:

· Whether or not to maintain expatriates in home-country programs, particularly if the multinational does not receive a tax deduction for it.

· Whether MNEs have the option of enrolling expatriates in host-country benefit programs and/or making up any difference in coverage.

· Whether expatriates should receive home-country or are eligible to receive host-country social security benefits.

Most US PCNs typically remain under their home-country benefit plan, with the exception of medical benefits: more than half of the MNEs surveyed by ORC assign their expatriates to an international healthcare plan. In some countries, expatriates cannot opt out of local social security programs. In such circumstances, the firm normally pays for these additional costs. European PCNs and TCNs enjoy portable social security benefits within the European Union. Laws governing private benefit practices differ from country to country, and firm practices also vary. Not surprisingly, multinationals have generally done a good job of planning for the retirement needs of their PCN employees, but this is generally less the case for TCNs.26 There are many reasons for this: TCNs may have little or no home-country social security coverage; they may have spent many years in countries that do not permit currency transfers of accrued benefit payments; or they may spend their final year or two of employment in a country where final average salary is in a currency that relates unfavorably to their home-country currency. How their benefits are calculated and what type of retirement plan applies to them may make the difference between a comfortable retirement in a country of their choice or a forced and financially less comfortable retirement elsewhere.

In addition to the already discussed benefits, multinationals also provide vacations and special leave. Included as part of the employee’s regular vacation, annual home leave usually provides airfares for families to return to their home countries. Rest and rehabilitation leave is also frequently available if the conditions of the host country are clearly below the standards of the home country. Typically, rest and rehabilitation leave provides the employee’s family with paid airfares to a more comfortable location near the host country. In addition to rest and rehabilitation leave, emergency provisions are available in case of a death or illness in the family. Employees in hardship locations generally receive additional leave expense payments and rest and rehabilitation periods.

APPROACHES TO INTERNATIONAL COMPENSATION OF EXPATRIATES

There are two main options in the area of international compensation – the Going Rate Approach (also referred to as the Market Rate Approach) and the Balance Sheet Approach (sometimes known as the Build-up Approach). In this section we describe each approach and discuss the advantages and disadvantages inherent in each approach.27

The going rate approach

The key characteristics of this approach are summarized in Table 8.1. With this approach, the base salary for the international transfer is linked to the salary structure in the host country. The multinational usually obtains information from local compensation surveys and must decide whether local nationals (HCNs), expatriates of the same nationality or expatriates of all nationalities will be the reference point in terms of benchmarking. For example, a Japanese bank operating in New York would need to decide whether its reference point would be local US salaries, other Japanese competitors in New York, or all foreign banks operating in New York. With the Going Rate Approach, if the location is in a low-pay county, the multinational usually supplements base pay with additional benefits and payments.

TABLE 8.1 Going rate approach

Based on local market rates Relies on survey comparisons among:

· Local nationals (HCNs)

· Expatriates of same nationality

· Expatriates of all nationalities

Compensation based on the selected survey comparison

Base pay and benefits may be supplemented by additional payments for low-pay countries

There are advantages and disadvantages of the Going Rate Approach, summarized in Table 8.2. The advantages are: there is equality with local nationals (very effective in attracting PCNs or TCNs to a location that pays higher salaries than those received in the home country); the approach is simple and easy for expatriates to understand; expatriates are able to identify with the host country; and there is often equity among expatriates of different nationalities.

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Advantages Disadvantages • Equality with local nationals • Simplicity • Identification with host country • Equity among different nationalities • Variation between assignments for same employee • Variation between expatriates of same nationality in different countries • Potential re-entry problems TABLE 8.2 Advantages and disadvantages of the going rate approach

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The disadvantages of the Going Rate Approach include: First, there can be variation between assignments for the same employee. This is most obvious when we compare an assignment in an advanced economy with one in a developing country, but also between assignments in various advanced economies where differences in managerial salaries and the effect of local taxation can significantly influence an employee’s compensation level using the Going Rate Approach. Not surprisingly, individual employees are very sensitive to this issue. Second, there can be variation between expatriates of the same nationality in different locations. A strict interpretation of the Going Rate Approach can lead to rivalry for assignments to locations that are financially attractive and little interest in locations considered financially unattractive. Finally, the Going Rate Approach can pose problems upon repatriation when the employee’s salary reverts to a home-country level that is below that of the host-country. This is not only a problem for firms in developing countries, but also for MNEs from many countries where local managerial salaries are well below that of the USA, which has long been the world market leader in managerial salaries, although the gap between US and some European salaries has been narrowing.28

