Items Description of Module Subject Name Human Resource Management Paper Name Performance and Compensation Management Module Title Performance

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1 Items Description of Module Subject Name Human Resource Management Paper Name Performance and Compensation Management Module Title Performance Management in International Context Module Id Module No Pre- Requisites Basic understanding of relevance of performance management Objectives To sensitize about international performance management scenario Keywords Performance, international, expatriate, culture

2 QUADRANT-I 1. Module 19: Performance Management in International Context 2. Learning Outcomes 3. Introduction 4. International Human Resource Management and Performance 5. International Performance Management 6. The Expatriates and Performance Management 7. Summary 1. Module 19: Performance Management in International Context 2. Learning Outcomes: By the end of this module, students will be able to understand the impact of diversity on international performance management system get familiar with the variance in performance management practices globally 3. Introduction: The purpose of performance management in any organization is to establish an alignment between individual aspirations and organizational expectations. Once a proper balanced is maintained between these two an individual could effectively perform at the level of expectation. Through effective performance system an employee could develop competencies to perform in a better manner. Performance management aims at converting plans into expected results through effective execution. It adopts proactive approach that requires a manger to detect the underperformance at an early stage and taking a corrective action to reduce future damage. Performance management also strives of creating an environment based on trust and honesty. Such an environment enables employees to go for open communication which is further essential for creating enhanced performances. Through proper utilization of performance management system it is easier to communicate what is expected from the employees. Also, employees will get proper feedback, guidance and training to improve their individual and team performances. Performance management helps in creating and retaining top performers. Due to its great importance for an organization, performance management has become an integral part of a corporate strategy. An organization can reap many benefits from performance

3 management such as it enhances the individual and team performances, identifies true potential of people, establish a proper mechanism to suitably reward the good performance, and encourages employees to develop themselves for taking better and more challenging roles. Depending upon the approach of doing business, an organization s performance management system has to adapt itself. For an organization aiming at offering cost effective products requires highly stable and trained workforce. The role of performance management system for such organizations is conduct result and trait based appraisal. On the other hand, an organization adopting innovation based philosophy of doing business requires retention of talent and appraisal conducted on the basis of results. This task is performed by performance management system. Those organizations that are adopting a reactive approach to sustain in the market require a performance management system that carries out appraisals on the basis of traits as well as results. The daunting task in international human resource management is to manage the performance of a firm across its international facilities. 4. International Human Resource Management and Performance: For the success of an organization, its human resources play a vital role. An organization with competent work force could produce higher level of performance and provide a competitive advantage. This competitive advantage could be used to differentiate an organization with its challenging competitors. These rules apply equally to domestic as well international businesses. The skill of its employees, their commitment level, and understanding of organizational goals is an asset to an organization operating at international level. The effective utilization of resources across international facilities is not possible without highly competent human resources. International human resource management aims at procuring and retaining best of work force across its international facilities. International human resource management activities are rotated around two elements. These elements are managing employees at home country, host country and third country; effective utilisation of people through effective procurement and allocation. The home country is where the firm has headquartered, host country is where the firm has its subsidiary, and the third country could be from where important resources such as finance and labour are arranged. In recent times, the companies are expanding and looking to take advantages of opportunities available across the globe. With such a move of the companies, the requirement of competent human resource has increased manifold. It has also increased the mobility of the human resource. Poor performance at international front could be fatal for the sustainability of an organization. Also, an underperforming team at an international assignment could cut short the future expansion plans of an organization. Newer forms of organizational structures have increased the requirement of highly effective communication system in order to develop clear common understanding organizational goals.

