Performance Management

Chapter Outline

Challenges for MNCs?

Basic Components of PM?
MN Performance Management
Five Major Constraints
Expatriate Performance Management
Who Conducts Performance Appraisal?
Contextual Model of Expatriate PM
Appraisal of HCN Employees

Monitoring Performance and Ensuring

conformance to agreed standards.
Effective PMS required to ensure Strategic
Cohesion and competitveness.

Basic Components of PM
MNC Strategies & Goals
Subsidiary Goals
Job Analysis
Job goals and standards
Performance Appraisal

Individual (PCN, TCN, HCN)

Basic Components of Performance

Management

MNC have specific expectations for each of its subsidiary

Market Performance
Contribution to total profitability and Competitiveness
MNC should recognize the various constraints the subsidiaries
may face while attaining the above said objectives at the time of
evaluating the performance of the subsidiaries.

Five Major Constraints (Factors to be considered)

Whole Versus Part
Non Comparable Data
Volatility of International Environment
Time & Distance
Variable levels of maturity

Control and Performance

Management

Performance management is part of the

multinationals control system.
Performance targets are part of formal control.
Performance management contributes to shaping
corporate culture, e.g.

Who conducts performance appraisal

Tangible versus intangible criteria
Individual versus team based appraisal
How results linked to HR decisions, e.g., compensation
and promotion

Expatriate Performance Management

Performance Variables
Motivation
Ability
Working Conditions

Expectations
Impact of the above said variables and their inter relationship should be
considered

Variables that influence Expatriate Performance

Compensation
Task
Environment
Cultural Adjustments

Variables Affecting Expatriate

Performance
Cultural adjustment self and family
Host environment
Headquarters support
Task
Compensation
package

Expatriate
Performance

Tasks
Expatriates are assigned Four Certain Tasks

1)

CEO or Subsidiary manager oversees and directs the entire foreign

operations.

2)

Structure Reproducer (Caries the assignment of building or Reproducing in

a foreign subsidiary a structure similar to that which he/ she knows from
another part of the company Example: Marketing framework,
implementing an financial Reporting system.

3)

Trouble Shooter- Individual send to a foreign subsidiary to analyze and solve

an operational problem.

4)

Operative-Performs functional job tasks in an existing operational structure.

Task Variable-Under the control of MNC. It can be better assessed and

changed.
Environment Factors-Not Under the Control.
MNC determines the role assigned with the task. Role is predetermined.
Expatriate (Role Recipient), the Parent Company ( Role Sender) predetermines
his or her role in a foreign assignment and role expectations are clearly
Communicated before his departure.
Role is defined in one country but performed in another (Role conception is
culturally bound)

HC stake holders also communicate the role conception to the Role recipient.
Trying to perform two different expectations may cause role conflicts.

Roles
A role is the organized set of behaviors assigned to a
particular position.
Effective role behavior is an interaction between the
concept of the role, the interpretation of expectations,
the persons ambitions, and the norms inherent in the
role.
The difficulty for the expatriate manager is that the role
may be defined in one country, but performed in
another.

PCN Role Conception

TCN Role Conception

Commitment to Parent Company

HQ Standards used in expatriate performance evaluation
Parent Company way of doing things in to subsidiary
Expatriate career with parent not the Host.
Host Govt
Environment has an impact.

Society, legal, Economic, technical and physical demands can be

major determinants of performance.

Cultural Adjustment
Main Cause for Expatriate Failure
Families and individuals have problems in adjusting to the
new environment.
Impacts managers performance.
Individuals vary in terms of their reaction and coping
behaviors.

