Compensation, Global HR

Pay For Performance: How It Is Viewed Around the World

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Pay for performance is a new concept in many countries.

Unlike the United States, some cultures consider it unacceptable to tell employees they are performing poorly. In these countries there is little variance in ratings, salary increases and bonuses. Performance ratings (if they exist at all), pay increases and bonuses are all pretty much the same.

Pay for performance, as we know it in the U.S., tends not to exist. Global companies need to understand the impact of these differences and search for ways to reconcile any conflicts.

How other countries view pay for performance

Here are examples of how pay for performance is viewed in some countries.

Countries: United States, United Kingdom, Canada, Denmark, the Netherlands and Australia.

The Norm: Measure individual performance and link that to the amount of pay increase — individualistic.

Countries: Egypt, Mexico, India, Japan, France and Venezuela.

The Norm: Measure performance at the group/team level. Believe results require collective effort — collectivist.

Countries: United States, Canada, Sweden, United Kingdom, Australia, the Netherlands and Germany.

The Norm: Believe that the same policies, methods, processes and standards should apply to appraising all employees — universalistic.

Countries: United States, United Kingdom, France and the Netherlands.

The Norm: Hold the individual totally accountable for meeting performance standards — external circumstances are rarely considered — internal control.

Countries: United States, Australia, Canada, United Kingdom and the Netherlands.

The Norm: Believe individual performance outcomes are due to forces at least partially outside of their control.  These cultures believe in external control.

Countries: Venezuela, China, Russia, Kuwait, Egypt, Saudi Arabia and India.

The Norm: Believe individual performance outcomes are due to forces at least partially outside of their control. These cultures believe in external control.

Countries: United States, Australia, Canada, United Kingdom and the Netherlands.

The Norm: Evaluate individuals based on what they accomplish, rather than who they are. These countries are achievement-oriented.

Countries: Egypt, Japan, China, Russia, Mexico and France.

The Norm: Believe that the status/qualifications (family, education) of the individual should be a consideration in evaluating performance – ascription-oriented.

Countries: United States, Canada, Sweden, United Kingdom, Australia, the Netherlands and Germany.

The Norm: Believe that the same policies, methods, processes and standards should apply to appraising all employees — universalistic.

Countries: Venezuela, Russia, China, India, Japan and France.

The Norm: Believe that the identity of the person (family, education) and the circumstances should be considered — particularistic.

 Countries: United States, Netherlands, United Kingdom, Australia and Canada.

The Norm: Employees expect to participate in setting performance standards and challenge the manager when there is disagreement on performance level — low control.

Countries: Mexico, Venezuela, France and China.

The Norm: Employees contesting a performance rating or challenging a manager would be highly unlikely — high control.

You need to invest time

If a company wants pay for performance implemented company-wide and has operations in countries that aren’t used to it,  it can be done. But it must be done in a way that shows respect for the culture and patience while the managers are learning and becoming comfortable with it.

Some heavy training needs to be done. They need to understand the fact that not all employees perform at the same level, some are better performers than others. Telling them the percentage of employees at each rating level for the whole company might help them see that the rest of the company really is using this system.

Managers could be asked to spread their ratings to use two rating levels in the first year — i.e. “3” – Meets Expectations and “2” — Exceeds Expectation. Additional rating levels could be added in subsequent years.

Does this take a lot of time? Absolutely.

Change doesn’t come quickly

But cultural change does not come quickly. Trying to cram a 5 point rating scale down managers’ throats for immediate use will cause major problems. If pay for performance is worth implementing it needs to done in a way that will cause the least havoc.

Bottom line: Understanding cultural differences is important to HR when implementing pay for performance plans. Knowing what reactions to expect ahead of time enables HR to develop ways to reconcile the differences.

With the help of education and transition plans, pay for performance can be successful over time on a global basis.

Jacque Vilet, President of Vilet International, has over 20 years’ experience in International Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expat twice during her career. Jacque has also been a speaker in the U.S., Asia and Europe, and is a regular contributor to various HR and talent management publications. Contact her at jvilet@viletinternational.com.
  • Jared

    Agree that out of the box P4P solutions don’t work in global organizations but rather solutions that are tailored for specific regions and cultures that have been commincated and implemented effectively.