International Performance Management - Term Paper Example

 «International Performance Management» Introduction Performance management is one of the key concepts in the modern management literature and practices as it allows organizations to continuously monitor their progress against their set objectives. The idea always is to measure the effectiveness and efficiency of the steps taken so far towards achieving any specific objectives which are set in order to achieve broader organizational aims and objectives. The objective of setting up an effective performance measurement system therefore outlines the setting up of the management by objective principles within the organization. An effective performance management system therefore comprises of different elements such as setting up adequate compensation structure, providing organizational support, providing training and development as well as setting up an effective performance appraisal system within the organization. Such aspects are applied to Hindustan Unilever and suggest that the Unilever in India is following a policy which comprises of both its international strategy as well as combining it with the domestic policy of nurturing a talent which can better exploit the local knowledge to successfully perform in the market. However, despite following such a policy there is an increase in the employee turnover in Hindustan Unilever indicating that the compensation structure at the company may not be favorable to retain high performance employees. In order overcome such problems, it is critical that the overall performance management system has the more weighage in favor of local environment and the context. International Performance Management International landscape of doing business is getting tougher and tougher day by day as more and more players are mushrooming into the different markets with more innovative ideas and strategies to capture the market. One of the most effective responses which MNEs can put forward is the setting up of an effective performance management system which can ensure that organization’s strategic objectives are achieved with maximum efficiency. In such a context performance management therefore is a key concept which is however been vaguely described as most of the definitions fail to comprehensively capture the true essence of the performance management. (Anderson et.al, 2006). International Performance management is considered as “A process that enables the MNE to evaluate & continuously improve individual, subsidiary unit & corporate performance against clearly defined, pre-set goals & targets.”(Taken from the Power Point Presentation attached with your order. please reference it as I am not sure from which book this is taken) The above definition suggests that international performance management comprises of three distinctive entities which MNEs have to manage in order to improve upon their performance. These three entities include following: 1. Individuals 2. Subsidiary Units 3. Corporate The above definition therefore suggests that the performance management is a very systematic process which involves a systematic approach of evaluating as well as developing goals for the effective performance management. However, what is also critical to understand is the fact that performance management is always a continuous process and requires an effective and on-going effort on the part of the top management of the firm to continuously monitor and evaluating the performance measurement criteria so that better systems and measurements can evolve to achieve the strategic objectives. Considering therefore, the strategic nature of the performance management, it is important to understand the strategic context within which the issue of performance management shall be viewed as failure to implement an effective performance management system may result into non- achievement of key strategic goals and wastage of resources which could have otherwise been utilized in more productive activities. Performance management however becomes more complicated when viewed and practiced in terms of international context. International Performance Management is therefore many comprehensive concepts than the simple performance management as different qualitative factors which contribute towards achieving the strategic objectives of the firm. Generally, performance management is viewed as a combination of different activities such as employee motivation; conditions of the working environment where the employees work and the overall ability of the employees to complete a certain task which are aligned with the expected outcomes of those tasks. However, international performance management adds few other dimensions to it also as it also encompass the compensation packages offered, the tasks at hand, the support of the Head Quarter, the host environment within which the expat work as well as the adjustment with the different cultural environment in which employees are going to work. In order to address all such issues, it is therefore critical that an effective performance management system is implemented within the organization which can ensure that the organizational objectives are met as per the expectations of the higher management of the firm. As such, following steps may be taken in order to set up an effective performance management system within the organization. How to be an Effective Performance Management? In order to set up an effective performance management within the organization, it is necessary that the following steps may be taken: Aligning HR strategy with Organizational Strategy The recent studies on HR hinted at establishing a link between the organizational performance and the HR strategy of the firm and as such directed their focus on viewing HR strategy in a much bigger perspective of the overall organizational strategy of the firm.