International Performance Management


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In this presentation, we will understand the challenges of international performance management, analyze the areas in terms of skill and other traits, understanding the conflicting role expectation and analyze the variety of appraisers in international performance appraisal.
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International Performance Management

  1. 1. Learning Objectives Understand the challenges of international performance management. Analyze the areas in terms of skills and other traits and behaviours to be appraised. Understand the conflicting role expectation , difference between role and job expectations and expectations from different organizations. Analyze the variety of appraisers in international performance appraisal and determine who should appraise the performance? 1Chapter Seven Performance Management
  2. 2. Learning Objectives Discuss the system of performance appraisal. Understand the problems associated with the international performance appraisal; and Discuss the measures to make the international performance management effective. 2Chapter Seven Performance Management
  3. 3. Structure1) Introduction2) Challenges of international performance management .3) Areas to be appraised.4) Organizational role expectations.5) Who should appraise the performance?6) System of performance appraisal.7) Problems of performance appraisal.8) How to make appraisal effective?9) Conclusion10) Summary. 3Chapter Seven Performance Management
  4. 4. 7.1 IntroductionManaging employee performance based on the organizational needs, strategic requirements and customer preferences is crucial aspect of international human resource management. MNCs incur high cost on human resources due to employment of different kinds of foreigners. Therefore, they expect the foreigners to perform distinctly and create , contribute and add significant value to the organizational activities.Foreign employees are also aware of their cost to MNC and are concerned to contribute phenomenally to the organization goals and strategies.MNCs encounter critical challenges in the process of international performance management. 4Chapter Seven Performance Management
  5. 5. 7.2 Challenges of international performance management Total Company versus Parts of it. Standard format versus Customized format. Uniformity of Data of Performance. Environmental variations Validity of performance criteria. Time and distance variations. Varied levels of maturity. Rater’s competence. Rater’s bias. Host environment. Cultural adjustments. 5Chapter Seven Performance Management
  6. 6. 7.2 Challenges of international performance management Total Company versus Parts of it.MNC consists of headquarters, subsidiaries and its various alliance companies. HR manager needs to use different type of appraisal technique for each part, as decision affects various organs of the MNC differently. Even the implementation process of the decision results in contrasting outcomes.The best practice from the point of view of a subsidiary may not be the best for HQ or other subsidiaries. Hence decisions that benefit most of the parts and on long rather than short term basis are to be preferred and considered appropriate.MNCs face similar dichotomy situations in their pricing policies. 6Chapter Seven Performance Management
  7. 7. 7.2 Challenges of international performance management Total Company versus Parts of it.Now the core issue is how to measure the performance of employees working in HQ and subsidiaries , when the HQ and subsidiaries follow different strategies and implement varied actions. These aspects of dichotomy in decision making and implementation also result in dichotomy in measuring performance of employees.Another difficulty of performance appraisal is the time span of the impact of the decision or action. Employee makes decision in a particular year, but the impact may be in other years. Should the performance affected in the year of decision or in the year of result of the decision be appraised? 7Chapter Seven Performance Management
  8. 8. 7.2 Challenges of international performance management Standard format versus Customized format.Normally parameters like profits, return on investment, cash flows, productivity, sales per employee, punctuality, rate of customer complaints etc are applied to employees in a group for measuring their performance. Some MNCs additionally apply qualitative parameters like innovation, leadership , motivation, judgement , adaptability etc for performance appraisal.Should the HQ and subsidiaries adapt the same and standard criteria / performance factors or different criteria. Different criteria are appropriate for their individual environments but vitiate uniformity of performance rating. For a PCN working in a subsidiary should we apply HQ or host country criteria is another question that has no clear answer. 8Chapter Seven Performance Management
