International HRM

Module Number: 04

Module Name: Performance Management and

International Industrial Relations
International HRM

Syllabus

• Multinational Performance Management-

• Performance Appraisal of International Employees;
• International Industrial Relations;
• Trade Unions-Response of Trade Unions to Multinationals

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Aim: To develop opportunity to assess job progress, encourage interest and improve job performance by
pointing out areas of development and by recognizing productive work

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Objectives
.

• Recognize many aspects that influence expatriate performance management and evaluation.
• Identify performance management difficulties in a worldwide organization.
• Recognize how labour relations work.

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Outcomes
.
• Understanding of the measures to make the international performance management
effective
• Implement the role and strategies of the MNCs in IR

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Table of Contents

1. Multinational Performance Management

2. Performance Appraisal of International Employees
3. International Industrial Relations
4. Trade Unions
5. Response of Trade Unions to Multinationals

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I. Multinational Performance Management

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▪ Management of performance is a procedure.

✓ It helps the multinational to assess and improve its performance over time.-
✓ Individual, subsidiary unit, and corporate performance are measured
✓ against clearly defined, pre-set goals and objectives.

▪ Companies that operate on a worldwide scale, as opposed to regionally focused multinational enterprises
(MNEs), are known as global multinational enterprises (MNEs).

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▪ International Performance Management

➢ It is the process of assessing an individual's performance in a systematic way.

➢ The performance being measured against various job related factors as well as individual traits.
➢ In addition one's potential for performance is measured.

IHRM is a process “that enables the multinational to evaluate and continuously improve individual, subsidiary unit
and corporate performance, against clearly defined, pre-set goals and targets”.

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• Definitions
➢ According to Newstrom, “It's the process of assessing employees' performance, communicating that
information with them, and looking for ways to help them better.’’

➢ Performance appraisal is the process through which management determines how successful it has been in
hiring and placing personnel.

➢ A "performance appraisal" is a method of assessing an employee's job performance in terms of the job's
requirements.

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• Multi National Performance Management Constraints

➢ Parts vs. whole

➢ Data that isn't comparable
➢ The global environment's turbulence
➢ Separation in terms of both time and distance
➢ Maturity levels that vary
➢ Management of control and performance

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• MNE Control & Performance

MNE HQ

Focusing on
standardisation of
Formal - informal Global mix of strategic
practices, Socialisation
control activities outcomes and results
& compliance to
norms/values

Subsidiary

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▪ Performance Management of International Employees

➢ Performance of expatriates – PCN, TCN, and HCN.

➢ Short-term and long-term assignments are issues.

➢ Factors include the nature of the assignment and the presence of family members.

➢ There are issues for both expatriates and non- expatriates.

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• Performance Appraisal

➢ A communication tool for assessing each individual's contribution.

➢ Ability and achievement must be determined with acceptable precision and consistency.

➢ To assist in identifying roadblocks to high performance.

➢ The systematic examination of employee performance and understanding of a person's talents for future

growth and development is known as performance appraisal.

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• Periodic evaluation allows managers to have a deeper grasp of each employee's abilities, allowing them to

facilitate, train, and grow their employees' abilities and strength.

• A quest to measure job progress, pique curiosity, and improve job performance by highlighting and

recognizing effective labour.

• A feedback system will aid in performance improvement.

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• Performance Feedback

➢ The provision of timely feedback is a crucial part of good performance management.

➢ Employees benefit from timely feedback since it allows them to enhance their performance.

or

Self
Financial Planner18
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• Factors to be considered in individual performance & appraisal process

Headquarters’ support

Compensation Package
Task
Host Environment

Expatriate Performance Management

System
Cultural Adjustment

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• Performance Appraisal at Pepsi-Cola International

❑ Common performance appraisal system: focuses on motivating managers to achieve and maintain high
standards of motivation.

❑ Factors associated with high performance in diverse markets were identified:

❖ Handling business complexity ❖ Composure under pressure

❖ Results orientation ❖ Technical knowledge
❖ Organizational savvy ❖ Positive people skills
❖ Leadership ❖ Effective communication and impact
❖ Executive excellence
❖ Maturity

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• Continue....