The balance sheet approach

The key characteristics of this approach (which is the most widely used approach for international compensation) are summarized in Table 8.3. The basic objective is to ‘keep the expatriate whole’ (that is, maintaining relativity to PCN colleagues and compensating for the costs of an international assignment29) through maintenance of home-country living standard plus a financial inducement to make the package attractive. This approach links the base salary for expatriates to the salary structure of the relevant home country. For example, a US executive taking up an international position would have his or her compensation package built upon the US base-salary level rather than that applicable to the host country. The key assumption of this approach is that foreign assignees should not suffer a material loss due to their transfer, and this is accomplished through the utilization of what is generally referred to as the Balance Sheet Approach. According to Reynolds:

The balance sheet approach to international compensation is a system designed to equalize the purchasing power of employees at comparable position levels living overseas and in the home-country and to provide incentives to offset qualitative differences between assignment locations.30

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TABLE 8.3 The balance sheet approach

· Basic objective is maintenance of home-country living standard plus financial inducement

· Home-country pay and benefits are the foundations of this approach

· Adjustments to home package to balance additional expenditure in host country

· Financial incentives (expatriate/hardship premium) added to make the package attractive

· Most common system in usage by multinational firms

There are four major categories of outlays incurred by expatriates that are incorporated in the Balance Sheet Approach:

1 Goods and services – home-country outlays for items such as food, personal care, clothing, household furnishings, recreation, transportation and medical care.

2 Housing – the major costs associated with housing in the host country.

3 Income taxes – parent-country and host-country income taxes.

4 Reserve – contributions to savings, payments for benefits, pension contributions, investments, education expenses, social security taxes, etc.

Where costs associated with the host-country assignment exceed equivalent costs in the parent country, these costs are met by both the MNE and the expatriate to ensure that parent-country equivalent purchasing power is achieved.

Employee: Brian Smith Position: Marketing Manager Country: New Euphoria Reason for change: New Assignment Effective date of change 1 February 2013 Amount Paid in Australian Paid in local Item A$ PA dollars AS PA currency NES PA Base salary 200000 100000 150000 Cost of living allowance 50000 75000 Overseas service premium (20%) 40000 40000 Hardship allowance (20%) 40000 40000 Housing deduction (7%) -14000 -14000 Tax deduction -97 000 -97000 TOTAL 219000 69000 225000 COLA Index = 150 TABLE 8.4 Expatriate compensation worksheetTable 8.4 shows a typical spreadsheet for an expatriate assignment using the Balance Sheet Approach. In this example, an Australian expatriate is assigned to a hypothetical country called New Euphoria which has a Cost-of-Living-Index of 150 relative to Australia and an exchange rate of 1.5 relative to the Australian dollar. In addition to a foreign service premium, a hardship allowance is also payable for this location. Housing is provided by the MNE, and a notional cost for this is recognized by a 7 per cent deduction from the package, along with a notional tax deduction (we discuss taxation later in the chapter). The expatriate can see from this spreadsheet what components are offered in the package and how the package will be split between Australian currency and New Euphoria currency.

There are advantages and disadvantages of the Balance Sheet Approach, summarized in Table 8.5. There are three main advantages. First, the Balance Sheet Approach provides equity between all foreign assignments and between expatriates of the same nationality. Second, repatriation of expatriates is facilitated by this emphasis on equity with the parent country as expatriate compensation remains anchored to the compensation system in the parent country. Third, this approach is easy to communicate, as Table 8.4 illustrates.

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Advantages

TABLE 8.5 Advantages and disadvantages of the balance sheet approach

Equity

· Between assignments

· Between expatriates of the same nationality

Facilitates expatriate re-entry Easy to communicate to employees

Disadvantages

· Can result in great disparities

· Between expatriates of different nationalities

· Between expatriates and local nationals

· Can be quite complex to administer

There are two main disadvantages of the Balance Sheet Approach. First, this approach can result in considerable disparities – both between expatriates of different nationalities and between PCNs and HCNs. Problems arise when international staff are paid different amounts for performing the same (or very similar) job in the same host location, according to their different home base salary. For example, in the Singapore regional headquarters of a US bank, a US PCN and a New Zealand TCN may perform the same (or similar) banking duties but the American will receive a higher salary than the New Zealander because of the differences in US and New Zealand base-salary levels. As noted above, differences in base-salary levels can also cause difficulties between expatriates and HCNs. Traditionally, this has referred to the problem of highly paid PCNs being resented by local HCN employees because these ‘foreigners’ are perceived as being excessively compensated (and because they are blocking career opportunities for locals).