  9. 9. 7.2 Challenges of international performance management Standard format versus Customized format.Organizational performance in terms of sales, profits, repatriation of profits is influenced by the regulations of the host country’s Government like issuing license or canceling the issued license, exchange rate controls, immigration and migration controls, tariffs, subsidies and employment of nationals.Therefore, increase [or decrease] in profits can’t be always attributed to the performance of the employee alone.In fact MNCs cannot follow a standard format of performance rating as the influences of environmental factors vary from country to country and hence from subsidiary to subsidiary. 9Chapter Seven Performance Management
  10. 10. 7.2 Challenges of international performance management Uniformity of Data of Performance.MNCs and their subsidiaries not only work in different environment but also carry-out different kinds of business including manufacturing, trading, dealing in services, construction projects and the like. Therefore providing uniform data for appraisal is not feasible. The problem can be partially resolved by converting the data into [parent company] monetary terms.But this is not a solution owing to variations in living costs , purchasing power in various countries. Differences in accounting standards among countries pose another challenge in measuring employee performance on a uniform scale. 10Chapter Seven Performance Management
  11. 11. 7.2 Challenges of international performance management Uniformity of Data of Performance.Accounting standards differ due to cultural factors that decide the degree of conservatism with which accounts are prepared. Germans are very conservative while Americans optimistic. Accounting system is also oriented towards the information requirements of capital providers – individual investors or bankers. Political ties also determine systems that MNCs follow for accounting.Historic cost versus inflation accounting provide profits numbers that are not comparable. Advanced countries procure financial resources from various sources in a developed markets through a variety of financial instruments and , therefore, follow a sophisticated system of accounting. Thus level of economic development also impacts data uniformity. 11Chapter Seven Performance Management
  12. 12. 7.2 Challenges of international performance management Environmental variationsIn view of variations in environmental influences among subsidiaries as well as different growth rates of environments, employees’ performance across the subsidiaries cannot be measured using uniform appraisal criteria and scale.Environmental factors became more vibrant after recent phase of globalization which initiated trends towards erosion of national cultures and formation of global culture, establishment of WTO, EU and its currency “Euro” , increased mobility of human resource, IT revolution, large scale out sourcing, ‘glocal’ strategy etc. 12Chapter Seven Performance Management
  13. 13. 7.2 Challenges of international performance management Validity of performance criteria.MNCs use different performance criteria based on end contribution to the company and some based on employee traits. Former include profits, ROI, cash flows, productivity etc. and latter include dynamism, decisiveness, initiative, judgement etc. Each of these criteria may not be valid for local settings of a subsidiary.Cultural and social environment, economic system and institutional set up , political ideologies and structure that influence the business as well as the performance of the managers vary from the parent country to the host country. Therefore , the performance criteria valid in the parent company may not be valid in the host country. 13Chapter Seven Performance Management
  14. 14. 7.2 Challenges of international performance management Time and distance variations.Performance of business activities in MNCs is complicated by distance and different time zones between parent company and subsidiaries.Measurement of performance of employees working in MNCs is challenging compared to those working in domestic company as the employees working in the domestic companies can meet the colleagues face to face, while the employees of the MNCs have a limited choice to do so.The information technology devices like video conferencing, emails, fax and telephone, though, have reduced the complexities. 14Chapter Seven Performance Management
  15. 15. 7.2 Challenges of international performance management► Varied levels of maturity.People of different countries are generally strong in different skills, have different levels of maturity and are strong in different disciplines. Indians are strong in Mathematics and logic, while Americans in systematic analysis.MNCs should not , therefore, adopt the same performance appraisal format and scale to measure the performance of employees of home country nationals and different host country nationals as well as third country nationals. 15Chapter Seven Performance Management
  16. 16. 7.2 Challenges of international performance management► Rater’s competence.The person who appraises the performance of employees of the MNCs, i.e. those who work either in HQ or subsidiaries is called the rater. Usually the raters executives either in the HQ or in a subsidiary. It is quite likely that these raters have no experience of working in other countries and they do not know the social, business and work challenges that the foreign employees face.It is doubtful if that such raters possess required competence to appraise the performance of expatriates. 16Chapter Seven Performance Management