Concept of Adjustment Cycle

Typical Phases encountered during cultural adjustments

PIV
PI
Adjmt

PIII

PII

Time

U Curve
It is purely based on Psychological reason
PI (Prior to Assignment) (Reactions)
Fear, Anxiety, excitement, sense of adventure
Upswing in mood upon arrival in the country. It is referred as
honey moon phase.
Realities of everyday life in foreign intrudes. Home sickness sets
in.
Downswing Commences (Party is over)

PII
Leads to period of crisis
This can be a critical time and how he copes with psychological
adjustment.
This phase has an important outcome in terms of success and
failure.
Once past this crisis point, Expatriate comes to terms with the
demands of the new environment

Pulling Up (PIII)
Begins to adjust to new environment
Healthy recovery (PIV)

U Curve is not normative (some dont experience) Individual reaction

differ.
Time Period involves varies. No conclusive statistical support for this.
Does not explain how and why people move through various phases.
Family members experience it differently.
How family members adjust is important since it has a spillover
effect.
Personality factors also play a major role in explaining the managers
ability to adapt.
Authoritarian have difficulty in accepting and adjusting.
Open minded individuals seems to adapt to new environment more
easily

Performance and development Planning Process

Appraiser will assign relevant

URR to Appraise

Appraise will draw-up

Development Plan

Appraise will submit

Performance and
Development
plan to Appraiser

Appraise will identify Flexible

KRAs and write Optional
KRAs if required

Appraise will assign percentage

weightages to each KRA and
RR out of a total of 100%
for each section

Appraiser will discuss

targets using stretch
tool and finalise PDP

Appraise Will Set

Targets and
Develop Action
Plan for each KRA

Appraise will define

Routine
Responsibilities and
Develop Action Plans

Appraiser will
send finalised
plan to Reviewer
for Sign-off

Final Performance &

Development Plan for
The Appraise

Mid-Year Review Process

Appraise will complete

Self appraisal on PDP

Midyear feedback document

completed

Appraiser will provide feedback on

Performance and guide Appraise on
future direction

Appraise will submit

Self-Appraisal to Appraiser

Midyear
feedback will be documented

Final Review Process

Appraise will complete Self-Appraisal and
Submit to the appraiser

Appraiser will review Self-Appraisal & Performance

Outcomes of the Appraise for the Performance Cycle

Appraiser will Provide feedback on each area

Of Performance and development to Appraise

Appraiser will determine rating on each KRA,RR and

Competency

Appraiser will determine Overall Score based

On KRA Score, RR Score and the weightages
Assigned to each section

Appraiser Sends final Review documents and Overall

Score to Reviewer

Concludes Final Review

Phase

Final Score is communicated to

Appraise and Appraiser

Reviewer Validates and

provides Final Score

Contextual Model of Expatriate Performance

Management

Performance Appraisal
Performance criteria
Hard goals: objective, quantifiable and can be
directly measured
Soft goals: relationship or trait-based
Contextual goals: factors that result from the
situation in which performance occurs

An appraisal system that uses hard, soft and

contextual criteria is advocated

Other Factors Affecting Appraisal

Who conducts the performance appraisal
Use of standardized or customized appraisal
form
Frequency of appraisal
Performance feedback
Timely
Geographical distance affects

Comparative Summary of Performance Review

of Some Countries
Criterion

America

Japan

Russia

Middle-East

Objective

Periodic Review based On preset

goals: Identify Personal Strength
& Weaknesses

Find out why the performance

is not in harmony with the
group

Period review based

on preset goals;
Identify Personal
Strength &
Weaknesses

Set employee on the

track; Reprimand for bad
performance

Structure

Formal Procedure; Every 6/12

months; In the Managers office

Informal: Ad hoc with

employee; Frequent reporting
to administration; In office
Coffee Shop, bar

Formal; Annual; In
managers office

Informal, Ad-hoc;
Recorded in managers
office

Interaction

Two way; Both sides openly

present own point of view;
Manager as a leader, advisor;
Employee independent, self
motivated

Employee answers Managers

concerns; Manager gives
advice as parent, mentor,
senior employee; Part of
group/family; continuous
feedback

Evaluation

Success Measured by
performance to stated goals

Success measured by
contribution to group harmony
& output

Outcome

Promotion; Salary Increase;

Bonus; Commission; Salary
Freeze; Loss of Title; Loss of
Power

Mainly affect the amount of

Semi Annual Bonus: Less
Important Job; Job Rotation

Stress agreement on expectation;

Documented review

Performance Continually
forward to Personnel; Open
door

Training is Planned;
Reward in terms of
Bonus

Admiration or Threat of
Punishment: One-way
door

Openness; Equality; Fairness

Group Achievement;
Relationship

Individual
Achievement;
Information Seekers

Privacy: Authority;
Parenthood

Closing

Influencing
Cultural
Variable

Two Way; Open

Success Measured
by performance to
stated goals
Bonus; Training

One Way door

Manager guides
Subordinate; Authority
figure mentor; random
Feedback; Child is
family
Success Measured by
Personal contribution

Bonus of day Salary;

Promotion; Salary
decrease

Who Conducts PA?

