Performance Management Chapter 10 Performance Management IBUS 618 Dr. Yang

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 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: Cont. IBUS 618 Dr. Yang

Chapter Objectives (cont.) 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 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. IBUS 618 Dr. Yang

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 IBUS 618 Dr. Yang

Basic Components of Performance Management IBUS 618 Dr. Yang

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 IBUS 618 Dr. Yang

Control and Performance Management Performance management is part of the multinational’s control system. Performance targets are part of formal control. Performance management contributes to shaping corporate culture, e.g. Who conducts performance appraisal Tangible versus intangible criteria Individual versus team based appraisal How results linked to HR decisions, e.g., compensation and promotion IBUS 618 Dr. Yang

Expatriate Performance Variables Affecting Expatriate Performance Cultural adjustment – self and family Host environment Headquarters’ support Task Compensation package Expatriate Performance IBUS 618 Dr. Yang

Individual Performance Management The task: Chief executive officer Structure reproducer Troubleshooter Operative Task variables are generally considered more under the control of the multinational than environmental factors. IBUS 618 Dr. Yang

Roles A role is the organized set of behaviors assigned to a particular position. Effective role behavior is an interaction between the concept of the role, the interpretation of expectations, the person’s ambitions, and the norms inherent in the role. The difficulty for the expatriate manager is that the role may be defined in one country, but performed in another. IBUS 618 Dr. Yang

PCN Role Conception IBUS 618 Dr. Yang

TCN Role Conception IBUS 618 Dr. Yang

Headquarters’ Support The support of headquarters is important – both to the individual expatriate and accompanying family members – as a performance variable IBUS 618 Dr. Yang

The Host Environment The external context can be a major determinant of expatriate performance Differing demands in terms of the context: Societal Legal Economic Technical Physical Type of operation involved (e.g. IJV versus wholly-owned subsidiary) IBUS 618 Dr. Yang

Contextual Model of Expatriate Performance Management IBUS 618 Dr. Yang

Non-expatriate Performance Management Effects of factors associated with constant air travel, e.g. Depression, anxiety, sleep disturbance, health Stress associated with frequent absences and effect on family relationships Non-standard assignments share these aspects, e.g. Commuter arrangements Virtual assignments IBUS 618 Dr. Yang

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 IBUS 618 Dr. Yang

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 IBUS 618 Dr. Yang

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. IBUS 618 Dr. Yang

HCN Role Conception IBUS 618 Dr. Yang

Chapter Summary Technical competence is a necessary but insufficient condition for successful international performance. Most multinational firms seek managerial characteristics when selecting international managers, e.g. Cross-cultural interpersonal skills Sensitivity to foreign norms and values and Ease of adaptation to unfamiliar environments The added challenge is the effective management and appraisal of performance across all of the multinational’s operations. Cont. IBUS 618 Dr. Yang

Chapter Summary (cont.) 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. Multinational performance aspects such as 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 Factors associated with expatriate performance: the compensation package; task and role; headquarters’ support; host environment factors and cultural adjustment. (cont.) IBUS 618 Dr. Yang

Chapter Summary (cont.) Performance management of non-expatriates and those on non-standard assignments, e.g. Virtual assignments as an illustration of some of the aspects that need to be considered in non-traditional types of assignments. Specific issues relating to the performance appraisal of international employees Appraisal of HCN employees in subsidiary operations. (cont.) IBUS 618 Dr. Yang

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. IBUS 618 Dr. Yang