Module 5:

Performance Management
1) Performance Management and MNE,

2) Constraints in goal attainment,

3) Performance management cycle,

4) Performance Management of International Assignees,

5) Third and host country employees,

6) Issues and challenges in international performance management,

7) Country specific performance management practices.

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1). Performance Management: Management and MNE

In global terms, performance management can be described as a process which allows an

A MNE is not uniform across all of its subsidiaries and therefore, a number of environmental
contingencies must be considered in relation to the various subsidiaries. These contingencies are
the mental distance between the parent and host country, entry modes and the role of the
subsidiaries

Performance appraisal of an expatriate is a crucial task, with the possibility of conflict between the
subsidiary manager and the headquarters. But it is up to the subsidiary managers to set precise
targets and establish clear criteria for performance measurement in order to avoid such conflict.
Furthermore, the mental distance between the parent and host country can make managing the
subsidiary a difficult task due to the cultural differences, language barriers, as well as the social
and political conditions.

It is for this reason that companies tend to hire more PCNs within subsidiaries, as they are more
able to create an informal communication network in the organisation and build social capital in
the corporation, all the while having a dual commitment to both the subsidiary and the organisation
as a whole. As a result, the PCN will further enable the subsidiary to have greater knowledge of
what is happening in the MNE. Therefore, subsidiaries will no longer exist in isolation with strong
control from headquarters, since they will experience greater integration and autonomy. However,
there is at times a conflict of interest between the headquarters and the subsidiaries which can
make managing international operations a huge challenge

Performance management of expatriates is undoubtedly more difficult than in the case of domestic

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managers. The performance of an expatriate will depend on a variety of issues such as the
compensation, cultural adjustments, tasks and job roles, as well as support from headquarters and
the host environment. The expatriate will face a number of problems when they take up a job
within a foreign country. For example, the tasks and job roles are often defined in the context of
the expatriate's home country and therefore they may not be able to understand their particular job
role in the foreign environment .

Furthermore, the expatriate may face difficulty in adjusting to the foreign culture, and it will be up
to the MNE to ensure that they acclimatize, as this is vital to the expatriate being able to perform
at their best in terms of the job in hand. The host environment will also pose challenges due to a
combination of several other factors such as, social, economic, legal, technological and physical
complications. Therefore, taking everything into account it is absolutely vital as well as a crucial
performance variable that a sufficient level of support is provided to the individual and their family
by both the headquarters and hosts.

2). Constraints in goal attainment

• Unsatisfactory performance improvement:

The indicators are Employees behavior/ effort not directed towards organizational goals in
adequate monitoring of behavior to ensure that the goals are being met.

• Incorrect decisions being made:

Wrong decisions on pay raise, promotion, transfer, training, discharges and probability periods
completion results in non-motivated employees.

• Legal compliance not being met:

Due to erratic performance it lands firms in a legal battle, diverting its focus on non –
productive areas.

• Inadequate job satisfaction:

Employees tend to become emotional and frustrated if they perceive that the ratings they get
are unfair and inaccurate.

• Increased turnover of employees:

Dissatisfaction in the job sets in and one of the outcomes of the job satisfaction is increased
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 turnover.

• In consistency between organizational strategy and behaviour:

Performance evaluation, will being out the employee‘s behaviour lacking strategic focus - i.e.
negative consequence of the strategy.

• Inconsistency between organizational strategy and performance appraisal:

• Performance appraisal not able to identify employees with potential not rewarding to match
with performance not properly deciding employees need for development. Unsatisfactory
performance improvement:

3). Performance Management Cycle

One of the most challenging tasks of lHRM is managing the performance of a firm‘s various
international facilities. Performance management may be understood as a process that enables an
international firm to evaluate and continuously improve individuals, subsidiary unit, and corporate
performance, against clearly defined, preset goals and targets. An expatriate's
performance needs to be assessed to effect his or her promotions, assess training and development
needs, and introduce pay rises.

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4). Performance Management of International Assignees

A CONTEXTUAL MODEL OF EXPATRIATE PERFORMANCE MANAGEMENT

Tahvanainen has taken a grounded theory approach and qualitative analysis.

Model illustrates how performance valuation is both an outcome of the company strategies and goals and an
important source of information on which other personnel-related activities, such as training and
development and performance-related pay are based.

5). Third and host country employees

Performance appraisal is a method of evaluating the behaviour of employees in the work spot,
normally including both the quantitative and qualitative aspect of job performance.

Appraisal of expatriate third and host country employees

PERFORMANCE CRITERIA

Basis for performance criteria:

1. Hard goals
2. Soft goals
3. Contextual goals

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CONDUCTING OF PERFORMANCE APPRAISAL

Ø Subsidiary managers tend to assess according to subsidiary performance.

Ø Appraisal for other employees is likely to be conducted y subsidiary's chief.

Ø Multiple raters are sometimes used in the domestic context.