Superior Appraise their Subordinates.
Superiors back at HQ evaluates the performance of the
subordinates who are separated geographically in such case the
performance cannot be evaluated since Supervisors are not in a
position to evaluate the expatriate performance on day to day
basis.
Subsidiary Managers has to be assessed according to the
Subsidiary Performance.
PCN or TCN Subsidiary Manager will implement local
strategies that favor short term performance.
Subsidiary CEO Conducts appraisal of the HC Supervisors.

Some Expatriates prefer to have PC Evaluations.

Reason

Their future Career progression depends on how the evaluation

data is utilized back at HQ.
Techniques Used

Multiple Raters Technique is used in Domestic Context.

Team Evaluation is used to evaluate the expatriate performance.
Frequency of Evaluation
Yearly Basis

Appraising HCN Employees

Main issue in HCN Appraisal is Cultural Adaptation
How to Overcome this?
HC Nationals to assist in devising a Suitable Appraisal System for
appraising the subsidiary employees and to advise on the conduct of
the appraisal.
Consequence

May affect the process of standardization of PMS.

HCN-Subsidiary Manager
He is expected to perform a role that is conceptualized by a psychologically and physically distant Parent
Company, but enacted in an environment with other role senders who are Psychologically and physically
close.
PC Role conception when communicated to the HCN, it crosses the cultural Boundary, as does the feedback
expressed as HCNs Role Behavior.
For Subsidiary Staff below the top management level. PMS is localized.
Conflicts may arise when HCN reports to PCN Expatriate Manager.
Companies use 360 Degree feedback and some companies used same appraisal form for HCN as for their
domestic employees.
Each has its own drawback..
To overcome this some companies are developing Information system to assist in PMS.
This also has its own set of problems.
Piracy

Legal Constraints imposed by some Host Govt.

However some companies like Pepsi Cola has been successful in devising PMS which takes care of Local
Concerns.

Pepsi Cola International

PCI devised a common PMS that focuses on Motivating Managers to achieve and maintain High Standards of
Performance. Administrative Consistency was achieved through the use of PMS of five feedback mechanism:
instant Feedback, Coaching, Accountability based Performance appraisal, development feedback and a HR
Plan.
The common system provided guidelines for Performance appraisal yet allowed modification to suit cultural
differences. For example, the first step, Instant feedback- is based on the principle that any idea about any
aspect of the business or about an individuals performance is raised appropriately and discussed in a sensitive
manner. The instant feedback message could be delivered in any culture; the important thing was not how it
was done but that it was conducted. In practice at PCI, the successful delivery of instant feedback required
some adjustment to local cultures. Americans used it because it fitted a fast paced way of doing business. In
most Asian cultures, feedback may be tough and direct but it is never given in public; nor, in some Asian
Cultures, does head nodding during instant feedback signify agreement, only that the message has been heard.
Some latins argue very strongly if they do not agree with the feedback and some employees, Indian Nationals,
for example, insist on a great deal of specificity.
The purpose of instant feedback was to improve business performance, not to criticize cultural styles. In using
this system, PCI was trying to balance the cultural and administrative imperatives of successfully managing
the performance of a diverse workforce.

Conclusion
In relation to the PMS, generally, it seems that the process remains problematic, irrespective
of the cultural impacts. For example, recent research reported common findings across 10
countries, which was the failure of PA to fulfill its development purpose. The study formed
the part of the Best Practices in IHRM project, described as a multi year, multi researcher,
multinational project. The Ten Countries were, Australia, Canada, China, Indonesia, Japan,
Korea, Latin America, Mexico, Taiwan and the USA.
The Researchers Noted

It appears that the potential of appraisal is not fully realized in the current practice, not only
( as widely believed) in the US , but also in most other countries.