• Five feedback based mechanism:

➢ Instant feedback
➢ Coaching
➢ Accountability-based performance appraisal
➢ Development feedback
➢ Human resource plan for future

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➢ HCN Role Conception

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PCN Role Conception

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• Challenges of international performance management

➢ Total Company versus Parts of it.
➢ Standard format versus Customized format.
➢ Uniformity of Data of Performance.
➢ Environmental variations
➢ Validity of performance criteria.
➢ Time and distance variations.
➢ Varied levels of maturity.
➢ Rater’s competence.
➢ Rater’s bias.
➢ Host environment.
➢ Cultural adjustments.

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• Total Company versus Parts of it

➢ A multinational corporation is made up of its headquarters, subsidiaries, and many partner companies.
Because decisions have varied effects on different parts of the MNC, the HR manager must apply a
different appraisal technique for each section. Even the mechanism for implementing the decision
produces mixed effects.
➢ A subsidiary's best practise may not be the best practise for HQ or other subsidiaries. As a result,
decisions that benefit the majority of parties and are taken for the long term rather than the short term
are preferred and considered appropriate.
➢ MNCs confront a similar quandary when it comes to pricing practises.

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• Total Company versus Parts of it

➢ The main challenge now is how to evaluate the performance of personnel in HQ and subsidiaries,
especially when the HQ and subsidiaries have distinct strategies and take different activities. Because of
the duality in decision-making and implementation, there is also a dichotomy in evaluating employee
performance.
➢ Another challenge of performance evaluation is the length of time it takes for a decision or action to have
an impact. Employees make decisions in one year, but the consequences may be felt in subsequent years.
Should the performance of those who were impacted in the year of the decision or the year of the
decision's result be evaluated?

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• Standard format versus Customized format

➢ Profits, return on investment, cash flows, productivity, sales per employee, timeliness, rate of customer
complaints, and other metrics are commonly used to assess the performance of a group of employees. For
performance evaluation, several MNCs use qualitative criteria such as innovation, leadership, motivation,
judgement, flexibility, and so on.

➢ Should the headquarters and subsidiaries use the same or similar criteria / performance variables, or
should they use distinct criteria? Different criteria are appropriate for their respective situations, but they
dilute performance rating uniformity. Another question is whether we should apply HQ or host country
criteria to a PCN working in a subsidiary.

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• Standard format versus Customized format

➢ The rules of the host country's government, such as issuing or cancelling licences, exchange rate controls,
immigration and migration controls, tariffs, subsidies, and employment of nationals, have an impact on
organisational performance in terms of sales, profits, and profit repatriation.

➢ As a result, an increase [or drop] in earnings cannot always be linked to the employee's performance.

➢ In fact, MNCs are unable to use a consistent performance rating methodology since environmental
conditions differ from nation to country, and therefore from subsidiary to subsidiary.

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• Uniformity of Data of Performance.

➢ MNCs and their subsidiaries not only work in different environment but also carry-out different kinds of
business including manufacturing, trading, dealing in services, construction projects and the like. Therefore
providing uniform data for appraisal is not feasible. The problem can be partially resolved by converting
the data into [parent company] monetary terms.

➢ But this is not a solution owing to variations in living costs , purchasing power in various countries.
Differences in accounting standards among countries pose another challenge in measuring employee
performance on a uniform scale.

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• Uniformity of Data of Performance

➢ Accounting standards differ due to cultural factors that decide the degree of conservatism with
which accounts are prepared. Germans are very conservative while Americans optimistic.
Accounting system is also oriented towards the information requirements of capital providers –
individual investors or bankers. Political ties also determine systems that MNCs follow for
accounting.

➢ Historic cost versus inflation accounting provide profits numbers that are not comparable.
Advanced countries procure financial resources from various sources in a developed markets
through a variety of financial instruments and , therefore, follow a sophisticated system of
accounting. Thus level of economic development also impacts data uniformity.

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• Environmental variations

➢ In view of variations in environmental influences among subsidiaries as well as different growth rates of
environments, employees’ performance across the subsidiaries cannot be measured using uniform appraisal
criteria and scale.