  17. 17. 7.2 Challenges of international performance management► Rater’s bias.The problems with subjective measure have opportunity for bias. The rater bias include Halo effect – the raters have a tendency to excessively depend upon rating of one trait or one behavioural consideration rather than carry a balanced appraisal of all traits or behavioural aspects. The Error of Central Tendency – Some raters follow the safe policy of rating all employees at the mid point of the rating scale and avoid rating at the extreme in spite of the employee’s actual performance. Central Tendency – Some raters follow the safe policy of rating all employees at the mid point of the rating scale and avoid rating at the extreme in spite of the employee’s actual performance. 17Chapter Seven Performance Management
  18. 18. 7.2 Challenges of international performance management► Rater’s bias. The Leniency and Strictness – The leniency bias crops up when some raters consistently assign higher rating liberally thereby defeating the whole purpose of ratings. Equally damaging one is assigning consistently low rates. Personal Prejudice – I f the rater dislikes any employee or any group , he/she may rate them at the lower end , which may distort the rating purpose and affect the career of the employee. The Recency Effect – The raters remember only the recent actions and rate accordingly ignoring employee’s performance over the period under appraisal. 18Chapter Seven Performance Management
  19. 19. 7.2 Challenges of international performance management► Host environment.Internal environment like structure of the host company organization, ownership pattern influence expatriates’ performance. 100% ownership by parent company, against a joint venture, allows PCN to work more successfully in the host company.External environment like social and cultural issues, political and economic issues affect the employee performance. In addition, availability of school and other educational facilities , medical and hospital facilities, recreational facilities, security situation & transportation facilities have their besring on foreign employee performance. 19Chapter Seven Performance Management
  20. 20. 7.2 Challenges of international performance management► Cultural adjustments.Adjustment of the employee to the organizational culture and country’s culture and adjustment of employee’s family members to the country’s culture significantly influence the employee’s performance. This fact should be considered in evaluation of the performance. The analysis of challenges of performance appraisal of expatriates reveals that it is rather critical to measure expatriate performance. Even it would be difficult to measure performance of host country / parent country national working in the HQ , as they also encounter cultural issues while dealing with foreigners. 20Chapter Seven Performance Management
  21. 21. 7.3 Areas to be AppraisedAreas to be appraised depend upon the type of employee and the purpose / assignment for which an expatriate is sent to the host country. Chief Executive Officer Structure Innovator Producer Skills MNC Trouble Transferor Employees Shooter Strategist Operative Consultant 21Chapter Seven Performance Management
  22. 22. 7.3 Areas to be AppraisedThe Chief Executive Officer is the one who manages the entire operations of a subsidiary.The Structure Producer the one who reproduces the structure. He /she is familiar with that in the parent company or in another subsidiary . The structures include marketing, establishing plant, introduction of a new product , training programme or service.The Trouble Shooter is the one who diagnoses, analyses and solves a specific operational problem.The Operative is the one who performs functional job in the existing operational structure. 22Chapter Seven Performance Management
  23. 23. 7.3 Areas to be AppraisedThe Strategist is the one who studies the environment under which the subsidiary operates , identifies the opportunities for new products / services / markets, identifies the possible threats, strengths, weaknesses and formulates appropriate strategy.The Consultant is the one who is assigned with the task of providing advice on operational or business issue.The Innovator has a task of innovating a new product / service based on the resources or the markets of the host country or creating opportunities for new markets.The Skills Transferor is the one who is assigned with the task of developing the host country national employees of the subsidiary . He /she stays in the host country for a short duration and trains the locals to take up & perform the jobs on their own. 23Chapter Seven Performance Management
  24. 24. 7.4 Organizational Role ExpectationsParent companies predetermine the roles and expectations of these roles from the parent country nationals before their departure for the host country. The MNC has to provide cross culture training along with information about of the role expectations to expatriates.The parent company, the parent company executive and the host company should have the common role expectations.When the third country national is selected for assignment, the clear determination of role expectations becomes more critical as culture of organizations where the TCN worked needs to be considered. 24Chapter Seven Performance Management
