Performance is one of the major tools that help in tracking the performance of employees. Organizations may use performance appraisal to motivate employees. Multinational corporations may face several difficulties in formulating performance appraisals. There is very limited research on efficient international performance appraisals that multinational corporations may adopt. A multinational corporation may use three strategies in appraising employees in international subsidiaries. A multinational corporation may use the home appraisal system to appraise employees in their international subsidiaries. A multinational corporation may also formulate a local system to appraise employees in the international subsidiary. Finally, a multinational corporation may appraise expatriates using the home appraisal system and appraise host country nationals (HCN) and third-country nationals (TCN) using the local appraisal system (Shen, 2005). All the above performance appraisals have various limitations. There is no single effective international performance appraisal system.
Goal incongruence and information asymmetry between the parent company and the subsidiary are the major factors that increase the complexity of international performance appraisals. Information asymmetry refers to the situation where there is a significant difference between the information needs of the parent company and the subsidiary. Goal incongruence refers to a situation where the goals of the parent company and the subsidiary are significantly different (Shen, 2005). Different environmental factors between the parent company and the subsidiary make it difficult for multinational companies to isolate job-related factors, determine performance factors, and formulate efficient performance appraisal procedures (Shen, 2005).
Multinational corporations use three different approaches to international performance appraisal. Multinational corporations may use the host-based approach, home-based approach, or integrative approach. In the host-based approach, multinational corporations adopt the local performance appraisal. This approach is responsive to the local needs of the subsidiary. On the other hand, the home-based approach involves the adoption of the home-based appraisal system. This approach creates similar yardsticks for measuring the performance of employees in different countries (Perkins & Shortland, 2006). However, this approach may face stiff opposition from HCN and TCN. An integrative approach is a hybrid approach that uses a mix of home and host performance appraisal systems. The major advantage of this system is the fact that it is responsive to the needs of the host country. However, it isn’t easy to use this approach (Shen, 2005).
There are two categories of issues in an international performance appraisal. Performance appraisal may address qualitative or quantitative issues of the multinational corporation. Some of the quantitative goals of international performance appraisals include market share, sales, and profits. It is easy to determine whether employees have met the quantitative goals of international performance appraisal (Griffin &Moorhead, 2011). On the other hand, qualitative goals include customer relations, loyalty, leadership styles, and interpersonal skills. It is difficult to determine whether employees of subsidiaries meet the qualitative goals of the multinational corporation (Nelson, Quick & Nelson, 2012). Companies should ensure that they set effective goals. Many companies use the acronym SMART to set effective goals. The acronym stands for Specific, Measurable, Agreed, Realistic, and Time-related (Shen, 2005).
Various factors affect the international performance appraisal of multinational corporations. Some factors may be company-specific or industry-specific. It is vital for multinational corporations to understand the factors that affect the performance of their expatriate workforce. Most US multinational corporations use a similar performance appraisal form for employees who are US nationals, HCN and TCN. This appraisal system has many demerits since HCN and TCN may not have a clear understanding of the appraisal system. It is vital for multinational corporations to ensure that expatriates do not engage in active management activities for the first six months (Chary, 2006). This gives the expatriates some time to adapt to the operations of the multinational corporation in the country.
Chary, S.N. (2006). Elements of international business. New Delhi: Wiley India Pvt.
Griffin, R.W. & Moorhead, G. (2011). Organizational behavior: Managing people and organizations. Mason, OH: Cengage Learning.
Nelson, Quick, J.C. & Nelson, I. (2012). Orgb 3. Mason, OH: Cengage Learning.
Perkins, S.J. & Shortland,S.M. (2006). Strategic international human resource management: Choices and consequences in multinational people management. London: Kogan Page Publishers.
Shen, J. (2005). Effective international appraisals: Easily said, hard to do. Compensation and Benefits Review, Jul/Aug, 70-79.