PERFORMANCE APPRAISAL PROBLEMS
Unintentional bias makes it difficult to evaluate the performance of expatriate managers objectively. In many cases, two groups evaluate the performance of expatriate managers—host-nation managers and home-office managers—and both are subject to bias. The host-nation managers may be biased by their own cultural frame of reference and expectations. For example, Oddou and Mendenhall report the case of a U.S. manager who introduced participative decision making while working in an Indian subsidiary.52 The manager subsequently received a negative evaluation from host-country managers because in India, the strong social stratification means managers are seen as experts who should not have to ask subordinates for help. The local employees apparently viewed the U.S. manager’s attempt at participatory management as an indication that he was incompetent and did not know his job.
Home-country managers’ appraisals may be biased by distance and by their own lack of experience working abroad. Home-office managers are often not aware of what is going on in a foreign operation. Accordingly, they tend to rely on hard data in evaluating an expatriate’s performance, such as the subunit’s productivity, profitability, or market share. Such criteria may reflect factors outside the expatriate manager’s control (e.g., adverse changes in exchange rates, economic downturns). Also, hard data do not take into account many less-visible soft variables that are also important, such as an expatriate’s ability to develop cross-cultural awareness and to work productively with local managers. Due to such biases, many expatriate managers believe that headquarters management evaluates them unfairly and does not fully appreciate the value of their skills and experience. This could be one reason many expatriates believe a foreign posting does not benefit their careers. In one study of personnel managers in U.S. multinationals, 56 percent of the managers surveyed stated that a foreign assignment is either detrimental or immaterial to one’s career.53
GUIDELINES FOR PERFORMANCE APPRAISAL
Several things can reduce bias in the performance appraisal process.54 First, most expatriates appear to believe more weight should be given to an on-site manager’s appraisal than to an off-site manager’s appraisal. Due to proximity, an on-site manager is more likely to evaluate the soft variables that are important aspects of an expatriate’s performance. The evaluation may be especially valid when the on-site manager is of the same nationality as the expatriate, since cultural bias should be alleviated. In practice, home-office managers often write performance evaluations after receiving input from on-site managers. When this is the case, most experts recommend that a former expatriate who served in the same location should be involved in the appraisal to help reduce bias. Finally, when the policy is for foreign on-site managers to write performance evaluations, home-office managers should be consulted before an on-site manager completes a formal termination evaluation. This gives the home-office manager the opportunity to balance what could be a very hostile evaluation based on a cultural misunderstanding.
• QUICK STUDY
1. What kinds of performance appraisal problems arise in an international business?
2. How can performance appraisal problems be reduced in an international business?
LEARNING OBJECTIVE 6
Understand how and why compensation systems might vary across nations.
Two issues are raised in every discussion of compensation practices in an international business. One is how compensation should be adjusted to reflect national differences in economic circumstances and compensation practices. The other issue is how expatriate managers should be paid. From a strategic perspective, the important point is that whatever compensation system is used, it should reward managers for taking actions that are consistent with the strategy of the enterprise.