International Human Resource Management

Managing people in a multinational context

Chapter Objectives
We address:
Multinational performance management at the global and local level:
o considering aspects such as non-comparable data,
o the volatility of the global environment,
o the effect of distance, and
o level of subsidiary maturity
Performance management as part of a MNEs control system
Factors associated with expatriate performance, including compensation
package, task and role, headquarters support, host environment factors
and cultural adjustment
Performance management of expatriates and non-expatriates, and for
those on non-standard tasks and assignments such commuter and virtual
issues related to the performance appraisal of international employees

Performance Management (PM)

Performance Management (PM) is a process that enables

the multinational to evaluate & continuously improve
individual, subsidiary unit & corporate performance
against clearly defined , pre set goals & targets.
Below model (Figure 11-1) allow to investigate the
complex interaction between local & global contexts for
performance & the tasks of the actors, performance
criteria, purpose for & timing of PM as these elements
relate to individual & firm outcome.
It provides convenient starting point for our exploration
of the links between multinationals internationalization
strategies, its goals for individual units in of individual
employees whether PCN, TCN or HCN.

Figure
11-1

Perspectives, issues, actions and consequences in

MNE performance management

Multinational Performance Management (MPM)

MNE has specific expectations for each of its foreign

subsidiaries, cooperative ventures & other forms of
operation modes in term of mkt. performance &
contribution to total profits & competitiveness.

When evaluating subsidiary performance against these

expectations however its is important to recognize
various constraints that may effect goal attainment as
below:-

MNE subsidiary performance constraints

1.
2.
3.
4.
5.
6.

Whole versus part

Non-comparable data
Volatility of the global environment
Separation by time and distance
Variable levels of maturity
Control and performance management

MNE subsidiary performance constraints

1. Whole versus part
Multinational is a single entity that faces a global
environment which means that it simultaneously
confronts differing national environment.
Integration & control imperatives often place the
multinational in the position where it decides that the
good of the whole is more important than one
subsidiary's short-term profitability.
E.g. Multinational establishes a JV in a particular mkt. in
order to have a presence there, even though it has low
expectations in the short-term & may provide minimum
resources to the venture.
Therefore the consequences of such global decision for
subsidiary mgt. must be taken into consideration for PA.
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MNE subsidiary performance constraints

2. Non- comparable data
Frequently, the data obtained from subsidiaries may be
neither interpretable nor reliable.

E.g. notions of what constitutes adequate quality

control checks can vary widely from one country to
another, import tariffs can distort pricing schedule or a
dock strike in one country can unexpectedly delay
supply of necessary components to a manufacturing
plants in another country.

These factors can make an objective of appraisal of

subsidiary performance problematic & may complicate
the appraisal of individual subsidiary managers.

MNE subsidiary performance constraints

3. Volatility of the global environment (local condition)
The turbulence of the global environment requires long
term goals flexible in order to respond to potential mkt.
contingencies.
E.g. SAR, Bird Flu & adoption of international accounting
standards (IAS), each of these events has had profound
implications for the global & local strategies
multinationals.
Because subsidiaries operate under such volatility &
fluctuation they must tailor long term goals to the specific
situation in a given mkt.
Problem arise when subsidiary managers perceive that
goals and deadline set by a distance HQ strategy team are
unrealistic & inflexible due to a failure to take into
account local conditions that change as a result of a
volatile environment.
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MNE subsidiary performance constraints

4. Separation by time & distance
Judgments concerning the congruence between
multinational & local subsidiaries activities are further
complicated by the physical distance involved, time-zone
differences, frequency of contact between the corporate
head office staff & subsidiary mgt. & the cost of the
reporting system.
5. Variable levels of maturity
Without the supporting infrastructure of the parent,
mkt. development in foreign subsidiaries is generally
slower & more difficult to achieve that at home, where
established brands can support new products & new
business areas can be cross-subsidized by other
division.
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MNE subsidiary performance constraints

As a result, more time may be needed to achieve result
than is customary in a domestic mkt. & this fact ought
to be recognized in the PM process.
6. Control & performance management.
PM is a part of a multinationals control system.
Through formal control mechanism & communication
through the feedback & appraisal aspects, PM also
contributes to shaping corporate culture both formally
& informally, thereby acting as an informal control
mechanism as well as part of the bureaucratic control
system.
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Figure
11-2

MNE control and performance

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Performance Management of International Employees

Traditional expatriate assignments when expatriates usually
their family members relocate to virtual assignment., where
no physical relocation by employees or their families is
required.
When attempting to manage the performance of staff
working across the multinational it is essential to consider all
these variables in relation to the nature of the international
assignment.

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Expatriate Performance Management

To determine expatriate performance it is important to
consider the impact of the following variables & their
interrelationship:-

1. The compensation package.

2. The task & role the assignment task variables &
role of the expatriate .
3. Headquarters support .
4.The environment in which performance occurs- the
subsidiary or foreign facility.
5.Cultural
adjustment
of
individual
and
accompanying family members.
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Figure
11-3

Variables affecting expatriate performance

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Expatriate Performance Management

1. The compensation package
Perceived financial benefits, along with the career
progression potential associated with an overseas
assignment are often important motives for
accepting the posting.

2. The task & role.

Expatriates are assigned to foreign operations to
fulfill specific tasks. There are 4 tasks:
1. CEO or subsidiary manager- oversees & directs the
entire foreign operation.
2. Structure reproducer carries the assignment of
building or reproducing in a foreign subsidiary a
structure similar to that which he knows from
another part of the company.