4 In international context, performance management considers issues that are ongoing and fall beyond the initial issues such as recruitment, selection, and training. While going international, an additional aspect i.e. subsidiary performance is added apart from individual and organizational performance. Now the performance of these three components is measured against predetermined expectations and goals. This requires that individuals have to perform in accordance of subsidiary expectations and subsidiaries have to perform in line with the organizational expectations. The performance of a subsidiary is marred by several constraints. At the time of evaluating the true performance of a subsidiary these constraints has to be considered. A poorly laid assessment mechanism could prove fatal for the future success of the organization. These constraints are: Variance in mechanism regarding reporting of performance data. Each country has its own inclusions or exclusions when it comes to reporting of data. So at the time of evaluation of performance of a subsidiary, it becomes important to scrutinize the performance data as per the requirement of the organization. Volatile international environment is another constraint that hampers the performance of a subsidiary. The subsidiaries of the organization are in different countries. Each country encounters major developments over a period of time. These developments are either as a result of global developments or acts as influencer to global changes. The major developments could be economic reforms, war, economic slowdown, terrorism etc. As these developments change the international business scenario, all the subsidiaries have to adjust according to the changing requirements. In such a situation, a subsidiary is required to strike a balance between the expectations of the parent organization and the demands of the local market. As the business expands, the subsidiaries are spread across the globe. Such an expansion poses different kinds of complications to the parent organization. It gets tougher to accurately evaluate the performance of a subsidiary due to physical distance, operations under different time zones, language barrier due to cultural diversity, reduction in frequent face to face communication among the key personnel and other employees. Although, communication technology has offered various tools like video conferencing, , and teleconferencing to resolve the communication issues, still it is difficult to replace face to face communication. Each subsidiary of the organization generally operates in a market which is at different level of its life cycle stage. This variance from country to country could affect the growth prospects of a subsidiary. Even similar efforts made by two subsidiaries operating in different countries fetch different performance related results. Such a situation creates a constraint for creating a benchmark for the performance. Also performances of different subsidiaries could not be compared with each other. It demands a greater level of sensitivity from the parent organization at the time of evaluation of subsidiary performances. The parent organization needs to consider the impact of country specific influencers while assessing the performance of a subsidiary. In international performance system managers are looking at a large geographical territory and they find it difficult to get in touch frequently with their subordinates due to the physical distances. It creates a situation of delayed feedback. The basic purpose of any feedback system is to maintain the timeliness of the information. In the absence of timely feedback, employees feel frustrated as they are not able to rectify their performances in time and also not able to take advantages of various developmental activities. More an employee moves in the hierarchical ladder tougher it becomes to provide timely and quality feedback. Irrespective of the constraints mentioned above, it is important for a firm to evaluate the performances of its subsidiaries to lay down the future course of action in order to achieve the desired goals.

5 5. International Performance Management: Keeping in mind the heightened demands of performance in this globalized era, the performance management system requires few radical changes in order to make it fit for international usage purposes. The managers of the host country are having the responsibility to create such a system that integrates the outcomes of all the branches of the organization. Once created, it helps in controlling the performance of its subsidiaries. Major challenge posed before international performance management system is the lack of awareness among the managers about the criteria to be adopted for assessment of the performance. Also, they fail to identify a suitable appraisal system for performance assessment. As mentioned earlier also that performance management system is guided by the requirements of the multinational organization. In international performance management a manager has to decide whether to focus on results only to assess the performance of an employee or go beyond the end results. Just focusing on the quantitative measures might not perfectly work in international scenario. A manger has to consider qualitative aspects such as attitude, adaptability, and acceptance of an employee. These quality aspects of an employee has a greater significance when comes to the performance in international context. As human relationship becomes complicated with international operations of the organization, it becomes important to establish a rapport between the employee under assessment and the manger that is having the responsibility to assess. Both the parties would only get satisfied in a situation when they are having a clear understanding of their respective activities. Ethnocentric Polycentric Regiocentric Geocentric Approaches

6 Depending upon the approach of the organization to enter into international market, the organization structure and human resource allocation varies from company to company. There exist four key approaches in this regard. An organization going for ethnocentric approach holds all the key positions for people from the home country. The purpose of this thought is either human resources of the home country are in a better position to understand the requirements of the organization or the host country lack in competent manpower. The approach stressing upon hiring people from the host country is known as polycentric approach. Under this approach host country people are hired to manage the international subsidiary operations. On the other hand key positions at parent country are still held by the people of home country. Sometimes the law of the host country dictates the employment composition in an organization but it varies from country to country. The regiocentric approach states that managers from various countries within a specific geographical region would be hired. Such an approach is preferable when expertise of the local market is the key requirement. But this approach sometimes creates compatibility issues between home and host country managers. The fourth and final approach is geocentric approach. Under this approach best people are hired irrespective of their country of origin. As the whole world is seen as a common global market, a geocentric approach seems fit. More weightage is given to the competence as compared to the nationality. It provides freedom to attract and create best talent pool for the organization. As the organization grows the approaches related to structure and staffing also changes. With changes in structure and staffing performance management purpose also changes. A manager has a responsibility to understand the evolution of their organization s subsidiaries in order to provide better integration of its performance management system. 6. The Expatriates and Performance Management: Expatriates are those employees of the organization which are working outside their home country with a plan to return to that or third country. As expatriates are expected to move to different countries and work under different cultures, their performance management activity requires special attention. Generally, expatriate performance management is not conducted to the required extent. The expatriates performance is evaluated in the context of a single country or culture. Such kind of evaluation practices could provide misleading information related to individual performance. The performance management activity for expatriates is complex and time consuming. Due to nature of the job assigned, expatriates have move from one country to other. With every movement, the performance assessment criteria of the employee also changes. If an expatriate employee s performance is evaluated on the basis of criteria set for employees of home country then the results could be non - reliable. The general criteria to assess the performance of an employee are the commitment level, ability to do things, individual competencies and skills, and expectations. In case of expatriates, few additional factors are added as these are having an impact on their overall performance. An international assignment raises the financial expectation of an expatriate. Generally, an employee strikes a trade off between the discomfort of the assignment and the monitory gain. If financial expectations are not adequately met in job assignment, it results into frustration and reduction in motivation. Such a condition directly affects the performance of an employee. An expatriate is sent to foreign subsidiary for performing varied tasks. These tasks or assignments vary from taking charge of the subsidiary to trouble shooting to provide a solution to the problem facing the subsidiary. These assignments are clearly observable and taken into account at the time of performance assessment. Few criteria like cultural set up of the host country should also be included as it is invisible but having a strong impact on the performance of the expatriate.

