Introduction
Globalization has opened doors of opportunities for companies and organizations to explore markets beyond their home countries. Because of globalization and increase in mobility, these companies are able to enter new markets and to offer their products and services to new customers. This paper focuses on a multinational company and its performance management strategy concerning expatriates or international assignees. This paper discusses the different challenges and problems in managing the performance of international assignees, analyzing the different areas in international performance management. Recommendations to make international performance management more effective are also presented.
In order to start the discussion and to provide a foundation for the paper let us briefly discuss international human resource management (IHRM). IHRM deals with the procurement, allocation and effective utilization of employees in international settings. International Human Resource Management is the process of procuring, allocating and affectively utilizing human resources in a multinational corporation. HRM managers in multinational corporations need to accomplish two contradictory objectives. The first one is that they need to combine HRM policies in all the company’s subsidiaries located in different parts of the world. The HRM managers must also ensure that the management of human resources in the organization is flexible enough to adapt to different cultures (Sims 2002).
Compared to domestic HRM, in the filed of IHRM, there is a need for a broader outlook in almost all HRM tasks. IHRM personnel are expected to effectively hurdle through issues like taxation in international settings, repositioning employees to various locations, tasks to ensure successful expatriation, development and appraisal of domestic employees and international assignees, and management of host-government relations. In the subsidiary level, the HRM personnel are more involved in the employees’ personal lives (Dowling et al 2008). Subsidiary HRM personnel often arrange housing and healthcare for international assignees. Aside from that are also in-charge of transporting, educating, and facilitating recreational activities for international assignees and domestic employees (Sims 2002).
The International Assignee
For the purpose of this report, we will call an international assignee an expatriate. An expatriate is defined as citizens of the country of the headquarters of the multinational firm and employed by the firm in the country of its headquarters that is transferred or assigned to another country, to work in a foreign subsidiary or other type of operation of the multinational firm for more than one year (Briscoe and Schuller 2004).
The expatriate or international assignee needs to develop and use the competencies necessary for any managerial assignment. But in addition to these capabilities, they must also develop the following:
- Ability to manage an international business and all the complexities that it entails
- Ability to manage a workforce with cultural and subcultural differences
- Ability to plan for, and conceptualize, the dynamic of a complex, multinational environment
- Being more open-minded about alternative methods for solving problems
- Being more flexible in dealing with people and systems
- Understanding and managing the interdependencies among the firm’s domestic and foreign operations (Briscoe and Schuler 2004)
International Performance Management
Sims (2002) characterizes performance management (PM) as the HR task that aims to integrate performance assessment with wider HRM systems. This is done to ensure that employees performance and behavior are in accordance to the overall objectives of the organization. This means that performance management aims at identification, encouragement, measurement, evaluation, improvement, and rewarding of employees based on their performance in fulfilling their responsibilities (Sims 2002). PM aids the organization in sustaining or improving performance (Gilley and Maycunich, 2000).
In the international level performance management entails more challenges. Basically, international performance is employed to monitor performance and ensure conformance to agreed standards. International performance management is the process that enables multinational companies to evaluate, and continuously improve individual and corporate performance against preset goals and targets (Pattanayak 2005).
Effective Performance Management for Expatriates
International performance management is a designed, implemented and evaluated intervention of a multinational company for the purpose of managing performance of its global workforce so that performance (at the individual, team, and organizational level) contributes to the attainment of strategic objectives and results in overall multinational company desired performance.
Organizations develop performance management systems for a number of reasons, but primarily for evaluation and development. These purposes are much the same for domestic and international operations. The major difference is that implementation of these goals is much more difficult in the global arena. An effective international performance management achieves the following goals:
Evaluating Goals
- To provide feedback to managers so they will know where they stand
- To develop valid data for pay, promotion, and job assignment decisions, and to provide a means of communicating these decisions
- To help management in making discharge and retention decisions and to provide a means of warning employees about unsatisfactory performance
Development Goals
- To help managers improve their performance and develop future potential
- To develop commitment to the company through discussion of career opportunities and career planning with the manager
- To diagnose individual and organizational problems
- To identify individual training and development needs
Company Background
Hewlett Packard is known as one of the world’s top company that offers assistance in technology. The company’s diverse offerings include Information technology infrastructure and other computer-related products.
