I N TH E D ESIGN OF MA NA GEMENT
C ON TRO L S YSTEM S, D OES CULTURE
MA TTER?
C OM PA RIN G TH E N ETHERLANDS WI TH
C URAÇA O
“HOW DOES NATIONAL CULTURE AFFECT THE REWARDS &
ADMINISTRATIVE CONTROL SYSTEMS?”
This master thesis aims to give an in depth understanding of how multinational companies adapt their Management Control System package across countries and to what extent this can be explained by differences in national culture. Multiple case studies were used to investigate this matter; interviews were conducted within companies operating in both Curaçao and the Netherlands. The national culture is analyzed using Hofstede’s Cultural dimensions model (Hofstede, 1980a) in combination with the cultural metaphor. Apart from this unique way of conceptualizing and operationalizing the national culture, this study contributes to the academic field by incorporating the studied countries and by looking at two elements of Management Control Systems: rewards and compensation and administrative controls. The main conclusions are that individualism and uncertainty avoidance have a stronger impact on reward controls and the effect uncertainty avoidance on administrative controls is moderated by size and ageing. Combining two types of cultural approaches has been very useful in understanding cultures and their effects on MCS.
Claudiviëne N. D. Cordilia 2086689
c.n.d.cordilia@student.rug.nl MSc. Business Administration
Specialization: Organizational and Management Control University of Groningen
Faculty of Economics and Business Supervisor: Dr. C.P.A. Heijes Co- assessor: Dr. A. Rehman Abbasi
June 16th, 2016
ACKNOWLEDGEMENTS
After five long months, I can finally put the finishing touch on my master thesis and give it a catchy title: “In the design of Management Control Systems, does culture matter”? As a student, I always went the extra mile and took on tasks that seemed impossible. Of course it had to be the same for my master thesis, which made it an intense learning experience for me, not only in the scientific area, but also personally. By incorporating my motherland, Curaçao, as one of the research objects, I have learned so much about the culture of Curaçao. This research focusses on finding out whether national culture has influence on the reward system and the administrative control system. In order to do this, large firms within two countries, Curaçao and the Netherlands, will be studied. This thesis is written in order to finish my studies at the University of Groningen, namely Business administration: Specialization in Organizational and management control. With that being said, I would like to take a moment to reflect on the people who have supported and helped me through the process.
I would first like to thank my thesis advisor Dr. Coen P. A. Heijes. His door was always open whenever I needed advice or had a question about my research. He referred me to the right people that would help me throughout my research. Although he was concerned about the workload, he admired my optimism and steered me in the right direction whenever he thought I needed it. Furthermore, I would like to thank the population of Curaçao and the Netherlands, especially those who took the time to support me by filling in the surveys.
I would also like to thank the Directors and senior managers of the companies I interviewed. Although they were very busy, they spared 1.5 hours of their busy schedule to help me gather the information I needed to analyze the Management Control Systems. Without them, I would not have been able to do my research.
Finally, I must thank my friends for providing me with encouragement throughout my years of study and through the process of researching and writing this thesis. This accomplishment would not have been possible without them. Thank you.
TABLE OF CONTENTS
Acknowledgements ... 2
Summary ... 5
1. Introduction ... 6
1.1. Research theme ... 6
1.2. Conceptualization of the national culture and the Management Control Systems (MCS) ... 6
1.2.1. National culture ... 6
1.2.2. Management Control Systems ... 7
1.3. Research goal and significance ... 7
1.3.1. Gap in management control field ... 7
1.3.2. Gap in research on national culture ... 7
1.3.3. This paper’s contribution ... 8
2. Literature Review ... 9
2.1. Management Control System ... 9
2.1.1. Reward and Compensation control systems ... 9
2.1.2. Administrative control systems ... 10
2.2. The national culture ... 11
2.3. National culture in relation to MCS ... 12
2.3.1. Uncertainty avoidance and the MCS ... 13
2.3.2. Power distance and the MCS package ... 13
2.3.3. Individualism and the MCS package ... 14
2.3.4. Masculinity and the MCS package ... 15
2.4. Research questions ... 16
3. Methodology ... 17
3.1. Data collection ... 17
3.1.1. Data collection on the national culture... 17
3.1.2. Data collection on rewards and administrative controls ... 18
3.2. Data analysis ... 19
4. Results ... 20
4.1. The national culture in Curaçao ... 20
4.1.1. Power distance in Curaçao ... 20
4.1.2. Collectivism in Curaçao ... 21
4.1.3. Masculinity in Curaçao ... 21
4.2. The national culture in the Netherlands ... 22
4.2.1. Power distance in the Netherlands ... 23
4.2.2. Individualism in the Netherlands ... 23
4.2.3. Feminism in the Netherlands ... 24
4.2.4. Uncertainty avoidance in the Netherlands ... 24
4.3. Management Control Systems in Curaçao ... 25
4.3.1. Reward and compensation systems in Curaçao ... 25
4.3.2. Administrative control systems in Curaçao ... 26
4.4. Management Control Systems in the Netherlands... 27
4.4.1. Rewards and Compensation Systems in the Netherlands ... 27
4.4.2. Administrative control systems in the Netherlands ... 28
4.5. National culture in relation to MCS package ... 29
4.5.1. Power distance and MCS package ... 29
4.5.2. Collectivism and MCS package ... 30
4.5.3. Masculinity and MCS package ... 32
4.5.4. Uncertainty avoidance and MCS Package ... 33
4.6. Other factors influencing MCS package ... 34
4.6.1. Size ... 34
4.6.2. Ageing ... 34
5. Discussion and conclusion ... 35
5.1. Discussion ... 35
5.2. Conclusion ... 37
5.3. Limitations ... 37
References ... 39
Appendix A: The national culture of Curaçao- survey results ... 45
Appendix B: The national culture of the Netherlands – survey results ... 49
SUMMARY
For many years, researchers have emphasized the importance of understanding how multinationals adapt their Management Control Systems across countries and to what extent this can be explained by differences in national culture. Culture is mostly viewed through a cultural general view (e.g. dimensional approach). Furthermore, most researchers only investigate how culture affects one type of management control instead of looking at the complete package, especially since multinationals never apply only one type of management control. This study combined the dimensional approach developed by Hofstede (1980a) with the cultural metaphor. This combination represented a perspective that described the national culture fully, while lowering the probability of inaccurate stereotyping. Furthermore, this research captured rewards and administrative controls as a means to explore how management controls are applied within firms. The application of these management controls has been explored between two specific ethnic groups that vary significantly in national culture, namely Curaçao and the Netherlands. This study demonstrated how the rewards and administrative controls differ between these countries due to the national cultures. By using the paradoxical perspective to capture the national culture, this study gave a more comprehensive understanding of how behavior is influenced by the fundamental traits that influence how people think, feel and respond. The cultural paradox therefore ensured an in depth understanding of the cultures and how they affect the choice of reward and administrative controls. Differences of national cultures are therefore identified, together with the different effect they have on reward and administrative controls.