However, feelings of resentment and inequity can also run in the other direction. For instance, as indicated above, the USA has the highest level of managerial compensation in the world. Thus, a multinational that establishes a subsidiary in the USA (or acquires a US business) may find that if it uses a Balance Sheet Approach, its expatriates may be substantially underpaid compared to local American employees. While the logic of the balance sheet states that being tied to the home country assists in repatriation because the expatriate identifies with the home country, research in equity theory31 suggests that employees do not always assess compensation issues in a detached way.

The issue of base salary differences is also a concern for US employees working for foreign firms operating in the USA. Many non-US multinationals are reluctant to pay high US salaries to US employees who are offered international assignments” (as HCNs into the firm’s home-country operations, or as TCNs in a regional subsidiary). US employees are equally reluctant to accept the lower salaries paid in the firm’s home country. Thus, the Balance Sheet Approach can produce disparities and may also act as a barrier to staff acceptance of international assignments. A second problem with the Balance Sheet Approach is that while this approach is both elegant and simple as a concept, it can become quite complex to administer. Complexities particularly arise in the areas of tightly integrated private and government fund transfers (e.g. taxes and pensions).

A third emerging approach to international compensation: ‘Local Plus’ ^

Over the past decade, a third approach to international compensation, summarized in Table 8.6, and called Local Plus has begun to emerge, particularly in the Asia Pacific region. A Local Plus approach is one in which expatriate employees are paid according to the prevailing salary levels, structure, and administration guidelines of the host location, plus provided ‘expatriate-vpe’ benefits such as assistance with transportation, housing, and dependents’ education in rec-nition of the employee’s ‘foreign’ status. Benefits may be paid in-kind (directly by the MNE) s add-ons to local salary levels at a grossed-up rate to account for host taxes. Local Plus

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224 CHAPTER 8 INTERNATIONAL COMPENSATION

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Employees can be taught how to be exceptional managers.

True

False

Management includes the pursuit of organizational goals efficiently and effectively.

True

False

Organizations can gain a competitive advantage simply by matching their competition in terms of cutting costs and responsiveness to employees.

True

False

Taking care of the customer is not as vital for nonprofit organizations compared to for-profit businesses.

True

False

Management is defined as the pursuit of organizational goals ____.

efficiently and effectively

correctly and with synergy

economically

efficiently and in a detailed-oriented manner

with passion and effectiveness

ABC Manufacturing employs some of the top professionals in its field, and because of their skills and experience, ABC is highly efficient and outperforms its competitors. ABC Manufacturing has a ____ over its competition.

quality mark

effectiveness advantage

synergy

leadership dimension

competitive advantage

Even for nonprofits, sooner or later there will be no organization without ____.

ethical standards

good laws

the Employee Rule

customers

synergy focus

New York Times columnist Thomas Friedman noted that globalization has leveled the competitive playing fields between industrial and emerging-market countries. This phenomenon proposes that ____.

the world is one

globalism is decreasing

the world is flat

world economies are too narrow

one world government is the answer

The principal functions of management are ___.

executing, planning, organizing, leading

scheduling, organizing, leading, staffing, monitoring

staffing, planning, motivating, delegating

planning, organizing, leading, controlling

staffing, planning, leading, delegating

When the manager of a local restaurant sets goals and then develops a plan on how to achieve them, she is ____.

planning

monitoring

delegating

organizing

staffing

Managers are classified into the four levels of ____.

upper, regional, middle, lower

upper, middle, floating, lower

top, middle, first-line managers, team leaders

top, middle, first-line, advisors

upper, board of directors, middle, lower

According to management scholar Henry Mintzberg, managers play three roles:

interpersonal, analytical, professional

professional, leader, informational

interdependent, monitor, analytical

interpersonal, informational, decisional

interpersonal, analytical, monitor

Conceptual skills consist of ____.

the ability to think practically

the ability to think analytically, to visualize an organization as a whole, and to understand how the parts work together

the job-specific knowledge needed to perform well in a specialized field

the ability to work well in cooperation with other people to get things done

the ability to think in a logical manner

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