Culture and Compensation in India

Instructions: For a country of your choice, conduct research into the cultural characteristics that you believe should be important considerations in establishing a core compensation program for a U.S. company that plans to locate there. Discuss these characteristics. In addition, discuss whether you feel that pay-for-performance programs are compatible. If compatible in any way, what course of action would you take to promote this compatibility? If not compatible, why not?

Solution.

Culture and Compensation in India

Culture has important implications for a variety of the dimensions of business. It is, therefore, an essential consideration for any organization when expanding into a new market. Through a critical review of the local culture within new markets, managers are able to design policies and products that will enable them to flourish. For example, a company in the US may identify India as a potential market, owing to its centrality within Asia and its large population. In such a case, some of the cultural issues the business would need to consider are described below.

Owing to the uniqueness and diversity of culture, it is essential to have a systematic approach of evaluating it. Hofstede’s dimensions of national culture provide a useful framework to do so (Muduli, 2011). There are five of these dimensions, including power distance, individualism-collectivism, masculinity-femininity, uncertainty avoidance and long-term orientation (Liu & Lee, 2012). Power distance deals with the hierarchy in a society, and the level of separation between those in power and those below them. India is characterized by a high power distance meaning there is a greater hierarchy. When it comes to Individualism versus collectivism, the Indian culture is a highly collectivist one (Muduli, 2011). The third dimension of culture is masculinity versus femininity. Masculinity manifests itself in the form of a propensity for items such as status symbols and those that indicate power, while femininity concerns itself with extending help to others. Indian culture is characterized by low masculinity. Uncertainty avoidance represents risk behaviors and reactions. India has a high uncertainty avoidance culture, meaning they avoid uncertainty and don’t prefer risk (Muduli, 2011). A final aspect is long-term orientation, which Hofstede finds indeterminate especially owing to the non-linear nature of time as per the Indian cultural perspective (Geert Hofstede, n.d). These are the essential cultural considerations that affect human resource policy.

Based on the aspects identified above, pay for performance programs are generally not compatible with the Indian culture. For example, according to Martocchio (2015), cultures with a high power separation are more likely to have compensation strategies that reinforce power differentials. This does not correspond to a performance-based pay system.

References

Geert Hofstede. (n.d). What about India. Retrieved from Geert Hofstede: https://geert-hofstede.com/india.html

Liu, W. K., & Lee, Y. S. (2012). Assessment of Cultural Dimensions, Leadership Behaviors and Leadership Self-Efficacy: Examination of Multinational Corporations in Taiwan. In 2012 International Conference on Government, Law and Culture,, 28, 1-05.

Martocchio, J. J. (2015). Strategic Compensation: A Human Resource Management Approach. Upper Saddle River, NJ: Pearson/Prentice Hall.

Muduli, A. (2011). Performance Based Reward and National Culture: An Empirical Evidence from Indian Culture. Synergy, 9(1), 8819-8834.