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Royal Holloway University of London

MSc International Management

Discuss the challenges to effective compensation in MNCs and how consistency and equity of compensation can be achieved.

Introduction

In today’s increasingly competitive environment, businesses are globalizing their firms in order to maximize their profitability and compete effectively. This globalization is exasperated by the availability of cheap labour, raw materials, increased market share and competitive taxation systems. This has led to an increase in Multinational Corporations (MNCs), which are enterprises that deliver services or mange production in more than one country. With the rise of MNCs, managers have to deal with diverse …show more content…

These costs vary based on factors such as taxes, exchange rates, and currency fluctuations which are very difficult to determine precisely. Additionally, the returns specifically are difficult to monitor and determine as it is challenging to quantify the return/value of providing expatriates with a cross-cultural and international experience. An organization must determine the key drivers of its expatriate program, in order for HR to begin to define objectives and assess expatriates return. In order for an expatriate to succeed in their new location, the posting must be planned for strategically. Clear business goals and objectives need to be set and agreed upon right form the onset. When a posting is based on the premise of achieving strategic objectives, then the potential to succeed is enhanced (accruing benefit) and cost reduced (chance of failure). The method used to identify, select, and train the expatriate for a particular position needs to be very clear. It needs to be embedded with the necessary qualities the MNC is looking for within the open position. It must also teach the expatriate about the country’s values and beliefs in order to properly prepare them for what is to come. When this is done clearly, the cost of the assignment will reduce and benefit will increase. Additionally, different jobs come with different challenges, both in terms of the physical location of the position and the MNCs strategic objectives. Compensation