The findings show that both countries had a preference for intrinsic rewards; Curaçao preferred intrinsic rewards that are group based (e.g. group outings, celebrations) in order to keep the employees happy and loyal. The extrinsic rewards that were applied were also group based: the employees were compensated individually based on the performance of the group and the company. The Netherlands, on the other hand, preferred intrinsic rewards that are individual based (e.g. courses, involvement) in order to contribute to the development of the employees. Extrinsic rewards were also based on their individual performance. Findings also showed how size and ageing affects administrative controls: larger organizations with a young staff have stricter rules and policies and monitor extensively. Smaller organizations with older staff are looser.
1. INTRODUCTION
1.1. RESEARCH THEME
Any Firm that operates internationally is likely to encounter some challenges in managing cross-cultural relations. According to Otley & Berry (1980), contingency theory states that the optimal functioning of a Management Control System (MCS) depends on the particular elements of a firm’s context. With this in mind, many have realized that national culture plays a role in the design of MCS (Chow et. al., 1991). Ouchi (1979) argued that culture under certain circumstances can provide a synergistic element to the control system. Furthermore, cross‐cultural studies have suggested that companies from different cultural background have different preferences for management practices and control systems (van der Burg, 2010). This paper therefore considers the contingency factor “National culture”. Wursten et al. (2009) emphasized the importance of taking into account the different cultures in which a business operates, in order to improve efficiency. Tallaki & Bracci (2015) stated that if MCS does not align with the national culture, this can have consequences for the achievement of the organizational goals. These researchers, alongside other researchers (Schneider, 2006; Roth et al., 1991), have argued that by taking the national culture into account, the Management Control Systems can be designed in such a way that the organization can achieve its goals more effectively.
1.2. CONCEPTUALIZATION OF THE NATIONAL CULTURE AND THE
MANAGEMENT CONTROL SYSTEMS (MCS)
1.2.1. NATIONAL CULTURE
Hofstede (1980a) defines national culture as 'the collective programming of the mind which distinguishes the members of one human group from another'. Although there are many approaches to conceptualize national culture, the dimensional approach is the most used approach. Many have argued that Hofstede’s (1980a) model on culture gives the best picture on national cultural differences (Doupnik & Tsakumis, 2004). Although Hofstede (2002) has repeatedly warned against the expectations of his dimensions, many researchers have chosen to continue to use this measurement of national culture. Schuler and Rogovsky (1998), for example, argued that Hofstede (1980a, 1993) have presented the most comprehensive, yet straightforward, means to measure national culture. This model is furthermore the most validated by research, because it is perhaps the only model based on rigorous culture research rather than on somebody’s opinion (Wursten et al., 2009).
and distinct dimensions, using the culture-specific perspective; the cultural metaphor (Gannon, 2008).
Therefore, in order to increase the quality of this study, the national culture will be studied by combining the dimensional approach developed by Hofstede (1980a) with the cultural metaphor. This combination will represent a perspective that revolves around cultural paradoxes. According to Nielson & Gannon, (2005), this combination will describe the national culture fully, while lowering the probability of inaccurate stereotyping. Furthermore, the disadvantages of the dimensional approach will be combatted, while capturing the complexity of the national culture. This method of studying the national culture will later on be discussed in more details.
1.2.2. MANAGEMENT CONTROL SYSTEMS
Management Control Systems (MCS) are defined as ‘the systems and processes in place that attempt to align employee behavior to organizational objectives’ (Flamholtz et al., 1985; Malmi and Brown, 2008). Seen as most contemporary organizations use a number of MCS, the term package will be used as they design and coordinate all these number of MCS intentionally (Malmi & Brown, 2008). This study thus uses an adapted version of the MCS typology developed by Malmi and Brown (2008). This typology was chosen, because it provides a comprehensive framework which presents a broad range of MCS. Furthermore, the main focus of this typology is to highlight the fact that single MCS are part of a broader control context and should therefore be studied as a package of controls.
Malmi and Brown (2008) have recognized the challenges of researching the MCS package. As MCS operating as packages are large and complex phenomena, larger research teams and research programs are likely to be needed to study these issues. Seen as that is not the case at this moment, this study will specifically focus on two categories of control within the Malmi and Brown (2008) typology: Rewards and compensation and Administrative controls. These categories were chosen, as they are the most relevant categories for this study because of their possible relationship to national culture (Chow et al., 1999; Harrison & McKinnon, 1999; Jansen et al., 2009; Malmi & Brown, 2008).
1.3. RESEARCH GOAL AND SIGNIFICANCE
1.3.1. GAP IN MANAGEMENT CONTROL FIELD
Even though the idea of Management Control System operating as a package has existed for many years, there has been little empirical research on this topic. Therefore very little is known about how these different systems are actually combined across organizations (Malmi & Brown, 2008). Furthermore, researchers mostly study the effect of national culture on one type of management control (Malmi & Brown, 2008).
1.3.2. GAP IN RESEARCH ON NATIONAL CULTURE
of Curaçao and have written about its origin and history, no one has ever linked it to management control studies to see how it affects the MCS implemented in the companies of Curaçao.
1.3.3. THIS PAPER’S CONTRIBUTION
Therefore, this study will aim to contribute to the management control field and the cultural field by addressing these literature gaps, this contribution will take place by investigating the effect national culture has on two types of management Control Systems: reward and compensation and administrative controls. This study will thus demonstrate how multinational companies adapt these types of management controls across countries and to which extent this can be explained by differences in national culture. By studying two management control types instead of one, this paper will ensure a broader and clearer view of the management Control System package. The investigation of differences in management controls will take place by comparing four companies operating in the Netherlands and Curaçao. These countries were chosen, as there may be significant differences in culture. Since neither Hofstede nor other researchers have studied these dimensions in Curaçao, this study will also be contributing by measuring these dimensions. The Netherlands, on the other hand, has been a research object in many studies and has therefore enough information about its cultural dimensions. This paper will thus not only make the above mentioned contributions, but will also contribute in introducing Curaçao to organizational and management literature.
2. LITERATURE REVIEW
In order to explain the relationship between national culture and the two types of Management Control Systems, it is important to define the key concepts related to this theme, as well as the relationship between them. The literature review will therefore give an overview of what is already known about national culture and Management Control Systems.
