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It often seems as if our world is shrinking. Satellite, Internet and cable technologies make it easier for us to communicate with friends, colleagues, and strangers in other countries on a real-time basis. Increasingly open borders give us easier access to more countries, and citizens of previously ‘closed’ countries in turn have access to the rest of the world. We are daily learning more about other cultures, their similarities as well as their differences. And we are learning that some products and brands truly do have global appeal, as more and more companies expand outside their home nations.

However, this global expansion and ‘harmonization’ brings with it some very real problems for managers in global organizations. Globalization may well be about standardization and homogeneity within the marketplace, but its impact on the company internally can be exactly the opposite. As a company expands to include overseas operations and starts to employ people from different national cultures, management faces a number of challenges. Not least of these are how to motivate and reward employees and how to be an effective expatriate manager.

Formal reward and incentive systems can play a key role in aligning employee behavior with corporate strategy. In particular, such systems can be used to provide incentives for employees to focus on goals and actions that will contribute to, or that are essential to, the company’s ability to achieve its strategy. Poorly designed reward systems can result in opportunistic behavior or in decisions that fly in the face of corporate goals. Many organizations particularly when they are large or complex – will try to standardize their systems as much as possible, to allow for consistency and comparability across equivalent business units. However, such an approach could fail to take into account the impact that cultural differences may have on behavior in the workplace.

For example, US nationals typically are fairly individualistic, have a lower than average aversion to risk, and cope well with ambiguity. Consequently, an employee reward scheme within a US-only company (allowing for industry specific factors) might be based on standards linked to initiative, risk-taking and individual performance as well as to team or group objectives. However, if the company then applies exactly the same reward scheme to its divisions in Germany it might run into problems. German nationals generally have a lower tolerance for ambiguity and risk than their American counterparts, and they place more importance on definable technical abilities. They are therefore less likely to be motivated by a system that offers most reward for initiative and risk-taking. This particular reward system might also run into problems within the company’s divisions in Korea, where group performance is going to be valued more highly than individual achievement.

Because such differences can exist among cultures, managers of the global organization may choose instead to develop reward systems that are in line with the different national cultures. This might solve the problem of how to align employee behavior with corporate strategy, but other problems may result from the difficulty of comparing performance across different systems. For example, if the parent company wants to make a comparative evaluation of the skills and effectiveness of managers in different countries, what criteria should it use when the management incentives and rewards are based on country-specific factors? Having country-specific reward systems may also prove problematic if workers from one country are transferred to the company’s operations in another country. Should they be evaluated and rewarded according to the system and standards of their home or their host country? Will there be perceived unfairness, whether on the part of the host workers or the expatriate workers?

When a company has operations in more than one country there is often a temptation to transfer key personnel from the company’s home nation to the overseas division. Presumably, such individuals already exhibit the kinds of behaviors the company wants to encourage and promote, although the problem still remains of whether to evaluate their performance according to ‘home’ or ‘away’ standards. However, an additional set of issues can also arise with expatriate workers. Although they may already have been indoctrinated into the corporate culture, the way in which that culture is expressed overseas may be very different. One aspect of corporate culture is style, particularly management style. Some of the pointers to management style include the extent to which decision-making is centralized, the level of autonomy granted to different grades of employees, and the number of layers in the corporate hierarchy.

In the US, it is increasingly common for decision-making to be decentralized and ‘pushed down the line’ wherever possible, and as a result companies have increasingly flat hierarchical structures. US workers are generally more comfortable with autonomy and as a result managers in the US may find that their role is more to set goals than to give instruction. However, an expatriate US manager may have to modify his/her management style when overseas. For example, workers in many Asian countries may be more comfortable following clear directions and rules for work than their American counterparts. In this situation the expatriate US manager in an Asian division may spend more time giving direction than would normally be the case in a US division.

Ignoring language barriers, communication could pose very real problems for the unwary expatriate US manager. For example, a lack of public disagreement with a proposal or idea may not mean that there is general agreement. In Germany, public criticism of a higher-level decision is frowned upon. In Korea, the importance of ‘face’ also means that public criticism of any kind is avoided. At the same time, Korean nationals often have an indirect way of communicating, so that the real meaning of "yes" and "no" may be different in different situations. The expatriate US manager must be aware of these differences and try to find more reliable methods of getting opinions on ideas and proposals. 

Communication differences also have to be taken into account by the expatriate US manager giving feedback to host nation employees. German nationals tend to be more literal and to take things more at face value than their American counterparts. In general, therefore, feedback on performance should also be very precise and literal, and based on clearly defined, unambiguous standards rather than on subjective criteria. The importance of ‘face’ in many Asian cultures dictates that any negative feedback or criticism there should be given in private, a nicety that may not always be applied in the US workplace.

As more and more companies move outside their home nations it becomes a matter of routine to evaluate the impact of such expansion on functional areas and product lines, and to find ways of taking advantage of an increasingly homogenous global marketplace. However, global businesses must go beyond this and recognize that their internal systems and structures are now being applied to a more heterogeneous workforce. In such a situation, internal standardization may be positively harmful, particularly when applied to employee reward and incentive systems. These companies must also make an honest assessment of their managers’ ability to operate effectively within this more diverse and challenging environment. The skill-set needed for successful management in the home nation may need to be supplemented or even completely overhauled if it is to be of use within the global organization.

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