Editor’s Note: Effective expatriate performance management is essential for multinational enterprises to maintain a competitive edge in the global business environment. This essay explores the critical factors influencing expatriate performance, such as comprehensive compensation packages, tailored performance expectations, and thorough cultural adjustment support. It highlights the importance of balanced performance criteria and multi-rater appraisal systems for holistic evaluations. By addressing these factors, MNEs can enhance their expatriate management systems, leading to improved global operations and sustained competitive advantage. Future research should focus on culturally sensitive appraisal methods and the long-term impact of various expatriate management strategies on organizational success.
Expatriate Performance Management in Multinational Enterprises: Challenges and Strategies
Introduction
In today’s highly competitive global business environment, multinational enterprises (MNEs) must maintain a global perspective and international knowledge to retain their competitive advantage (Barbara et al., 1995). Consequently, effective expatriate performance management has become crucial for the success of MNEs. This essay explores the key factors influencing expatriate performance and examines strategies for effective performance management and appraisal of international employees.
Factors Influencing Expatriate Performance
Compensation Packages
Compensation is a critical factor in expatriate management, influencing both the decision to accept an international assignment and ongoing performance. The goal of expatriate compensation is to “keep employees whole” (Omig, 1999), which requires consideration of several factors:
- Cost of Living Adjustments: Accounting for differences in housing, education, and healthcare costs between home and host countries.
- Healthcare Provisions: Ensuring adequate and easily accessible healthcare coverage in the host country.
Two main approaches to international compensation are:
- Going Rate Approach: Simple but can lead to variations between expatriates of the same nationality in different locations.
- Balance Sheet Approach: Used by over 85% of organizations, providing equity between expatriates of the same nationality and ensuring equivalent purchasing power abroad (Overman, 2000).
Nature of the Expatriate Job
The nature of the expatriate’s role significantly impacts the entire expatriate management system (Tahvanainen, 2000). Research on IT industry expatriates in Taiwan revealed that different companies employ varied goal-setting arrangements based on the nature of the expatriate’s mission (His-An Shih et al., 2003). This supports the EPM model suggested by Tchvanciner (1998), which can help MNEs improve their global management strategies.
Cultural Adjustment
Cultural adaptation is a significant challenge for many expatriates (Brewster and Harries, 1999). Effective pre-departure training, including language and cultural sensitivity training, is crucial for improving expatriates’ cultural awareness and cross-cultural suitability (Dowling et al., 1999). However, many MNEs provide insufficient or incomplete cross-cultural training (Brewster, 1995; Waxin et al., 1997; Selmer, 2000).
Research on American and European companies operating in China highlights the importance of:
- Handling cultural differences
- Effective communication with local staff members
- Continuous cultural identification through training and daily interactions
Performance Appraisal of International Employees
Performance Criteria
Effective performance criteria should balance:
- Achievement of objectives (“hard” criteria)
- Job-related behaviors
- Day-to-day effectiveness (“soft” criteria)
Scholars recommend involving returned expatriates in developing appropriate criteria and updating these criteria every five years to ensure relevance to the overseas environment (Peter W. et al.).
Appraisal Raters
While the immediate supervisor typically evaluates employee performance, research suggests that expatriate performance can benefit from multi-rater evaluations, including:
- Supervisors
- Peers
- Subordinates
- Self-appraisal
- Customers
Studies of IT companies with subsidiaries in Taiwan reveal that most use a combination of self-rating and immediate supervisor rating, with some incorporating client evaluations.
Performance Appraisal Forms
Standardized performance forms facilitate comparisons between expatriates worldwide. Research by Gregerson et al. (1996) found that over three-quarters of surveyed companies used standardized performance forms. However, the disadvantage of this approach is the potential lack of adjustment to host country conditions.
Conclusion
Effective expatriate performance management is crucial for the success of multinational enterprises in today’s globalized business environment. Key considerations include:
- Developing comprehensive compensation packages that account for cost of living differences and healthcare needs
- Tailoring performance expectations to the specific nature of the expatriate’s role
- Providing thorough cultural adjustment support and training
- Implementing balanced performance criteria that consider both objective achievements and subjective factors
- Utilizing multi-rater appraisal systems for a more holistic evaluation
- Balancing standardized appraisal forms with local adaptations
By addressing these factors, MNEs can enhance their expatriate performance management systems, leading to improved global operations and competitive advantage. Future research should focus on developing more nuanced, culturally sensitive appraisal methods and exploring the long-term impact of various expatriate management strategies on organizational success.
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