2.1. MANAGEMENT CONTROL SYSTEM
One of the challenges in studying Management Control Systems (MCS) involves the difficulty of clearly defining its concept of MCS (Malmi & Brown, 2008). Some researchers such as Abernethy and Chua (1996), Flamholtz et al. (1985), Merchant and van der Stede (2007) and Ouchi (1979) based their definition of management control on the assumption that someone (e.g. senior manager or top management) is seeking to control the behavior of others (e.g. employees). Malmi and Brown (2008) suggested to use the concept of Management Control System, so that organizational controls can include not only controls directed at employees, but also all devices and systems managers use to ensure that the behavior and decisions of their employees are consistent with the organization’s objectives and strategies, but exclude pure decision- support systems. Therefore, MCS are defined as ‘the systems and processes in place that attempt to align employee behavior to organizational objectives’ (Flamholtz et al., 1985; Malmi and Brown 2008).
The typology developed by Malmi and Brown (2008) identifies five types of controls: Cultural controls, Planning controls, Cybernetic Controls, Rewards and Compensation and Administrative controls. Researchers have recognized the effect that national culture has on some of these control elements, namely “Reward and compensation systems” and “Administrative controls systems” (Chow et al., 1999; Harrison & McKinnon, 1999; Jansen et al., 2009; Malmi & Brown, 2008).
Brock et al. (2000) made a good argument about how different planning outcomes may emerge due to cultural differences, therefore indicating that planning processes can be affected by national culture. However, they also realized that culture is a factor that has little effect on planning, because there are many more factors that influence the planning process. Especially in terms of global strategy, the planning process requires internal consistency throughout the global firm. When studying the effect of national culture on the degree of budget participation (part of cybernetic control), Harrison (1992) and Lau et al. (1997) both found no significant differences between Australia (a low Power distance, low individualism country) and Singapore (a high Power distance, high individualism country). Lastly, when studying the effect of national culture on the approach to control, Lebas & Weigenstein (1986) discussed how countries scoring high or low on each dimension have a preferred approach to control. Nevertheless, it was still unclear the extent to which national culture impacts cultural control.
Therefore, because researchers have found little to no relationship between national culture and the controls “planning”, “cultural” and “cybernetic”, these three will not be discussed further in this research. Only the management controls: “reward and compensation” and “administrative controls”, will continue to be discussed in the remainder of this study.
2.1.1. REWARD AND COMPENSATION CONTROL SYSTEMS
organization (Malmi & Brown, 2008). Reward systems are either extrinsic or intrinsic. According to Ryan and Deci (2000), extrinsic motivation refers to doing something because it leads to a separable outcome. It is based on tangible rewards that are typically offered by a supervisor or manager who holds all the power in relation to when extrinsic rewards are offered and in what amount (DeMatteo and Sundstrom, 1998; Jansen et al., 2009). Intrinsic rewards, on the other hand, are psychological rewards that employees get from doing meaningful work and performing it well (Mottaz, 1985). Extrinsic rewards are usually financial in nature, e.g. rise in salary. DeMatteo and Sundstrom (1998) argued that material rewards can be more effective in motivating employees because they are important to most employees. Ryan and Deci (2000) have also argued that management accounting mainly focuses on extrinsic rewards. Although this has been the case for many years, extrinsic rewards are becoming less important (Mottaz, 1985; Csikszentmihalyi, 1978). Csikszentmihalyi (1978) argued that nowadays, daily motivation is strongly driven by intrinsic rewards.
2.1.2. ADMINISTRATIVE CONTROL SYSTEMS
Administrative control systems direct employee behavior through the organizing of individuals and groups, the monitoring of behavior and who is accountable for the behavior of employees and the process of specifying how tasks or behaviors are to be performed or not performed (Malmi & Brown, 2008). Malmi and Brown (2008) classify administrative control into three categories, namely:
1) Organization design and structure:
Organizational structures formally specify the different roles for organizational members, or tasks for groups, to ensure that the activities of the organization are carried out (Chenhall, 2003). Chenhall (2003) stated that the structural arrangements influence the efficiency of work, the motivation of individuals, information flows and control systems. Lawrence and Lorsch (1967) refer to structure as the way in which the organization is differentiated and integrated. Differentiation deals with the extent to which sub-units act as quasi entrepreneurs. Integration, on the other hand, is concerned with the extent to which the subunits act in ways that are consistent with organizational goals. The mechanisms to achieve differentiation involve decentralizing authority, while integration involves rules, operating procedures, committees and the like. Designers of MCS use the structure as a control device in order to encourage certain types of contact and relationships. They formulate the MCS to be consistent with the intent of organizational structure (Malmi & Brown, 2008; Chenhall, 2003).
2) Governance structure within firm:
The governance structure relates to the company’s board structure and composition, as well as its various management and project teams (Malmi & Brown, 2008). This can be used as a control device, as governance can be structured in a way which directs the behavior of organization members. Their activities are therefore coordinated both vertically and horizontally.
When studying the effect of ownership structure on the firm value, Lemmon & Lins (2003) found that there is a link between ownership structure and firm performance. They therefore provided additional guidance to policymakers engaged in the ongoing debate about the proper role and design of corporate governance features.
3) Procedures and policies:
consider the extent to which MCS are differentiated or integrated (Chenhall, 2003). This control device is probably the approach most visible in organizations. It couples procedures with systems to monitor outcomes, reports and performance evaluation (Lebas & Weigenstein, 1986).
2.2. THE NATIONAL CULTURE
Many studies have emphasized the influence of national culture on the management control practices of an organization. This emphasis is due to the increasing globalization and internationalization (Tung & Verbeke, 2010). The increasing globalization makes it harder to change the management practices, because globalization leads to standardization (Newman & Nollen, 1996). Be that as it may, many still believe that management practices do differ by national culture, because managerial attitudes, values, behaviors and efficacy all differ across cultures (Newman & Nollen, 1996).
Culture has been conceptualized in many ways in the past. Many have found that in order to understand and operationalize the concept of culture, one must identify the dimensions of the cultural differences (Smith et al., 1996). That is why many have used the cultural dimensions model developed by Gerard Hofstede (1980a) as a way to frame culture (Delemark & Listherby, 2013). Hofstede (1980a) defines national culture as 'the collective programming of the mind which distinguishes the members of one human group from another'.
Hofstede (1980a) conducted a study in order to measure the national cultures of 66 different countries. Based on the results of this study, Hofstede (1980a) identified four different dimensions of national culture.
Uncertainty avoidance (UAI)
The UAI dimension expresses ‘the degree to which the members of a society feel uncomfortable with uncertainty and ambiguity’ (Hofstede, 1980a). This dimension looks at the attitude towards uncertainty and to what extent people try to control it (Hofstede, 2005).
Individualism (IND)
‘Individualism’ is defined as ‘a preference for a loosely-knit social framework in which individuals are expected to take care of only themselves and their immediate families’. Collectivism, on the other hand, is defined as ‘a preference for a tightly-knit framework in society in which individuals can expect their relatives or members of a particular in-group to look after them in exchange for unquestioning loyalty’ (Hofstede, 1980a).
