You are on page 1of 21

International and Comparative HRM

Lecture 10: Performance management

Alhajie Saidy Khan (alhajie.saidykhan@anglia.ac.uk)


Lord Ashcroft International Business School
Lecture aims

Understand the concept and significance of performance


management as HRM function and its Anglo-American origins

Have some comprehension of the component parts of


performance management and model of PM in Multinational
contexts

Develop awareness of the impact of culture and context on


performance management

Explain the linkages between performance management and other


elements of the HRM architecture within an organisation
PM: conceptual clarity and significance

PM is the HRM sub-system that links corporate goals with rewards, improvement of
performance and employee development and, is therefore,

one of the key areas of HRM policy and practice necessary to implement successful global
HRM (Brewster et al., 2011, p. 187 citing Sparrow and Hiltrop, in 1994).

Although often conceptually confused and often used interchangeably with Performance
appraisal (PA), PM refers a broader and more strategic concept of which PA is just one
aspect (Brewster et al. 2011; Bach, 2005; Redman, 2009)

However, PM represents a development on the much more historical practice of PA, which
has its origins in the monitoring systems developed by Taylor and, to a lesser extent, Robert
Owens Silent monitors.

Thus, it is important to recognise the implications of Anglo-American cultural origins of PM


for its global application.

Brewster et al, 2011; Varma et al., 2008


Defining Performance Management

The various HRM activities that organisations use to identify and develop
their aggregate competence, improve overall organisational performance and
determine rewards

A strategic and integrated process that involves the incorporation of goal-


setting, appraisal and development into a coherent framework that aligns
individual and group performance and goals with wider organisational goals
and objectives

So, it may be about senior management concerns, but it is much more that
the formal, periodic (yearly, quarterly, half-annual) conversations between
line manager and employee about priorities and their achievement (PA)

Sources: Brewster et al., 2011; also: Armstrong and Baron, 2004; Budhwar and
DeNessi, 2008; DeNessi, 2000; Fletcher, 2001)
So, according Armstrong and Barron, PM is:

a process which contributes to the effective management of


individuals and teams in order to achieve high levels of
organisational performance. As such, it establishes shared
understanding about what is to be achieved and an approach
to leading and developing people which will ensure that it is
achieved'.
Armstrong and Baron, 2004, p. 192
Stages in the PM process

Planning - objective and target setting around the what of performance, in


line with strategic cascade.

Managing - identification of development areas either during the performance


planning discussion or during a separate (usually mid year) development
review, often conversation is in competency terms.

Reviewing - most performance management still rely on a rating, but not all,
some use forced distribution. Ratings typically a scale e.g:

exceeds expectations

meets expectations

development required to meet expectations?


Brewster et al., 2011
Performance management perspectives

Balanced scorecard perspectives and typical measures

Kaplan and Norton, 1996 in Brewster et al., 2011


Performance management perspectives

Example of Competency feedback for current job band S2ii (Brewster et al., 2011
Comparative use PA for Manual and clerical workers
in selected countries

Brewster et al. 2011, chap. 9


Percentage of firms with PA systems & categories of
employees involved in selected countris1995 & 99
1995 1999

Mgt Prof Clerical Manual Mgt Prof Clerical Manual

Denmark 42 41 39 23 56 48 47 32

France 85 77 61 53 86 84 5 67

Japan - - - - 83 82 79 77

Spain 63 77 64 56 59 66 46 40

Sweden 87 83 83 63 89 84 95 80

Switzerland 89 94 89 87 93 95 92 91

Netherlands 79 82 79 78 84 82 82 82

UK 90 87 76 51 92 90 85 68

Brewster et al. 2011, chap. 9


Percentage of firms where appraisal is used to
determine the following outcomes in selected countries
Country 1995 1999 2004

training promotion career Pay training promotion career Pay training promotion career Pay

Denmark 41 25 25 16 82 49 52 36 87 - 71 66

France 74 54 59 53 95 74 74 61 - - - -

Japan - - - - 29 85 37 91 - - - -

Spain 63 55 41 52 77 63 50 63 - - - -

Sweden 93 49 52 35 98 48 54 41 79 - 66 86

Switzerland 91 70 59 53 98 74 55 60 96 - 91 76

Netherlands 71 59 66 52 83 69 80 63 88 - 92 75

UK 89 61 72 40 98 62 77 34 98 - 87 54

Brewster et al. 2011, chap. 9


From PA to PM

Taking a strategic view of objectives and mechanisms for individual


performance
Integrating individual, unit, and corporate objectives
Increase complexity of the appraisal process
Decentralisation of appraisal process with greater role for line
managers
Evaluate criteria complicated by mix of tangle and less tangible and
thus, difficulty of measuring variables
Bach 2005: 294)
The necessity of global integration as competitive strategy requires
development of supporting HR policies and practices including PM
systems
(Tahvanainen and Suutari 2005)
Critical role of PM in IHRM strategy

A successful global HRM requires possession of the skills and


knowledge of formulating and implementing policies and practices
that effectively integrate and cohere globally dispersed employees,
while at the same time recognizing and appreciating local
differences that impact the effective utilization of human resources
(p. 268)

As the aspect of HRM that seeks to link organisational goals with


rewards, performance improvement and employee development
through performance appraisal, Performance Management, is
necessary for effective global HRM strategic.

