INTERNATIONAL INTERNATIONAL PERFORMACE PERFORMACE

MANAGEMENT SYSTEMMANAGEMENT SYSTEMBy Dr AnneBy Dr AnneMHRM-2MHRM-2

IHRMIHRM

Performance ManagementPerformance Management

Performance management is a means of Performance management is a means of getting better results from the getting better results from the organization’s teams and individuals within organization’s teams and individuals within an agreed framework of planned goals, an agreed framework of planned goals, objectives and standards. (Armstrong and objectives and standards. (Armstrong and Murlis )Murlis )

The essence of performance management The essence of performance management is the development of individuals with is the development of individuals with competence and commitment , working competence and commitment , working towards the achievement of shared towards the achievement of shared meaningful objectives within an meaningful objectives within an organization which supports and organization which supports and encourages their achievement . (Lockett)encourages their achievement . (Lockett)

A communication tool to measure A communication tool to measure each individual’s contributioneach individual’s contribution

To evaluate talent and To evaluate talent and achievement with sensible achievement with sensible consistency and accuracy.consistency and accuracy.

To Help distinguish barriers to To Help distinguish barriers to top performance.top performance.

Why Appraise Performance ?Why Appraise Performance ?

Periodic evaluations help managers to Periodic evaluations help managers to have a better understanding of each have a better understanding of each employee’s skills, with the goal to facilitate, employee’s skills, with the goal to facilitate, train and develop abilities and power of train and develop abilities and power of their employees.their employees.

A chase to assess job development , A chase to assess job development , encourage interest and enhance job encourage interest and enhance job performance by pointing out the performance by pointing out the development and recognizing productive development and recognizing productive work.work.

A feedback system that might otherwise be A feedback system that might otherwise be overlooked.overlooked.

Aims of performance Aims of performance Management…….Management……. When we know what is expected of When we know what is expected of

us , and have played a role in us , and have played a role in forming these expectations, we will forming these expectations, we will do our best to meet the goals.do our best to meet the goals.

We can meet expectations only We can meet expectations only through our capabilities and if we get through our capabilities and if we get support from the management support from the management through processes systems and through processes systems and resources . resources .

Plan

Review

Monitor

Act

Design Process for ExpatriateDesign Process for Expatriate

Goal settings for expatriates.Goal settings for expatriates. Performance AppraisalPerformance Appraisal

THE EXPATRIATETHE EXPATRIATE

Individual Performance And Individual Performance And AppraisalAppraisal Factors to be considered in the Factors to be considered in the

individual Performance and individual Performance and Appraisal process:Appraisal process:

Expatriate performance Expatriate performance management systemmanagement system

Compensation Package Compensation Package TaskTask Headquarter SupportHeadquarter Support Host EnvironmentHost Environment Cultural AdjustmentCultural Adjustment

International CompensationInternational Compensation

Key components of an International Key components of an International Compensation Programe :Compensation Programe :

Base SalaryBase Salary Foreign Service Foreign Service

Inducement/Hardship premium Inducement/Hardship premium AllowancesAllowances BenefitsBenefits Tax DifferentialsTax Differentials

Components :Components :

Base SalaryBase Salary An expatriates base salary is normally in An expatriates base salary is normally in

the same range as the base salary of the the same range as the base salary of the similar position in the home country.similar position in the home country.

Foreign Service PremiumForeign Service Premium A foreign service premium is an extra pay A foreign service premium is an extra pay

the expatriate receives for working outside the expatriate receives for working outside his or her country of origin.his or her country of origin.

It is offered as an inducement to accept It is offered as an inducement to accept foreign postings.foreign postings.

AllowancesAllowances Hardships Allowances:-Hardships Allowances:- Payments to compensate expatriates Payments to compensate expatriates

for exceptionally hard living and for exceptionally hard living and working conditions at certain foreign working conditions at certain foreign locations.locations.

