Globalization of Performance Appraisals: Theory and Applications

Steven H. Appelbaum, Ph.D.

Professor of Management
John Molson School of Business
Concordia University
1450 Guy St. (MB-13-369)
Montreal, Quebec, Canada H3H 0A1
email: <shappel@jmsb.concordia.ca>

Michel Roy, MBA

Management Consultant
Montreal, Quebec, Canada

Terry Gilliland, MBA

Director of IT and Automation
Locweld Inc.
Montreal, Quebec, Canada

October 2010
 Globalization of Performance Appraisals: Theory and Applications

Abstract

Purpose
This article attempts to provide a more complete perspective regarding the “best practices” for
performance appraisals of “distant” employees in global organizations.

Design/methodology/approach
A range of published works (1998-2009) on multi-national corporations and performance appraisals were
reviewed. The literature was used to determine human resource challenges associated with globalization
as well as the types of performance appraisals, common pitfalls and elements for improvement of
appraisal systems. Concepts were then combined to determine the “best practices” for performance
appraisal in a global setting. Finally, a small questionnaire consisting of six questions was constructed
and sent to managers in two companies in the health care industry meeting the criteria of having “distant”
employees. The questions were open ended in order to allow for a variety of responses enabling the
researchers to view trends and make comparisons to literature.

Findings
Adequate training must be provided to both the appraiser and the appraisee in order to avoid the many
rating errors that are common in performance appraisal. Training should include cultural, legal and
customer differences by country providing managers with the tools to improve on the process. Managers
must also be given the opportunity to build the required relationship with these employees.

Research limitations/implications
A questionnaire was sent to several key managers in two complex pharmaceutical firms meeting the
criteria with responses received. Further empirical research on the best practices of performance appraisal
for distant employees in global organizations should be pursued.

Practical implications
This article provides a source of information on what practices are followed in order to support the
performance appraisal of “distant” employees in different parts of the world.

Originality/value
There is limited literature dealing with “distant” employee performance appraisal in global organizations
and this article attempts to fill this need.

Type of Article: General Review

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Introduction
Globalization has become the mainstream for many industries and with it comes the difficulties
associated with social, political, environmental and cultural consequences. The purpose of this
article is to help identify, through a review of literature, the “best practices” in performance
appraisals within a globalized or multi-national corporation (MNC). In general, performance
appraisals in MNC’s are not unlike performance appraisals in any other organization. The area
where the authors have chosen to focus, however, is on upper management levels where it is not
uncommon for a manager to have employees scattered throughout the world. This distant
relationship adds other challenges for both the appraiser and the appraisee. These challenges may
in some cases be similar to those experienced by matrix organizations where an employee does
not report to his/her direct superior on a day to day basis, but rather to the business unit where
they are located and supplying their services.

The article will be broken into five sections. The first section will look at some of the reasons for
globalization of organizations, the strategies and structures needed to operate on a global basis,
and some of the challenges faced by Human Resources (HR) in a globalized environment. The
next section will look at performance appraisals and will highlight the different methods
currently in use, some of the common pitfalls, positive and negative outcomes and, finally,
elements that can be implemented in order to improve on current practices. The third section will
discuss performance appraisals in a global setting and what systems prove to be most effective
and which do not. This will be accomplished through discussion of the challenges, trust and
relationship requirements, cultural differences and the types of appraisal systems best suited for
this environment. Next, the researchers will compare the results from the review of literature to
two companies in the health care industry, MDS Pharma Services (Contract Research
Organization) and Pfizer (Biopharmaceutical). In order to make the comparison, a small
questionnaire consisting of six questions was constructed and sent to managers meeting the
criteria of having “distant” employees. The questions were open ended in order to allow for a
variety of responses enabling the researchers to view trends and make comparisons to literature.
Finally, the authors will offer recommendations for performance appraisals in the global
environment.
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Trends and Reasons for Globalization Structures and Strategies

The availability of foreign products and services in many countries of the world has dramatically
increased since the 1990s and it is not uncommon to see stores such as a Carrefour in
competition with superstores such as Wal-Mart (Hammond and Grosse, 2003). An explanation
for this may be found in the definition of globalization as sited by Hammond and Grosse (2003).
It is the homogenization of people’s tastes and demand patterns around the world, due to
increased access to international communication of information about products and services as
well as increased access to transportation of products and people across borders. However, with
expansion comes the difficulty of employing people in more than one country and the need for a
structure-strategy on how the operations are to function in this foreign environment.