Hewlett Packard Way
The company values and philosophy were established by David Packard in 1989. These values is central to the HP Way. The values that the company wants to promote is no different from the values of other large organization. Perhaps, the main difference is the commitment that everyone in the organization is giving the HP values as a tool in management. The foundation of all the activities in the company centers on the “Hewlett Packard Way”. .The HP Way promotes respect for everyone and recognition of each one’s successes (Peters and Waterman 1982).
The HP Way: Subsidiary Level
The aggressive growth strategy of Hewlett Packard has led to its entrance to different markets around the world. As a market entry mode, the company used subsidiaries. The values of the HP Way are transferred to these subsidiaries. The HP Way serves as management and performance principles that guide how work is done in every subsidiary.
HP: Performance Appraisal
Employee performance is directed by the company’s management by objectives system (MBO). Trough MBO, employees and their managers set short- and long-term goals. These performance goals are based on the overall goals of the company. The performance goals of the employees are designed to be integrated to the overall goals of HP (www.uob-community.ballarat.edu.au). The performance goal-setting is done annually in Hewlett-Packard.
The MBO system that HP uses allows managers and employees to meet and together, set goals and objectives for a specific time frame. In order to successfully appraise performance based on the goals, the goals are designed to be easily quantified. During the agreed timeframe when the goals are to be met, the manager and the employee meets on a regular basis to discuss performance and to measure the employee’s achievements (Sims, 2002).
International Performance Management at HP
The adoption of the HP Way by overseas subsidiaries entails that the HP Performance Management be employed in these organizations. These companies use both MBO and Paired-Comparison methods in appraising expatriate performance. Expatriates report and are appraised by the host-country managers who in turn report to the parent company.
In the subsidiary environment, it is important to understand that culture affects the performance appraisal system. Culture, up to some extent, affects the determination of what performance aspects will be measured and how the management will go about the performance appraisal process. Another important consideration is who will conduct the performance appraisal for expatriates. There are the host-country manager and the parent-country manager to consider. The expatriate must answer to both the subsidiary he is working in and the organization he is working for. The managers from the two units have different information of the expatriates performance and they may have different views on what good performance means. Although the host-country manager has a better view of the expatriates performance and behavior, he or she may evaluate expatriates from his/her own cultural perspectives and expectations. The cultural perspectives of the host-country manager may not be similar to those of the parent-county manager, The host-country manager may also have a broad perspective of the entire organization and may have limited information on how individuals contribute to the organization. Host-country managers also tend to not understand the experiences of expatriates therefore not considering these experiences in the performance appraisal. The performance appraisal can also be confusing, if the performance appraisal tools and forms of the home-country company will be used without training and educating the evaluator.
Letting the parent-country manager do the performance appraisal also poses different challenges. One of this is geographical distance. The home-office management is often remote that it may not be fully informed on what is going on in an overseas office. Because home-office managers do not have a full information of expatriate performance, and because the multinational may have other international operations, where other expatriates must be appraised, they sometimes measure performance based on quantitative measurements such as profits.
Issues and Problems with the Current Performance Management
1. Invalid Performance Criteria
International assignees often receive inappropriate performance appraisals because the performance criteria common in their countries are applied to expatriates even though those criteria might not make sense in the foreign culture. In the case of Hewlett-Packard, the performance appraisal criteria that are being employed in the headquarters are also being used overseas. This causes problems because the performance appraisal criteria were designed without considering the external factors that may affect performance in international settings. There is a need for the company to construct criteria for evaluation according the subsidiary’s unique situation.
2. Inadequate Rater Training
One problem that coincides with invalid performance criteria is inadequate rater training. Performance raters from the headquarters are not properly trained and are not sufficiently educated on the different factors that affect performance in the subsidiary setting. In the home country setting, managers are evaluated by bosses with whom they have significant amount of interaction and with whom they work closely. Problems arise in the subsidiary level because many home-country top executives who complete expatriate’s appraisals lack information about the cultural, social and business contexts in which the work is performed.
3. Rater Bias
In cases, where performance appraisal is done by host-country managers, problems arise because of rater bias. Individuals from different culture consistently misinterpret each others’ behaviors, possibly basing the appraisals. At times, these misinterpretations will be based on a preconceived attitude on the part of the rater, that is, based on some characteristics of the international assignee that is not directly related to the performance under review.
4. Host Environment
The environment in the foreign setting is of primary importance. The performance of the expatriates is affected by different factors in the subsidiary level. Among these in the difference between the expatriates’ culture and the culture of the country where the subsidiary operates. Another is the differences in the society and economic status. Consequently, international assignee performance and performance expectations need to be placed within its international as well as its organizational contexts.
