Effective Performance Management of Expatriates
Introduction
The central tenet of performance management is the word performance which is defined as accomplishment of something or working effectiveness. Performance, on the one hand, is the act of carrying out or accomplishing something such as a task or action while, on the other, it is also the way in which somebody does a job as judged by its effectiveness. Within an organisation, performance is realised as three levels namely organisation, process and individual, and the interrelationships among these levels serve as the vantage points of an organisation. Acquiring economies of scope and scale is directly correlates acquiring competitive advantage. For multinational enterprises (MNEs) seeking to acquire cost and location advantages, expatriation is of high importance.
Expatriate management reflects the growing concern for expatriate performance hence expatriate performance management. With operating strategically in mind, expatriates are given assignment because of control and co-ordination of operations, transfer of knowledge and skills and managerial and professional development. Hence, expatriate performance management is very important in the success of multinational companies (MNCs). For MNEs to ensure effective expatriate performance management, foreign assignments must be closely linked with the strategic operational requirements, requiring that the expatriate assignment would be the best decisions in global sourcing decisions. An effective expatriate performance management also implies that the expatriate assignments must generate value for the MNC as a whole aside from being cost effective as well.
In this paper, international performance management and effective performance management will be discussed. Discussions will be built upon the case of an MNC which is Shell. How Shell manages the performance of its expatriates will be discussed. Shell is one among the several MNCs which depends heavily on international assignments or expatriation employment. The company regards expatriation as a corporate resource wherein global business skills could be enhanced.
International Performance Management
Expatriation is a multifaceted phenomenon influenced by individual and organizational factors. Individual factors are expatriate managers’ competencies, motivation, attitudes, beliefs and values, while, the parent and local companies’ approach to expatriation in aspects of preparation, planning, training and support are the organizational factors (Mendenhall and Kuhlman, 2001, p. 121). Shell is one of the companies that foster a high level of expatriation (Cameron, 2002). Shell has a long history of expatriate employment because it is fundamental to the nature of the company. Shell believes that expatriate staffs in all the businesses contribute to the growth and success of the company especially through the combination of competences and expertise of local staff and expatriate staff.
According to Fenwick and De Cieri (1995) and Hitchcock (1992), performance management is the process of transforming strategic objectives into action, monitoring progress, and rewarding results. Definitions of performance management as a holistic, or integrated, strategic approach, thus extending the concept beyond performance appraisal, are now in common use. For example, a process for establishing shared understanding about what is to be achieved, and approach to managing and developing people in a way which increases the probability that it will be achieved in the short and longer term (as cited in Fenwick, De Cieri and Welch, 1999).
Foreign subsidiaries and joint ventures are structured and managed much like their parent companies, but usually both have expatriate and local managers, making the management of the performance of international assignees more complex and difficult than with domestic operations. Performance management system (PMS) is a critical component in the development of international management. International performance management plays an important role in performance feedback, individual job assignments, development planning and identification of training. In the global context, performance management encompasses three processes to which international PMS relies: defining performance, facilitating performance and encouraging performance.
From the manager’s perspective, performance ensures that individual employees or teams know what is expected of them and they stay focused on effective performance (as cited in Stahl, Bjorkman and Cebula, 2006, p. 179). The performance of expatriates is based on three key elements such as goals which direct performance toward higher levels of performance, measures that quantifies accomplished goals and assessment of the progress toward goals attainment. One of the responsibilities, further, of the managers is to eliminate roadblocks to successful performance. It is also important for managers to provide adequate resources in getting a job done right and a third is to pay careful attention to selecting employees. In encouraging performance, it is also the manager’s responsibility to provide sufficient rewards which employees value, do so in a timely fashion and do so in a fair manner (pp. 179-181). According to Schuler and Jackson (2007), there are performance problems which cause damage to international mobility, productivity and global leadership development. For Shell, there is the need then to enhance global business skills. Building global business competencies among Shell expatriates aids directly in the achievement of Shell’s global business strategies (p. 418).
In the control process, according to Ouchi (1977), there are two phenomena that can be monitored and evaluated: behavior and output. In other words, it is possible to design and implement control mechanisms that measure and monitor performance. This is particularly pertinent for the MNE, in its quest for coordination, consistency and compliance of behavior and outcomes throughout its global operations: at headquarters and at each subsidiary level. As mentioned earlier, the challenge is how to do this in an effective way. It is generally accepted that the object of control is to measure and monitor expatriate performance so that behaviors and outputs are aligned with the organization’s goals. The MNE management issue is the balance between cultural and ‘bureaucratic’ control mechanisms especially in the context of international assignments. It is still necessary, though, to have some level of bureaucratic control in the form of rules, regulations and procedures, budgets, reporting systems, and formal structure. The issue is “how much” and for expatriates, how much power will be vested on them and how much control they could apply in the workplace or the subsidiaries. However, despite the body of literature on MNE control, little has been said about how the two forms of control interact in the management of individual and organizational performance of the expatriates.
