Question

Case 11.2 “Japan’s Canon Uses Incentive Compensation (Japan)”.

As multinational firms open more and more operations in more and more countries, they must make basic decisions about what structure they want for their compensation system in each country. Trying to use a centralized system everywhere can cause problems in countries that may utilize different compensation systems. And, yet, trying to localize the compensation system may also run up against cultural assumptions about what might or might not work, as the following example shows. At the end of 1995, Canon ranked forty-third in market value on the Tokyo stock exchange. By the end of 2001 it had shot up to eighth. Canon's performance is driven by a competitive company culture that sets it apart in Japan. Canon has long based compensation on performance instead of seniority, creating significant wage differentials, greater than at other Japanese companies. For example, in March 2002, 21 of its best assembly workers were each awarded a bonus and the title "miester" This clearly goes against the traditional Japanese culture of group performance and recognition and seniority-based pay. Canon's R&D also runs on competitive principles. Cash-flow management reduces development time and cost. Unprofitable products are cut mercilessly. Patents protect newly developed technology. Researchers can receive unlimited rewards for big patents, and such incentives have spurred epoch-making products like the laser beam printer and bubble jet printer. CEO says, "Canon works on competitive principles. It does not treat people equally—but it does treat them fairly." Canon has adopted decidedly non-Japanese incentive schemes to support its successful global competitiveness. Clearly, MNEs must assess carefully what will work best where.

1. from the above case provide a summary of each case

2. From an organizational strategic perspective, does it make sense to implement a centralized and standardized compensation system globally?

Answer 1

1.

Basis the details mentioned in above case, please find below the summary of the case:

• This case talk about as company expand its operation a decisions about compensation structure should be made in each country
• Both centralized system and localize the compensation system have these issues
• Due to their policies Canon moved forty-third to eighth in market value (by end of 1995 to 2001)
• Canon has policy which is based on performance instead of seniority. For example workers awarded a bonus and the title "mister
• Canon's R&D also runs on competitive principles which means that they don’t treat people equally but they does treat them fairly
• Canon non-Japanese incentive schemes help them to support its successful global competitiveness

2.

No, I don’t feel that implementing a centralized and standardized compensation system globally will help the company. As each and every country have their own specific issues and how they get motivated. Following one stick approach for everyone will not help to company to achieve the desired results which they wish to, as each and every person is different and their situation on how they perceive compensation is different. In my view, company should do a careful analysis of local issues, needs and demands of local staff in particular country and accordingly set their compensation structure to get better results.