5. Cultural Adjustment
The process of cultural adjustment is a critical determinant of expatriate performance and needs to be taken consideration when evaluating that performance.
Recommendations
1. Criteria for Appraising International Assignees
The performance criteria must be structured with consideration to different factors that affect performance in the subsidiary level. An example of the list of criteria that can be included in the performance appraisal is presented below:
Qualifications
- Training
- Experience
- Technical Skills
- Social and Language Skills
- Education
Targets
- Directly derived from the parent company’s objectives
- Directly derived from the subsidiary’s objectives
- Directly derived from local objectives
- Developmental goals
Attitude for
- Flexibility
- Interpersonal understanding and communication skills
- Ability to cope with the stress of the assignment
- Openness to change
Job Performance
- Result areas; development of local team
- Communication and decision making
- Personal growth and development
- Application of expertise
2. Rater Training and Employee Education
One approach to performance appraisal training is to alert managers to common errors of judgment so they can spot them in how they evaluate others and guard against them. Appraisal methods that have clear performance dimensions are likely to reduce rating errors (London 1997). It is important to educate the employees on the objectives and aims of performance appraisal and how it is done In order to lessen confusion, the company must ensure that the objectives and purpose of the performance appraisal are communicated clearly (Longnecker and Goff 1992).
3. Clear Performance Appraisal Goals and Objectives
There is no single best way of designing and implementing performance management systems. What works in one organization might fail in another. However, based on the experience of a wide range of organizations tend to point out that effective performance management systems have the following characteristics (Strebler et al 2001):
- The performance management system has clear aims and measurable success criteria.
- Employees are involved in the design and implementation of the system.
- The system is simple to understand and operate.
- Effective use of the performance management system is at the core of manager’s performance goals.
- The system allows employees a clear ‘line of sight’ between their performance goals and those of the organization.
- The system focuses on role clarity and performance improvement.
- The focus on performance improvement is closely linked to an adequately resourced training and development infrastructure.
- The purpose of any direct link between the performance management system and employee rewards is made crystal clear, and proper equity and transparency safeguards are built in.
- The performance management system is regularly and openly reviewed against its one success criteria.
- Performance appraisal must be free from bias and discrimination. The key is not which form or which method is used but whether managers and employees understand its purpose.
4. Cultural and Social Training for Expatriates and Raters
The raters and the expatriates must be properly trained in the areas of culture and society of the host-country subsidiary in order to deal with the different cultural and social issues that may affect the performance management of international assignees. Training and development programs that prepare employees for working internationally typically include:
- Language Training – Includes language training and seminar on how the people think and act in relations with others
- Cross-Cultural Training – Includes understanding one’s own cultural conditioning, understanding cultural differences, and understanding work attitudes and motivations in other cultures
- Assessing and Tracking Career Development – Includes maximizing the career benefits of foreign assignments and repatriation
- Managing personal and family life in the form of culture shock (Sims 2002)
5. Performance Appraisal done Collaboratively by Home-County and Host-Country Managers
In many case the final appraisal is done in the parent country, where the appraisers typically have little knowledge of local circumstances or of local culture and their impacts on the overall unite performance or on the expatriate or local manager’s performance. Achieving results equivalent to a comparable unit or manager in the home country may well require larger efforts in terms of flexibility and creativity. In view of the geographical, communicative, and cultural, distance between the foreign subsidiary or joint venture and the home-country appraiser, local management are often called in to give their opinion. In order to ensure that the performance appraisal has a holistic view of the expatriate’s performance and behavior, and to make sure that all factors are considered, it will be more advantageous to have collaboration between the home-country manager and host country manager.
Conclusion
International Human Resource Management deals with human resources issues on a different level. Compared to domestic HRM, IHRM requires more planning and there are more factors to consider and to analyze. One of the aspects of IHRM which needs attention from HR professionals is International Performance Management (IPM). Effective IPM requires careful analysis of the parent company’s visions and goals and deep understanding of the environment in which subsidiary operates. The case of Hewlett-Packard presented different issues and problems that a multinational company faces in managing expatriate performance. These problems and issues are invalid performance criteria, inadequate rater training, rater bias, host environment. Most of these are also being experienced in the parent company, however the problems faced by subsidiaries are more complicated. In order to deal with this, the parent company and the subsidiary must work together in creating a clearer criteria for appraising international assignees, training raters and educating employees, creating clearer performance appraisal goals and objectives, and conducting cultural and social training for expatriates and raters.
References
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