IHRM Chapter 9 International Human Resource Management Managing

IHRM Chapter 9 International Human Resource Management Managing people in a multinational context International Performance Management

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 MNE’s 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 v 2

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 multinational’s internationalization strategies, its goals for individual units in of individual employees whether PCN, TCN or HCN. • • • v 3

Figure 11 -1 v Perspectives, issues, actions and consequences in MNE performance management 4

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: - v 5

MNE subsidiary performance constraints 1. 2. 3. 4. 5. 6. v Whole versus part Non-comparable data Volatility of the global environment Separation by time and distance Variable levels of maturity Control and performance management 6

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. v 7

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. v 8

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 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. v 9

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. v • 10

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 multinational’s 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. v 11

Figure 11 -2 v MNE control and performance 12

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. v 13

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. v 14

Figure 11 -3 v Variables affecting expatriate performance 15

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. v 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. 16

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. v 17

Expatriate Performance Management v 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 manager’s work performance. 18

A cross -cultural context for PM • • • v 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 France’s labor laws allow some flexibility in assessing performance within a merit-based and non-discriminatory framework. 19

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. v 20

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. v 21

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. ’ v 22

PM of international employees. v • 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. 23

Performance Criteria. v • The global firm’s ability to measure an employee’s 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. 24

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. v 25

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 subsidiary’s CEO or the immediate host-country supervisor, depending upon the nature & level of position concerned. • • v 26

Who conducts the PA Regards to expatriate PA, host-country manager may have clearer picture of expatriate performance & can take into consideration contextual criteria. • v 27

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. v 28

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. • • • v 29

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. v 30