Housing AllowancesHousing Allowances Cost-of-living AllowancesCost-of-living Allowances Educational AllowancesEducational Allowances Relocation AllowancesRelocation Allowances

Parent country wages Parent country wages everywhereeverywhere

Wean expatriates from Wean expatriates from allowancesallowances

Pay based on local or regional Pay based on local or regional marketsmarkets

Cafeteria selection of Cafeteria selection of allowancesallowances

Global pay systemsGlobal pay systems

TAXATIONTAXATION

Unless a host country has a Unless a host country has a reciprocal tax treaty with the reciprocal tax treaty with the expatriate’s home country , the expatriate’s home country , the expatriate may have to pay income expatriate may have to pay income tax to both the home country and the tax to both the home country and the host country governments.host country governments.

When a reciprocal tax treaty is not in When a reciprocal tax treaty is not in force , the firm typically pay the force , the firm typically pay the expatriate’s income tax in the host expatriate’s income tax in the host country.country.

BENEFITSBENEFITS

Many firms also ensure that Many firms also ensure that their expatriates receives the their expatriates receives the same level of medical and same level of medical and pension benefits abroad that pension benefits abroad that they received at home.they received at home.

Compensation Other Compensation Other Approaches:-Approaches:- Headquarter based compensation Headquarter based compensation

Paying home country wages Paying home country wages regardless of location.regardless of location.

Host based compensation system Host based compensation system Adjusting wages to local lifestyles Adjusting wages to local lifestyles and costs of living.and costs of living.

Global pay systems Global pay systems Worldwide job Worldwide job evaluations, performance appraisal evaluations, performance appraisal methods, and salary scales are methods, and salary scales are used.used.

Expatriate’s Performance Expatriate’s Performance Appraisal: ChallengesAppraisal: Challenges Fit for international operations Fit for international operations

according to multinational according to multinational strategy.strategy.

Unreliable dateUnreliable date Complex and volatile Complex and volatile

environments.environments. Time difference and distance Time difference and distance

separationseparation Local cultural situationsLocal cultural situations

In most cases two groups evaluate In most cases two groups evaluate the performance of expatriate the performance of expatriate managers – Host nation managers managers – Host nation managers and Home office managers – and and Home office managers – and both are subject to unintentional biasboth are subject to unintentional bias

Home country managers tend to rely Home country managers tend to rely on hard data when evaluating on hard data when evaluating expatriatesexpatriates

Host country managers can be Host country managers can be biased towards their own frame biased towards their own frame employees.employees.

Expatriate’s Performance Expatriate’s Performance Appraisal Appraisal

Fit the evaluation criteria to Fit the evaluation criteria to strategystrategy

Fine-tune the evaluation criteriaFine-tune the evaluation criteria Use multiple sources of Use multiple sources of

evaluations with varying periods evaluations with varying periods of evaluationof evaluation

To reduce bias in To reduce bias in Performance AppraisalPerformance Appraisal Most expatriates believe more weight Most expatriates believe more weight

should be given to an on site Manager’s should be given to an on site Manager’s Appraisal than to an off-site Managers Appraisal than to an off-site Managers appraisal.appraisal.

A former expatriate who has served in the A former expatriate who has served in the same location could be involved in the same location could be involved in the appraisal process to help reduce bias.appraisal process to help reduce bias.

When the policy is for the foreign on-site When the policy is for the foreign on-site managers to write performance evaluations managers to write performance evaluations , home office managers should probably be , home office managers should probably be consulted before an on-site manager consulted before an on-site manager completes a formal termination evaluation. completes a formal termination evaluation.

The Expatriate Manager: The Expatriate Manager: CompensationCompensation The Balance sheet ApproachThe Balance sheet Approach Provides a compensation package that Provides a compensation package that

equates purchasing power equates purchasing power Allowances for the cost of living , housing, Allowances for the cost of living , housing,

food , recreation , personal care , clothing , food , recreation , personal care , clothing , education , home furnishing , transportation education , home furnishing , transportation and medical care.and medical care.

