1. Chapter 13 Evaluating and Rewarding International Employees

2. 13-2Copyright © Houghton Mifflin Company. All rights reserved. Overview Performance appraisals Compensation of international employees Compensating foreign country nationals

3. 13-3Copyright © Houghton Mifflin Company. All rights reserved. Performance Appraisal Usually disliked by both parties General reluctance to provide feedback about performance –Particularly when negative Process inherently difficult Cultural differences add additional complexity

4. 13-4Copyright © Houghton Mifflin Company. All rights reserved. Giving an Evaluation 1.Requires memory of performance over evaluation period 2.Evaluate performance evenly throughout period 3.Compare performance with other people 4.Provide feedback and explain rewards

5. 13-5Copyright © Houghton Mifflin Company. All rights reserved. International Dimensions of Evaluations Limited time with employee if in different location Limited understanding of the work environment Limited understanding of the larger cultural environment

6. 13-6Copyright © Houghton Mifflin Company. All rights reserved. Who Should Evaluate Performance? Supervisor –Host country supervisor –Home country supervisor Peers Subordinates Customers

7. 13-7Copyright © Houghton Mifflin Company. All rights reserved. Evaluations by Host/Local Managers Manager is familiar with local cultural values & behavior Ability to assess employee’s cultural skills Daily interactions with employee Manager’s use of his/her cultural biases Language barriers Different perception of appraisal process May not be connected to overall company goals

8. 13-8Copyright © Houghton Mifflin Company. All rights reserved. Evaluations by Home Office Management Familiarity with work over career Speaks the same language Same cultural values and beliefs Shared cultural identity Geographically and psychologically distant Limited contact with home office –Often during problem periods Lack of understanding of environment

9. 13-9Copyright © Houghton Mifflin Company. All rights reserved. Best Approach Use both home office and local supervisor evaluations for best results

10. 13-10Copyright © Houghton Mifflin Company. All rights reserved. When Should Performance Be Evaluated? Typically at 6 mo. or 1 yr. in U.S. International assignments complex –Often takes time to adjust Compromise strategy –Use both informal feedback early and formal feedback at year end Consider cultural perspective toward evaluation Best option may be the “right” time for a given situation

11. 13-11Copyright © Houghton Mifflin Company. All rights reserved. What Should Be Evaluated? Environment in which the job is done –Cultural constraints Task or tasks themselves –Level of interaction with host culture Personality of the expatriate –Predictors of adjustment

12. 13-12Copyright © Houghton Mifflin Company. All rights reserved. Using Financial Indicators to Measures Performance Not always easy to interpret due to –Currency fluctuation –Conversion issues –Differences in accounting methods

13. 13-13Copyright © Houghton Mifflin Company. All rights reserved. Guidelines for Expatriate Evaluation Rate the assignment by determining difficulty level & weight evaluation Combine & weigh assessments by home- and host-country managers Involve people with expatriate experience Review evaluation with home office prior to offering feedback to employee

14. 13-14Copyright © Houghton Mifflin Company. All rights reserved. Determining Assignment Difficulty Extent of language adjustment Degree of cultural toughness Economic and political stability

15. 13-15Copyright © Houghton Mifflin Company. All rights reserved. Evaluating Foreign-Born Employees In addition to other considerations, managers must decide how to deliver feedback –Subjective or objective –Formal or informal –Focus on tasks or interpersonal relations –Group vs. individual format –Praise vs. criticism

16. 13-16Copyright © Houghton Mifflin Company. All rights reserved. Differences in Performance Evaluation Systems Across Three Countries

17. 13-17Copyright © Houghton Mifflin Company. All rights reserved. Compensation More than just level of pay –Health care –Pension plans –Vacation –Personal time off –Recreation/health facilities Great variations within a culture and across cultures

18. 13-18Copyright © Houghton Mifflin Company. All rights reserved. Meaning of Compensation Exchange of effort and output for wages and benefits –Western individualist cultural perspective Achievement Protection or safety net Entitlement and obligation

19. 13-19Copyright © Houghton Mifflin Company. All rights reserved. Compensation (cont’d) Great variations across countries Many companies look for low-cost labor Labor not the only cost a company should consider Companies should consider tax issues for both the company and for the employee Perks part of total compensation

20. 13-20Copyright © Houghton Mifflin Company. All rights reserved. Oceans Apart: CEO Compensation In Several Countries

21. 13-21Copyright © Houghton Mifflin Company. All rights reserved. Paid Vacation Days in Various Countries

22. 13-22Copyright © Houghton Mifflin Company. All rights reserved. Basis for Compensation Equity principle Bonus system and net pay Loyalty and commitment Philosophy toward compensation is changing in many places Systems becoming more similar, yet still large differences

23. 13-23Copyright © Houghton Mifflin Company. All rights reserved. Predicted Compensation Practices across Cultures

24. 13-24Copyright © Houghton Mifflin Company. All rights reserved. Potential Sources of Costs Associated with Expatriation

25. 13-25Copyright © Houghton Mifflin Company. All rights reserved. Models for Expatriate Compensation Ad hoc approach –Individually negotiated Localization –Paying the same as local nationals Balance sheet method –Keep the expatriate “whole” –Same standard of living

26. 13-26Copyright © Houghton Mifflin Company. All rights reserved. The Balance Sheet Approach to Expatriate Compensation

27. 13-27Copyright © Houghton Mifflin Company. All rights reserved. Compensating Foreign Country Nationals Peg to U.S. standards Use prevailing country standards –Most common Companies must deal with discrepancies among expatriates, local, and third-country nationals –Three groups often working together