➢ Environmental factors became more vibrant after recent phase of globalization which initiated trends towards
erosion of national cultures and formation of global culture, establishment of WTO, EU and its currency
“Euro” , increased mobility of human resource, IT revolution, large scale out sourcing, ‘glocal’ strategy etc.

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• Validity of performance criteria

➢ MNCs use different performance criteria based on end contribution to the company and some based on
employee traits. Former include profits, ROI, cash flows, productivity etc. and latter include dynamism,
decisiveness, initiative, judgement etc. Each of these criteria may not be valid for local settings of a
subsidiary.

➢ Cultural and social environment, economic system and institutional set up , political ideologies and
structure that influence the business as well as the performance of the managers vary from the parent
country to the host country. Therefore , the performance criteria valid in the parent company may not be
valid in the host country.

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• Time and distance variations

➢ Performance of business activities in MNCs is complicated by distance and different time zones between
parent company and subsidiaries.

➢ Measurement of performance of employees working in MNCs is challenging compared to those working

in domestic company as the employees working in the domestic companies can meet the colleagues
face to face, while the employees of the MNCs have a limited choice to do so.

➢ The information technology devices like video conferencing, emails, fax and telephone, though, have
reduced the complexities.

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• Varied levels of maturity.

➢ People of different countries are generally strong in different skills, have different levels of maturity and
are strong in different disciplines. Indians are strong in Mathematics and logic, while Americans in
systematic analysis.

➢ MNCs should not , therefore, adopt the same performance appraisal format and scale to measure the
performance of employees of home country nationals and different host country nationals as well as third
country nationals.

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• Rater’s competence

➢ The person who appraises the performance of employees of the MNCs, i.e. those who work either in HQ or
subsidiaries is called the rater. Usually the raters executives either in the HQ or in a subsidiary. It is quite
likely that these raters have no experience of working in other countries and they do not know the social,
business and work challenges that the foreign employees face.

➢ It is doubtful if that such raters possess required competence to appraise the performance of expatriates.

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• Rater’s bias

➢ The problems with subjective measure have opportunity for bias. The rater bias include

✓ Halo effect – the raters have a tendency to excessively depend upon rating of one trait or one
behavioural consideration rather than carry a balanced appraisal of all traits or behavioural aspects.
✓ The Error of Central Tendency – Some raters follow the safe policy of rating all employees at the
mid point of the rating scale and avoid rating at the extreme in spite of the employee’s actual
performance. Central Tendency
✓ – Some raters follow the safe policy of rating all
✓ employees at the mid point of the rating scale and avoid rating at the extreme in spite of the
employee’s actual performance.

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• Rater’s bias

➢ The Leniency and Strictness – The leniency bias crops up when some raters consistently assign higher
rating liberally thereby defeating the whole purpose of ratings. Equally damaging one is assigning
consistently low rates.

➢ Personal Prejudice – I f the rater dislikes any employee or any group , he/she may rate them at the lower
end , which may distort the rating purpose and affect the career of the employee.

➢ The Recency Effect – The raters remember only the recent actions and rate accordingly ignoring
employee’s performance over the period under appraisal.

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• Host environment

➢ Internal environment like structure of the host company organization, ownership pattern influence
expatriates’ performance. 100% ownership by parent company, against a joint venture, allows PCN to
work more successfully in the host company.

➢ External environment like social and cultural issues, political and economic issues affect the employee
performance. In addition, availability of school and other educational facilities , medical and hospital
facilities, recreational facilities, security situation & transportation facilities have their besring on foreign
employee performance.

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• Cultural adjustments

➢ Adjustment of the employee to the organizational culture and country’s culture and adjustment of
employee’s family members to the country’s culture significantly influence the employee’s
performance. This fact should be considered in evaluation of the performance.

➢ The analysis of challenges of performance appraisal of expatriates reveals that it is rather critical to
measure expatriate performance. Even it would be difficult to measure performance of host country /
parent country national working in the HQ , as they also encounter cultural issues while dealing with
foreigners.

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• Introduction

➢ Human resource management practices result in creation of relations among employees , management
and trade unions. Such relations are called Industrial Relations.

➢ Similarly, the human resource management policies and practices of international business with regard
to different country nationals [PCN, HCN & TCN] result in relations among management of MNC and
different kind of employees . Such relations are called international industrial relations.