When organizations globalize operations, they are faced with the question of how to integrate the
new operation with the existing one. One concern is the relationship that will be maintained
between the corporate center and its foreign-based subsidiaries (Kamoche, 1996). It has been
stated that a central issue for management of MNCs is the extent to which the operations will
adapt to the foreign host’s environment versus maintaining parent company practices (Prahalad
and Doz, 1987; Rosenzweig and Singh, 1991). One obvious reason for this is when organizations
find themselves operating in foreign countries, the subsidiaries will face pressures to both adapt
locally and integrate globally (Sauers, Lin, Kennedy and Schrenkler, 2009). This conflict of
goals and practices leads to MNCs having to adopt one of two strategies; multidomestic or global
orientation (Porter, 1990; Roth, Schweiger and Morrison, 1991).

According to De Wit and Meyer (1998), with the similarities in international demand,
organizations can reap the benefits of product standardization on a global scale. With product
standardization, the international integration is facilitated through the pursuit of further
economies. The greater the standardization, the greater the economies of scale that can be had by
the firm which means the organizations pursuit will likely be towards global integration as
opposed to multidomestic.

However, the firm must meet the needs of its customers and in a foreign country these needs may
differ from what is considered standard. Furthermore, globalization is seen by some as a threat to
national identity and a loss of national sovereignty (Hammond and Grosse, 2003). In Latin
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America for example, the benefits of globalization are heavily debated. Those having benefited
little claim that the appearance of it being the solution to poverty and underdevelopment has
been false. In Europe on the other hand, the views are more positive, and in Asia, although there
is resistance to cultural homogenization, the opening of borders has resulted in staggering growth
rates. In order to satisfy these concerns, perhaps MNCs should seriously consider the benefits of
adopting the multidomestic strategy and forego some of the benefits of standardization.

While these two strategies would seem at odds with one another, there remains a third
possibility. This strategy, referred to as “global localization” benefits from the best of both
approaches. Described by Ohmae (1994) as the most advanced stage of corporate globalization;
where management of the MNC is both global and local in orientation. Rather than develop only
local responsiveness, knowledge transfer or pursue global efficiency, Bartlett and Ghosal (1988,
1992) believe that all must be practiced simultaneously. This structure would require managers
to act based on a shared perspective rather than on an organizational chart. This was referred to
by Bartlett and Ghosal (1992) as “creating a matrix in the manager’s minds”. The global
localization strategy and structure diffuses power across the MNC creating an interdependent
network of firms (Kidger, 2001).

Ultimately, the strategies put in place by the corporation will dictate the Human Resource
Management (HRM) policies and procedures that Human Resources (HR) will put in place as
well as the challenges that will be faced.This is the next challenge to be analyzed.

Human Resource Challenges with Globalization

As organizations enter globalization they face the decision of what strategies they will use in the
foreign host country. This decision will also help dictate what HR strategy will be implemented.
As global strategies are adopted by the firm, higher levels of global integration of key HRM
processes are needed (Brewster and Suutari, 2005). As such, HR managers can no longer simply
adapt past processes for the future and the changes will affect everything from recruitment and
team selection to performance measurement and training. The company’s subsidiary strategy and
cultural and legal differences are some of the challenges that must be considered by the global
HR department. Along the same lines as the globalization strategy, HR will need to consider the
benefits of both local and standardized policies. The four main challenges identified during the
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literature review were the “Duality Challenge”, “Legal/Cultural Challenge”, “Leaders and
International Teams Challenge” and “Performance Challenge”. For the purpose of this paper, the
authors will focus on performance appraisals and the challenges which ensue.

A (Brief) Background on Performance Appraisal Failures

Many researchers have published articles on the pitfalls and the failures of performance
appraisals including Schweiger and Sumners (1994), Longenecker (1997), Fink and Longenecker
(1998), Rees and Porter (2003), Piggot-Irvine (2003) and Rees and Porter (2004). All of these
researchers have identified different results as to why performance appraisals fail. Psychometric
errors are one of the main reasons why performance appraisals are done ineffectively within
corporations. These errors, leniency, halo effect, restriction of range, recency and contrast, are
attributed to the psychological predisposition of the appraiser during the appraisal process.