Power distance (PD)
The PD dimension expresses ‘the degree to which the less powerful members of a society accept and expect that power is distributed unequally’ (Hofstede, 1980a). This dimension looks at how inequalities are handled among people (Hofstede, 2005).
Masculinity (MAS)
‘Masculinity’ represents ‘a preference in society for achievement, heroism, assertiveness and material rewards for successes. Its opposite, femininity, stands for ‘a preference for cooperation, modesty, caring for the weak and quality of life’ (Hofstede, 1980a).
the data is out- dated and their assumption that domestic population is completely homogeneous. In addition, Osland & Bird (2000) found that Hofstede’s model relies too much on stereotyping and simplification, which can create a mental frame that will be hard to look beyond. Furthermore, they argued that culture cannot be understood without considering the context. The dimensional model therefore does help to some degree, but does not convey the complexity found within cultures (Osland & Bird, 2000).
Cross- cultural management accepts the distinction between two types of analysis as two broad overlapping perspectives for classifying cross-cultural studies (Gannon, 2008):
1. Etic, or cultural- general, analysis : The survey based- method (e.g. Hofstede’s model), 2. Emic, or culture-specific, analysis: Analyzes each national culture in depth to highlight the
unique and different dimensions.
To describe national cultures emically, a new approach to national cultures, the cultural metaphor, was constructed (Gannon, 2004). Nielsen & Gannon (2005) describes a cultural metaphor as; any activity, phenomenon, or institution with which most members of a given culture identify cognitively or emotionally and through which it is possible to describe each national culture’. Lakoff and Johnson (1980) stated that cultural metaphors help people to expand or modify the understanding that the etic dimensional approach provides. Therefore, by combining both perspectives, they will reinforce one another and will describe a national culture fully and will lower the probability of inaccurate stereotyping (Nielsen & Gannon, 2005). This combination leads to a third perspective that revolves around cross- cultural paradoxes.
Gannon (2008) defines a paradox as ‘a statement, or a set of related statements, containing interrelated elements that are opposed to one another or in tension with one another or inconsistent with one another or contradictory to one another (that is, either/or), thus seemingly rendering the paradox untrue when in fact it is true (both/and)’. Gannon (2008) argued that thinking paradoxically tends to minimize distortions and stereotyping because it does not focus on defending a statement, but rather focus on attempting to resolve the paradoxes confronted. Also, paradoxical reasoning minimizes generalization about certain cultures that may or may not be accurate or that may have been accurate in the past and are no longer accurate. Gannon (2008) and Nielsen & Gannon (2005) furthermore argued that important empirical survey- based studies (e.g. Hofstede’s model) disregards historical context and current developments. Paradoxical reasoning can minimize this. In reality, history explains why cultures are so complex (Osland & Bird, 2000; Altman, 1992; De Mooij 2010). That is why it is important to study national culture fully and the paradoxical perspective may be the best instrument.
2.3. NATIONAL CULTURE IN RELATION TO MCS
When looking at each cultural dimension individually, Chow et al. (1999) argued that IND and MAS have the largest effect on the design of management controls, while PD and UAI have less effect. This section will discuss each dimensions and their relationship to each control element.
2.3.1. UNCERTAINTY AVOIDANCE AND THE MCS
Chow et al. (1999) found that UAI did not have a lot of effect on Management Control Systems. Vriesendorp (2007) noticed that the results from studies about the effect of this dimension on MCS are often not supported in respect with most of the expectations. However, there is evidence of some kind of relationship between UAI and MCS (Lebas & Weigenstein, 1986; Newman, & Nollen, 1996).
Reward and compensation systems
Countries with low UAI are more likely to favor having a large proportion of variable compensation, whereas those with high UAI feel that bonus and other compensation features will put some of the recipient’s income in jeopardy and will therefore demotivate employees (Pennings, 1993). This statement is supported by the study of Jansen et al. (2009), when studying the automotive industry. They found that the Netherlands does not apply reward practices often. They prefer a stable income. The Netherlands is known to exhibit a slight preference for avoiding uncertainty (Hofstede, 1980a). The US, on the other hand, does apply this type of control system, because the employees are motivated by the rewards (Jansen et al., 2009). According to Hofstede (1980b), the US scores below average on the UAI dimension. They concluded that Americans tend to be more tolerant to new ideas and opinions from anyone (Hofstede, 1980b). Therefore, based on these studies, it can be argued that countries with high UAI are less likely to use rewards as a control tool.
Administrative control systems
Countries with low UAI are more informal and have a less solid structure. Countries exhibiting high UAI, on the other hand, maintain rigid codes of belief (Hofstede, 1980b). In these cultures, there is an emotional need for rules (even if the rules never seem to work). According to van der Burg (2010), UAI is the most important cultural dimension when it comes to policies and procedures. He argued that high UAI cultures have a preference for clear, unambiguous and formalized policies and procedures. Low UAI cultures, on the other hand, have a preference for a limited number of policies and procedures, being informal and do not have a problem with non‐adherence. Hofstede (1980a) also explained this when identifying the different national cultures in the world. According to Hofstede (1980a), the US scores below average on the uncertainty dimension. They concluded that Americans do not require a lot of rules and are less emotionally expressive than higher- scoring cultures. Furthermore, relying on clear procedures, well-known strategies and well-understood rules helps employees reduce uncertainty (Newman & Nollen, 1996). Crozier’s (1964) also found the same, when comparing French organizations (high UAI) to U.S. (Low UAI) ones, namely that rules, such as integrating and control mechanisms, are more efficacious in France than in the U.S. Therefore it can be argued that countries with low UAI are less likely to apply administrative controls.
2.3.2. POWER DISTANCE AND THE MCS PACKAGE
Reward and compensation systems
Countries that score high on PD are more likely to rely on compensation differences as a means of further accentuating a person’s position in a stratified society. One of the main reasons is due to the unequal distribution of income (Pennings, 1993). Kibbelaar (2005) also supported this and argued that this is due to the large difference between the income of men and women, and high- and low educated. Countries with equal income distribution are less likely to use compensation practices (Zanden, 1986). However, if compensation practices are implemented, teamwork is prized in countries with low PD (Lebas & Weigenstein, 1986). Therefore, based on these studies, it can be argued that countries with low PD are less likely to use compensation systems. When they do use it as a control system, they prefer teamwork rewards.
