Question

How culture have impacted the compensation policies of mnc?

Answer 1

Hundreds of companies in today’s world operate internationally. British Petroleum, Royal Dutch/Shell Group, Exxon Mobil, Toyota, General Electric, Wal­Mart, IBM, Morgan Stanley, and nearly every one of the most recognizable brands worldwide have international operations ( The Super 50 , Forbes, 2015). In order for these multinational corporations to be effective, they must consider their local impact on the countries they operate within, the local practices, and cultural boundaries that exist. Often the burden of ensuring cultural compatibility and efficacy falls on the Human Resources manager, focusing “specifically on structural training and development and retention ­oriented compensation” (Ngo, Human Resources Practices and Firm Performance of Multinational Corporations: Influences of Country Origin ). The Hofstede Theory of Cultural Dimensions is a valuable measure of cultural differences that many companies use when deciding to take on these international endeavors; and Hofstede’s theory often aids in the smooth transition into foreign lands. By using this theory, Human Resources Managers and policy creators are able to identify the best training methods for the local­ as well as base ­country employees. However, the importance of adapting to international and corporate cultural differences is immense. In a world where a company’s Corporate Social Responsibility and sustainability efforts is increasingly an important factor considered by consumers, the response and adaptation to seamlessly integrating into a multitude of global cultures is critical. The impact of sustainability on profits is, as well, a motivating influence on a company’s desire to treat employees and the surrounding environments with the utmost respect. The focus of this paper will be on the application of Hofstede’s theory to two prominent international companies ­ General Electric and Royal Dutch Shell Plc ­ as well as the impact on their human resources policies due to these international cultural variations.