  25. 25. 7.4 Organizational Role Expectations Parent company’s Subsidiary’s Role perception Expectations from Expectations from of the PCN the PCN the PCN Organizational Organizational Culture of the Role content of Norms of the Parent company the PCN Subsidiary Culture of the Culture of the Host country Parent company’s country 25Chapter Seven Performance Management
  26. 26. 7.4 Organizational Role Expectations Parent company’s Subsidiary’s Role perception Expectations from Expectations from of the TCN the TCN the TCN Organizational Organizational Culture of the Role content of Norms of the Parent company the TCN Subsidiary Culture of Organizations Culture of the Culture of the Where TCN worked Host country Parent company’s previously country 26Chapter Seven Performance Management
  27. 27. 7.4 Organizational Role ExpectationsThe critical aspect of the role is the task performance. However, the task performance does not take place on its own. The host country environment and parent company expectations influence the task performance.The performance appraisal of the foreign employees should consider the role rather than just task . Role includes task plus various other factors like leadership skill, inter-personal skills, team building skills, understanding and adapting towards organizational culture and host country culture at the work place.We shall have a look at role aspects of performance of foreign employees and try defining each aspect. 27Chapter Seven Performance Management
  28. 28. Role Aspects of Performance of Foreign Employees Meeting Conflicting Leadership needs Interpersonal Relationships skills Teambuilding Job tasks Parent company & Cultural issues of Subsidiary Various countries Understanding & expectations adaptingTowards organizational integrity culture Skills of Managing Motivational Environmental skills influences 28 Chapter Seven Performance Management
  29. 29. 7.4 Organizational Role ExpectationsTask: Job tasks are core of employee’s assignment. They include duties and responsibilities of the job incumbent.Leadership: Leadership aspects of the role include leading the subordinates, inspiring the junior employees for higher level targets, innovations and to realize their potentialities.Meeting Conflicting Needs: the needs of the parent company and subsidiary vary basically. Parent company needs profits to be transferred to the parent company while the subsidiary emphasizes on the reinvestment of the profits for its sustainability, growth and development. Expatriate’s performance can be measured based on the degree at which the conflicting needs / expectations are balanced. 29Chapter Seven Performance Management
  30. 30. 7.4 Organizational Role ExpectationsInterpersonal Relationship Skills : maintenance of inter personal relations among the employees and the stakeholders connected to the overall job performance determines the performance of the expatriate.Cultural Issues: The best fit culture to the efficient performance of the task depends upon adapting the culture of the host country rather than the culture with which the expatriate is familiar with.Integrity: should be the binding factor of task performance from the long run point of view of the stakeholders concerned. 30Chapter Seven Performance Management
  31. 31. 7.4 Organizational Role ExpectationsManaging Environmental Influences : Both internal & external environmental factors influence the job performance of foreign employees. The skills of foreign employee in converting the environmental factors in favour of the job enhance the employee performance.Motivational Skills: Cultures of certain countries make the employees inhibitive of their skills, talents, and potentialities. The motivational and inspirational skills of foreign employees help them in motivating the national employees that enhances the job performance.Organizational Culture: Organizational culture sometimes determines the mode of carrying the activities. The foreign employee can use the skills only if he/she adapts to this culture. 31Chapter Seven Performance Management
  32. 32. 7.4 Organizational Role ExpectationsTeam Building : Team building skills of foreign employee invariably enhance their job performance . These skills include work along with others, carrying with others, understanding the culture and the way others do the work, adjust one’s own traits and the way of doing work towards others, skills of collaborating with others’ ideas and talents.These role factors should be taken into account in deciding the areas to be appraised of a foreign employee. In addition, to the organizational role , the foreign employees’ family roles like spouse and parent influences on job performance should also be considered. Employee skills and initiative in helping the spouse and children in adjustment process forms a part of of appraisal of the foreign employee.. 32Chapter Seven Performance Management