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Expatriate Performance Management

3. Troubleshooter the individual who is sent to a
foreign subsidiary to analyze & solve a particular
operation problem.
4. Operatives- perform functional job such as lower
level or supervisory level.
3. HQ support
Process of adjustment to the foreign location typically
produce to verifying degree, a range of emotional &
physiological reactions to unfamiliar situation
encountered over the period of the stay in the host
country.
The level of the HQ support provided to the individual
& the family is an important performance variable.
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Expatriate Performance Management

4. Host environment
The environment has an impact on any job but it
becomes of primary important with regards to
expatriate mgt.
The international context with difference societal,
legal, economic, technical & physical demands can be
major determinant of expatriate performance.
5. Cultural adjustment
The process of cultural adjustment may be critical
determinant of expatriate job performance.
Cause of expatriate failure cover the purpose of
adjustment.
Expatriate & their family will have some difficulty
adjustment to a new environment this will effect the
managers work performance.

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A cross -cultural context for PM

Regional & national institutional, regulatory &

historical contexts can impact the character of the
criteria selected, task definitions, the timing & even the
purpose of PM.
E.g. PM (Danish & Swedish) described as decentralized,
based on broad range of hard & soft criteria (the
balanced scorecard) & strategically linked to identify &
support changes in operational level activities.
In France, legal & cultural factors combine to create
PM system characterized by administrators with a high
level of expertise even though Frances labor laws allow
some flexibility in assessing performance within a
merit-based and non-discriminatory framework.
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PM of non-expatriates

Non-expatriates(i.e. the international business traveler

or frequent flyer) were describes as employees whose
work involved international travel but who are not
considered international assignees because they do not
relocate to another country.

PM challenges for non-expatriates are:-

1. How to determine performance criteria & goals

related to the effective conduct of non-standard
assignments, especially virtual assignees.
2. An understanding of the criteria for performance is
generally advocated as a highly participative process
between supervisor & employee.
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PM of non-expatriates
3. Isolating the international dimensions of job
performance might not be as straightforward as in
traditional expatriate assignments.
4. Outstanding performance, under-performance or
failure in no expatriates & non-standard assignments will
challenge the PA process.
5. Who conducts PA, how & based on what performance
data may be intensified when it involves increasing
numbers of others outside head office with whom the
assignee is working.
6. A detailed analysis of other pre-departure & ongoing
training that might be required for non-expatriate
assignment is yet to be conducted.
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PM of non-expatriates
7. The challenge of IHRM are to reward when dealing
with international assignments & the way compensation
for each type of international assignment fits with global
compensation strategy.
8. The impact of non-standard assignments on host
country national co-workers should also considered the
impact of these staff on international business travelers
& commuters who drop in and drop out.

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PM of international employees.

Individual PM involves a set of decision on the

dimensions and level of performance criteria, task &
role definition & timing of the formal & informal
aspects of the appraisal.

It comprises a formal process of goal setting, PA &

feedback.

Data from this process is often used to determine pay

& promotion, T&D requirement.

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Performance Criteria.

The global firms ability to measure an employees

individual contribution to performance & to assess the
aggregate contribution of human capital to strategic
progress is a complex & timely.

Goals tend to be translated into performance appraisal

criteria so specifically & measurability issues are
important aspects & need to reorganized the hard, soft
& contextual goals are often used as the basis for
performance criteria.

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Goals of PA
1. Hard Goals

Objective and quantifiable and can be directly measured.

Directly measured (i.e. return-on-investment, market
share, financial results, profits)

2. Soft goals
Are subjective, qualitative .
Tend to be relationship or trait-based ( i.e. leadership
style, interpersonal skills)
complicated by culture
3. Contextual goals
Attempt to take into consideration factors that result
from the situation in which performance occurs.
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Who conducts the PA

Employees are appraised by their immediate superiors &

can pose problem for subsidiary CEO (or manager).
They work in countries geographically distance, yet are
evaluated by superiors back at HQ who are not in a
position to see on a day-to-day basis how the expatriates
performs in a particular situation.
Subsidiary managers tend to be assessed according to
subsidiary performance with a reliance on hard criteria
similar to that applied to heads of domestic units &
divisions.
Appraisal of other employees is likely to be conducted by
the subsidiarys CEO or the immediate host-country
supervisor, depending upon the nature & level of position
concerned.

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Who conducts the PA

Regards to expatriate PA, host-country manager may

have clearer picture of expatriate performance & can
take into consideration contextual criteria.

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Standardized or customized PA forms.

Domestic companies commonly designed PA forms for

each job category, particularly those using a traditional
PA approach rather than PM.

The standardization assist in the collection of accurate

performance data on which personnel decision can be
made & allows for cross- employee comparisons.

Employees who relocate within the multinational & nonexpatriate assignees who also cross cultural boundaries
in their performance context do not always feel HQ
appraisal forms allow for consideration of the critical
success factors of their performance like cross- cultural
competence.
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Frequency of appraisal.

Formal PA is commonly on a yearly basis and extend to

international performance system.
E.g. US companies using annual appraisal system were
more likely to used standard appraisal forms & hard
criteria.
An important aspect of an effective PM system is the
provision of timely feedback of the appraisal process.
One of the problem with annual appraisal is the
employees do not receive the consistent frequent
feedback considered critical in order to maintain or
improve their performance.
For virtual assignees, is complicated when geographical
dispersion dictates reliance on email communication.

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Appraisal of HCN employees.

PM in different nations can be interpreted as a signal of

distrust or even an insult.

E.g. In Japan it is important to avoid direct confrontation

to save face and this affect the way PA is conducted.

One way to overcome the dilemma adoption is to use

host-country nationals to assist in diversifying a suitable
system for appraising subsidiary employees & to advise
on the conduct of the appraisal.

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