A common approach for MNE management to achieve its desired level of organizational and individual expatriate performance is through increasing emphasis on cultural control, defined as a combination of personal control and control by socialization (Baliga and Jaeger 1984). The rationale behind this is that self-managed performance will contribute to overall MNE performance by mitigating the control problems of coordination, consistency and compliance inherent in MNEs. For example, it would be important for any expatriate to an identified a clear, shared understanding of the company’s mission and objectives; the visible behavior and public actions of senior management; and the organization’s personnel policies, practices, and systems as three important tools affecting the culture of the organization. Because there could be differentiated structures inside subsidiaries, expatriates should be accustomed to a shared superordinate vision, individual self-control, and the capacity to negotiate individual differences (as cited in Fenwick, De Cieri and Welch, 1999).
International assignees’ performance depends on the role they are given to. The main goal of any expatriate is to contribute towards the achievement of the organisation’s strategic objectives through coordination and control. Further, expatriates assume additional roles of facilitating an open communication between the foreign operation and at the home country. Expatriation also serves as means of personnel development and knowledge transfer and transmitter of corporate culture. Overcoming lack of qualified host country nationals is also possible with expatriation. However, expatriation conforms to culture shocks for the individuals and costs, failure rates and repatriation for the home office (Mossler, 2003). In 2004, Shell launched the New Generation Expatriation program to facilitate and accommodate the needs of the business and the expatiate staff including family issues. The program is intended to sustain and further how expatriate members create values for Shell. These are to move critical skills to places where they are required and develop careers which will supply Shell with globally competent leaders (Hofmeister, 2004).
Poorly managed international assignment has its consequences as the expatriate could contribute in negating the business of a maximum return on investment (ROI); productivity of the expatriates is directly equated with expatriate’s ROI. If management assignments proved to be delinquent, the performance and effectiveness of the expatriates will be lessened. Career uncertainties will be also possible due to poor management of the expatriate’s career development and failures of appreciating the international experience. Downward job mobility, increased financial pressures and lack of expectations communications are other consequences (McNutty, 2005). Shell is known for its reliability in terms of expatriation employment. Shell as a company and as a brand contributes to the motivation as well as other intrinsic and extrinsic motivations about expatriation (Hofmeister, 2004).
As such, the global PMS directly impacts the performance of expatriates and foreign managers which in turn impacts the value of foreign experience and expatriation. In general, PMSs are intended for evaluation and for development. The purposes of domestic and international PMSs are technically the same except that the implementation of the system is much more difficult for the latter. The evaluation goals of the performance management in the international environment, including Shell, are consists of providing feedbacks to managers so that they will know where they stand, developing valid data for pay, promotion, job assignment decisions and providing means of communication of decisions, helping management in making discharge and retention decisions, and providing means of warning employees regarding poor performance (Barry, 1993).
The development goals of global PMS, on the other hand, include helping managers improve their performance and develop future potential, developing commitment to the company through discussing career opportunities and career planning with the manager, motivating managers via recognition of their efforts, diagnosing individual and organisational problems and identifying individual training and development needs (Briscoe and Schuler, pp. 354-355). Monitoring the performance and ensuring conformance to agreed standards are important elements of IHRM (Pattannayak, 2005, p. 421).
Effective Performance Management
As Armstrong and Baron (1998) put it, performance management is also a strategy that relates organizational endeavors embedded in the context of human resource (HR) policies, culture and communication systems into the individual expatriate performance objectives. A fully-realised performance management is a holistic process, but for this very reason, such process is complex and capable of being misunderstood (CIPD, 2005). Based on these definitions, an effective performance management purports on establishing a culture, sharing expectations, creating interrelationships and a joint-holistic-continuous process which also involves planning and measurement (CIPD, 2005). Vance and Paik (2006) also relate that that an effective performance management should entail an ongoing professional and productive organisational learning and so the requirement for the individual expatriate to commit to continual reflection regarding the expatriation experience (p. 258).
One of the features of an effective expatriate performance management is measurability, that is objectivity versus subjectivity. Objective measures include hard criteria as sales, units produced, error rate, personnel data, absence rate, turnover and tardiness. In contrast, subjective measures focus on performance measures and their goal is to accurately assess performance. Successful expatriate PMS strikes a balance between these two elements and ensures both objectivity and subjectivity, at the credibility of results and stability of the system itself. Opportunity-biases occur and the performance is modified by the current organisational situation (Gautam, n.d.). In addition, the organisations must take into account the downstream consequences of selected performance measure, the upstream consistency and the compatibility of measures to skills, capabilities and organisational culture (Zoltners, Lorimer & Sinha, 2006, p. 187).