(Cooke,2001). As discussed above that performance management is one of the constructs of the overall organizational strategy of the firm it is therefore important the HR strategy of the firm is aligned with its overall organizational strategy. The increasing diversity at the workplace requires that the managers of the organizations must ponder on the question of how to create an environment where there is a complete fit between the people and the organization so that the organizational objectives are achieved in their optimum way. The current drive to bring in more creativity and innovation within the organizations therefore demand that the performance management system within the organization is effectively designed and managed in such a way that it ensures implementation of an ethical performance management system. In order to achieve such objectives, it is important that the HR strategy is aligned with the overall strategy of the organization. In order to achieve such objectives, it is therefore important that the HR department clearly plans its activities by starting job design and analysis process in such a way that it fits into achieving the overall objectives of the firm. However, it is important that the Job Analysis and Design shall be logically prepared by taking into account the existing job inventory at the organization and by conducting surveys etc. to exactly learn about the perceptions of the current incumbents on the job so that an effective system can be developed. While dealing with effective performance management of expats, the job design and analysis process becomes more complicated as it may involve certain cultural as well as motivational factors which need to be taken into account for setting up an effective performance management system. Performance Appraisal In order to be an effective in performance management, the respective departments need to set up performance objectives for the different employees. Setting up of the individual performance goals provide a clear communication to the incumbents as to what are the expectations from them and under what conditions the subsequent performance appraisals will be performed. However, it is very important to consider that the performance appraisal mechanism shall be fair and without bias and shall be based on the job analysis and design of the respective employee. Various research studies have indicated the different rater biases in a performance appraisal process such as biasing on age, ethnicity, gender, respective cultural values etc. (Cook, 1995). While evaluating an expat, such biases may further magnify and influence the rater’s ability to clearly and logically appraise the performance. Therefore, a good performance management system within the organization must ensure that the impact of such biases are minimized by setting up alternative checks and balances which can help organization to counter such biases. In one of the studies conducted by Woods (2003) suggests that the expats the multiple cross cultural variables shall also be included in their overall performance appraisal in order to set a culturally diverse performance appraisal system with an in-built system of providing effective and regular feedback to employees on performance. Such feedback also however needs to be impartial and practical shall be tailored in such a way that it serves as a motivational factor rather than a distraction for the employees. Training & Development In order to effectively set up an environment of high performance, MNEs are also required to provide a regular opportunity to their employees to continuously upgrade and develop their skill level. This can be achieved through training and development of the employees so that the skill deficiencies in them can be effectively removed or minimized in order to achieve more efficiency. It is however the job of the HR to ensure that the training and development of the expats match with the expected job performance and shall fit the overall strategy of the organization. (Berger & Nixon, 1981). It is also important to note that the training and development of the expats shall also include elements of helping expats to fit into the local environment and must develop capabilities to understand and adjust into the local culture. Compensation Setting up an effective compensation structure for expats is one of the most critical issues as it must include an added layer of motivation which can force an expat to leave his country to work in a relatively alien environment. It is therefore important that the compensation structure shall comprise of both the financial as well as non-financial benefits to expats. What is also important is the fact that the perceived gaps between the actual versus preferred performance shall be minimized in order to improve upon the performance level of the employees, especially expats.(Chang et.al, 2004). It has also been argued that since expats come on a fixed contract with less legal protection from their host environment. Therefore, organizations often set up exploitative compensation structures slightly different from what is offered to the locals. Organizational Support MNEs also need to show the necessary support, especially to the expats in order to help them and their families to adjust into a new environment. This is also critical in the sense that a job is also considered as a social contract between the employee and the employer with certain rights and obligations for each party. However, implicitly, it is also been perceived that the organization shall provide necessary support in order to fit into the environment within which the employee has to work and live. As such a performance management system at the organization shall ensure that it carry the elements which basically provide a mechanism for organizational support to employees in order to help them to adjust easily and subsequently concentrate