Administrative control systems
PD has to do with following up orders and doing what is told. The extent to which the employees adhere to and comply with the policies depends on the tone at the top coming from higher management. Within this dimension the integrity of business management is critical in relation to compliance with policies and procedures (van der Burg, 2010). Within countries with high PD, power is centralized in companies and government and has more hierarchical levels than comparable companies in lower PD countries. Furthermore, these countries tend to have less employee participation in decision- making (Newman & Nollen, 1996). According to Newman & Nollen (1996) employees are less likely to participate because they view participation with fear, distrust and disrespect because participation is not consistent with their national culture. Managers who encourage participation in these cultures are more likely to be seen as weak and incompetent. Morris & Pavett (1992) found that in Mexico (high PD), authoritarian management practices are more effective compared to the U.S. National cultures with low PD are likely to have flat, or decentralized, organizational structures (van der Burg, 2010). Participation and teamwork are prized and interference by the hierarchy is minimized (Lebas & Weigenstein, 1986). It can therefore be argued that countries with high PD are more likely to use administrative controls. For countries with low PD, power is decentralized. Control is disliked and attitude towards managers are informal and on first name basis. Communication is direct and participative (van der Burg, 2010).
Hofstede (1980a) found that the dimension “UAI” substitutes “PD”. Lebas & Weigenstein (1986) argued that the hierarchy depends on the simultaneous level of PD with UAI. For example, in a country with high UAI and low PD (e.g. Germany), the hierarchy is more likely to be rule bound. They would more likely be concerned with the uncertainty, then the power in such cases (Lebas & Weigenstein, 1986). In countries where the PD is larger than the UAI (e.g. France), the hierarchy is often able to twist the rules. Administrative control is therefore less strong due to the low UAI level (Lebas & Weigenstein, 1986).
2.3.3. INDIVIDUALISM AND THE MCS PACKAGE
As mentioned before, Chow et al. (1999) argued that IND has a big impact on the design of management controls. Newman & Nollen (1996), Lebas & Weigenstein (1986) and other researchers have found a relationship between IND and management controls.
Reward and compensation systems
equal compensation and prefer a large component of variable income (Vriesendorp, 2007). Collective cultures, on the other hand, prefer equal compensation and a more stable income (Vriesendrop, 2007; Bond et al., 1982). Therefore, it can be argued that collectivist cultures are less likely to use rewards as control tools.
However, if reward systems are allocated in collectivist cultures, these rewards are more in line with the equality principle (Leung & Iwawaki, 1988). Studies have found that collectivists actually performed higher when the evaluation and identification of their contribution was done on a group-basis. The reverse was found for individualistic participants (Eisenberg, 1999). Abdullah and Gallagher (1995) also argued that collectivistic cultures have a strong belief in interdependence among people and thus are more likely to emphasize group or team-based achievement than individualistic cultures. That is why most organizations in collective countries adopt group based reward systems. Individualistic countries, on the other hand adopt individual based reward systems (Leung & Iwawaki, 1988). Organizations in high individualistic countries will therefore be less likely to adopt group based compensation, whereas the opposite is expected from collective organizations. This also corresponds to what Jansen et al (2009) found about the Netherlands (high IND).
Administrative control systems
The elements of administrative controls are also influenced by IND. Griffin et al (2014) and Hanks (2015) found that individualistic society tends to have a loose organizational structure. A collectivist society, on the other hand, will likely have a rigid organizational structure and expect individuals to subsume their desire for recognition into the group's efforts. Li and Harrison (2008) also argued that firms based in societies that value higher levels of individual freedom tend to have smaller boards and consolidated leadership positions. Lastly, van der Burg (2010) argued that employees in high individualistic cultures do what is good for them without taking into account whether there is a policy in place or not. They might be compliant with a policy but only if it is in their own interest. Employees in high collectivistic cultures make decisions based upon what is best for their “in‐group”. As with individualistic cultures, they might thereby be compliant with the company policies and procedures, but that would not be their main focus when making a decision or carrying out a job. The opinion of the individual or the “in‐group” is critical when making a decision. Therefore, it can be argued that a company in a collective country will more likely have a rigid organizational structure, a larger board and consolidated leadership and will more likely make decisions based on what is good for the group. They will therefore most likely use administrative controls. The opposite is expected from companies within an individualistic country.
2.3.4. MASCULINITY AND THE MCS PACKAGE
Chow et al. (1999) argued that MAS, together with IND, have the largest effect on the design of management controls.
Reward and compensation systems
therefore not only prefer performance based reward, but also prefer these to be extrinsic. Managers in feminine countries will therefore be less likely to use extrinsic rewards as control tools. Masculine cultures, on the other hand, will more likely use reward incentives that are individually based.
Administrative control systems
The three aspects of administrative control are also influenced by MAS. After testing the effect of national culture on governance structure on 399 multinational manufacturing firms, Li and Harrison (2008) argued that firms based in masculine societies tend to have consolidated leadership positions, meaning that their structure are more solid compared to feministic societies. Ozbebek and Kilicarslan Toplu (2011) concluded the same, when using Turkey as a case. Van der Burg (2010) argued that MAS does not have a clear relationship with policies and procedures. He stated that it can be expected that feminine cultures have a lower need to comply with the policies and procedures since they were involved in developing them, and on the other hand masculine cultures have the higher need for policies and procedures to maximize productivity. Lebas & Weigenstein (1986) confirmed this by arguing that a bureaucratically oriented control system would fit a masculine culture better because they externalize control clearly. Based on what is found on this relationship, one could argue that masculine cultures are more likely to use administrative control systems as a way to create and maintain a solid company.
2.4. RESEARCH QUESTIONS
This study is guided by the need to find out whether the reward system and the administrative control system is largely the same in the Netherlands and Curaçao. If this is not the case, it is important to explore how and why they differ.
Based on the identified literature gap, the goals of this research and the literature review, the following research question is formulated:
“How does national culture affect the management controls “reward and compensation” and “administrative controls”?”
In order to answer this research question, the following sub questions have to be answered:
1) How is the concept of “national culture” defined and operationalized in the Netherlands and Curaçao? (discussed in chapter 2 and 4)
2) How is the concept of “reward and compensation” and “administrative controls” defined? (discussed in chapter 2)
3) Which rewards and administrative controls are applied within the firms in the Netherlands and Curaçao, and why? (discussed in chapter 4)
3. METHODOLOGY
In this study, Curaçao and the Netherlands were compared in order to capture possible differences in the control designs. Comparative case studies are used as a means to collect data on the rewards and administrative controls within the multinational organizations studied. In the previous section, the literature review was discussed and the relationship between the important concepts was identified. This section will now discuss the chosen research methods.
3.1. DATA COLLECTION
This study has used different methods to collect data on the effect of national culture on rewards and administrative controls. Primary, as well as secondary data is chosen to collect data. Eisenhardt (1989) states how these multiple data collection methods ensure a stronger substantiation of constructs. Baxter and Jack (2008) argued that this enhances the reliability of a case study.
The methodology is divided into two parts:
1) Data collection on the national cultures: survey-based data and secondary data, 2) Data collection on reward and administrative controls: interviews.
3.1.1. DATA COLLECTION ON THE NATIONAL CULTURE
In order to measure national culture, this study will combine Hofstede’s cultural dimensions, a cultural- general perspective, with the cultural metaphor, a cultural-specific perspective. This choice has been made as it covers many limitations presented due to the dimensional approach. It furthermore captures the complexity and underlying reasoning behind the scores of the cultural dimensions and will therefore give a broader and clearer picture of the national cultures.