This approach equalizes purchasing This approach equalizes purchasing power across countries so employees power across countries so employees can enjoy the same standard in their can enjoy the same standard in their foreign position as the enjoyed at foreign position as the enjoyed at home .home .

Balance Sheet Approach to Balance Sheet Approach to expatriate compensationexpatriate compensation

One of the Greatest One of the Greatest ChallengesChallenges Balance Sheet Approach Balance Sheet Approach adjusts adjusts

managers compensation so that managers compensation so that manager receives same standards of manager receives same standards of living as in home country + extra pay living as in home country + extra pay for locating overseas.for locating overseas.

Packages are complex Packages are complex because of because of determining adequate base salary determining adequate base salary because of difference in currencies , because of difference in currencies , variance in tax rates and determining variance in tax rates and determining what benefits can be utilized and are what benefits can be utilized and are of value in foreign countries.of value in foreign countries.

Appraising Expatriate Appraising Expatriate ManagersManagers Challenges in appraising overseas managers Challenges in appraising overseas managers Determining who should appraise the manager.Determining who should appraise the manager. Deciding on which factors to base the appraisal.Deciding on which factors to base the appraisal.

Improving the expatriate appraisal processImproving the expatriate appraisal process Stipulate the assignment difficulty level , and adopt Stipulate the assignment difficulty level , and adopt

the performance criteria to the situation.the performance criteria to the situation. Weigh the evaluation more towards the on-site Weigh the evaluation more towards the on-site

Manager’s appraisal than off-site manager’s Manager’s appraisal than off-site manager’s appraisal.appraisal.

If the home office manager does the the actual If the home office manager does the the actual written appraisal use the former expatriate from the written appraisal use the former expatriate from the same overseas location for advice.same overseas location for advice.

More weight given to onsite

Managers evaluation?

Expat who worked in

Same location should

Assist the home manager?

If foreign manager is appraising

Home manager should be

consulted

Performance Appraisal at Performance Appraisal at PEPSI COLA International.PEPSI COLA International. Common performance appraisal system:Common performance appraisal system: Focuses on motivating managers to achieve and maintain Focuses on motivating managers to achieve and maintain

high standards of motivation.high standards of motivation.

Factors associated with high performance in diverse Factors associated with high performance in diverse markets were identified :markets were identified :

Handling business complexity Handling business complexity Results orientationResults orientation Organizational SavvyOrganizational Savvy Leadership Leadership Executive Excellence Executive Excellence Composure under pressureComposure under pressure MaturityMaturity Technical knowledge Technical knowledge Positive people skillsPositive people skills Effective communication and impactEffective communication and impact

Five Feedback based Five Feedback based MechanismMechanism

Instant feedbackInstant feedback Coaching Coaching Accountability based Accountability based

performance appraisalperformance appraisal Development feedbackDevelopment feedback Human Resource Plan Human Resource Plan

For example, the first step of instant feedback is For example, the first step of instant feedback is based on the principle that any idea about any based on the principle that any idea about any aspect of the business or about an individual’s aspect of the business or about an individual’s performance is raised appropriately and discussed performance is raised appropriately and discussed in a sensitive manner.in a sensitive manner.

The instant feedback message can be delivered in The instant feedback message can be delivered in any culture; the important thing is not how it is done any culture; the important thing is not how it is done but that it is done. The purpose of instant feedback but that it is done. The purpose of instant feedback is always to improve business performance, not to is always to improve business performance, not to criticize cultural styles. Guidelines for appraisal, criticize cultural styles. Guidelines for appraisal, modification to suit cultural differences .modification to suit cultural differences .

Pepsi Cola Int. tries to balance the cultural and Pepsi Cola Int. tries to balance the cultural and administrative imperatives of successfully managing administrative imperatives of successfully managing the performance of a diverse workforce.the performance of a diverse workforce.

THANKSTHANKS