Some researchers have suggested that one possible way to minimize psychometric errors is by
using a multi-rater system of evaluation (Appelbaum, Nadeau and Cyr, 2008B), (Edwards and
Sproull, 1988), (Rees and Power, 2003). A self performance appraisal is another method that can
support the multi-rater system to reduce the presence of psychometric errors. As compared to the
multi-rater system, very little research has been carried out related to the self-assessment
appraisal method. However, most studies that were done on self-evaluation indicated positive
results relating to the appraisal process. Farth et al (1991) state that self-evaluations can increase
the effectiveness of the appraisal system and result in a positive impact on an employees’
satisfaction with the evaluation and his/her perception of justice and fairness. Similar results
were found by Jackson et al (2003). Employees who had a chance to rate themselves became
more involved and committed to his/her personal goals.

Elements to Improve Performance Appraisals

Piggot-Irvine (2003) conducted three studies from 1996 to 2001 on the topic of performance
appraisals. Based on the findings, the author mapped out (Figure 1) all of the essential elements
required to perform an effective performance appraisal.

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Figure 1: Elements of appraisal effectiveness. (Piggot-Irvine, 2003)

Training is a crucial factor to conducting effective performance appraisals. Companies must train
their managers on how to conduct performance appraisals and managers must know how to set
proper goals and objectives at the beginning of the calendar or evaluation year. There is a general
consensus among researchers on the topic that companies must give some sort of training to their
managers on how to give proper appraisals to employees. Managers must receive training in
supervision skills, coaching and counseling, conflict resolution, setting performance standards,
linking the system to pay and providing employee feedback.

In addition, the appraiser must receive periodic re-training in order to maintain their performance
assessment skills. The rater should also be evaluated each year on how they conduct performance
appraisals with their employees (Boice and Kleiner, 1997).

According to the (Piggot-Irvine, 2003) model the most important elements to conducting an
effective performance appraisal are respect, openness and trust. These key features must not only
be present during the appraisal but they must be practiced between managers and subordinates

5
throughout the year. One way to develop this relationship is for managers to give feedback to
their employees on a frequent and ongoing basis.

In the first section of this article, the different aspects of globalization and their associated
challenges were covered while the second part provided an overview of the performance
appraisal process. In the next sections the authors will attempt to synthesize both topics in a
global context while providing a brief review of the literature. The discussion will identify some
of the main challenges companies are facing today and provide a real-life comparison of two
major companies in the life sciences industry with the findings relevant on conducting
performance appraisals on a global scale.

Performance Appraisals in Global Corporations

The trend towards globalization has created many challenges for Human Resource Management
(HRM) and much of it focuses upon performance appraisals. International performance appraisal
is a topic that attracts considerable interest from practitioners and academics, but most of the
research on this subject has concentrated on expatriate performance appraisals. To date not many
articles have been published on MNCs and international performance appraisal. The review of
literature suggests that conducting international performance appraisals is very challenging given
that a performance appraisal done in a local context can already be a complex process. When
performing one in a different country variables such as language barriers, different values, and
different cultures come into play and make the task more complicated (Brewster, 1988). The
main reason cited was the difficulty for managers to know exactly what their employees
accomplished each day at work due to the geographic distance (Shen, 2004).

Shen looked at the differences between Chinese and Western performance appraisals. The key
differences were:

• Chinese performance appraisals are usually less transparent than Western appraisals
• Chinese performance appraisals are usually limited in feedback and communication
• Chinese companies do not provide training in order to improve appraisers skills
• Chinese appraisees cannot change his/her results in the appraisal document
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 • Chinese appraisers will not communicate negative feedback to appraisees

Shen mentioned that all the managers that he interviewed from the Chinese multinational
companies commented on the fact that the Chinese performance appraisal needs to be improved.
They believe the appraisers should be able to communicate on a regular basis with the appraisees
and they should also be able to inform the appraisees on their weaknesses so that they can
improve (Shen, 2004).

One possible solution to correct these differences is for the Chinese multinational companies to
adopt Western-style performance appraisals in order to measure managers and employees
performance. However, Hempel argued that Western-style performance appraisal may not be the
answer (Hempel, 2000).

