International Performance Management and Appraisal - Literature review Example

Executive summary

The concept of globalisation has made it possible for multinational companies to seek the expansion to other countries. However, there are myriad of challenges –many of them cultural- encountered in trying to appraise the performance of the employees. The challenges are often compounded by the human resource manager during the deployment of expatriates. Similarly, some expatriates lack the relevant global leadership traits to manage a diverse workforce. Also, the appraisal criterion may fail to consider the varied factors faced by expatriates. The challenges can be addressed by ensuring only the expatriates with cultural knowledge are deployed. Additionally, the expatriates need to work with the locals from an interactive position as opposed to a dominant one. Lastly, the HR needs to be clear on the performance appraisal criterion that will be used in the assessment of both the expatriates and workers.

1.0 Introduction

The phenomenon of globalisation has presented companies with an opportunity to expand operations to other overseas markets. Today, multinational companies (MNEs) operate in several countries while retaining one headquarters. Despite the flurry of activities abroad, all the business activities are meant toward the achievement of the overall organisational objectives. To ensure that workers from all regions work toward one goal, many MNEs constantly carry out performance appraisals. However, this process is not always seamless owing to various challenges including those related to culture. Carrying out performance management and performance appraisals in a cross-cultural environment has its challenges. Considering the importance of performance management and appraisals, the following is a critical analysis of the challenges encountered while conducting the stated tasks.

2.0 Literature review

2.1 The purpose of cross-cultural performance management

An effective international performance management ensures that the personnel, units, and workforce working overseas adhere to the policies of the parent company to protect its interests. As MNEs continue to expand to other regions, a challenge of managing the employees arises. The challenge is catalysed by cross-cultural differences and organisational culture in managing the workers. Subsequently, many MNEs engage in International Performance Appraisal (IPA). Briefly, the IPA refers to the Human Resource management (HRM) process that makes it possible for the MNEs to evaluate and continually improve the workforce’s performance. Usually, the performance appraisal is conducted against the objectives defined by the organisation (Alston and Mujtaba, 2011). Therefore, an MNE’s objectives could be jeopardised by a poor IPA.

Additionally, the management of cross-cultural performance is imperative in identifying, growing, and retaining talents. Since every worker is unique in strengths, skills, and expertise, an effective IPA ought to identify talented workers from other regions. Subsequently, the development of the talent ought to occur to ensure the employees’ skills help the organisation in the pursuit of its objectives (Shen, 2005). An HR ought to work with the expatriates in identifying the talented employees to avoid poaching by the competitors. Still, talented workers coming from a particular region can benefit the company through their knowledge of the environment. Therefore, an IPA ought to be crafted in a way that it easily identifies, grows, and retains talent.

Furthermore, IPA is instrumental in the management and coaching of the employees to help them deal with the identified gaps. Often, a workforce’s inability to meet preset goals is not related to their commitment but their skills and experiences. Appraisals ought to be developed in a way that they address the skill gaps existing in a particular workforce after which relevant coaching is offered. Collings (2012) recommends that the HR ought to work with expatriate to hire workers who possess the potential of transforming an organisation instead of focusing on experience alone. Embracing such a process and ensuring constant feedback, employees’ potential is easily exploited for the benefit of the company.

Also, IPA leads to employee learning and rewards and recognition that often culminate in increased productivity. As companies embark on training programs meant to improve the skills of the employees, the output increases as the workers become more competent in their positions. The output is further boosted by the presence of incentives (Vance, 2006). Whenever an HR avails rewards and recognitions to workers that show improvements, the output inevitably increases due to motivation. Westover and Taylor (2010) noted that the presence of rewards and recognition is important in many cultures. Hence, every MNE ought to include incentives in their IPA programs to ensure improvements. However, such improvements can never be realised without the presence of an IPA.

2.2 Challenges

The IPA’s success is often affected by the issue of culture whereby one group of workers attempt to implement own culture in an organisation. While an MNE might be doing business elsewhere, it tends to retain its values and beliefs. Conversely, such companies have to hire employees from other regions; a clash of cultures often arises (Tsang, 2007; Beranek and Martz, 2005). Without even realising it, employees in a particular region might ignore the company policies and try to work as per their cultures. In such environments, implementing a successful IPA takes time (Lawler, Benson and McDermott, 2012). The situation is complicated in the instances where a group embraces a national culture that contradicts that of an organisation.

Additionally, IPA’s success is often influenced significantly by the exposure managers have on the global business. Woods (2003) noted that one of the reasons hampering most of the Australian firms’ ability to penetrate Asian markets is the lack of exposure to the global market. Understanding the culture of the people where one intends to do business is vital in managing their performance. Similarly, expatriates exposed to the business environment globally tend to achieve tremendous success when it comes to the management of other workers from different cultures. Sadly, the author noted that many companies hardly consider an expatriate’s past cross-cultural performance prior to deploying them.

Also, the lack of a clear appraisal criterion compounds the process. Though expatriates may be aware of the organisational culture, the failure by the HR to develop an appraisal criterion beforehand can lead to other challenges. In appraising expatriates, the HR ought to employ different criteria owing to many variables. According to Woods (2003), an IPA on expatriates ought to consider the task criteria, environment, and personality factors when conducting an appraisal. The appraisal criteria ought to be developed before an expatriate leaves their country whereby the HR explains the company expectations in the areas of operation efficiency and productivity. However, these expectations have to consider the business environment where the expatriate will be working and set realistic targets. Failure to craft a criterion that considers the environment may pose further challenges to the HR when conducting the appraisal on the expatriates.

