International Performance Management And Appraisal Management Essay

2119 words (8 pages) Essay in Management

 5/12/16  Management  Reference this

Disclaimer: This work has been submitted by a student. This is not an

example of the work produced by our Essay Writing Service. You can
view samples of our professional work here.

Any opinions, findings, conclusions or recommendations expressed in this

material are those of the authors and do not necessarily reflect the views of
UK Essays.

Share this: Facebook  Twitter  Reddit  LinkedIn  WhatsApp   
In global terms, performance management can be described as a process
which allows an international company or multinational enterprise (MNE) to
evaluate and constantly improve individual and corporate performance in
relation to pre-set goals and targets. Furthermore, performance appraisals
are considered to be a key human resource management (HRM) activity of
performance management and can influence the implementation of
business strategy within a company. According to Milliman et al. (2002,
p.106) the purpose of performance appraisals is to ‘identify individual
strengths and weaknesses, evaluate training needs, plan future
development, and provide motivation through serving as a basis for reward
and career feedback’. This has been further simplified by Harzing and
Ruysseveldt (2004) who suggest that performance appraisals involve the
two processes of observation and judgement through the evaluation and
development of performance. Furthermore, international performance
appraisal (IPA) can be regarded as a strategic process that helps the MNE
to continuously improve global operations through their employees by
matching up to certain pre-set objectives. However, we will find that while
performance appraisals are important in terms of performance
management, they can also often be viewed as problematic.

A ‘global manager’ can generally be considered as someone who has the

capability and experience of working for a MNE in additional countries
throughout the world. Therefore, in this context it could be said that
expatriates are an example of global managers. An expatriate is regarded
as an employee who is transferred out of their home country as a manager
and into another area of the company’s international operations in order to
perform an international assignment (Dowling et al. 2008, p.4). In this
essay, I will be discussing the key issues faced by a MNE regarding
international performance management and appraisal. Moreover, I will also
be considering the different methods of IPA, while giving particular focus to
the appraisal of expatriates.

International Performance Management and Appraisal

A MNE is not uniform across all of its subsidiaries and therefore, a number
of environmental contingencies must be considered in relation to the
various subsidiaries. These contingencies are the mental distance between
the parent and host country, entry modes and the role of the subsidiaries
(Colakoglu et al., 2009). There are several staffing models that are
considered while filling up positions in the subsidiaries. In the geocentric
staffing model, companies employ the most competent person irrespective
of the country the employee actually belongs to. On the other hand,
regiocentric is a geographic strategy and a subset of the geocentric
approach whereby employees remain within a particular geographic region,
allowing managers to enjoy regional autonomy (Schuler et al., 2002). In the
ethnocentric staffing model, parent-country nationals (PCNs) are employed
to fill up the higher level positions, whereas in the polycentric staffing
model, host-country nationals (HCNs) are employed with the belief that the
company will benefit from their local knowledge (Varma et al., 2005).
Furthermore, the ethnocentric and geocentric staffing models also require
integration and transfer of knowledge inside the host country unit in order to
enable better performance from the subsidiary. Moreover, this will mean
that the particular staffing strategy adopted will have an impact on the
subsidiaries performance (Colakoglu et al., 2009).

Get Help With Your Essay

If you need assistance with writing your essay, our professional essay
writing service is here to help!

Find out more

The diverse business strategies of an organisation along with the dynamic
global environment create the need for strategic HRM. It has become
necessary to strategically manage the human resources of an organisation
with the aim that they fit into the global environment and perform well. The
operation of MNEs involves two dimensions, these being multiculturalism
and geographic dispersion. These two aspects are balanced by adopting a
mix of a centralised and decentralised approach since they both have their
own benefits. Strategically, it is vital that the HRM fits with the business
strategy of the organisation. Furthermore, there is complete control from
the headquarters and this centralised approach makes it imperative to
develop uniform performance evaluation criteria all throughout the
subsidiaries of the MNE (Caliguiri, 2006). In this strategy local
responsiveness is very important, whereas global integration is not
required. The decentralised approach makes them develop performance
evaluation criteria depending on the host country, with the performance
evaluation being aligned with the subsidiary’s strategy. Moreover, these
organisations experience immense pressure for local responsiveness along
with global integration and therefore, performance evaluation will also take
into consideration the global as well as the local perspectives (Caliguiri,
2006). This means that the success of MNEs can very much depend on the
performance of expatriates.

Performance appraisal of an expatriate is a crucial task, with the possibility

of conflict between the subsidiary manager and the headquarters. But it is
up to the subsidiary managers to set precise targets and establish clear
criteria for performance measurement in order to avoid such conflict.
Furthermore, the mental distance between the parent and host country can
make managing the subsidiary a difficult task due to the cultural
differences, language barriers, as well as the social and political conditions.
It is for this reason that companies tend to hire more PCNs within
subsidiaries, as they are more able to create an informal communication
network in the organisation and build social capital in the corporation, all
the while having a dual commitment to both the subsidiary and the
organisation as a whole (Colakoglu et al., 2009). As a result, the PCN will
further enable the subsidiary to have greater knowledge of what is
happening in the MNE. Therefore, subsidiaries will no longer exist in
isolation with strong control from headquarters, since they will experience
greater integration and autonomy. However, there is at times a conflict of
interest between the headquarters and the subsidiaries which can make
managing international operations a huge challenge (Boussebaa, 2009).

Performance management of expatriates is undoubtedly more difficult than

in the case of domestic managers. The performance of an expatriate will
depend on a variety of issues such as the compensation, cultural
adjustments, tasks and job roles, as well as support from headquarters and
the host environment. The expatriate will face a number of problems when
they take up a job within a foreign country. For example, the tasks and job
roles are often defined in the context of the expatriate’s home country and
therefore they may not be able to understand their particular job role in the
foreign environment (Newlands and Hooper, 2009). Furthermore, the
expatriate may face difficulty in adjusting to the foreign culture, and it will be
up to the MNE to ensure that they acclimatise, as this is vital to the
expatriate being able to perform at their best in terms of the job in hand.
The host environment will also pose challenges due to a combination of
several other factors such as, social, economic, legal, technological and
physical complications. Therefore, taking everything into account it is
absolutely vital as well as a crucial performance variable that a sufficient
level of support is provided to the individual and their family by both the
headquarters and hosts (Dowling et al., 2008).

Get Help With Your Essay

If you need assistance with writing your essay, our professional essay
writing service is here to help!

Find out more

International Performance Appraisal Methods

The performance appraisal of expatriates can involve a number of

complicated issues. As such, the data available for carrying out the
appraisal may be unreliable, the international environment can be complex
and dynamic, it is difficult to carry out an appraisal in a volatile
environment, and the geographical distance along with the different time
zones often make the appraisal difficult to conduct. Furthermore, as
mentioned earlier, the local culture can also have a significant impact on
appraisals.

A MNE may carry out an appraisal using the home-based approach or the
host-based approach. In practice, these appraisals would be carried out
once a year in order to ensure better performance management of the
expatriate (Dowling et al., 2008). Alternatively, expatriate appraisals may
be carried out using the home-based approach, while the host system is
used for appraising third-country nationals (TCN) and HCN. An integrative
approach can also be used by combining both the home and host
performance appraisal policies in order to create an effective balance.
Furthermore, in terms of who will carry out the appraisal, HCNs may be
made to conduct appraisals as they can help in devising a suitable
appraisal system while helping the acculturation process. An ex-expatriate
may also be an option, while self-evaluation may additionally be used,
allowing the expatriate to evaluate themselves (Armstrong, 1998).
Moreover, the 360-degree feedback could also be employed. This can
assist in the issue of biasness as it involves multiple sources for feedback,
including peer’s who work within close proximity of the expatriate.

Nevertheless, an IPA will generally be carried out by different nationals,

including HCNs and PCNs. However, there may be conflicting opinions and
perspectives, and several biases may take place when a PCN conducts the
appraisal. The geographical distance can also make it difficult for the PCN
to carry out the appraisal in an effective manner and therefore, not allowing
an appropriate evaluation criteria to be set. Furthermore, it is difficult for the
PCN to understand the global business scenario and evaluate performance
in context to the international scenario as they may fail to understand the
business challenges that exist in the global environment (Shen, 2005). The
PCN is forced to rely only on subsequent data while making the evaluation,
and therefore they are only able to judge the performance on the basis of
quantitative data and not qualitative data. On the other hand, despite
overcoming the dilemma of cultural adaptation, a HCN may also have
certain biases while conducting a performance appraisal, as they may not
feel trusting towards the expatriate, while doubting their intentions.

Performance appraisal in MNEs can also often involve assessment by the

immediate manager, where a narrative report is prepared by the manager
annually regarding the expatriates work quality and output. Measurement
techniques like simple rankings, behavioural checklist, and comparison with
objectives are used. This is likely to be based on the appraisal practices
within the host country, which can involve certain cultural issues. We
already know that language barriers can pose a problem, however, a MNE
may also face difficulties in developing countries where performance
appraisal constraints exists in the form of ‘face saving’, as well as in the
authoritarian societies where employee involvement in appraisals is very
limited (Brewster and Harris, 1999).

Get Help With Your Essay

If you need assistance with writing your essay, our professional essay
writing service is here to help!

Find out more

However, the main challenge is in maintaining global consistency and local
fit. A MNE realises that performance appraisals require local adaptation,
and consequently managers from different cultures will perceive different
appraisal methods as appropriate. The performance evaluation criteria
should therefore be easy to understand and should motivate managers
irrespective of their culture and nationality (Paauwe and Dewe, 1995 cited
in Shen, 2005). Furthermore in terms of setting performance goals, MNEs
may either set hard goals or soft goals. Hard goals are quantifiable goals
and can be measured through return on investments, profits and market
share, whereas, soft goals are qualitative and based on relationships or
traits, including customer relations, effort, cooperation, initiative
communication skills and leadership skills. MNEs will have the three
choices of host standards, home standards or integrative standards when
determining the criteria for expatriates. The performance expectation
should therefore be effectively communicated to expatriates, while
appraisal forms should also be customised according to the understanding
of the HCN and PCN, and it should be ensured that the appraisal is
conducted in a non-biased manner (Shen, 2005). Moreover, MNEs will
often exempt the expatriate from management duties and appraisal in order
to enable them to adjust into the new environment. Consequently, it could
also be argued that performance appraisal can be improved in the
subsidiaries of the MNEs by setting clear evaluation criteria.

Conclusion

An effective IPA would ensure that a subsidiary is efficiently applying the

corporate strategy, and provided that the design of the IPA is suitable, this
will result in a positive effect on the company’s performance (Janssens,
1994). The performance appraisal of an expatriate can of course be a very
difficult task. However, this will generally be carried out by a joint effort from
both HCNs and PCNs, which therefore removes the possibility of biasness
and allows the expatriate to be assessed in an honest way. Furthermore,
according to Milliman et al. (2002), performance appraisal remains an
enigma in the management process. On one hand, it is considered to be a
critical management tool which enhances communication, development
and implementation of the company’s strategy, while on the other hand,
critics contend that it creates more problems than it resolves and can lead
to employees being de-motivated. Nevertheless, performance evaluations
clearly have the potential to positively influence global managers, but an
important issue to consider with performance appraisals is whether they
are carried out in an effective manner and in alignment with their intended
purposes.

As more multinational companies (MNCs) expand their international

operations, they are becoming more exposed to, and gaining experience
in, the diversity of cultures, customs and practices in each country in
which their subsidiaries are located.  It is also argued that multinational
companies are one of the vehicles diffusing these practices, because one
important activity of a global MNC is to transfer its practices around the
world. However, these MNCs rapidly fall into the dilemma of having to
decide whether to globally standardize their human resource
management approach or to locally adapt their human resource policies.
The issue of convergence versus divergence becomes a major concern
for these companies. According to prior research, HRM (human relations
management) practices in MNCs are shaped by the active interaction of
opposing pressures for internal consistency and for isomorphism with the
local institutional environment. Moreover, many HR practices are very
sensitive to institutional and cultural differences. Among these practices,
we mention the performance appraisal (PA). Performance appraisals are
used as tools to ensure consistency in information between MNC
headquarters and subsidiaries, to maintain control and to encourage the
desirable behavior of employees working in subsidiaries dispersed
around the world. However, the degree of standardization of performance
appraisals is debatable. Some researchers consider it more beneficial to
standardize, while others claim that the process should be adapted to the
context and the strategy of the MNC.

Performance appraisal is a key element of performance management and

can be defined as “the process of identifying, observing, measuring and
developing human resources in organizations”. International performance
appraisal refers to the HRM process that enables an MNC to evaluate
and continuously improve the performance of employees, in order to
reach clearly predefined goals that serve to improve the overall progress
of the company. Use of standardized performance appraisal can lead to a
reduction in inconsistencies in information between the parent company
and the subsidiary in the foreign country. However, it is an extremely
complex process, as there is no written-in-stone method of assessing the
performance of employees in distant countries. Environmental factors and
differences in subsidiary companies and their countries, such as the
difference in societal, legal, economic, or physical demands, can affect
the performance appraisal process greatly. There are many other
variables to consider when evaluating in a different country, such as
language barriers, differences in values, and differences in cultures that
make the process even more difficult.

Hence, any person evaluating the performance of an employee in a

subsidiary company should take into account the cross-cultural
interpersonal qualities, the employee’s sensitivity to foreign norms, laws
and customs, and the adaptability of employees to uncertain and
unpredictable conditions that may arise. International performance
appraisal is a topic that attracts the attention of practitioners and
academics; however, most research has concentrated on expatriate
performance appraisals. Standardization of performance appraisal
practices in foreign subsidiaries versus the localization of those practices
to fit the subsidiary country is an important debate that has been
discussed in the literature. Despite the fact that MNCs strive for
consistency in their HR practices across subsidiaries, those practices are
shaped by local customs, and subsidiaries usually hire employees from
the host country’s labor market, making it difficult for them to diverge from
local norms. Moreover, when transferring “foreign best practices” to MNC
subsidiaries, national values may present some initial barriers.

As a result, many advocates of localization consider that locally

customized activities are more effective. Many consider that performance
appraisal is the practice that is mostly affected by culture, and it has been
classified as the most difficult to transfer across cultures. In other words,
it is identified as the most “culture-bound” HR practice. Recent research
on performance appraisals in China revealed that western appraisals
couldn’t be applied in a standardized way and didn’t have a positive effect
in the Chinese setting, due to the inability of employees to set their own
objectives and development plans, the negative perception employees
had about the fairness of the performance appraisal system and the
inability of managers to take ownership of the performance reviews.
Other studies used Hofstede’s cultural dimensions to explain that in high
power distance countries, performance appraisal only concerns
employees but not managers. In such countries, only managers are the
source of evaluating employees. In low power distance countries,
performance appraisal concerns employees from all ranks, and multiple
source evaluation techniques are widely used. One example is the 360-
degree system, which uses a variety of raters. This method requires low
power distance and high levels of participation. This appraisal method is
also not appreciated in highly collectivist countries because it is believed
to harm group harmony. In individualistic cultures, performance criteria
are usually objective and quantitative, focusing on the individual’s
productivity. In collectivist cultures, loyalty takes precedence over
productivity, so poor performers are protected if they maintain
harmonious relations with the group.

Performance appraisal methods also vary across cultures. When it comes

to collectivist cultures and high power distance cultures, the method used
is usually informal and unsystematic and involves subjective factors. The
360-degree performance appraisal method, for example, cannot be
applied equally in all cultures.  In the Chinese culture, it is considered
inappropriate for people in inferior positions (subordinates in the
workplace) to express opinions counter to those of people in superior
positions. Such a method is therefore more suitable for cultures with low
power distance and individualistic values rather than in collectivist and
high power distance cultures. Moreover, different cultures may have
different understandings of ratings. Arab culture, for example, is classified
as high context and uses implicit messages. High context cultures and
firms value flexibility, social harmony and cooperativeness.

The main challenge for HR managers is to make “explicit the implicit”

through the use of formalized and “explicit” forms of performance
appraisals. Several researchers have identified the difficulty of using
explicit instruments in cultures that have long-held traditions of familial
control, recognize the importance of face and practice diffuse values. On
another note, the employee performance could be interpreted or valued in
different ways due to differences in cultures, values and belief systems.
For example, what is right/wrong or good/bad behavior could be
interpreted differently by the individual collecting and evaluating the data,
and this is due to cultural differences.

Even self-appraisal in collectivist countries is not appreciated because of

the need for humility in self-presentation. In high power distance and
collectivist cultures, feedback is usually initiated by the superior, who is
considered trustworthy. It is indirect, non-confrontational, subtle and
private. It is extremely rare to conduct face to face performance
interviews in collectivist cultures. If the feedback is negative, it is usually
not easy to give or receive. In cultures where the distinction between life
and work space is blurred (i.e. diffuse cultures), negative feedback on
one’s job performance is perceived as attacking the person’s personality.
In such cultures, there is tendency to avoid giving negative feedback to
save the employee from losing face. Even positive feedback is not well
received in collectivist countries, since it may disturb group harmony and
cause jealousy. The notion of giving feedback is not common and if
given, it should be done in an indirect, private and non-confrontational
way. For example, US-style performance appraisal processes are usually
management by objectives (MBO). Employees work jointly with their boss
to set objectives, assess their own performance, and comment on
whether their boss has helped them achieve their targets or made things
difficult for them. However, in Eastern countries, where open responses
to seniors are discouraged, where admitting faults (by employees) or
criticizing (the employees) amounts to a loss of face and where criticizing
the boss in front of that person would be seen as some sort of
organizational suicide, the implementation of these performance
appraisals would be different in subsidiaries operating in such countries.
On the other hand, the person who gives the feedback in collectivist
cultures should be in a senior position as well as respected for his/her
wisdom and expertise. The feedback should also target a group rather
than an individual.

Another important cultural factor is the loyalty to the superior that takes
precedence over effective performance as measured by Western criteria
in MENA (Middle Eastern and North African) countries. In collectivist
cultures, loyalty to the in-group is also more important than productivity.
High-performing employees within a group might be disliked by the group
and thus might be perceived as disturbing the group harmony and/or
might invoke jealousy. In this regard, “soft” performance criteria were
highlighted in the Chinese appraisal context, such as loyalty, honesty,
and maintaining a good interpersonal relationship with others.

What Is Performance Management?

Performance management is a corporate management tool that helps
managers monitor and evaluate employees' work. Performance
management's goal is to create an environment where people can perform
to the best of their abilities to produce the highest-quality work most
efficiently and effectively.

A formal performance-management program helps managers and

employees see eye-to-eye about expectations, goals, and career progress,
including how individuals' work aligns with the company's overall vision.
Generally speaking, performance management views individuals in the
context of the broader workplace system. In theory, you seek the absolute
performance standard, though that is considered unattainable.