Therefore, the data on the national culture was collected in two ways: 1) Cultural – general: survey – based data
2) Cultural – specific: secondary data SURVEY– BASED DATA ON NATIONAL CULTURE
In order to meet this criterion, Dutch people were also asked to fill in the survey. Although only 50 respondents were expected, 72 people have filled in the survey correctly. The results of this survey were expected to be the same as what Hofstede found, because mean scores are used to calculate the scores. The Dutch results are therefore used purely as an instrument to complete the calculations of the scores for the national culture of Curaçao. To measure the Dutch national culture, the scores measured by Hofstede (1980a) are used. The findings were later on compared to see whether there is a difference in culture between the two countries.
SECUNDARY DATA ON NATIONAL CULTURE
Secondary data on national culture was used to gather culture specific data on the national cultures in question. Secondary data thus expands the understanding of the results that the surveys have provided. By using secondary data, this study not only minimize stereotyping, but will also identify and/ or minimize generalization about the Dutch and Curaçaoean culture that may or may not be accurate or that may have been accurate in the past and are no longer accurate (Gannon, 2008). Unlike empirical survey-based studies, including this type of data collection will not disregard historical context and current developments.
EBSCOhost and Google Scholar are used as databases to find high quality academic literature on the national culture of the Netherlands and Curaçao. To further strengthen the reliability and the construct validity of this research, books are also used. Lastly, n
on-academic sources are also
used to collect additional data.
3.1.2. DATA COLLECTION ON REWARDS AND ADMINISTRATIVE CONTROLS
A multiple case study approach has been chosen to collect data on the MCS, because it will provide a depth of data with contextualized and detailed description that other instruments (such as questionnaires or surveys) do not readily provide (Yin, 2009). This research method is chosen above a single- case design, because single case studies have an inability to provide a generalizing conclusion (Yin, 2009).Data on rewards and administrative control systems was collected from multinational organizations operating in both Curaçao and the Netherlands. These companies have to be operating in both Curaçao and the Netherlands in order to get a better picture of how (and if) the design of these controls change once the same company is operating in a different culture.
These organizations all operate in the financial sector. The financial industry provides for relatively clean and powerful tests for cross- national effects. According to Jansen et al. (2009), the one- industry setting makes it possible to control for many non-descriptive variables of cross-national differences but that could affect the design of MCS. Therefore, if cross-national differences are present, this study is more likely to reveal them.
The interviews took place in the workplace of the respondents, at different moments in time. An executive (senior manager or director) was interviewed at each Curaçaoan and Dutch firm. Two Dutch firms had two interviewees during the interviews. They argued that the two could complement each other whenever this was needed. Therefore, a total of 10 respondents were interviewed. The right respondent was chosen by contacting each firm and asking for contact information of the executives that were able to answer the interview questions. Their ability to answer the questions was identified based on two criteria: 1) whether this person is a business unit manager, a general manager or has a higher position, 2) whether this person has the knowledge about management controls used in the firm. These respondents were asked about two of the adapted elements of Malmi and Brown’s (2008) typology. The interviews also included questions about possible factors that may influence the MCS package. Furthermore, the elements of the compensation package, as well as the elements of the organizational structure, design and corporate governance are covered. With the interviewees’ consent, the interview was taped. One Dutch company did not want to be taped. Therefore, notes were taken in order to capture as much information as possible. Due to the nature of this study, the interview started with open-ended questions and later on moved towards semi-structured interviews. The interviews lasted approximately 75 minutes.
3.2. DATA ANALYSIS
The primary and secondary data mentioned above have been collected to identify the national culture of Curaçao and the Netherlands.
The interviews, on the other hand, identified the design of the rewards and administrative control (see appendix D and E).
The interviews were transcribed as follows:
1) Firstly, transcripts were made from the tapes and notes. Each interview was transcribed by writing what was said.
2) The transcripts were later on browsed as a whole, where notes were made about the first impressions.
3) Then the transcripts were read again, one by one very carefully.
4) After reading the transcripts again, relevant words, phrases, sentences or sections were labeled per relevant section of the study: Coding. The decision of whether something is relevant was based on the fact that it was repeated in several places, it was something unexpected, the interviewee explicitly stated that it was important, and similar findings were found in previous literature.
5) After coding each transcript, the results are compared with the other coded transcripts. 6) New categories were created by bringing several codes together. The categories are based
on the research questions and the objective of this study, in order to be unbiased.
4. RESULTS
After collecting and analyzing the data, interesting results were found. These results are discussed in this section. See appendix A and B for the results of Curaçaoean and Dutch respondents respectively. Appendix C provides the scores calculated from the surveys and appendix D and E provides the transcripts of the interviews.
4.1. THE NATIONAL CULTURE IN CURAÇAO
After the Dutch colonialism, many people from other countries have migrated to Curaçao because the welfare at their own countries was worse than Curaçao. That is why Curaçao is a culturally and ethnically diverse society, which was historically shaped by the mechanisms of this colonialism and slavery (Allen, 2010). The culture of Curaçao has west-European, west-African and Caribbean influence (Veelzijdig Curaçao, 2016). These influences have shaped the afro-Caribbean traditions, as well as the language, the music, the food and religion (Curaçao, 2016).
4.1.1. POWER DISTANCE IN CURAÇAO
Allen (2010) argued that someone’s place in Curaçao’s society depended primarily on their occupation, skin color and ethnic heritage, which in turn have influenced the way people experience and define the local or national identity. Before the emancipation in 1863, Dutch people and Sephardic Jews formed the elite of the island, while African slaves formed the lowest class (Heijes, 2010). After the emancipation of 1863, those that formed the lower class did not see any improvement in their economic and social position. The racial factor and lack of employment possibilities was the main cause for this lack of improvement (Heijes, 2010; Allen et al., 2003; Römer, 1977). Eventually, hierarchies, divisions and contradictions of the post-colonial society have led to a labor protest and social uprising on the 30th of May in 1989 (Allen, 2010). The distance is
also noticed within organizations. When exploring the power dynamics between Curaçao and the Netherlands, Heijes (2010) found that lower level employees are somewhat afraid of consequences set by superiors. From the past and recent studies it is clear that Curaçao is segmented and characterized as a country where status does matter (Heijes, 2010; Allen et al., 2003; Römer, 1977). That is why Curaçao scores high on the PD dimension.
4.1.2. COLLECTIVISM IN CURAÇAO
After the events of 1969, Curaçaoeans have renewed their interest in the African roots of the black population and have gained an appreciation for their identity as a “child of Curaçao” and their language (Heijes, 2010; Allen, 2010). According to Römer (2008), emphasis tends to be placed on patriotism and unity and on cohesion and solidarity among all inhabitants, both those who have long historical roots in the society and the relative newcomers. Being a “child of Curaçao” is therefore an issue of membership (Allen, 2010).