  33. 33. 7.4 Organizational Role ExpectationsAreas to be appraised for HCN :Compared to domestic company employee measuring performance of host country national is relatively difficult as host country nationals work with employees of various cultures of parent and third countries . HCN have to understand the cultures and predict the behaviour of parent country and third country nationals and accordingly adjust their interpersonal behaviour.Therefore, HCN has to be appraised on skills of understanding varied cultures and behaviours, cultural adaptability and behaviour modification based on others’ cultures. 33Chapter Seven Performance Management
  34. 34. 7.4 Organizational Role Expectations Parent company’s Expectations from Role perception The role conception of of the HCN the HCN Host Country National Subsidiary’s Role content of Expectations from the HCN the TCN Organizational Organizational Culture of Culture of the The subsidiary Parent country 34Chapter Seven Performance Management
  35. 35. 7.5 Who Should Appraise Performance?In case of domestic company an employee is appraised by the immediate supervisor. In case of a foreign employee it is difficult to determine immediate superior as managers from the host country as well as the parent company supervise / oversee work of a foreign employee working in a subsidiary.Therefore, most of the MNCs use multiple appraisers. Performance is appraised by superiors from both the parent and host country. In case of PCN appraiser from parent country is a must to oversee PCN career progression, if not the performance directly. 35Chapter Seven Performance Management
  36. 36. 7.5 Who Should Appraise Performance?Some MNCs adopt 360 degree appraisal process under which the foreign employee’s performance is appraised by various stakeholders like customers, bankers, government, suppliers, market intermediaries, trade unions, subordinates, colleagues, human resource professionals, superior in the parent company, superior in the subsidiary and certifying officer of the client company appraise the performance of the employee.Even though several persons are party to the appraisal, home and host country managers play the key role in appraising. 36Chapter Seven Performance Management
  37. 37. 7.6 System of Performance Appraisal.Performance appraisal of international employees is a 12-step process.i. Establish performance standards based on job description, job specification, cultural requirements, and adaptability to foreign environment, talents in enabling family members to adjust to foreign environment.ii. Communicate standards to employees as well as appraisers.iii. Decide upon the performance appraisal format.iv. Measuring actual performance by the evaluators through observation, interviews, records and reports. 37Chapter Seven Performance Management
  38. 38. 7.6 System of Performance Appraisal.Performance appraisal of international employees is a 12-step process.v. Frequency of appraisal. Normally once a Adjust actual performance due to environmental influence.vii. Compare the adjusted performance with that of others and the previous performance.viii. Compare the actual performance with standards and find out deviations , if any.ix. Feedback to appraisee. Mutual discussion between the appraiser and appraisee, makes appraisal close to perfectness in ratings. 38Chapter Seven Performance Management
  39. 39. 7.6 System of Performance Appraisal.Performance appraisal of international employees is a 12-step process.x. Suggest changes to job analysis and standards to bring about improvements in job description, job specification and standards of appraisal.xi. Consider the appraisal results for contract renewal and promotion.xii. Plan for employee training and development. Consider issues like demonstration of initiatives, realization of potentiality, presentation of commitment behaviours, exhibiting interpersonal relations, proof of intelligence and show casing distinctive capabilities and talents. 39Chapter Seven Performance Management
  40. 40. 7.7 Problems in Performance Appraisal.Performance appraisal of international employees is critical and a challenge due to Content Bias:- Most MNCs view international performance management on the lines of domestic performance management and focus on task factors at the cost of culture and environment factors when the latter play a dominant role in the perfromance of international employees. Ineffective raters:- MNCs use multiple raters for appraisal of foreign employees, but the ratings of the rater from the parent company only are considered for decisions relating to promotion, revision of compensation package or renewal of contract. The rater from parent company, sadly, is unaware of the culture of the host country or that of the foreign national. 40Chapter Seven Performance Management
  41. 41. 7.7 Problems in Performance Appraisal. The Recency Effect:- The raters generally remember the recent actions of the employee and do not weigh employees performance for the period under review. Distant Work Place:- Foreign employees working on the projects can’t be directly observed even by the host country supervisor. Similarly , the performance of other employees workers working in the field in different places cannot be directly observed by the raters. Added to this the parent company superior who never observes the employee at work rates the performance. 41Chapter Seven Performance Management
