compensation will vary in accordance with the staffing orientation. For example,
an ethnocentric orientation, expatriating senior management from headquar-
ters to positions in international subsidiaries, has usually been associated with
an approach based on compensating the manager and his or her family for
relocating outside their home country through a number of allowances
(Harvey, 1993). In contrast, MNCs with a predominantly geocentric approach
might more readily adopt a global compensation strategy. Such an approach,
according to Milkovich and Bloom (1998) moves away from relying on stereo-
typical ideas of cross-cultural, cross-national differences toward understanding
and leveraging cross-cultural and cross-national differences. These approaches
will be discussed further later in this chapter.
Compensation for international staff transfersUntil recently, international compensation research and practice has been
firmly focused on expatriation. This focus is understandable given the reported
high direct costs of such assignments. Take, for instance, the following example.
The million dollar assignmentThe Director of Compensation and Benefits for Europe, the Middle East and
Africa at UK-based Lucent Technologies, Steve Spencer, notes that the
‘million dollar assignment’ (in terms of total costs over three years) is now
commonplace. He allocates the costs as:Recurring costs Non-recurring costs
US$ p.a. US$ p.a.
Basic salary 100,000 Preparation/orientation 10,000
Performance bonus 20,000 Relocation/shipment 25,000
Pension, insurance, 20,000 Temporary 5,000
etc. accommodation
Accommodation 50,000 Relocation allowances 15,000
Schooling 25,000 Repatriation/shipment 25,000
Local transport 10,000 Repatriation allowance 10,000
Home-leave travel 10,000
COLA^1 /Hardship 10,000
Tax gross-up 75,000
Total 320,000 Total 90,000
Total x 3 years 960,000Total assignment cost: US$1.05 million over three years (assuming a married
assignee with two school-age children).(^1) Cost of living allowance.
Source: Spencer, 1999: reproduced with permission.
International Compensation and Performance Management 313