According to the literature it seems there is a universal consensus on the importance of

international performance appraisals but there is a lack of agreement on what are the best
practices to conduct them at the global level. Brewster (1988) argues that the performance
appraisal at the international level is extremely complex because there is no correct way to assess
the performance of someone who is located a distance from the appraiser. Long distance
assessment can be quite challenging and complications may arise due to differences in culture
and society. In addition, the appraiser cannot evaluate the appraisee’s body language which
makes it more difficult. There are other factors that make an international performance appraisal
extremely complex such as different norms and policies, different legal systems and different
economic environments. This article will focus on the challenges of conducting performance
appraisals at the global level due to cultural differences and geographic distance.

Challenges of Conducting Performance Appraisals in Global Corporations

Conducting performance appraisals is an extremely complex process despite all the tools in
place. As previously mentioned; there are many variables that can interfere with the process and;
as a result; the performance appraisal would be perceived as ineffective and unfair particularly
when this process is performed at an international level. This article focuses on three major
challenges when conducting global performance appraisals: 1) Individualist and collectivist

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cultures, 2) Cultural differences and their relationship to leniency psychometric error and 3) trust
and open relationships. These were generally described earlier in the article.

Individualist and Collectivist Cultures. Globalization has become a major trend for many
companies and as such, studies were done at an international level allowing researchers to make
cross cultural comparisons. Bailey et al, (1997) analyzed employees’ performance in
individualist and collectivist cultures. The results demonstrated that employees of an
individualistic culture tend to rate their performance more favorably as compared to collectivist
culture. An individualistic culture is a culture in which the members' primary focus is that of
themselves and their immediate families (e.g.US and UK are considered as individualist
cultures). In contrast, a collectivist culture is one in which people tend to view themselves as
members of groups (families, work units), and usually consider the needs of the group to be more
important than the needs of individuals (e.g.China and Japan). There are some additional studies
that correlate with the results found by Bailey et al. Furnham and Stringfield (1998) and Stoker
and Van der Heijden (2001) found that employees from Western countries have a tendency to
rate their performance higher than their supervisors do. Cheng and Kalleberg (1996) analyzed
two individualist countries (US and UK). They found that US employees were more likely to
report that the quality and quantity of their work was higher than those of their British
counterparts.

It is a known fact, as the literature supports, that there is a gap between the evaluations of the
rater and the ratee but this gap exists for different reasons depending on the culture. The next
section will look at one specific culture to explain why this performance evaluation gap exits
between supervisors and employees. This gap is caused by the leniency psychometric error.

Cultural Differences and the Leniency Psychometric Error. Leniency errors occur when a
manager tends to be more lenient than his or her peers when rating employees or is more lenient
towards one employee when compared to another. As a result employee ratings are inflated and
do not reflect the reality of employee performance for the year.

A considerable amount of studies were devoted to the leniency error in Western cultures and, as
previously stated, these researchers are in agreement that self-ratings are significantly higher
than the corresponding supervisors’ ratings (Bailey et al, 1997; Stoker and Van der Heijden,
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2001). The authors of this article described a study that was conducted in the United Arab
Emirates (UAE) and noticed that the gap between the rater and ratee is still present for more or
less the same reason as Western countries. Mohyeldin and Suliman (2002) suggested that UAE
employees tend to rate their performance evaluation higher than their supervisors. The Arabic
culture is considered to be an individualist culture and therefore their rewards are linked to high
individual performance (behavior similar to Western countries). However, Arabic countries still
have certain “old-fashioned”historic practices. For instance, when an Arabic employee is
punished he/she will never know or be informed of the reasons for the punishment. This type of
behavior is contradictory to the notion of fairness, justice and ethics management. Arabic culture
is very similar to Asian culture at that level in that they are not transparent when conducting
performance appraisals.

Mohyeldin and Suliman (2002) also indicated that a married person will always get a better
performance appraisal as compared to a non-married person in Arabic culture. Married
employees do not want to lose their jobs or status within the company as this would be
considered a disgrace to them and their family. Supervisors are therefore inclined to overestimate
a married employee’s performance in order to avoid his/her complaints and confrontations.
Furthermore, married supervisors want to avoid any issues coming from their employees as they
too do not want to lose their jobs or status within the company.