➢ These relations play a crucial role in strategy formulation & implementation in international business
either by enabling or disabling the MNCs in the process of doing business in various countries.

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• Meaning

➢ Industrial relations means the relationship between employees and the management in the day-
today working of the industry. ILO defines “ Industrial relations deal with either the relationship between
the state and employers’ and workers’ organizations or the relation between the occupational
organizations themselves”.

➢ International industrial relations deals with the complex relationship among employers and
employing foreign national, employees of different nationalities, home and host country governments
and trade unions of the organizations operating in various countries and their national & international
federations.

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• Factors of Industrial Relations

➢ Institutional factors :

✓ Home and host country government policy, labour legislation, voluntary courts, collective agreement,
employee courts, employers’ federations, social institutions like community, caste, creed, system of
power status etc in various countries form Institutional factors.

➢ Economic factors :

✓ Include economic organization, like capitalist, communist, mixed etc. , the structure of labour force,
demand for and supply of labour force etc.

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• Factors of Industrial Relations

➢ Technological factors :
✓ Include mechanization, automation, rationalization, computerization, information
technology etc..
✓ Social and Cultural factors :
✓ Include population, religion, customs and traditions of people, ethnic groups, cultures of various groups of
culture etc.
➢ Political factors :
✓ Include political system in the country, political parties and their ideologies, their growth, mode of
achievement pf their policies, involvement in trade unions etc.

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• Factors of Industrial Relations

➢ Governmental factors :

✓ Include host and home country governmental policies like globalization policies, industrial policy,
economic polocy, labour policy, export policy, migration and immigration policies etc.

✓ Globalization policies in countries like Bulgaria brought dramatic changes in MNCs in that country. Early
involvement of Trade Unions is advised when MNCs plan to take over earlier Public enterprises where
there is a tradition of trade unions.

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• Three Actors of Industrial Relations

Industrial societies necessarily create industrial relations defined as the complex of interrelations among
workers, management and the government. Three major participants or factors of industrial relations, thus,
are workers and their organizations, management and the government.
[1] Workers and their organizations :
The total worker plays an important role in industrial relations. The total worker includes working age,
educational & family background, psychological factors, social background, culture, skills, attitude towards
others’ work etc.
Workers’ organizations, prominently known as trade unions, play major role in industrial relations. The
main purpose of trade unions is to protect the workers’ economic interests through collective bargaining
and by bringing pressure on the management through economic and political tactics. Trade union factors
include leadership, finances, activities etc.

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• Three Actors of Industrial Relations

➢ Employers and their organizations :

[2] Employers employ expatriates, pay salaries and various allowances, provide a variety of benefits,
regulate the working relations through various policies, rules and regulations & by enforcing labour laws of
the country.
They expect workers to follow rules & regulations, contribute their resources to the maximum to achieve
organizational goals and mission. The difference between demands of the workers and employers results in
industrial conflict. Normally employers’ power is higher than that of their workers. But their power is
undermined when compared to that of trade unions.
Employers form their organizations to equate [or excel] their bargaining power with that of the trade unions.
These organizations protect the interest of the employer by pressurizing the trade union and the
government.

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• Three Actors of Industrial Relations

[3] Government :

Government plays a balancing role as a custodian of the nation. Government exerts its influence on
industrial relations through its labour policy, industrial relations policy, implementing labour laws, the
process of conciliation adjudication by playing the role of a mediator etc. It tries to regulate the activities
and behaviour of both employees’ and employers’ organizations, individual and group organizations

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• Trade Unions

A trade union is a continuing long term association of employees, formed and maintained for the specific
purpose of advancing and protecting the interests of the members in their working relationship. Some argue
that it also covers employers’ organizations and friendly societies.
Workers join trade unions
to attain economic security or permanent employment with higher salaries and benefits.
to improve their bargaining power and balance it with that of the management.

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Workers join trade unions – contd.

to ventilate workers’ grievances to management.
to inform workers’views, aims, ideas and dissatisfaction / frustration to
management.
to secure protection from unexpected economic needs like illness,
accidents, injury etc.
to satisfy their social needs.
to satisfy their needs for belonging and
to secure power.

