Incentive pay configurations: the influence of national culture

Abstract

Purpose The purpose of this paper is to investigate the influence of national culture on the adoption of four different incentive pay bundles (incentive maximizer, contingent rewarder, profit rewarder, and incentive minimizer) using GLOBE national culture dimensions in 14 countries. It uses incentive pay bundles derived by Prince et al. (2016). Design/methodology/approach The study adopted multilevel random-intercept logistic modeling using firm incentive practice usage from the CRANET database and country culture scores from the GLOBE study. Findings Evidence suggests that in-group collectivism is associated with increased use of the incentive maximizer approach, in which firms use a combination of high levels of individual, team, and profit sharing incentives, and decreased use of the incentive minimizer approach (where firms minimally employ incentives) and the individual and team bonus focused contingent rewarder configuration. Higher uncertainty avoidance is linked to increased use of the profit rewarder approach (where only profit sharing is emphasized) and decreased use of the contingent rewarder approach. Performance-orientation cultures appear to support using the incentive maximizer and avoiding the incentive minimizer bundles. Originality/value This study investigates incentive practice bundles that firms use verses separate analysis of practices and use the GLOBE culture metrics. It utilizes multilevel modeling, which has been lacking in past studies of culture and incentives.

Impact of national culture on organizations’ use of selection practices

“…The GLOBE study national culture dimensions of in-group collectivism, uncertainty avoidance and power distance, are used to test the influence of national culture. These three dimensions were selected because they have been shown to have the most influence on the adoption of HR practices (Newman and Nollen, 1996; Prince et al , 2018). The GLOBE culture dimensions were developed through a multi-phase, multi-project initiative in which approximately 150 co-principal investigators worked to develop a more rigorous model of national culture (House et al , 2004).…”

“…National culture has been shown to have a strong influence on HR practices. For example, Prince et al (2018) found evidence that national culture will influence the adoption of incentive pay configurations across countries. Similar findings have been found with recruitment practices (Allen and Vardaman, 2017; Budhwar and Khatri, 2001).…”

“…National culture constrains the practices organizations can implement before they risk losing legitimacy in a country (North, 1990). This paper looks at three dimensions of national culture (in-group collectivism, uncertainty avoidance and power distance), all three of which have been shown to effect the adoption of HR practices in prior studies (Nadeem et al , 2018; Newman and Nollen, 1996; Prince et al , 2018).…”

“…If the selection practices fail to be seen as legitimate (North, 1990), the organization will struggle to find employees with the knowledge, skills, ability and attitude (KSA), it needs to operate. National culture is one aspect of the external environment that has a strong influence on HR practices (Allen and Vardaman, 2017; Newman and Nollen, 1996; Prince et al , 2018).…”

National culture moderators of pay for individual performance and the financial performance of multinational enterprises

“…In these cultures, merit or task-related behaviours are more important than status. The value attributed to performance as a goal for employees in high performance orientation cultures aligns with the underlying value of PFIPc (Aycan, 2005;Gooderham et al, 2018;Prince et al, 2018;Rabl et al, 2014;Schuler & Rogovsky, 1998), which constitutes recognition (compensation) for high performance.…”