Mohyeldin and Suliman (2002) suggested that it is time now for all the organizations that are
operating in the United Arab Emirates to transfer from a secret performance appraisal to an open
appraisal. When employees openly discuss their performance results with their supervisors the
perception gap will be reduced. Reducing the gap between the appraiser and appraisee will
improve the communication, trust and relationship between them. We now consider how
building trust and an open relationship may be challenging in the global environment.

Trust and open relationships. Developing trust and open relationships between supervisors and
employees is fundamental to achieving an effective performance appraisal. Normally this process
is easily achieved when both manager and employee are working locally. The daily face to face
interaction makes it easy for the supervisor to provide informal feedback on how well the
employee is performing at work. This mitigates any surprises at the year-end performance
9
appraisal. However, developing trust and open relationships could be quite challenging when
supervisors and employees are working in different countries. Different cultures and background
can slow down the development of trust and open relationships between managers and
subordinates. For instance, Chinese and Japanese employees will not trust anyone immediately.
It may take years before you earn their trust and be able to have open relationship. However,
once this has been achieved, they will be very loyal and it will take much to destroy that trust and
the relationship. On the other hand, North Americans will trust and develop relationships much
faster than Asians. Other factors such as time zone differences, language barriers, gender and
social status can interfere with the development of trust and the relationship process between
supervisor and employee. These factors and challenges can widen the gap between the rater and
the ratee and in the end the performance appraisal could be perceived as unfair (Piggot-Irvine,
2003). We can now compare the complexity of performance appraisals as found in the literature
with actual situations obtained from two organizations in the life sciences industry.

Applications in Practice

In order to compare the information obtained through the review of literature, the authors
conducted a small research study with two international companies operating in the health care
industry: MDS Pharma Services and Pfizer.The survey consisted of a six question questionnaire
and was sent to several managers meeting the criteria of having “distant” employees. The sample
was small due to the limited number of managers responsible for distant employees.The
questions were open ended in order to allow for a variety of responses. A face to face interview
was also conducted with the Vice President of Human Resources of Pfizer Global
Pharmaceuticals located in the United Kingdom. Seven MDS managers were also interviewed
and two managers declined.

The following terms used in the questionnaire are defined as follows:

The term “distant employee” is where a manager and his employee are separated by a significant
distance, normally another country and another time zone. This separation often makes it
difficult to communicate with or see the employee on a regular basis. Also the term“multi-rater
performance appraisal” refers to an employee being rated by more than one source. Typically
this will be their direct manager as well as other managers for whom they may have provided
10
services throughout the year. The questionnaire asked the following with the modest results to
follow:
1. What approach do you use to make a fair performance appraisal of your distant
employees?
(E.g. Standard appraisal, Self- appraisal, 360 degree, multi-rater appraisal.)
2. Are performance appraisals performed face to face with distant employees? Is this
budgeted?
3. Which performance appraisal system do you believe would be the most appropriate for
distant employees?
(E.g. Standard appraisal, Self- appraisal, 360 degree, multi-rater appraisal.)
4. How do you build the trust and open relationship required with a distant employee to give
a performance appraisal that will be considered justified and appropriate by the
employee?
(E.g. Asia historically requires years of relationship-building to trust someone. This may
not be present. I.e. Manager is in UK and employee in Japan.)
5. How do cultural differences affect the way performance appraisals are received by distant
employees?
(Westerners typically rate themselves higher on an individual basis than Asian people.
This is because the Western mindset is to work individually where as Asians work
collectively.)

6. What other difficulties do you see when conducting performance appraisals for distant
employees?

Approach for Fair Performance Appraisals. The first question asked managers what type of
performance appraisal they used with their distant employees (i.e.Standard, Self-appraisal, 360
degree, multi-rater). In all cases, managers stated that they used some form of a multi-rater
system whether formal or informal. In most circumstances the feedback from outside
stakeholders was obtained via email or phone conversations. Another method said to be used by
one manager was self-appraisal. This would seem to be in line with the best practices obtained
through the review of literature and the use of performance appraisals know today basically as
11
“modern methods” (Schweiger and Sumners, 1994; Appelbaum, Nadeau and Cyr, 2008B). The
interview with Pfizer’s VP of HR revealed that Pfizer has implemented a common understanding
of the rating among leaders as well as a calibration process that is used to ensure fairness across
teams and team members. Furthermore, both firms use Specific, Measurable, Achievable,
Realistic and Time bound (S.M.A.R.T.) objectives, a form of management by objectives, that
are set at the beginning of the appraisal year and evaluate personnel on these objectives
accordingly.