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• Concerns of Trade Unions in MNCs

➢ The main concern of the trade unions towards MNCs is the possibility of MNCs shifting their
manufacturing and other businesses to countries where the influence of trade unions is either zero or
negligible. Hence trade unions deal with MNCs very carefully.
➢ MNCs try to locate very crucial operations that require very skilled human resource in their home country
and locate other businesses in countries where required human resource is available in plenty and at low
cost.
➢ Others practice home country human resource policies and procedures in all their host country subsidiary
operations.
➢ Both strategies reduce or eliminate bargaining powers of the trade unions in the host countries.

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• Influence of trade unions on HR practices of MNCs

Trade unions in MNCs influence decisions with regard to employment of parent & third country nationals,
salary and benefits ; and promotions.

Employment:

MNCs in search for the best talent prefer employment of expatriates whereas trade unions prefer
appointment of host country nationals particularly for senior management jobs. Trade unions influence host
country governments to enact laws for imposing the regulations and limits over the appointments of all
kinds of expatriates. Thus unions in developed countries oppose MNCs relocating of jobs / business
outsourcing.

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Salaries & benefits:

Trade unions are concerned with two aspects in respect of salaries and benefits viz. salary discrimination
between expatriates and host country nationals and enhancement of salary levels of all kinds of employees.

These pressures from unions to increase salaries of host country nationals at par with those of expatriates,
their demands for minimum salaries, maternity benefits, gratuity, pension, accident benefits, occupational
health benefits and medical benefits result in loss of advantage of locating the operations in the host
country.

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• Influence of trade unions on Business Practices of MNCs Optimum Size:

Trade unions can limit the economies of scale that MNCs can avail in the process of location, expansion
diversification, mergers, joint ventures and takeovers.

Location & Shifting

MNCs prefer to locate various units in different countries based on the availability of qualitative resources
including human resources at the least possible cost. Trade unions of MNCs oppose such shifts to other
countries as the move results in lost opportunities to workers in their country.

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Closure of units:

MNCs prefer to close the units in some countries where the human resource conditions and trade union
influences are unfavourable. But the trade unions lobby the national governments in order to enact
redundancy legislations & regulatory measures.

In fact, some unions demand MNCs to leave some countries.

Thus trade unions influence the MNCs in their HR practices as well as their business activities. MNCs in
turn, in order to protect their interests formulate and implement strategies to counter influence of trade
unions.

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• MNCs strategies to Counter Trade Union Influences

Offset the losses in one country with the profits earned in other country.

Alternate and dual sources simultaneously to have a back up facility in case any problem crops up due to
union intervention.

Develop the ability to shift production locations by restricting key activities in home country and establish
subsidiaries in developing countries for operations that require relatively lower level of skills.

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• MNCs strategies to Counter Trade Union Influences

Development of diversified portfolios which reduces the concentrations of trade unions control and enables
the organizations to spread the risk of trade unions.

Development of superior knowledge in labor laws of the host country, skills of negotiations with trade
unions on salary, recruitment and other human resources..

MNCs either stop investing additional funds or divest in order to make the plant less competitive as well as
non- economical , so that trade unions can’t be any more demand oriented and stop threatening the MNCs

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• Self-Assessment Questions:

1. Which of the following terms refers to the process of evaluating an employee's current and/or past
performance relative to his or her performance standards?
a) Recruitment
b) Employee selection
c) Performance appraisal
d) Employee orientation
Answer. c

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2. The primary purpose of providing employees with feedback during a performance appraisal is to
motivate employees to _
a) apply for managerial positions
b) remove any performance deficiencies
c) revise their performance standards
d) enroll in work-related training programs

Answer. b

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3. Identify the major actor of industrial relations from the following

a. Employers
b. Unions
c. Government
d. all of the above

Answer: d

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4. Employees join unions to fulfil their __ needs.