Then, the level of engagement between the management and the workers is crucial in achieving IPA objectives. Apparently, IPA might not achieve significant success unless it first considers the link between employee-management engagements. Trussa et al (2013) suggested that the performance of employees is often entwined with the engagement they have with the management. However, the engagement has to be kept in check since even high levels are likely to have a negative impact. It is the lack of clarity on what level a group requires that often complicate the IPA process. The HR and expatriates are often unaware of whether to highly engage employees or do it minimally.

There is also the issue of varied economic, political, and social factors that hinder the success of an IPA. In some regions, the business environment favours an MNE while the opposite occurs in other regions. For instance, the Chinese political factors may not favour an MNE due to some restrictions, regulations, and political influences. Socially, the Chinese employees and managers believe that effective performance is dependent on an individual’s attributes as opposed to culture (Hempel 2001). In this case, an expatriate might encounter difficulties appraising the employees as a group as some might argue they are being racially targeted. Similarly, an HR’s expectations may not be met if the economic factors do not work to the benefit of the company.

2.3 Features

The performance appraisal of expatriates is not universal as challenges vary with business environment. Bonache and Noethen (2014) argued that since expatriates are aware of the organisation culture of their company, the appraisal process is not often characterised by the difficulties witnessed in appraising international employees. Woods (2003) argued that the selection of expatriate managers ought to be informed by their performance in the area of intercultural awareness. Before these managers are selected, the HR ought to assess their past intercultural performance to ensure suitability. Evaluating managers’ past performance in this area would provide the HR with the information needed to decide their suitability. As a result, the expatriate managers’ selection would be done purely on merit thus helping the company in appraising international employees.

Also, an IPA is characterised by trust between employees and the supervisor. Often, many MNEs place demands on employees to deliver short-term profits using the performance appraisals. Such steps tend to work only to the disadvantage of the company. In a study conducted in Australia, it was noted organisations that placed such demands on employees ended up inhibiting the employee-supervisor relationship (Maley and Moeller 2014). Further, the study showed that potential benefits of IPA may not be realised due to these approaches. In the absence of clarity on the motive of conducting appraisals, Shen (2005) noted that the employees’ productivity declines. In contrast, an IPA that is clear elevates the trust levels between workers and supervisors especially when the parties involved embrace the exchange theory.

3.0 Analysis and discussion

Woods’ article about performance management among expatriates presents thought-provoking facts recommendations whose applications could transform the IPA. In the article, one of the facts Woods (2003) argued about was the selection process of expatriates. The author regrettably noted that most MNEs do not consider the past performance of an expatriate in the area of cultural knowledge. Consequently, most of the managers deployed as expatriates lack the relevant skills of managing a cross-cultural group hence affecting the entire IPA performance. The assertions by Woods are factual because international business management can only be successful once a manager first understands the constituency. McEvoy and Buller (2013) noted that misunderstandings are likely to occur often in an environment where the manager is not aware of the cultural differences.

The best way to handle with employees keen on embracing national culture at the workplace is posting a manager with previous experience in a similar environment. As indicated earlier, employees tend to advance their national culture in the workplace, and this can affect the objectives of an MNE. It is inevitable for a workforce to have a national culture and to seek to implement the same but the expatriate can foresee it and prepare accordingly (Gerhart, 2009). The preparation is often done by enlisting the assistance of a co-worker from the host country. Wood (2003) noted that experienced expatriates “were more reliant on co-worker support in the host country rather than looking for support from the home country” (529). The co-worker is likely to confront the workers based on their knowledge compared to the expatriate who may not fully comprehend the culture of the workers.

A leader’s success in managing cross-cultural workers takes more than just experience and position. An expatriate tasked with the management of employees from other cultures need to possess crucial traits including the understanding of the business environment. Such a manager needs to know the political social, and economic environment in several areas affect business and that there will bad and good times (Denton, 2013). Additionally, an expatriate needs to learn the trends, tastes, technologies, perspectives of many cultures. Thirdly, it is important for the managers to work simultaneously with people diverse cultures; should also adapt to interacting with them (Wendt and Euwema 2009; Hanna, 2012). Lastly, such leaders ought to relate with people from the equality position as opposed to superiority.

4.0 Conclusions and recommendations

Clearly, IPA success is dependent on several actions from both the expatriates and the HR. The unavoidable challenges that MNEs encounter while doing business overseas could be minimised through various steps. First, the selection of expatriates ought to be informed by their past performance in employee management and cultural knowledge. As seen above, many firms overlook this factor and instead deploy expatriates without considering their history performance. Secondly, exposing managers to the global business environment is equally important. In the research conducted in Australia, many firms failed to seize the existing opportunities in Asia because their managers were not exposed to the environment.

Thirdly, the IPA done on employees ought to be carried out by expatriates as opposed to HR managers that are not aware of the cultural differences. The above position gives credence to Wood’s assertions that performance appraisal with expatriate is often characterised by satisfaction. Also, the appraisal of expatriate ought to consider the various factors facing their constituency since regions are unique. It is erroneous for HR managers to employ the same appraisal criterion to assess all expatriates oblivious of the respective economic, political, and social challenges facing them. Lastly, the success of every IPA is influenced by the expatriate’s level of trust and engagement with their subordinates. Therefore, managers ought to cultivate high levels of trust and moderate levels of engagement with the employees.