In his book called “Curaçaose man” (Curaçaoean Men), Marcha and Verweel (2004) stated that Curaçaoeans are raised under their parents wings. Although they grow up, many stay dependent of their parents. Even if they get married they continue to depend on their parents (or other family members) by, for example, having dinner at their houses instead of cooking themselves. This behavior is due to the culture and is precisely the definition of a “collective” society.
This high collectivism corresponds with what is found in the results of the surveys. The findings of the surveys indicate that, compared to the Netherlands, Curaçao scores low on the dimension individualism. When asked about the importance of having sufficient time for personal or home life, 47,9% of the Curaçaoean respondents found this to be of utmost importance, compared to 25% of the Dutch respondents. Having a job respected by family and friends was seen by the majority of the Curaçaoean respondents as either very important (39,9%) or of moderate importance (27%). The majority of the Dutch respondents, on the other hand found it to be either of moderate importance (45,8%) or of little importance (23,6%). This indicates that Curaçaoans values family/ friends’ opinion and value quality time at home more than the Dutch. Heijes and Hollander (1996) support these findings by arguing that family thighs and personal networks are very important to Curaçaoans.
4.1.3. MASCULINITY IN CURAÇAO
In Curaçao, traditional gender roles have had a large impact on the societies (Temmink, 2005). Men mostly have a “macho” behavior, whereas woman have a more passive and submissive behavior (Temmink, 2005; Busari et al., 2008). Temmink (2005) argued that the most important reasoning behind this is due to life problems. Men are usually absent in the household, leaving women to fend for themselves and care for the children on their own (Central Bureau of Statistics [CBS], 2004; Marcha & Verweel, 2004). This impacts their social participation. From the financial aspect, many women depend on the men, because men are on average higher educated and have a higher position within organizations (Temmink, 2005; Maybach, 1994). Furthermore, there are more unemployed women compared to men in Curaçao (Central Bureau of Statistics [CBS], 2004). Therefore, there is an inequality when it comes to gender roles (Temmink, 2005; Bussari et al., 2008). That is why many women are attracted to men with a “macho” behavior and prefer their men to be dominant (Temmink, 2005; Maybach, 1994). They feel a sense of security whenever this is the case and argue that without such men, they are not able to live comfortably (Abraham-Van der Mark, 1993).
Because of this gender inequality and the consequences because of it, Curaçao is considered to be a
Masculine country. This statement is supported by what is found in the surveys. The findings
When asked about the importance of promotion chances, 51,5% of the Curaçaoean respondents found it to be very important, compared to 33,3% of the Dutch respondents. This indicates that Curaçaoeans value achievements and good performance, which supports what Bussari et al. (2008) found on the culture of Curaçao. They also argued that Curaçao places an emphasis the culture on performance and difference in sexes.
4.1.4. UNCERTAINTY AVOIDANCE IN CURAÇAO
The economic state of Curaçao has been through a roller-coaster. Many organizations started to feel the effect of the economic crisis (Allen, 2010). After the United States and the Netherlands signed tax treaties in the 1980s, Curaçao lost many clients from offshore businesses. Market protection later on resulted in the establishment of local industries for production of soap and beer, after the efforts of stimulating tourism have been partly successful (Everyculture, 2016). Many organizations therefore started to focus more on avoiding uncertainty in order to succeed in the Curaçaoean market (Everyculture, 2016). The importance of being successful is because of the so called “shame culture”: if someone makes an incorrect decision, the whole group will be ashamed and people will be ashamed of the group (Heijes, 2004). When uncertainty is high, a lot of pressure is put on the decisions that have to be made in order to react to the issue in question. The shameful feeling is caused because Curaçaoeans do not want to be perceived as “less” because of a mistake they made (Heijes, 2004). They will therefore take their time to make important decisions and avoid anything that may lead to the group (or individual) losing their faces (Heijes, 2004). A high preference for
uncertainty avoidance is therefore present in order to protect the personal image (Heijes, 2004).
The surveys have also found that Curaçao scores higher for this dimension than the Netherlands. When asked if they agree with the following statement: A company's or organization's rules should not be broken - not even when the employee thinks breaking the rule would be in the organization's best interest, the majority of the Curaçaoean respondents either agreed with the statement (39,9%) or agreed strongly with the statement (22.1%). The majority of the Dutch respondents, however, were undecided with the statement (40,3%). These results show that Curaçaoeans are more certain on their feelings; they value rules, which indicate the preference for avoiding flexibility and changes caused by uncertainty.
4.2. THE NATIONAL CULTURE IN THE NETHERLANDS
4.2.1. POWER DISTANCE IN THE NETHERLANDS
The welfare system of the Netherlands is known to avoid inequality. After the war, social rights provided a normative justification for building social programs (Cox, 2001; Bussemaker, 1992). The postwar welfare state found that public assistance is a right to which all citizens are entitled (Data monitor Europe, 2006; Cox, 2001). This of course, does not come for free. Those in need of public assistance are required to do something and are even encouraged to change their lifestyles in order to successfully keep a job (Cox, 2001; Bussemaker, 1992). That is why the Dutch state is placing more responsibility on individuals to secure their own welfare. They furthermore only target the needy for support (Cox, 2001). This supports the main principle of the social policy of the Netherlands: all members of the society must be able to play an equally active role in the society (government, 2016). The Dutch government argues that by stimulating participation in the society, social exclusion and income inequality can be avoided (government, 2016). Nevertheless, there are certain groups that may need support in finding their place in the labor market, such as older people, the disabled, and families on low income, ethic and other minorities. Until those groups are able to participate, the Dutch government supports them in every way possible (government, 2016; Cox, 2001).
The Netherlands therefore values independence and equal right, indicating low power distance (Hofstede, 1980a). Hofstede (1980b) found that the Netherlands scores low on this dimension (score of 38), meaning the Dutch have the following characteristics; being independent, hierarchy for convenience only, equal rights, superiors accessible, coaching leader, management facilitates and empowers. Power is decentralized and managers count on the experience of their team members. Employees expect to be consulted. Control is disliked and attitude towards managers are informal and on first name basis. Communication is direct and participative.
Although the results of the survey conducted in this study was not meant for measuring the Dutch culture, the findings did support the above mentioned. As mentioned before, only 8,3% found having a boss (direct superior) you can respect, to be of utmost importance. This indicates that they value equality.
