Culture and Organizational Culture

Culture is regarded as the key factor for international business and international human resource management (IHRM) to become successful. (Briscoe & Schuler, 2004:114) Well-managed culture can bring about desirable employment relationship (ER), and is therefore becoming the concentration to obtain “competitive advantage”. More specifically, culture is critical to business activities because it strongly affects the development and maintenance of a series of factors, including the accumulation of credibility, the cultivation of goodwill, the incentive for employees, the production of lucrative goods, and so forth. In the international context, multinational corporations (MNCs) are seeking to manage the culture inside their corporations but across the borders. The involvement of cultural diversity makes this issue far more complex to MNCs.

MNCs are enterprises which extend their production or service to more than one country. They are distinct from international trade organisation in that they own or control facilities of value-adding production on an international level. (Leat 1999:96 cited in Leat 2001)) This unique feature determines that one crucial task facing MNCs is the IHRM on the premise of cultural diversity.

There are a number of areas in IHRM that can be delved into within the scope of organisational life. In this paper, particularly, focus will be put on the issue of compensation practice. Generally, employee compensation consists of wages, incentives and benefits. Nevertheless, in what proportion compensations’ components appear and on what basis compensation program is arranged vary from country to country. These differences are the product of various national cultures, and should direct the IHRM practice. If applied to other countries regardless of the cultural gap, the compensation policies in the organisation’s country of origin can encounter unexpected obstacles, or even generate harmful repercussions. This