  42. 42. 7.7 Problems in Performance Appraisal. Appraisal Forms:- MNCs use standard appraisal form for the domestic and foreign nationals. Such forms do not suit the requirements of PCN, HCN or TCN employees. Failure of Superiors in conducting appraisal Interviews:- Due to distance factors many raters do not conduct any interview with the employee to be appraised. Use of Performance Data:- For major decisions like promotion, revision to pay package or renewal of contract personal opinions or network is used by MNCs instead of the data emanating fro performance appraisals. 42Chapter Seven Performance Management
  43. 43. 7.8 How to Make Performance Appraisal Effective?The problems discussed could be overcome by adaptingReliability and Validity:- the appraisal system should provide reliable and valid data and information. Techniques of appraisal should be designed to assure this.Appraisal should be relevant:- The technique should be designed with the purpose of the appraisal in mind.Customization of appraisal forms:- Different factors influence performance of PCN, HCN and TCN employees. Similarly requirements of the parent company and various subsidiaries vary significantly. The customized forms should cover these and standard forms be discontinued. 43Chapter Seven Performance Management
  44. 44. 7.8 How to Make Performance Appraisal Effective?The problems discussed could be overcome by adaptingConsensus of Appraiser & appraisee:- The appraiser or the designer of the appraisal form is not aware of all issues affecting job performance, but appraisee knows them . Hence the inputs from the appraisee be used in design of the form, content of appraisal, technique to be used etc.Open & Continuous Communication:- Foreign employees want to know continuously how well they are performing on the job. An effective appraisal system should arrange for the continuous feedback to the foreign employee. Expectations of the appraiser should be clearly indicated to employee in advance. 44Chapter Seven Performance Management
  45. 45. 7.8 How to Make Performance Appraisal Effective?The problems discussed could be overcome by adaptingSensitive to ground realities:- Performance appraisal forms, appraisal procedure and evaluators should be sensitive to the changing and varying ground realities related to culture factors, language, semantics, foreign political factors, trade unions. Government policies and functioning.Appraisee’s access to the results:- The employee to be appraised must know the rules of the game. He/she should receive information and adequate feedback about the performance results. 45Chapter Seven Performance Management
  46. 46. 7.8 How to Make Performance Appraisal Effective?The problems discussed could be overcome by adaptingEasy to operate:- Performance appraisal process as well as procedure should be easy to operate for the appraiser and the employee being appraised.Rater’s knowledge about the Appraisee:- Rater should be provided with information about appraisee’s work, behaviour, culture, organizational culture, environmental factors affecting appraisee’s work . 46Chapter Seven Performance Management
  47. 47. 7.9 ConclusionInternational performance appraisal to be effective should be close to the ground realities of the country where the employee concerned is working. Global performance appraisal should not be like local performance appraisal for a domestic company.Therefore, it should be customized for the country, company and the employee. Performance management should aim at improving the skills rather than making employees redundant. 47Chapter Seven Performance Management
  48. 48. 7.10 Summary International human resource managers as well as managements of MNCs face a variety of challenges and difficulties in managing the performance of different types of employees. These challenges include: Total Company versus Parts of it, Standard format versus customized format, Uniformity of data of performance, Environmental variations, Validity of performance criteria, Time and distance variations, Varied levels of maturity, Rater’s competence, Rater bias, Host environment and cultural adjustments. 48Chapter Seven Performance Management
  49. 49. 7.10 Summary Areas to be appraised vary from one type of the employee to other type of employee like parent country national, host country national and third country national. In addition, it also varies based on the purpose / assignment for which expatriate is sent to the host country. Parent companies predetermine the roles and expectations of these roles from the parent country nationals before departure for the subsidiary. 49Chapter Seven Performance Management
  50. 50. 7.10 Summary Performance of the employee is normally appraised by the immediate supervisor in case of a domestic company. International performance management is not that effective as it should be , owing to the challenges as well as the problems of performance appraisal. 50Chapter Seven Performance Management
  51. 51. Well students this brings us to the end of our session 07! Next we move to session 08 On “Training & Development” Development Chapter eight. Good Luck! 51Chapter Seven Performance Management
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