Organisational support includes basic work conditions, resources, facilities and inputs from expatriates and foreign managers among others. As part of PMS, such factors must enable these people to do better and deliver expected results. The need for these employees to do such, one must have competencies, motivation and organisational support. If these support mechanisms does not exist in the organisation, the organisation cannot expect to implement an effective expatriate PMS and to arrive at desirable results (Rao, 2004, p. 220). In its expatriate training programmes, Shell uses the expression ‘the road to Hell is paved with good intentions for the purpose of illustrating that despite good intentions, there would be emergent problems when expatriates interact with host country nationals (Jacob, 2003, p. 225). There are instances that glass barriers are built between local managers and the expatriate, which is then exacerbated by the evaluative nature of both instead of being objective.
An expatriate PMS to be effective also requires the competencies of leaders and international HR managers. As such, leaders are also accountable for the success of the PMS so, they must be also competent in order to teach competency towards the team. Further, Rao (2004) relates that “the biggest bottleneck in PMS implementation lies on the competencies and incompetence of the HR department”. The business sense and the involvement within the main business must be understood and lived-by by the HR employees (p. 220). As overseers, they are the ones who must understood the competitiveness and the international assignment’s purpose more before they can make expatriate follows and do the same. This initiative will reflect in PMS. In Shell international, Shell people services provides integrated services including expatriate management as part of their international HRM initiative. Shell is one company which believes there is no substitute for global experience and this belief is so strong that Shell employees could only refuse to international assignments once (Hobeche, 2005, p. 209).
Alignment of global expatriation assignment goals vis-à-vis individual international assignees goals is also critical. All efforts must align according to the purpose and objectives of the MNC. Mission, vision, goals and organisational strategies must be defined and clearly understood at all levels and in both headquarters and subsidiary. In particular, the individual expatriations tasks must contribute to overall plans of the enterprise and, in return, plans should create performance standards such as quantity, quality, time and cost. These standards should then be translated into performance for each expatriate (Gautam, n.d.). Moreover, misalignment puts excessive pressures on the top management of both headquarters and foreign subsidiary, though, it also identify the maturity level of the organisation (Verweire and Berghe, 2004, p. 294) once reflected in the PMS. In order that Shell could enhance the performance of their expatriates, there is an ongoing cross-cultural coaching. For instance, there are residential training courses inherent to expatriate training programmes to give them knowledge and understanding of both the business and social norms. In order that the company can modify the performance of international assignees, Shell implements ‘area desks’ wherein each expatriate’s performance was evaluated and given attention to. Expatriates also receive briefings annually in terms of the changes in their performances and what should be changed and improved (Holbeche, 2005, p. 209).
There are considerations in choice of a schema of strategic foreign assignments as: cost, usefulness in employee development, usefulness in administrative decisions and validity (Gautam). Evidently, the pre-implementation plan of the expatriation is critical; however, most MNCs with emphasis on international HR managers fail to design a customised scheme. Most global firms and HR employees seem to overlook and undermine the importance of this stage. They fail to answer the who, the why and the how of expatriation. In addition, improper PMS is also evident in standard-setting, appraisal method and the ‘kindergarten report card’ among others which, in fact, standards must be set according to the level of expertise (Bacal, n.d., p. 22). For expatriation to be successful, Shell engages in determining achievable rate and feasibility tests. In the former, Shell tries to increase its expatriation proportionate to the state of development of the subsidiary so that the company could accommodate the demands of the expatriate as well as their families and children. In terms of feasibility, expatriates are given the right autonomy via experience profiles of the expatriate (Barry, 1993, pp. 36-37).
MNEs seek informations to improve systems and on which to base rewards. On the other hand, expatriates seek valid performance feedback and extrinsic rewards. These conflicts are anathema to the requirements of an effective PMS as relevance to job performance, distinguishing high and low performance and fairness and acceptability. Moreover, the organisation’s measures, standards and methods might increase the conflict within the workplace, which in the host country (Gautam, n.d.). A more dense conflict arises regarding the internationalisation initiatives of HRM. Contemporary trends and labour changes implicate HR functions including employee attraction and retention, job design, employee motivation, reward systems and employee relations (Gunnigle, Heraty and Morley). Hendry (1994) relates that within Shell the emphasis is given on the need for greater cohesiveness, which is generally consists of strongly communicated behavioural values, expatriate cadre deployed as a corporate resource and socialization through a well-understood reward and promotion structure (p. 86).
Conclusion
At Shell, expatriation is an important element of achieving global business goals. The company strongly believes that expatriates contribute to the growth and success of the company. Shell, on the other hand, also believes that performance problems of expatriates directly impact international mobility, productivity and global leadership development. In order to address performance problems, Shell launched New Generation Expatriation program. Such programme serves as an aid in facilitating and accomodating the needs of expatriates and therefore sustains their performance. Shell, in order to modify the performance of expatriate, offers intrinsic and extrinsic motivations for expatriation. Shell embraces global PMS systems in managing the performance of their expatriates associated with cross-cultural coaching and annual briefing.
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