Face -to-Face Appraisals. One issue that continually appeared in the literature was the need for
a relationship and trust between appraiser and appraisee. Managers tended to agree with this and
felt that a face to face appraisal was extremely important. However, in situations such as the
economic turmoil that many industries are facing today, the availability of a travel budget for the
purpose of performance appraisals is rare. As such, many managers are modifying their travel
schedules in an effort to ensure they are able to be at a particular location when performance
appraisals are due. This is usually acceptable for the annual review, but is far less likely to be
accepted for the quarterly or midyear reviews. Since face- to- face encounters are not always
possible, “the appraisal should become a process more than a dialog” as stated by the Pfizer VP
of HR. This was also viewed by many authors as the type of information that must be spread to
managers and employees. This understanding will help to cement the fact that even the weekly
phone calls can and should be used to provide feedback on an ongoing basis.

Appropriate Performance Appraisal System. Brewster (1988) argues that the performance
appraisal at the international level is extremely complex because there is no correct way to assess
the performance of someone that is located a distance from the appraiser. The difficulty for
managers to know exactly what their employees accomplished each day at work due to the
geographic distance (Shen, 2004) was echoed by one manager that wrote “I’m not on site to
witness my teams’ performance”. As such, all managers felt that a multi-rater system would be
of greatest value. Some managers felt that a combination of multi-rater and self-appraisal could
provide even more information however they believed this to be labor intensive. One comment
that was found to be interesting by the authors in the literature was that distant employees are
considered trusted employees without the need for direct supervision. This suggests that these

12
employees were actively sought out as potential candidates and developed to operate in the
global environment. A final comment on this subject was that caution must be taken when doing
international performance appraisals across cultures. It was mentioned that although appraisal
methods such as the 360 degree was of great value, some cultures, such as a collectivist culture,
are not accepting of these methods.

Trust and Relationships. Managers felt that the first year and hence the first impression that they
had on their distant team members was critical. They believed that the first meeting had to be
face to face and the standards and expectations had to be designed up front. While setting
expectations the managers could also state what they were promising to do for the employees,
however the managers had to ensure that they delivered on these promises. This built the
foundation of trust upon which a relationship could be constructed. Interaction, communication
and regular feedback were also cited as requirements as well continuous fairness amongst team
members to continue the trust building. Furthermore, employees need to feel that the manager is
accessible regardless of the distance that separates them. For this reason, face to face meetings
should occur throughout the year. However there must be formal and informal interactions
between the manager and his/her team at least once a week; either virtually, by phone or in
person. Another comment related to the need for the manager to find out “what made each
employee tick”. They would work to find what each employee valued (title, work, money, etc.)
and help the employee to satisfy those particular needs thereby building the trust and relationship
with the employee. Factors such as time zone differences, language barriers, gender and social
status can interfere with the development of trust and open relationships between the supervisor
and employee. These factors can widen the gap between the rater and the ratee and in the end the
performance appraisal could be perceived as unfair (Piggot-Irvine, 2003). It would seem that
most managers have developed some tactics with which to avoid these problems even though
formal processes may not be in place.

Different Cultures Receive/Perceive Performance Appraisal Differently. The Pfizer VP of HR

spoke of how different cultures may have a different understanding of ratings. Therefore Pfizer,
starting with its leaders, is developing a common understanding of ratings so as to ensure that an
“excellent” translatted quanitatively rating will have the same meaning across different countries.

13
MNCs will need to balance the need to standardize HR best practices across borders with the
need to integrate local policies and customs (Poutsma, Ligthart, Veersma, 2006), but with
standardization resources must be in place to ensure a common understanding of the standards.
Managers cited the need to clearly communicate what rating system was being used and what
behaviours translated into what rating. There was also a consensus that managers need to
familiarize them with the culture they were dealing with and to use the approach that was
appropriate for that culture. This awareness of culture can also help managers accept the way a
distant employee may react to the performance appraisal. For example, one manager spoke about
his employees in France being very protocol driven. As such, if they were to disagree with the
rating, they would go to the HR department with their concerns rather than discussing it one on
one with the manager. The manager stated that he viewed this action differently than if it were to
happen with his North American employees. This suggests that cultural training is important for
managers with employees in different countries and the organization should take this into
consideration during globalization. Much of this development can be achieved through the use of
international teams where managers can gain international experience and learn cross-cultural
interaction (Brewster and Suutari, 2005). Working in a team environment, leaders must be able
synthesize diverse cultural needs and perspectives of all team members (Odenwald, 1996)
thereby preparing them for a future role in global management.

