compensation strategies may be at once culture free (etic) and culture bound
(emic). Milkovich and Bloom’s (1998) international compensation model con-
sists of three sets of different forms of total (monetary and non-monetary)
compensation. The ‘core’ set is defined as that compensation which signals the
organization’s ‘global mind-set’. Local conditions can be accounted for with
variations in specific practices, but they must be consistent with core policies.
The need for each subsidiary or business unit to be able to choose from total
compensation options, which might be important to gaining and sustaining
competitive advantage in each of their operating markets, is allowed for in the
‘crafted’ set of compensation forms.
The final, ‘choice’, set of total compensation offers flexibility for employ-
ees to choose from various options in total compensation from within a total
cost framework. This acknowledges the ‘difficulties in identifying national cul-
tures’ by customizing at the individual level (Milkovich and Bloom, 1998: 23),
allowing individuals to have some say in their international compensation. It
seems that, as involvement in globalization intensifies, multicultural environ-
ments increasingly influence MNC populations, and approaches such as that
of Milkovich and Bloom are likely to find favour. Indeed, recent results from
the Best Practices in International HRM study suggest that understanding ‘what
employees in a given culture want from a compensation system rather than
replicating current cultural norms’ might be the way forward for international
compensation (Lowe et al., 2002: 76).
An effective international compensation strategy facilitates implementation
of MNC strategy and contributes to employee job satisfaction and the motivation
to achieve MNC goals. As shown in Figure 12.1, a robust international compen-
sation strategy balances internal and external relativities across the MNC in order
to ensure consistency and equity. However, as O’Donnell (1999) and Bonache
and Fernández (1997) have recently pointed out, the strategic role of inter-
national compensation systems has been largely neglected. The second part of
this chapter deals with performance management, the way in which goals may
be transformed into action, the progress towards goal achievement monitored
and the results rewarded. As indicated at the beginning of this chapter, perfor-
mance management is defined and its dual purposes outlined within the context
of MNCs. Then, at the functional level, performance appraisal, the core human
resource management activity of performance management, is examined.
3 PERFORMANCE MANAGEMENT OF
INTERNATIONAL STAFF
Performance management, according to Lewis (1998: 67), ‘is a term used to
describe an integrated set of techniques which have had an independent
International Compensation and Performance Management 317