Sparrow, Schuler & Jackson, (1994) IJHRM, vol. 5(2): pp. 267-299)
Challenges for PM in international context

International scope and applicability of ethnocentric PM systems


developed in home country

A multi-dimensional and culture-bound concept and therefore,


potential for inter and intra-cultural differences in definitions and
interpretations of criteria and outcomes

Thus, effective execution may require context specific mechanisms and


variables unfamiliar to expatriate or even geocentric managers.

But global PM requires managing inter-related complexity of


establishing performance criteria and outcomes for HCN and expatriates

Varma, Budhwar and DeNise, 2008)


Model of PM in Multinational context

Global (external) context


Cultural and institutional factors

Organisational (internal) context


Organisational culture (vision, structure, design)

PM Process Choice Moderators


Performance expectations Outcomes
Performance criteria (what) Strategic fit
Cognitive processes that affect
Instrument (how) Effectiveness
PA (Motivation, Self- efficacy,
Frequency (how often) Fairness
affective regard, rater-ratee
Choice of evaluator (who) Outcomes
context for training, performance
Standardisation/Localisation Rewards
feedback

Design Implementation Evaluation


Adapted from Varma, Budhwar and DeNise, 2008
Applying cross-cultural theory to PM

Individualism: autonomous view of the individual

Collectivism: view of the Individual as part of a group

Horizontal cultures: Equality and small power distance

Vertical cultures: Inequality and high power distance


Koerner, A. F and Fujiwara, M (2000) Rational model of horizontal and vertical
individualism/collectivism
Influence of culture on performance criteria

Level of achievement:
Collectivism: individuals role in the group and group harmony and relationship.
Individualist: direct feedback to improve individual performance and self identity

Feedback approach:
Horizontal view provide opportunity for individuals to participate
Vertical focus mainly on top-down communication and control and avoid
perceptions of managerial weakness by encouraging significant levels of
participation

Communication style:
High culture context: consider the surrounding context of the feedback, Pay close
attention to the body language of the individual and be indirect in conveying
feedback (read between the lines)
Low culture context: direct and explicit communication and follow up verbal
feedback with written summary
Comparative Crosscountry PM characteristics
Factor UK USA India China
Macro strategy Increasingly seen as component of Seeks strategic alignment in pursuit Not really, because HR systems Majority of organisations do not
strategic HRM of business objectives, history of tens to focus more on maintenance have strategic goals or a cascade
MBO approaches than performance
Development, culture change Meet legal requirements and as Decision making around Decision making, narrow focus
Purpose of pm
programmes as well as PRP admin process for decision making promotions around reward
reward and promotion
Accepted, but largely ill-regarded Accepted as necessary evil Low level of acceptance seen as Low level of acceptance, not taken
Acceptance of approach
time wasting seriously

In context of increased Manager as judge predominantly. Subjectivity of managers in rating, Highly subjective manager
Manager/appraisee
devolvement of HR to line. Line Both sides report dissatisfaction particularly inflation of ratings for evaluations. Saving face and thus
relationships managers as judge and/or coach with processes those they care about tolerance of poor performance

PM process and Use of competencies, 360, links Multi-source feedback, Some team-based appraisal and Effort more important than
to reward and high talent calibration of ratings, results
practices focused on a combination of use of 360 feedback. Paternalistic outcomes Self and
what and how top-down approach & systems peer/subordinate evaluations used

Outcomes Reward and corrective Justification of rewards Promotion and pay, but less Reward
mechanism clarity in link between these and
performance improvements

Brewster et al., 2011


So, what are the key points?

PA is a key component of PM but PM is a more recent, strategic and holistic


construct, which aims to incorporate individual target setting and reviewing
performance along with development and motivation of employees in light of
overall organisational goals.

Some claim the emergence of best practice has emerged around the typical
process, which includes planning, managing and reviewing (Brewster, 1995)
.

However, PM has Western (US) origins and there are challenges to the
implementation of the typical process in non-Western contexts.

Consequently, although there is evidence of widespread use of appraisal,


differences still exist between countries and culture and institutions pose
challenges to standardise global processes.
(Brewster et al. 2011, Varma et al., 2008
Selected readings

Armstrong and Baron, (2004), Managing performance in action, London: cipd


Bach, S. (2005), New Directions in Performance Management in S. Bach (ed) Managing
Human Resources, Oxford: Blackwell (Chapter 11)
Brewster, C, Sparrow, P, and Vernon, G (2007): International Human Resource Management
2nd edition. London, CIPD Publishing (Chapter 9)
Koerner, A. F and Fujiwara, M (2000) Rational model of horizontal and vertical
individualism/collectivism http://www.comm.umn.edu/~akoerner/pubs/nca2000.pdf
Redman, T. (2009) Performance Appraisal. In T. Redman & A. Wilkinson (eds.)
Contemporary Human Resource Management: Text and Cases, 2nd Edition. London:
Prentice Hall, (pp. 175-206).
Sparrow, Schuler & Jackson, (1994) Convergence or divergence: human resource practices
and policies for competitive advantage worldwide, IJHRM, vol. 5(2): pp. 267-299)
Tahvanainen, M and Suutari, V. (2005) Expatriate performance management in MNCs in
H. Scullion and M. Linehan (Eds.) International Human Resource Management: A Critical
Text, London: Palgrave McMillan (Chapter, 5)
A. Varma, P. S. Budhwar and A. DeNesi (eds.), (2008) Performance Management Systems: A
Global Perspective (Global HRM),Oxford and NY: Routeledge, (Chapters 1 & 17).
Varma A. and Budhwar, P. S. (2011) Global Performance management in A. Harzing and
A. H. Pannington (eds.) IHRM (3RD edition), Sage. Chapter 13 (pp. 440-467).