Other Difficulties Encountered. The final question was used to elicit difficulties and concerns
that may not have been found in the literature. Below are some points taken from the responses:

• “I am used to walking around to read non-verbal cues of my people and I have lost that”.

• “Time zone differences force communication to largely be based on email and phone
messages. This makes it difficult to ensure that messages are received and understood”.

• “Performance appraisals are very personal and if you cannot be there in person, it can
magnify the sense of distance”.

• “Distant employees may have a sense of separation and loneliness and adds the challenge
of ensuring the employee feels included in the team or department”.

14
 • “Not knowing the individual enough and not spending enough time to get to know the
employee”.

• “Not supplying sufficient development for a distant employee”.

• “Error in rating without a formal multi-rater process in place. Stakeholder feedback was
received too late”.

The last point was explained through the description of an incident the manager encountered. He
felt that an employee had a very good year and had performed quite well. He felt that some
aspects merited an “exceeds expectations” rating, but not in all areas. The overall rating the
employee was finally given was exceeds expectations. One month after the appraisal, the
manager visited the site to establish goals for the coming year. At that time the manager received
stakeholder feedback that would have resulted in the employee getting a “meets expectations”
had the information been received prior to the evaluation.Distance can confuse and distort
positive intentions in a most interesting manner.

Overall, there appears to be a correlation between the review of literature and the responses
obtained from the two firms even considering the limited responses and interviewees. Although
formal processes and procedures were not necessarily in place, all managers had a sense of what
was required in order to meet the needs of their distant employees. A summary of conclusions
and some recommendations will follow.

Conclusions

The trend towards globalization has increased in the last decade and as borders continue to open
and the world continues to get smaller through communication and ease of transportation, it is
likely to continue for the coming years. This realization requires MNCs to adopt strategies and
structures that can operate across multi-cultural environments in order to optimize efficiencies
while accounting for local policies and practices. The final strategy that is adopted by the
organization will inevitably influence the HR strategies that are put into practice and the
challenges that are associated with those practices. This “duality” in the organization will present
managers with new difficulties in the management of employees and the organization should
attempt to identify potential leaders and develop their skills through training and the use of
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multi-cultural teams’ s an opportunity and challenge rather than as a problem in need of some
nebulous solution.

Theoretically performance appraisals are a form of providing feedback, deciding promotions or

termination, determining compensation, identifying strength and weakness or areas for change
and identifying development needs that can help with career planning. It is a tool that both the
appraiser and the appraisee can use to enhance performance of employee and the organization.
However, the type of appraisal used must be in line and congruent with the requirements and
structure of the organization in order to reap the benefits. Training must also be provided in order
to limit many of the common rating errors that are experienced with all appraisal systems in
order to ensure that the performance appraisals are effective and the consequences of ineffective
performance appraisals is avoided. Once the performance appraisal is expanded to the global
setting the challenges are enhanced.

Performance appraisals in a globalized environment increase the challenges that the manager will
experience and myriad issues to be solved. The manager must now consider the cultural and
legal differences that the foreign subsidiary and hence distant employees are accustomed to.
They must ensure that the rating system has a common understanding across the different
cultures they manage and they must be aware of how each culture may react to the appraisal and
have respect and understanding of the reaction. However, the most difficult and yet extremely
important aspect of effective performance appraisals is the trust and relationship between
appraiser and the appraisee and in a globalized setting, this becomes even more challenging.
Managers must work to build the relationship through regular contact and if possible regular face
to face contact. The contact allows the manager to provide feedback to the employee and allows
for formal and informal communication that is usually achieved in the local environment with
daily interactions. Failing the ability for face to face contact, the manager is required to learn to
leverage the technologies available today such as video-conferencing. This can enhance the
communication by allowing the manager to view the body language of the employee without
having to physically travel to the location.

