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Would it be possible to know your sources? I thank you in advance. Kiran Khan. Thatavarthi Shankarshana. Divyanka Patel.
- International Performance Management.
- Performance Evaluation of Foreign Subsidiaries;
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Embeds 0 No embeds. No notes for slide. International Performance Management 1. Learning Objectives Understand the challenges of international performance management. Analyze the areas in terms of skills and other traits and behaviours to be appraised. Understand the conflicting role expectation , difference between role and job expectations and expectations from different organizations.
Analyze the variety of appraisers in international performance appraisal and determine who should appraise the performance? Learning Objectives Discuss the system of performance appraisal. Understand the problems associated with the international performance appraisal; and Discuss the measures to make the international performance management effective. Structure1 Introduction2 Challenges of international performance management.
MNCs incur high cost on human resources due to employment of different kinds of foreigners. Therefore, they expect the foreigners to perform distinctly and create , contribute and add significant value to the organizational activities. Foreign employees are also aware of their cost to MNC and are concerned to contribute phenomenally to the organization goals and strategies.
MNCs encounter critical challenges in the process of international performance management. Standard format versus Customized format. Uniformity of Data of Performance. Environmental variations Validity of performance criteria. Time and distance variations. Varied levels of maturity. Host environment. Cultural adjustments.
MNC consists of headquarters, subsidiaries and its various alliance companies. HR manager needs to use different type of appraisal technique for each part, as decision affects various organs of the MNC differently. Even the implementation process of the decision results in contrasting outcomes. The best practice from the point of view of a subsidiary may not be the best for HQ or other subsidiaries.
Hence decisions that benefit most of the parts and on long rather than short term basis are to be preferred and considered appropriate. MNCs face similar dichotomy situations in their pricing policies. Now the core issue is how to measure the performance of employees working in HQ and subsidiaries , when the HQ and subsidiaries follow different strategies and implement varied actions.
These aspects of dichotomy in decision making and implementation also result in dichotomy in measuring performance of employees. Another difficulty of performance appraisal is the time span of the impact of the decision or action.
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Employee makes decision in a particular year, but the impact may be in other years. Should the performance affected in the year of decision or in the year of result of the decision be appraised? Normally parameters like profits, return on investment, cash flows, productivity, sales per employee, punctuality, rate of customer complaints etc are applied to employees in a group for measuring their performance.
Some MNCs additionally apply qualitative parameters like innovation, leadership , motivation, judgement , adaptability etc for performance appraisal. Different criteria are appropriate for their individual environments but vitiate uniformity of performance rating. For a PCN working in a subsidiary should we apply HQ or host country criteria is another question that has no clear answer. In fact MNCs cannot follow a standard format of performance rating as the influences of environmental factors vary from country to country and hence from subsidiary to subsidiary.
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. 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.
Knowledge management in MNCs: the importance of subsidiary transfer performance
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. 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. 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. 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.
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. The person who appraises the performance of employees of the MNCs, i. 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. 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 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. External environment like social and cultural issues, political and economic issues affect the employee 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.
According to prior research, HRM human relations management practices in MNCs are shaped by the active interaction of opposing pressures for internal consistency and for isomorphism with the local institutional environment. Moreover, many HR practices are very sensitive to institutional and cultural differences.
Among these practices, we mention the performance appraisal PA. Performance appraisals are used as tools to ensure consistency in information between MNC headquarters and subsidiaries, to maintain control and to encourage the desirable behavior of employees working in subsidiaries dispersed around the world. However, the degree of standardization of performance appraisals is debatable. Some researchers consider it more beneficial to standardize, while others claim that the process should be adapted to the context and the strategy of the MNC.
International performance appraisal refers to the HRM process that enables an MNC to evaluate and continuously improve the performance of employees, in order to reach clearly predefined goals that serve to improve the overall progress of the company. Use of standardized performance appraisal can lead to a reduction in inconsistencies in information between the parent company and the subsidiary in the foreign country. However, it is an extremely complex process, as there is no written-in-stone method of assessing the performance of employees in distant countries.
Environmental factors and differences in subsidiary companies and their countries, such as the difference in societal, legal, economic, or physical demands, can affect the performance appraisal process greatly. There are many other variables to consider when evaluating in a different country, such as language barriers, differences in values, and differences in cultures that make the process even more difficult.
Knowledge management in MNCs: the importance of subsidiary transfer performance | Emerald Insight
International performance appraisal is a topic that attracts the attention of practitioners and academics; however, most research has concentrated on expatriate performance appraisals. Standardization of performance appraisal practices in foreign subsidiaries versus the localization of those practices to fit the subsidiary country is an important debate that has been discussed in the literature.
As a result, many advocates of localization consider that locally customized activities are more effective. Many consider that performance appraisal is the practice that is mostly affected by culture, and it has been classified as the most difficult to transfer across cultures.
Performance Evaluation of Foreign Subsidiaries
In such countries, only managers are the source of evaluating employees. In low power distance countries, performance appraisal concerns employees from all ranks, and multiple source evaluation techniques are widely used. One example is the degree system, which uses a variety of raters. This method requires low power distance and high levels of participation. This appraisal method is also not appreciated in highly collectivist countries because it is believed to harm group harmony. In collectivist cultures, loyalty takes precedence over productivity, so poor performers are protected if they maintain harmonious relations with the group.
Performance appraisal methods also vary across cultures. When it comes to collectivist cultures and high power distance cultures, the method used is usually informal and unsystematic and involves subjective factors. The degree performance appraisal method, for example, cannot be applied equally in all cultures. In the Chinese culture, it is considered inappropriate for people in inferior positions subordinates in the workplace to express opinions counter to those of people in superior positions.
Such a method is therefore more suitable for cultures with low power distance and individualistic values rather than in collectivist and high power distance cultures.