4.2.2. INDIVIDUALISM IN THE NETHERLANDS
Because of the welfare system and how the state stimulates independence, the Dutch community has developed a strong belief in individual freedom and expects the government to play a role in issues such as morality and religion (Bussemaker, 1992). Children are encouraged to find their own “self” and to explore their abilities and talents (Boone et al., 2007). They are encouraged to get a job at an early age in order to get the sense of independence and responsibility (Boone et al., 2007). The Dutch individualism is also reflected in politics; 9 different political parties form the parliament. Not one party has an absolute majority, meaning that decision-making is based on consultation and consensus (Boone et al., 2007).
4.2.3. FEMINISM IN THE NETHERLANDS
As explained, feminine countries are supportive to its people, strive for consensus and value equality, solidarity and quality in their working lives (Hofstede, 1980b). This is exactly how the culture of the Netherlands is: It has been deliberately chosen to not let any party have an absolute majority in the parliament, to encourage consensus. The social security system, access to health care and education indicate a high value of the well-being of the society (Bussemaker, 1992). Lastly, the welfare system has been developed to encourage equality (Cox, 2001). Because the Dutch are very consensus driven, they take much longer to make important decisions. They are more likely to change their minds after making a decision, because they make decision using the so called “Growing Insights” (Vries, 1981).
According to Hofstede (1980b), the Netherlands scores 14 on this dimension masculinity and is therefore a Feminine society. In Feminine countries it is important to keep the life/work balance and you make sure that all are included. An effective manager is supportive to his/her people, and decision making is achieved through involvement (Hofstede, 1980b).
The results from the survey also indicate that feminine features within the Dutch community. When asked about the importance of promotion chances, the majority found it to be either very important or of moderate importance (resp. 33,3% and 41,7%), compared to Curaçao where the majority found this to be of utmost importance (31,3%) and very important (51,5%). This therefore indicates that the Netherlands values achievements less compared to Curaçao.
4.2.4. UNCERTAINTY AVOIDANCE IN THE NETHERLANDS
Internationally, the Netherlands is known for the adoption of social policies (Data monitor Europe, 2006). It became the first country to legalize many issues that were seen as a “taboo” (e.g. euthanasia, opening cannabis cafes). Although some have accepted these changes, others argue that the moral standards are blurring (VN, 2016). Many Dutch people are worried about this blurring of moral standards, the economy and the retrenchment of social security. The impact of global issues on the Netherlands and the arrival of foreigners are also making the Dutch community live in fear (VN, 2016; Data monitor Europe, 2006). This is a reason why they are individualistic: the more uncertain the community, the more people become individualistic and focus on their own survival (VN, 2016). Over the past years, the sense of “distrust” maintained within the Dutch culture, which supports what Hofstede found in 1980, namely that the Netherlands has a slight preference for
avoiding uncertainty.
Hofstede (1980b) found that the Netherlands scores 53 on this dimension, which indicate that they sometimes feel threatened by ambiguous or unknown situations and created beliefs and institutions that try to avoid these.
4.3. MANAGEMENT CONTROL SYSTEMS IN CURAÇAO
Every organization designs the Management Control Systems in their own way. They try to maintain the global guidelines of the company as whole, whilst not violating the country’s regulations. Although each organization has its own style, management controls in Curaçaoean organizations do have certain features in common.
4.3.1. REWARD AND COMPENSATION SYSTEMS IN CURAÇAO
The reward systems implemented in Curaçao know many elements. Amongst the organizations interviewed in Curaçao, the following construction of the reward system was common:
EXTRINSIC REWARDS
Variable extrinsic rewards are usually applied in the following forms:
- 13th month salary: an extra salary that each employee receives at the end of the year. - Salary increase: each year, those who perform better than what is expected of them
will receive an increase in salary. This reward is therefore performance based. A scale system is applied: yearly salary increase is possible until the maximum in that “scale” is achieved. Only if the employee is promoted, he or she moves to the next scale and can therefore be eligible for more increase in salary. The percentage of the increase lies between 2-5%.
- Promotion: If the performance of the employee is great and there is room for promotion within the organization, this will be granted to the employee. However, depending on the new role, this person has to comply with the criteria’s (e.g. skills, diploma) in order to be able to fulfill that role.
- Bonus: the organizations also grant rewards based on the company’s performance. Only if the company has a profit at the end of the year, employees will receive an extra bonus. Therefore, by performing well, the company will also perform well which in turn will be compensated.
One organization (O-cur) developed a special reward system, the so called “non-sickness bonus”, where employees receive NAF 250 each quarter if they do not ask for a sick leave. If they go all year without asking for a sick leave, they can receive an additional NAF 1000 at the end of the year. This reward system has been implemented because they have noticed that when people are sick, they stay home for one week, which affects the achievement of the targets.
After implementing this reward system, they immediately saw the effectiveness; people were trying to come to work every day.
INTRINSIC REWARDS
Intrinsic rewards are considered very important in Curaçao. The organizations argued that intrinsic rewards are effective incentives, because everyone is unique and will have different experiences within the organization. That is why it is important to take advantage of this by making the employees feel special and appreciated. This will create loyal and happy employees.
- Group activities: whenever the employees perform well (as a group), they can, for example, have lunch together as a group. Other activities, such as the annual Christmas party and the St. Klaas party are considered as traditions and are perceived as great ways to bring the employees together.
- Birthdays: whenever it is someone’s birthday, the colleagues will do something special. Some gather money from the other colleagues in order to buy a gift or a money card. Others decorate the person’s table with balloons and sing happy birthday when this person arrives at work. Some colleagues have gone as far as inviting famous local singers to come and sing when it was someone’s birthday. Management allows and encourages this because this special feeling will maintain the employees satisfied at work.
- Special projects: there are cases where some employees are considered to be “superstars”. However, it is not always possible to promote or reward these superstars. In such cases, the director will personally contact these superstars to tell them how proud they are of their performances. The director will furthermore ask for their expertise and invite them to do special projects. This will motivate these employees because they feel appreciated and noticed. They will therefore become sharper and their knowledge will expand, as these projects are usually outside their department.
- Organizing courses: Courses are occasionally organized to develop the knowledge and skills of the employees. This type of “intrinsic” motivation is, however, not often used.
4.3.2. ADMINISTRATIVE CONTROL SYSTEMS IN CURAÇAO
All organizations have different organizational structures and position titles. Depending on the size of the organizations, the structures can be more complex than others. Many Curaçaoean organizations are small in size. The biggest organization studied had 200 employees. This determined the design of the administrative control systems of these organizations.
1) Organization design and structure:
The organization design and structure is usually universal; multinationals maintain the same hierarchy in all countries. Curaçaoean organizations often have an integrated organization structure, meaning that their actions are consistent with the organizational goals. That is why; the organizations have rules and operating procedures that will help maintain order and encourage certain contacts and relationships. The hierarchy is set in a certain manner in order to communicate easily.
2) Governance structure within firm:
The composition of the governance structure is also usually the same in all countries. Each employee is familiar with their first contact point, which is usually their supervisor.
3) Procedures and policies:
