Introduction

Managing employee performance based on the organizational

needs, strategic requirements and customer preferences
is crucial aspect of international human resource
management. MNCs incur high cost on human resources
due to employment of different kinds of foreigners.
Therefore, they expect the foreigners to perform
distinctly and create , contribute and add significant
value to the organizational activities.
Foreign employees are also aware of their cost to MNC and
are concerned to contribute phenomenally to the
organization goals and strategies.
MNCs encounter critical challenges in the process of
international performance management.

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Performance Management
 7.2 Challenges of international performance management

Total Company versus Parts of it.

Standard format versus Customized format.
Uniformity of Data of Performance.
Environmental variations
Validity of performance criteria.
Time and distance variations.
Varied levels of maturity.
Rater’s competence.
Rater’s bias.
Host environment.
Cultural adjustments.

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 7.2 Challenges of international performance management

Total Company versus Parts of it.

MNC consists of headquarters, subsidiaries and its various
alliance companies. HR manager needs to use different
type of appraisal technique for each part, as decision
affects various organs of the MNC differently. Even the
implementation process of the decision results in
contrasting outcomes.
The best practice from the point of view of a subsidiary may
not be the best for HQ or other subsidiaries. Hence
decisions that benefit most of the parts and on long
rather than short term basis are to be preferred and
considered appropriate.
MNCs face similar dichotomy situations in their pricing
policies.
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 7.2 Challenges of international performance management
Standard format versus Customized format.
Normally parameters like profits, return on investment, cash
flows, productivity, sales per employee, punctuality, rate
of customer complaints etc are applied to employees in a
group for measuring their performance. Some MNCs
additionally apply qualitative parameters like innovation,
leadership , motivation, judgement , adaptability etc for
performance appraisal.
Should the HQ and subsidiaries adapt the same and standard
criteria / performance factors or different criteria.
Different criteria are appropriate for their individual
environments but vitiate uniformity of performance
rating. For a PCN working in a subsidiary should we
apply HQ or host country criteria is another question that
has no clear answer.
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 7.2 Challenges of international performance management

Uniformity of Data of Performance.

MNCs and their subsidiaries not only work in different
environment but also carry-out different kinds of
business including manufacturing, trading, dealing in
services, construction projects and the like. Therefore
providing uniform data for appraisal is not feasible. The
problem can be partially resolved by converting the data
into [parent company] monetary terms.
But this is not a solution owing to variations in living costs ,
purchasing power in various countries. Differences in
accounting standards among countries pose another
challenge in measuring employee performance on a
uniform scale.

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Chapter Seven Performance Management
 7.2 Challenges of international performance management

Environmental variations
In view of variations in environmental influences among
subsidiaries as well as different growth rates of
environments, employees’ performance across the
subsidiaries cannot be measured using uniform appraisal
criteria and scale.
Environmental factors became more vibrant after recent
phase of globalization which initiated trends towards
erosion of national cultures and formation of global
culture, establishment of WTO, EU and its currency
“Euro” , increased mobility of human resource, IT
revolution, large scale out sourcing, ‘glocal’ strategy etc.

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 7.2 Challenges of international performance management

Validity of performance criteria.

MNCs use different performance criteria based on end
contribution to the company and some based on
employee traits. Former include profits, ROI, cash flows,
productivity etc. and latter include dynamism,
decisiveness, initiative, judgement etc. Each of these
criteria may not be valid for local settings of a subsidiary.
Cultural and social environment, economic system and
institutional set up , political ideologies and structure that
influence the business as well as the performance of the
managers vary from the parent country to the host
country. Therefore , the performance criteria valid in the
parent company may not be valid in the host country.

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 7.2 Challenges of international performance management

Time and distance variations.

Performance of business activities in MNCs is complicated by
distance and different time zones between parent
company and subsidiaries.
Measurement of performance of employees working in MNCs
is challenging compared to those working in domestic
company as the employees working in the domestic
companies can meet the colleagues face to face, while
the employees of the MNCs have a limited choice to do
so.
The information technology devices like video conferencing,
emails, fax and telephone, though, have reduced the
complexities.
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 7.2 Challenges of international performance management

► Varied levels of maturity.

People of different countries are generally strong in different

skills, have different levels of maturity and are strong in
different disciplines. Indians are strong in Mathematics
and logic, while Americans in systematic analysis.

MNCs should not , therefore, adopt the same performance

appraisal format and scale to measure the performance
of employees of home country nationals and different
host country nationals as well as third country nationals.

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Chapter Seven Performance Management
 7.2 Challenges of international performance management

► Rater’s competence.

The person who appraises the performance of employees of

the MNCs, i.e. those who work either in HQ or
subsidiaries is called the rater. Usually the raters
executives either in the HQ or in a subsidiary. It is quite
likely that these raters have no experience of working in
other countries and they do not know the social,
business and work challenges that the foreign employees
face.
It is doubtful if that such raters possess required competence
to appraise the performance of expatriates.

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Chapter Seven Performance Management
 7.2 Challenges of international performance management
► Rater’s bias.
The problems with subjective measure have opportunity for
bias. The rater bias include
 Halo effect – the raters have a tendency o t
excessively depend upon rating of one trait or one
behavioural consideration rather than carry a balanced
appraisal of all traits or behavioural aspects.
 The Error of Central Tendency – Some raters
foo
l w the safe policy of rating all employees at the mid
point of the rating scale and avoid rating at the extreme
in spite of the employee’s actual performance. Central
Tendency
– Some raters follow the safe policy of rating all
employees at the mid point of the rating scale and
avoid rating at the extreme in spite of the employee’s
actual
Chapter Seven performance.
Performance Management 14
 7.2 Challenges of international performance management
► Rater’s bias.

 The Leniency and Strictness – The leniency

bais crops up when some raters consistently assign higher
rating liberally thereby defeating the whole purpose of
ratings. Equally damaging one is assigning consistently
low rates.
 Personal Prejudice – I f the rater dislikes a
n
y
employee or any group , he/she may rate them at the
lower end , which may distort the rating purpose and
affect the career of the employee.
 The Recency Effect – The raters remember only
h
te recent actions and rate accordingly ignoring
employee’s performance over the period under appraisal.
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 7.2 Challenges of international performance management

► Host environment.

Internal environment like structure of the host company

organization, ownership pattern influence expatriates’
performance. 100% ownership by parent company,
against a joint venture, allows PCN to work more
successfully in the host company.
External environment like social and cultural issues, political
and economic issues affect the employee performance.
In addition, availability of school and other educational
facilities , medical and hospital facilities, recreational
facilities, security situation & transportation facilities
have their besring on foreign employee performance.
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 7.2 Challenges of international performance management
► Cultural adjustments.
Adjustment of the employee to the organizational culture and
country’s culture and adjustment of employee’s family
members to the country’s culture significantly influence
the employee’s performance. This fact should be
considered in evaluation of the performance.

The analysis of challenges of performance appraisal of

expatriates reveals that it is rather critical to measure
expatriate performance. Even it would be difficult to
measure performance of host country / parent country
national working in the HQ , as they also encounter
cultural issues while dealing with foreigners.

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Chapter Seven Performance Management
 7.3 Areas to be Appraised
Areas to be appraised depend upon the type of employee and
the purpose / assignment for which an expatriate is sent
to the host country.
Chief
Executive
Officer
Structure
Innovator
Producer

Skills MNC Trouble

Transferor Employee
s Shooter

Strategist Operative

Consultant

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Chapter Seven Performance Management
 7.3 Areas to be Appraised

The Chief Executive Officer is the one who manages the

entire operations of a subsidiary.
The Structure Producer the one who reproduces the
structure. He /she is familiar with that in the parent
company or in another subsidiary . The structures
include marketing, establishing plant, introduction of a
new product , training programme or service.
The Trouble Shooter is the one who diagnoses, analyses and
solves a specific operational problem.
The Operative is the one who performs functional job in the
existing operational structure.

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Chapter Seven Performance Management
 7.3 Areas to be Appraised
The Strategist is the one who studies the environment under
which the subsidiary operates , identifies the
opportunities for new products / services / markets,
identifies the possible threats, strengths, weaknesses
and formulates appropriate strategy.
The Consultant is the one who is assigned with the task of
providing advice on operational or business issue.
The Innovator has a task of innovating a new product /
service based on the resources or the markets of the
host country or creating opportunities for new markets.
The Skills Transferor is the one who is assigned with the task
of developing the host country national employees of the
subsidiary . He /she stays in the host country for a short
duration and trains the locals to take up & perform the
jobs on their own.
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Chapter Seven Performance Management
 7.4 Organizational Role
Expectations
Parent companies predetermine the roles and expectations of
these roles from the parent country nationals before
their departure for the host country. The MNC has to
provide cross culture training along with information
about of the role expectations to expatriates.

The parent company, the parent company executive and the

host company should have the common role
expectations.

When the third country national is selected for assignment,

the clear determination of role expectations becomes
more critical as culture of organizations where the TCN
worked needs to be considered.

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Chapter Seven Performance Management
 7.4 Organizational Role
Expectations
Parent company’s Subsidiary’s
Role perception
Expectations Expectations from
of the PCN
from the PCN the PCN

Organizational
Organizational
Culture of the Role content of
Norms of
Parent company the PCN
the
Subsidiary

Culture of the Culture of the

Parent company’s Host country
country

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Chapter Seven Performance Management
 7.4 Organizational Role
Expectations
Parent company’s Subsidiary’s
Role perception
Expectations Expectations from
of the TCN
from the TCN the TCN

Organizational
Organizational
Culture of the Role content of
Norms of
Parent company the TCN
the
Subsidiary

Culture of Organizations Culture of the

Culture of the Where TCN worked
Parent company’s Host country
previously
country

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Chapter Seven Performance Management
 7.4 Organizational Role
Expectations
Parent company’s
Expectations
Role perception The role conception of
of the HCN
from the HCN Host Country
National

Subsidiary’s
Role content of
Expectations from
the HCN
the TCN

Organizational
Organizational Culture of
Culture of the The subsidiary
Parent country

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Chapter Seven Performance Management
 7.4 Organizational Role Expectations

The critical aspect of the role is the task performance. However, the
task performance does not take place on its own. The host
country environment and parent company expectations
influence the task performance.

The performance appraisal of the foreign employees should

consider the role rather than just task . Role includes task plus
various other factors like leadership skill, inter-personal skills,
team building skills, understanding and adapting towards
organizational culture and host country culture at the work
place.
We shall have a look at role aspects of performance of foreign
employees and try defining each aspect.
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Chapter Seven Performance Management
 7.5 Who Should Appraise Performance?

In case of domestic company an employee is appraised by

the immediate supervisor. In case of a foreign employee
it is difficult to determine immediate superior as
managers from the host country as well as the parent
company supervise / oversee work of a foreign employee
working in a subsidiary.

Therefore, most of the MNCs use multiple appraisers.

Performance is appraised by superiors from both the
parent and host country. In case of PCN appraiser from
parent country is a must to oversee PCN career
progression, if not the performance directly.

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Chapter Seven Performance Management
 7.6 System of Performance Appraisal.

Performance appraisal of international employees is a 12-step

process.

i. Establish performance standards based on job

description, job specification, cultural requirements, and
adaptability to foreign environment, talents in enabling
family members to adjust to foreign environment.
ii. Communicate standards to employees as well as
appraisers.
iii. Decide upon the performance appraisal format.
iv. Measuring actual performance by the evaluators through
observation, interviews, records and reports.

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Chapter Seven Performance Management
 7.7 Problems in Performance Appraisal.

Performance appraisal of international employees is

critical and a challenge due to

Content Bias:- Most MNCs view international performance

management on the lines of domestic performance
management and focus on task factors at the cost of
culture and environment factors when the latter play a
dominant role in the perfromance of international
employees.
Ineffective raters:- MNCs use multiple raters for appraisal of
foreign employees, but the ratings of the rater from the
parent company only are considered for decisions
relating to promotion, revision of compensation package
or renewal of contract. The rater from parent company,
sadly, is unaware of the culture of the host country or
that of the foreign national.
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Chapter Seven Performance Management
 7.7 Problems in Performance Appraisal.

The Recency Effect:- The raters generally remember the

recent actions of the employee and do not weigh
employees performance for the period under review.

Distant Work Place:- Foreign employees working on the

projects can’t be directly observed even by the host
country supervisor. Similarly , the performance of other
employees workers working in the field in different
places cannot be directly observed by the raters. Added
to this the parent company superior who never observes
the employee at work rates the performance.

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Chapter Seven Performance Management
 7.7 Problems in Performance Appraisal.

Appraisal Forms:- MNCs use standard appraisal form for

the domestic and foreign nationals. Such forms do not
suit the requirements of PCN, HCN or TCN employees.

Failure of Superiors in conducting appraisal Interviews:-

Due to distance factors many raters do not conduct any
interview with the employee to be appraised.

Use of Performance Data:- For major decisions like

promotion, revision to pay package or renewal of
contract personal opinions or network is used by MNCs
instead of the data emanating fro performance
appraisals.

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Chapter Seven Performance Management
 7.8 How to Make Performance Appraisal
Effective?
The problems discussed could be overcome by adapting
Reliability and Validity:- the appraisal system should provide
reliable and valid data and information. Techniques of
appraisal should be designed to assure this.

Appraisal should be relevant:- The technique should be

designed with the purpose of the appraisal in mind.

Customization of appraisal forms:- Different factors influence

performance of PCN, HCN and TCN employees. Similarly
requirements of the parent company and various
subsidiaries vary significantly. The customized forms
should cover these and standard forms be discontinued.

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Chapter Seven Performance Management
 7.8 How to Make Performance Appraisal
Effective?
The problems discussed could be overcome by adapting
Consensus of Appraiser & appraisee:- The appraiser or the
designer of the appraisal form is not aware of all issues
affecting job performance, but appraisee knows them .
Hence the inputs from the appraisee be used in design
of the form, content of appraisal, technique to be used
etc.

Open & Continuous Communication:- Foreign employees

want to know continuously how well they are performing
on the job. An effective appraisal system should arrange
for the continuous feedback to the foreign employee.
Expectations of the appraiser should be clearly indicated
to employee in advance.
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Chapter Seven Performance Management
 7.8 How to Make Performance Appraisal
Effective?
The problems discussed could be overcome by adapting
Sensitive to ground realities:- Performance appraisal forms,
appraisal procedure and evaluators should be sensitive
to the changing and varying ground realities related to
culture factors, language, semantics, foreign political
factors, trade unions. Government policies and
functioning.

Appraisee’s access to the results:- The employee to be

appraised must know the rules of the game. He/she
should receive information and adequate feedback
about the performance results.

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Chapter Seven Performance Management
 7.8 How to Make Performance Appraisal Effective?

The problems discussed could be overcome by adapting

Easy to operate:- Performance appraisal process as well as

procedure should be easy to operate for the appraiser
and the employee being appraised.

Rater’s knowledge about the Appraisee:- Rater should be

provided with information about appraisee’s work,
behaviour, culture, organizational culture, environmental
factors affecting appraisee’s work .

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