cross-cultural equity issues: us citigroup expatriates in china by team #3: jason lim calvin mak yao...
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Cross-Cultural Equity Issues:US Citigroup Expatriates in
ChinaBy Team #3:Jason LimCalvin MakYao Ting NiHsien-Fang (Fiona) WuTaojune (Simon) Cheng
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Presentation Overview
Fiona – Planning and Strategy
Calvin – Approaches to Compensation
Yao – Pay Gaps and Compensation
Jason – Employee Morale and Motivation
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The Reasons For Choosing China
One of the fastest growing developing economies in the world
2004, 9.5% 2006-2010, 8%
One of the most lucrative markets for their foreign investments
Market of 1.3 billion people
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China’s Economic Background
Prior to 1977, the government owned
everything In 1978, Economic Reforms and Open
Door Policy In 2001, World Trade Organization Today, 20 times larger
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Labor Market and Expatriates Cheap
Skilled
Need parent country nationals As managersAs trainers
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Compensation Plan
The going rate approach
The balance sheet approach
Calvin compensation plan
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Expansion of Citigroup
There's an explosion of opportunity
Half earnings should derive from international markets by 2009
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Strategies to Enter China
Alliances & partnershipsJoint-name credit card with Shanghai Pudong
Development Bank (SPDB) License
Internet banking license by Central Bank of China
Mergers & acquisitionsAcquiring stakes in China's domestic banks
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Compensation Approaches
Going rate – equal pay, but hard transition from high pay country to lower pay country.
Higher of host or home – equality, but very expensive for company.
Balance sheet approach – preserves living standards, but can have great disparities.
Reference points
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Balance Sheet Factors
Hardship premium Base pay Cost of Living Overseas premium Housing
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Hardship Factors Housing Climate and physical conditions Pollution Disease and sanitation Medical facilities Infrastructure Physical remoteness Political violence and repression Political and social environment Crime Communications Cultural and recreation facilities Availability of goods and services
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Average Rental Costs
Beijing, $1.82/square foot Shanghai, $3.02/square foot Guangzhou, $2.25/square foot Shenzhen, $1.14/square foot
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Cost of Living
Most expensive cities in the world:• Beijing (11)• Shanghai (16)• Shenzhen (30)• Guangzhou (32)
2004 CPI peaked at 5.2%, ended year at 2.4%
Income tax rate 45%
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Pay Gap & Compensation
Comparison of US & China pay gap
Pay Compensation
Current job market in Banking/Financial Sector in China.
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US Pay Gap CEO-Worker pay gap ratio: 281:1 (2002) (BusinessWeek)
Increasing executive pay 2004 Avg. total CEO pay w/ compensation $10.7mil (+5%)
(Pearl Meyer & Partners)
Pay varies regionally (HR Benefits Manager) Northeast $94,700, West Coast $99,400, North Central $83,400, Southeast
$82,900, South Central $87,700 (HR Magazine, Nov. 2004)
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China Pay Gap Executive-Employee pay gap ratio: 3-15:1
(2004) (The Development Research Center of the State Council)
Salary Range (Domestic vs. Foreign) Avg. worker salary 7,443 Rmb vs. 15,037 Rmb Avg. CEO salary 212,000 Rmb (The Beijing Labor and Social Security Bureau)
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China Pay Gap Pay varies regionally
Shanghai 44,957 Rmb, Beijing 42,118 Rmb, Guangzhou 37,096 Rmb (South China Morning Post 2005)
Gender Pay Discrepancy Avg. annual income of working women in cities 7,409.7 Rmb (30%
less than men) Avg. annual income paid to female executives and professionals
(57.9% & 59.6% less than male counterparts) (The All-China Women’s Federation and the National Bureau of Statistics)
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CEO Pay Components
0%
10%
20%
30%
40%
50%
60%
70%
80%
Basic Compensation 42% 76% 36% 57%
Variable Pay 63% 18% 51% 19%
Benefits 6% 3% 11% 16%
Perquisites 5% 3% 2% 8%
US China Germany Japan
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Current China Job Market
Hot Banking/Financial MarketHigh turnover rates 10-20%Executive incentives: stock options (38%), home
leave & company car (52%) (CFO Asia)
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What Is Motivation?
• Basic psychological process which explains why employees behave the way they do in the workplace.
• Willingness to exert high levels of effort toward organization goals, conditioned by the effort’s ability to satisfy some individual needs
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Unmotivated, Unhappy Chinese Employees
Highest among State-owned companies
Smaller amount for Joint Venture, Foreign Invested Enterprises
Higher rate of leaving for high/educated level employees
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What Motivates Employees?
Cash Incentive If stay in the company for entire contract length of time Reimbursing employees tuition
Treating Employees Guanxi Feelings of belonging Saving faces Loyalty
Special Training and Programs Ex: Citigroup’s Financial Education Training/Programs
Financial service Training Banking Programs
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Other Motivational Factors
Career Development Promotion
Performance evaluation Include capabilities, skills, achievements and actions Employees with higher rating should promote to higher post Denied promotion to lower rating employees Avoided seniority-based promotion
Shelter Saving plans Gift certificates Rewards
Travel
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Morale Factors Affecting Worker Wages Stock options
Degree of understanding about the stock option Useful in preserving employees who have worked
with a company for a few years and have seen the value of their stocks appreciate
Create sense of ownership Work more harder to obtain higher future growth
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Morale Factors (Cont.)
Recognition systemsEx: Achievement in R&D prize, Improvement
proposal prize, Excellent in customer care prize
Public Recognition Allow them to compare against their colleagues For better-educated workers, this recognition can
satisfy more than financial benefits
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Conclusion- Putting it Together
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Thank You For Your Attention!
Any Questions?