Strategic Information Technology Compensation: A Cross-Cultural Perspective

Strategic Information Technology Compensation: A Cross-Cultural Perspective

Chingning Wang (University of Sydney, Sydney, Australia)
Copyright: © 2019 |Pages: 30
DOI: 10.4018/JGIM.2019100102

Abstract

The 2008 financial crisis has made many high-tech firms vulnerable. Some non-American firms (e.g. in Taiwan) have even granted their IT professionals a “no-pay break” to reduce firms' financial uncertainty. The crisis leads to a need to re-examine managerial compensation thinking from a cross-cultural perspective. Drawing on cross-cultural case studies in Taiwan, a collectivist culture, and in the United States, an individualist culture, this research explores managerial thinking on how to align strategic IT compensation with personnel's immigrant status and IT sourcing strategies in different industrial and national/cultural contexts. It also explores how firms utilize nonmonetary compensation in different cultures. Compensation for IT professionals in Taiwan are reportedly to be more uniform because of the feature of collectivist culture. Compensation for IT professionals in the United States are reportedly more fluid thanks to a frontier culture and individualism. Therefore, negotiable competitive pay is emphasized. Both Taiwan and the US have suffered from wage stagnation for decades. In Taiwan, this stagnation may be related to a depreciation of higher degrees since the number of university graduates has been increased fivefold in two decades and IT related degrees have been amidst popular majors which lead to oversupply in IT workforce. In the US, this stagnation may be related to economic recession and reduced IT investment/full-time positions, dropping IT enrollment, IT skill/education-job mismatch, and increased reliance on IT contractors in an emerging IT gig economy. From a cultural perspective, “still under employment” in a Confucian society which emphasizes face-saving that has value in its own right and it explains why some firms in Taiwan granted IT professionals a “no-pay break” instead of immediate layoff to cope with the 2008 crisis. Meanwhile, to cope with the challenge of IT skill/education-job mismatch in the United States, using a domestic training program as nonmonetary compensation may be a viable alternative to IT firms whose IT compensation strategies emphasize lucrative pay or poach IT talents rather than nurturing IT talents. Theoretically, economic/organization theories derived from western experiences or ideologies in 1900s, where industrialization, private/hierarchical organizations, and higher education were booming, may not fit non-western countries' experiences or today's world where the trends of outsourcing, IT contracting, gig economy and depreciation of education are emerging.
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Introduction

The 2008 financial tsunami has resulted in increased layoffs and pay freezes in many businesses. The economic recession especially makes high-tech industries vulnerable. It also brings attention to several important issues of IT (and non-IT)1 compensation studies:

First, the need of cross-cultural perspectives: The 2008 financial crisis has invited criticism of the US perspective as lacking endogenous insights and unable to explain cross-cultural phenomena in compensation (Mintzberg, 2009; Sun, Zhao, & Yang, 2010). Economic theories commonly used to explain compensation has been criticized as assuming cultural homogeneity or been challenged as unable to explain endogenous compensation practices due to abstraction from contexts (Sun et al., 2010; Tjosvold & Leung, 2003).

Second, non-monetary compensation: The role of nonmonetary compensation is especially important during economic recession or in resource-scarce firms (Morrell, 2011). For example, some high-tech firms in Taiwan granted their IT professionals “no-pay breaks” to avoid immediate layoffs during the 2008 financial crisis. “No-pay break” is considered as a form of nonmonetary compensation to offset uncertainty resulted from shoestring budget, although in Taiwan it is often taunted as an unethical “innovative” management thinking worth of Nobel Prize (Wang & Kaarst-Brown, 2014a). Alternatively, other forms of nonmonetary compensation (e.g., flextime) can be translated into power and autonomy granted to IT professionals. Regrettably, while non-monetary compensation has been obliquely studied at best in empirical compensation research, its use in attaining, retaining IT professionals is still less explored. An exception is Wang and Kaarst-Brown’s (2014b) which explores the use of non-monetary rewards (i.e., IT contracting and flexible working hours) in a small U.S. based Chinese media firm to attract IT talents with relatively limited financial resources. They found internal status of IT division in media industry (relating to profit-making capability compared to other core professionals, i.e. IT professionals vs. news professionals and advertising professionals) has impact on their capability of resource competition, which in turn affects the level of IT compensation2.

Third, non-high-tech industries: in spite of the recession in high-tech industries due to 2008 financial crisis, IT demand and IT jobs still increase in other non-high-tech industries including financial services, transportation and health services (Morgan, 2009, 2010, 2011; Thibodeau, 2012). After the 2008 downturn, a more recent report further shows that IT jobs in architecture and management outnumber jobseekers (Rugaber, 2015). For the other example, IT-related positions in healthcare industry are expected to grow 15% from 2014 to 2024 (Information Technology Newsweekly, 2016). Because IT professionals work in both high-tech and non-high-tech industries, there should be more research on IT compensation in non-high-tech industries or even more cross-industrial studies on IT compensation.

Forth, increase in IT outsourcing and related IT personnel immigration: To cut compensation costs, many firms opt to IT outsourcing to locations (or countries) that has relatively inexpensive IT labor costs. This practice is also related to a firm’s IT personnel immigration strategy. Although outsourcing and personnel immigration strategies are issues closely tied with (contractual) compensation decisions in practice, very few compensation studies, if not none, address the relationships between firms’ IT outsourcing strategy, IT personnel immigration, and compensation strategy. Perhaps this is out of the difficulty in acquiring data in this aspect. This difficulty is further related to the fifth point below.

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