a. Social
b. Esteem
c. Economic
d. all of the above
Answer: d

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Case Study:
• Accent Launches New Sales Performance Management Platform
Accent Technologies, a top Sales AI provider, announced the release of its new Sales Performance
Management Platform today. The software improves sales productivity by using AI and data analytics to give
teams greater visibility into sales rep and team performance. The software works within CRM or
independently to give sales managers and leaders detailed visibility into sales activities, buyer responses and
selling effectiveness.
CRM Data Entry Automation-A key aspect of the platform is gathering the right data to analyze. Most
organizations struggle with CRM adoption, making the use of AI and analytics problematic. The Accent
solution solves the problem by automatically entering sales activity data into CRM so reps can focus on
selling.
“The data entry problem is a critical hurdle in delivering an effective Sales AI solution,” said Pete
McChrystal, Accent CEO. “We don’t want reps playing data entry clerks, we want them selling. But we had
to solve the low CRM adoption problem first or there’s no data to analyze. It’s like trying to study last week’s
game with no game video.

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• Sales Analytics Engine- Accent’s Sales AI platform is driven by its Synthesis Analytics engine which
ingests data from various sources such as CRM, email, calendar, social media and others. It then refines
and analyzes the data, and delivers insight to reps, managers, sales ops and leaders.
McChrystal continues, “Synthesis is a Big Data analytics engine focused on B2B sales and marketing. It’s
taken us over 4 years to develop. We assembled the latest and greatest tech stack and we had to refine the
sales operating system [AI and storage] that lets us do the advanced analytics. The engine is solid and will
heavily impact the way sales teams sell and improve productivity.”
Manager’s Dashboard- Sales leaders and managers get clear visibility into sales rep activities and
effectiveness through seller and team scorecards. Managers can see exactly what reps are doing, how they
are spending their time and how effectively they’re moving deals forward. All aspects of the selling motion
are evaluated and scored. Visualizations help leaders and managers see the health and status of
opportunities and overall pipeline. Specific visuals show how well key opportunities are being contacted
giving managers risk indicators and opening for coaching.
About Accent- Accent Technologies is a global technology leader in sales enablement and sales
performance software. The SaaS company helps sales teams sharpen execution and improve sales
productivity. Its sales enablement solution is comprehensive, offering solutions for sales content
management, guided selling, and sales performance management. Accent’s products are used by companies
in more than 100 countries around the globe.
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• Case Questions
1. What is the role of the sales job for an organisation and how does the new Sales Performance
Management Platform help the organization measure performance?
2. What is the role of the salesman and how does the new Sales Performance Management Platform help
the salesman perform the job effectively?
3. What is the future of performance management as observed in this case?

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Terminal Questions:
• Why is feedback a critical part of a successful performance management system? Discuss its cultural
dimensions
• Bring out the role of employer and the strategies before employer in IR

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Summary:
*International performance appraisal to be effective should be close to the ground realities of the country
where the employee concerned is working. Global performance appraisal should not be like local
performance appraisal for a domestic company.

* Therefore, it should be customized for the country, company and the employee. Performance management
should aim at improving the skills rather than making employees redundant.

* Industrial relations deals with the relations among employees, employer, trade unions and government.

*Trade unions influence MNCs’ HRM practices, Employment, Relocation of jobs/outsourcing and salaries
& benefits.

* Trade unions influence MNCs’ business practices, optimum size, location and shifting & closure of units.

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• Assignment Questions 1
• Discuss and identify one MNC where you have a contact in the HR department. While it might be difficult
for them to share the exact performance appraisal system they use, seek an interview with the HR person to
understand the following-
1. Is the PMS the same for all country locations?
2. What are the challenges they face in implementing the system?
3. How is the PMS linked to rewards, awards, salary hikes and training needs?

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• Assignment Questions 2

• What role(s) do you foresee for unions in the near future

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• Text Books:
Gupta, S.C., International Human Resource Management, Macmillan Publishers India, 2010.
Tayeb, M., International Human Resource Management, Oxford University Press, 2005
• Reference Books:
K. Aswathappa., Sadhna Dash., International Human Resource Management, Tata McGraw Hill, 3e
Edition, 2020.
Dowling, P.J., Festing, M., and Engle, A.D., International Human Resource Management, 5th Edition,
Cengage Learning, 2012.
Edwards, T., and Rees, C., International Human Resource Management, Pearson, 2007

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Topics URL Notes

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• Video Links

Topics URL Notes

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Trade Unions [Link] Analysis about Trade Unions in Multinational

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