Ø Virtual assignment situation

Appraisal of third country employees: TCN role conception

Appraisal of HCNs:

• The practice itself confronts the issue of cultural applicability

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HCN role conception

6). Issues and challenges in international performance management

1. Whole versus part

2. Non-comparable data

3. Volatility of the global environment

4. Separation by time and distance

5. Variable levels of maturity

Whole Vs Part

• Good of whole Vs Subsidiary‘s short term performance

• Is it a purely competitive Strategy?

• Is it a joint venture to establish new market

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Non-comparable data

l Data from a subsidiary may neither comparable nor interpretable

l Strikes

l Local labor laws

l Accounting standards

Volatility of the global environment

l Long term goals need to be flexible due to volatility

l Collapse of soviet union

l Gulf war

l European union

l Chinese reforms

Separation by time and distance

l Physical distance

l Time zone differences

l Frequency of contact between headquarters and local unit and cost of reporting system

l Despite of e-connectivity, not effective as face-to-face

l Problems may be more in underdeveloped

Control and performance management

l Performance management is part of the multinational‘s control system

l Performance targets, for example, are part of formal control

l Performance management contributes to shaping corporate culture

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7). Country specific performance management practices:

Based on Hofstede‘s 5 dimensional model of culture and value systems

AUSTRALIA.

The attributes of the institutional structure that define the Australian performance management
effort involve at least five elements.

First, is the structure of the Parliament, although often described as a Westminster parliamentary
system, the presence of a vigorous and independent upper house – the Senate – means that the
Prime Minister is often thwarted by this element of a bicameral system. This limits the ability of
this individual to speak for the entire government.

Second, the Australian executive has to acknowledge that there are separate states, some of which
are dominated by political parties in opposition to the parties in power at the national level. There
are times when attempts to act as if the nation was a unitary system do not extend beyond a
rhetorical posture.

Third, despite its relatively small size, the Australian national government contains a wide variety
of programs with quite different histories, political constituencies, and problems. Attempts to treat
the entire Commonwealth government as if marched in lock step are rarely successful.
Four, as a result of fiscal and management changes over the past 25 years, a number of programs
that had been operated by public entities have been contracted out.

In these instances, while the government has the ability to establish contractual19relationships
with non-government entities, in some significant instances they have limited ability to enforce
specific performance requirements.

Finally, the Australian political party system is characterized by strong and independent political
factions. The three main political parties contain very different perspectives on a number of
policies and programs. Two of these parties have been in a long-time coalition and are now in

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power.

NEW ZEALAND.

There are four elements that should be emphasized to understand the institutions and context of
New Zealand‘s performance management activities.
First, the formal political system is centralized and (despite efforts at administrative
decentralization) the system is run from the national capital. Related to this is the reality that the
country is very small.

INDIA

The system of confidential reports about the performance of government servants is a means to an
end, and not an end in itself. The end or ultimate goal is to optimize the achievement of
governmental policies and programmes through optimization of the development of the
government servant. The performance of every Government servant is assessed annually through
his/her Confidential Report, which is an important document providing the basic and vital inputs
for assessing the performance of the Government servant and his/her suitability for his/her further
advancement in his/her career on occasions like confirmation, promotion, crossing of Efficiency
Bar (EB), selection for deputation, selection for foreign assignment etc. Performance appraisal
through confidential reports is tool for human resource development in order to enable a
Government servant to realize his/her true potential. It is not a fault-finding process, but a
development one.

The system of confidential reports as it exists in the Indian Civil Service is based on the old
bureaucratic pattern of the colonial days, notwithstanding the fact that with the passage of time
some significant changes have been introduced in it, some of them on the lines of modern
management thinking. However, traditionally governance structures in India are characterized by
rule based approaches. The focus of the civil services in India is on process regulation; compliance
with centrally prescribed standards and rules; in other words, how things should be done and how
inputs should be aligned. With such focus on processes, systems in government are oriented
towards input usage how much resources, staff and facilities are deployed in a scheme, programme
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or project and whether such deployment is in accordance with rules and regulations. Thus, the
main performance measure is the amount of money spent and the success of the schemes,
programmes and projects is generally evaluated in terms of the inputs consumed. However,
broadly the system still operates as a tool of control and hardly of development (Gov, 2011).

In India, performance of the bureaucracy depends, to a great extent, on its relations with their
political masters; i.e. the politicians/ministers. Bureaucracy in India is accountable to the ministers
in charge of the department, but in practice, the accountability is vague and of a generalized nature.
Since there is no system of ex ante specification of accountability, the relationship between the
ministers and the bureaucrats is essentially issue-sensitive and bureaucrats deal with the ministers
as the issues present themselves. The role of the senior bureaucrat is to advise the ministers about
the long-term social pay off of any proposed policies so that these are not determined by short-
term political priorities. The accountability relationship can be anything from all-pervasive to
minimalistic and it is left to the incumbent minister to interpret it in a manner that is most
convenient to him/her. This leads to either collusive relationship or to discord between the two,
both of which can adversely affect the performance of the bureaucracy.

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