on the job in hand. (Zhu et.al.2006). Examples The following section will discuss a real life organization in order to further discuss the theories and discussions outlined above. As a part of this process, we are taking Unilever as an example. Brief Introduction to the Company Unilever is one of the largest FMCG companies in the world with presence in many countries of the world. Its international presence provides it a unique position in the market to have one of the most diversified work-force in the world. It employs more than 180,000 employees which are serving in different parts of the world and contributing to the overall success of the organization. Unilever has one of the richest corporate histories in the world as it has not only been able to make inroads into different markets through its popular brands but also through sheer strength of its diverse workforce comprising of many nationalities of the world forming a well knit team at Unilever which is balancing the profitable growth with the responsible corporate behavior. (www.unilever.com,2009). Example of Expats Problems Almost 7% of the total workforce of the Unilever comprises of the expats who are working in different countries and regions where Unilever is present. Unilever has a presence in the India also with the name of Hindustan Unilever and is successfully operating in the region for over 60 years now. Unilever’s policy for performance management in India has been focused on blending the local elements with its overall global policy. Its policy in therefore has been focused on developing the local talent through the international support from the shared culture of Unilever. However, what is problematic with this approach is the fact that Unilever in India is facing larger turnover although its performance management system is considered as a classic example of blending local knowledge with international expertise. Key Issues One of the key issues with the performance appraisal system at the Hindustan Unilever has been the fact that it is increasingly advocating the Unileverization all over its organization which is basically a radical shift from the fact that Unilever’s managers have been considered as good at understanding the local values and culture. Enforcing a completely new concept and idea therefore may not help expats to readily fit into the system of the organization, and therefore, it may require a little longer effort and time to clearly model the expats to fit into the system of the Unilever. Further, the in-house training of Hindustan Unilever is largely based on the international standards which significantly lack the cultural contexts of working in India. The training and development therefore have to be more local in context because of the lesser exposure of Indian employees to the international environment of doing business. The compensation of the employees however has increased in Hindustan Unilever in order to restrict the turnover. However, it still lacks the matching with the market salaries as other MNEs entering into Indian markets are offering much higher pays as in comparison to Hindustan Unilever. Further, Hindustan Unilever is also subject to different legal restrictions from the Indian government, especially in terms of compensation as well as hiring and firing policies because employees have the protection under the various laws to refer to the courts in any such matter. This gap between the actual versus the perceived differences therefore do not allow Unilever to completely implement a uniform and standardized performance management system for all employees including expats. Conclusion One of the important aspects of the performance management of expats is to effectively manage different factors such as training and development, setting up adequate compensation structure, organizational support as well as an impartial performance appraisal system within the organization. What is however also important to note that the organizational support is one the necessary elements of ensuring that the expats find it easy to fit into the overall organizational environment of the organization. The performance management of the expats largely therefore depends upon the added motivational elements offered to expats in order to attract and retain them. The current performance management systems are largely driven by implementation of the standardized standards across the different regions which are significantly difficult to implement because of the need for having the local knowledge and skills to successfully work in an international environment. References 1. Andersen, Bjorn, Henriksen, Bjørnar Aarseth. Wenche (2006). Holistic performance management: an integrated framework. International Journal of Productivity and Performance Management. 55 (1), pp. 61-78. 2. Cooke, Fang Lee (2001). Human Resource Strategy to Improve Organizational Performance: a Route for Firms in Britain? . International Journal of Management Reviews. 3 (0), pp. 321-339. 3. Cook. Mark (1995). Performance appraisal and true performance. Journal of Managerial Psychology. 10 (7), pp. 3–7. 4. Woods. Peter (2003). Performance management of Australian and Singaporean expatriates. International Journal of Manpower. 24 (5), p517 – 534 5. Berger, Mel. Nixon. Bruce (1981). Management Development that Works. Journal of European Industrial Training. 5 (3), p2-7. 6. Chang, C. Janie. Ou, Chin S. Wu. Anne (2004). COMPENSATION STRATEGY AND ORGANIZATIONAL PERFORMANCE: EVIDENCE FROM THE BANKING INDUSTRY IN AN EMERGING ECONOMY. Advances in Management Accounting. 12 (0), p137 - 150 . 7. Zhu, Weichun, Luthans, Fred, Chew, Irene K.H. Li. Cuifang (2005). Potential expats in Singaporean organizations. Journal of Management Development. 25 (8), p 763 – 776 8. www.unliver.com. (2009). Our History. Available: http://www.unilever.com/aboutus/ourhistory/. Last accessed 03 Feb 2009. Read More