7 The guidance and support to the expatriate from the home country office acts as catalyst to improved performance. The expatriate requires support in terms of settlement of family members and fulfilment of commitments made prior to the assignment. Any indication of lack of support might lead to distrust and lack of commitment from the employee. Environmental situation at the host country is also an important factor that affects the performance of an expatriate. With the change in country, both micro and macro environment of the employee changes. The employee has to adjust with newer laws, adapt to different technology, and adjust to different socio-cultural conditions. Apart from that the operating style of the subsidiary could different from the home country. The amount of power given and flexibility in making decisions also puts an impact on the performance of the employee. Multiple reporting at host and home country could hamper the performance of the employee. Apart from individual adjustments at the workplace, the family of the expatriate also needs adjustment. An unsettled family at a newer place puts psychological pressure on the person that eventually affects his performance. Performance management creates the compatibility between expatriate and organizational expectations. The performance management goals for expatriate must be tri-faceted. It must include the clearly quantifiable measures related to the performance of an employee. These could be presented in terms of market share or return on investments. The other category of goals considers relationship oriented performance. It could be mentioned in terms of leadership qualities of an individual or his negotiation power to extract best results. The final category of performance management goals focuses on the situations in which the performance is carried. Performance of head of the subsidiary is measured by the evaluators at the headquarters. On the other hand, the head of the subsidiary is responsible for assessing the performance of his subordinates. Considering the complexity involved, the performance of an expatriate is generally conducted by team of evaluators in order to get realistic results. A suggestive performance appraisal process is presented to appraise the performance of the expatriates: Always consider the difficulty level of the assignment of expatriate before appraising. Few countries are relatively easy to work with as compared to others. Generally working in China is considered tougher than working in Australia. A due weightage should be given for country of performance. More importance should be given to the appraisal by subsidiary manager as compared to appraisal of expatriate by home country manager. The manager in the host country is in better position to judge the performance in comparison to a distant living home country manager.

8 Generally, the appraisal report of an expatriate is prepared by home country manager. It becomes imperative to consult the host country manager for special remarks prior to finalizing the appraisal report. It is important to incorporate local market considerations at the time of appraisal. Few of the factors are more important in local market as compared to the home country. Many South American countries give more weightage to cordial management- employee relationship while in United States quantifiable performance is preferred. Due credit is given to the expatriate for accepting the challenging assignment and weightage to be assignment for providing useful insights to the home country. Such insights could further help in improving the performances at the subsidiary and organizational level. Few of the qualitative criteria for assessing the performance could be included for performance appraisal of expatriates. These criteria are the capability of an employee to generate team cooperation, ability to share the information to get the work done, ability to manoeuvre through tough situations, and capacity to adapt to a newer environment. Following are some of the practices adopted in different countries in context to performance management: Country US Russia Practices Evaluation is carried out on the basis of pre determined goals. Goals are mutually decided. Evaluation of employee performance is based on the individual traits of the employees and preset goals Japan Performance of an employee is measured in terms of his compatibility with the organizational philosophy. Middle East Performance appraisal is carried out as a controlling function in order to reprimand employees delivering poor performance. 7. Summary: In international context, performance management considers issues that are ongoing and fall beyond the initial issues such as recruitment, selection, and training. While going international, an additional aspect i.e. subsidiary performance is added apart from individual and organizational performance. Now the performance of these three components is measured against predetermined expectations and goals. This requires that individuals have to perform in accordance of subsidiary expectations and subsidiaries have to perform in line with the organizational expectations. The performance of a subsidiary is marred by several constraints. At the time of evaluating the true performance of a subsidiary these constraints has to be considered. Major challenge posed before international performance management system is the lack of awareness among the managers about the criteria to be adopted for assessment of the performance. Also, they fail to identify a suitable appraisal system for performance assessment. As mentioned earlier also that performance management system is guided by the requirements of the multinational organization. In international performance management a manager has to decide whether to focus on results only to assess the performance of an employee or go beyond the end results. Just

9 focusing on the quantitative measures might not perfectly work in international scenario. Expatriates are those employees of the organization which are working outside their home country with a plan to return to that or third country. As expatriates are expected to move to different countries and work under different cultures, their performance management activity requires special attention.

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