Finally, with the use of a questionnaire, the authors were able to compare/contrast the literature
to actual organizational situations in the modest research situation described. Responses from
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managers supported the literature quite closely in the difficulties in dealing with distant
employees. It was apparent that the managers were aware of the importance of communication
and multi-rater appraisals even though formal processes were not necessarily in place. The
managers also identified other difficulties such as the distant employees feeling a sense of
loneliness or separation. They also believed that if appraisals were not done in person, the sense
of distance could be magnified.

The authors believe that the multi-rater method of performance appraisals will provide the MNC
and its managers with the most reliable and consistent metrics on employee performance.
However, training on how to perform performance appraisals is of utmost importance as it will
enhance the effectiveness. Furthermore, managers of distant employees must be trained and
developed in the cultural and legal differences across countries. Organization must actively seek
out potential candidates and develop them to operate in the global environment through the use
of international teams where managers can gain international experience and learn cross-cultural
interaction skills. Finally, organizations must help the manager to learn how to build the trust and
relationship needed to be effective with his/her employees through travel, phone contact and
possibly virtual means to ensure the effectiveness and success of the globalization of
performance appraisals.

Recommendations

The challenges involved in the performance appraisal process are present even in a traditional
national environment. Rating an employee, unless it exceeds his/her expectations, can be a very
difficult task for a manager and is only amplified when put into a global setting. Managers must
be given the unique tools needed to perform the appraisal for a distant employee in order for it to
be effective.This article has attempted to identify these interventions.

The authors of this article believe that the recommended appraisal methods in a global
environment are 360 degree or multi-rater. This method allows the manager to receive feedback
on his/her employee’s performance from the people or business unit for whom the employee
performed services. The system should also include a standardized measurement scale and the
scale must have a common understanding across the organization in order to provide for reliable
and consistent metrics. Choosing the proper performance appraisal method and rating system
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must then be followed with training for the appraiser and the appraisee on effective performance
appraisals and specifically for the appraiser in the following areas:

• Supervision skills
• Coaching and counseling
• Conflict resolution
• Setting performance standards
• Linking the system to pay
• Providing employee feedback
• Cultural Differences

In addition, to maintain their performance assessment skills, the appraiser must continue to
receive periodic training. The use of training will help to reduce and possibly eliminate the
common rating errors that are experienced with even traditional performance appraisals.

In order to address the cultural and legal differences that exist from country to country, a
manager must be prepared for the task. The manager must be able to recognize and respect the
cultural differences and approach the employee’s appraisal in a manner appropriate with that
culture. Research suggests that training is imperative and leaders should be developed through
the use of global teams. This experience on global teams allows the managers to experience the
different cultures preferences and it provides a forum for the manager to build self awareness of
his/her own cultural preferences and values. The authors also believe that when given a new
position, a manager should receive training specific to the culture(s) he/she will be managing
(ex: if employees are Chinese and German and the supervisor is located in Canada then she must
receive training in the Chinese and German cultures).

The issue of building trust and a relationship with a distant employee is difficult for a manager.
The manager must make regular contact with the employee in order to help build the trust, but
he/she must also be aware of what is needed to build trust in that culture. The manager needs to
call/contact the employee weekly in order to provide feedback and to simulate the casual interact
that would be obtained if the employee were local. The lack of face to face meetings where body
language can be assessed and moods can be determined can inhibit the interactions that are

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generally used to build a connection. Ideally, the authors believe that organizations should
budget for visits by managers to distant employees on a regular basis. Not only would this help
to build a relationship, but it also allows the manager to speak with local stakeholders and assess
the employee’s performance on an ongoing basis. Furthermore, with the technologies available
today, managers should learn to leverage its use. For example, many organizations cannot budget
travel due to their economic situation. As such, a manager should consider the use of
applications like video conferencing. This will allow the manager to interact with the distant
employee and view the body language missed over the phone.

Finally, the authors recommend that additional empirical research be done on performance
appraisals for distant employees in a global organization.The current literature is quite limited
requiring the researching/writing of articles such as this one to help close the gap and/or expand
the base. Additional studies should be conducted in this area in order to prove they can reduce
the performance appraisal gap at the global level. Firms are continuing to globalize in order to
reap the benefits and further research will help these organizations to implement and maintain
the appropriate performance appraisal systems required for the optimum management of these
organizations.

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