Performance management Chapter 10 Performance management

Chapter objectives The aim of this chapter is to draw together the relevant literature on performance management in the international context as it relates to IHRM. The focus is on identifying those aspects that require a substantial modification of traditional performance management (especially appraisal criteria and processes) that are imposed by international operations. We specifically address the following aspects: multinational performance management at the global and local level: considering aspects such as non-comparable data, the volatility of the global environment, the effect of distance and level of subsidiary maturity (cont.)

Chapter objectives (cont.) performance management as part of a multinational’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 assignments such as commuter and virtual issues related to the performance appraisal of international employees.

What is performance management? A process that enables the multinational to evaluate and continuously improve individual, subsidiary unit and corporate performance, against clearly defined, pre-set goals and targets

Figure 10-1: Basic components of performance management

Evaluating subsidiary performance Factors to consider: Whole versus part Non-comparable data Volatility of the global environment Separation by time and distance Variable levels of maturity

Control and performance management Performance management is part of the multinational’s control system Performance targets, for example, are part of formal control Performance management contributes to shaping corporate culture

Figure 10-3: Variables affecting expatriate performance

Individual performance management The task: Chief executive officer Structure reproducer Troubleshooter Operative Task variables more under the control of the multinational than environmental factors

Roles A role is the organized set of behaviours assigned to a particular position Effective role behaviour is an interaction between the concept of the role, the interpretation of expectations, the person’s ambitions, and the norms inherent in the role (refer back to Chapter 7 – the role of the repatriate)

Figure 10-4: PCN role conception Figure 10-5: TCN role conception

Expatriate performance The support of headquarters is important – both to the individual expatriate and accompanying family members – as a performance variable

The host environment The external context can be a major determinant of expatriate performance Differing demands in terms of context: Societal Legal Economic Technical Physical Type of operation involved (eg. IJV versus wholly-owned subsidiary)

Figure 10-6: Contextual model of expatriate performance management

Non-expatriate performance management A seemingly neglected group Performance effects of factors associated with constant air travel Depression, nervous anxiety, sleep disturbance, health (DVT, weight gain, poor diet) Stress associated with frequent absences and effect on family relationships Non-standard assignments such as commuter arrangements and virtual assignments share these aspects

Performance appraisal Performance criteria Hard goals: objective, quantifiable and can be directly measured Soft goals: relationship or trait-based Contextual goals: factors that result from the situation in which performance occurs An appraisal system that uses hard, soft and contextual criteria is advocated

Other factors affecting appraisal Who conducts the performance appraisal Use of standardized or customized appraisal form Frequency of appraisal Performance feedback Timely Geographical distance affects

Appraisal of HCNs The practice itself confronts the issue of cultural applicability May be necessary to use local staff and a customized form Level of position involved is an important consideration

Figure 10-7: HCN role conception

Chapter summary Technical competence is a necessary but not sufficient condition for successful international performance. Cross-cultural interpersonal skills, sensitivity to foreign norms and values and ease of adaptation to unfamiliar environments are just a few of the managerial characteristics most multinational firms seek when selecting international managers. The added challenge is the effective management and appraisal of performance across all of the multinational’s operations. Therefore, we have explored in this chapter: The basic components of performance management system that is conscious of and responds to, the organizational, national and international elements. (cont.)

Chapter summary (cont.) Multinational performance aspects: whole (global) versus part (subsidiary); non-comparable data; the volatility of the global environment; the effect of distance and the level of maturity. Performance management as a control mechanism was briefly discussed. Factors associated with expatriate performance: the compensation package; task and role; headquarters’ support; host environment factors and cultural adjustment. (cont.)

Chapter summary (cont.) The performance management of non-expatriates and those on non-standard assignments. We used the virtual assignment as an illustration of some of the aspects that need to be considered in these non-traditional assignment types. The issues relating to the performance appraisal of international employees. Appraisal of HCN employees in subsidiary operations. (cont.)

Chapter summary (cont.) Broadening out the discussion to the multinational level and addressing performance management and appraisal concerns related to non-expatriates and those on non-standard assignments has been useful to remind us that there are many dimensions to international business operations that need to be considered when designing an effective performance management system in the multinational context.