Factors Influencing Expatriate Performance Appraisal System Success- An Organizational Perspective David C. Martina,*, Kathryn M. Bartolb

Journal of International Management 9 (2003) 115–132

Factors influencing expatriate performance appraisal system success: an organizational perspective David C. Martina,*, Kathryn M. Bartol b a

Department of Management, Kogod School of Business, American University, 4400 Massachusetts Avenue Northwest, Washington, DC 20016-8044, USA b Department of Management and Organizat Organization, ion, Robert H. Smith School of Business, University of Maryland, College Park, MD, USA

Abstract

This study exam examines ines the fact factors ors that influence influence the success of expa expatriate triate performance performance appraisal appraisal systems in U.S. multinationals, as perceived by the organizations. Results involving 94 firms suggest that th at cl clar arif ifyi ying ng pe perf rfor orma manc ncee ex expe pect ctat atio ions ns pr prio iorr to th thee pe perf rfor orma manc ncee ra rati ting ng,, th thee fa fair irne ness ss of th thee performance appraisal system, and the incorporation of career development positively influence perceptions of expatriate performance appraisal system success. The frequency of evaluating expatriates performance approached significance and consideration of the local environment in the performance appraisal process was not a significant contributor to the perceived success of the system. Research and practical implications, as well as suggestions for future research, are discussed. D 2003 Published by Elsevier Science Inc.

1. Introduction

Appraisin Apprai sing g the pe perfo rforma rmance nce of exp expatr atriat iates es is gai gainin ning g des deser erved vedly ly inc increa rease sed d res resear earch ch attent att ention ion.. Rec Recent ent stud studies ies hav havee bee been n pri primar marily ily des descri criptiv ptivee or pre prescr script iptive ive in nat nature ure.. The They y have focused on such issues as the process used for appraising expatriates (Harvey, 1997), 1997), practices used by multinationals in appraising the performance of expatriates (Gregersen et al., 1996), 1996), performance appraisal as both a strength and an area needing improvement in the world’ss larges world’ largestt multinatio multinationals nals (Pete (Peterse rsen n et al. al.,, 19 1996) 96),, the ne nece cessi ssity ty fo forr id ident entif ifyin ying g top

* Corresponding author. Tel.: +1-202-885-1922; fax: +1-703-319-1262. E-mail address: [email protected] (D.C. Martin). 1075-4253/03/$ – see front matter D 2003 Published by Elsevier Science Inc. doi:10.1016/S1075-4253(03)00030-9

116

D.C. Martin, K.M. Bartol / Journal of International Management 9 (2003) 115–132

management potential early as part of the human resource planning effort of multinationals (Cascio, 1993), and the transfer of t raditional performance appraisal principles across cultural boundaries (Vance et al., 1992). As Gregersen et al. (1996) have noted, much more remains to be done to acquire sufficient understanding to develop effective expatriate performance appraisal systems.

2. Background

Expatriate performance appraisal systems play a very significant role in the management of multinationals. Not only are the results of these systems used in almost every major decision involving the expatriates of the organization, they play a major role in ensuring the perpetuity of the multinationals, and greatly assist in achieving the goals of the firms. One of the prime uses of expatriate performance appraisal systems is the identification, selection, and development of the future leaders of multinational organizations. Developing internal management talent is one of the key functions of multinational organizations (Bartol and Martin, 1998). The need for managers with international experience is steadily increasing as more organizations are joining the global marketplace. During the period 1990–1998, the number of nonfinancial U.S. multinationals rose more than 20% to over 2500 (U.S. Direct Investment Abroad, 1998). One study of multinationals shows that international experience among senior executives is rare, with less than 15% reported to have it (Black et al., 1998). Another study reported that the leaders of General Motors, Avon, Campbell’s Soup, Ford, Gillette, Tupperware, Goodyear, General Mills, Case, and Outboard Marine all have significant overseas experience in their careers (Carpenter et al., 2000). Research by Gregersen et al. (1998) reports that senior executives of multinationals who have had international assignments indicated those jobs provided their single most influential leadership experience. The experience gained while an expatriate is invaluable. The expatriate is frequently called upon to perform many functions that go well beyond their primary function. These provide unique learning opportunities for the expatriate. The ability to handle myriad responsibilities using individual innovation and ability to make things happen through others has proved to be superb preparation for senior level positions in multinationals. Further, the skills developed by expatriates add positive dimensions to their parent organizations. These additional capabilities play a significant role in a multinationals’ ability to scan, organize, and reorganize resources rapidly so that regional boundaries are not barriers to potential products, business opportunities, or manufacturing locations (Rhinesmith et al., 1989). These newly acquired and practiced capabilities are normally recorded during the performance appraisal process. Thus, they become the basis for future actions and activities of the multinational. The expatriate performance appraisal system is also normally linked to the organization’s strategic planning process (Cardy and Dobbins, 1994). A multinational’s strategic planning process begins with the designation of corporate goals and strategies to support the


117

achievement of the goals. The relevant parts of the corporate goals and associa ted strategies are then cascaded to subordinate organizations and the individuals therein (Latham and Wexley, 1994). Expatriate managers receive goals that come from corporate or subordinate levels in the organization. These become individual performance goals that are used to describe expected actions and anticipated accomplishments by the expatriate. The expatriates achievements can contribute to administrative decisions that can both enhance and facilitate the multinational’s global strategy. They may also have the potenti al to identify and lead to the formulation and implementation of new goals and strategies (Butler et al., 1991). The new organizational strat egies become the basis for the subsequent goals of the expatriate (Gregersen et al., 1995). The achievement of these goals leads t o the accom plishment of the organizational strategy and possibly a competitive edge (Geringer and Frayne, 1990). Expatriate performance appraisal systems encompass many issues not normally addressed by domestic systems. The numerous concerns related to divergent cultures, legal and political factors, different criteria, and varying environments requires considerations that are beyond those generally associated with domestic performance appraisal (Davis, 1998; Dowling et al., 1994; Mondy et al., 1999; Oddou and Mendenhall, 2000). The emphasis on developing global managers is a major consideration. And, the expatriate performance appraisal system would normally be expected to include employees from different backgrounds and cultures. Such a system could include parent (PCNs), host (HCNs), and third country nationals (TCN). As a management tool, the expatriate performance appraisal system can make a substantial contribution in assisting the organization reach its goals. However, at least one group of researchers has noted that the published research on performance appraisal indicates that rarely have companies been able to design and implement a credible multinational performance appraisal system (Black et al., 1992). Thus, there is a need for a better understanding of the factors, or key components, that lead to a successful expatriate performance appraisal system. Therefore, this study attempts to identify those major factors, or key components, that relate to making an expatriate performance appraisal system in a U.S. multinational organization successful, from the organizational perspective.

3. Hypotheses

Our review of the research and discussions with professionals responsible for expatriate performance appraisal systems revealed several factors, or key components, that were considered essential to a successful system for expatriates (Cascio, 1993; Gregersen et al., 1996; Harvey, 1997; Mendenhall and Oddou, 1988). These factors, or key components, include the degree to which performance expectations are clarified prior to the performance rating, the frequency of evaluating expatriates performance, the fairness of the performance appraisal system, the incorporation of career development, and the consideration of the local environment in the appraisal process. These factors, or key components, are reviewed below.

118


3.1. Performance expectations clarification

The ambiguity of performance criteria in a foreign culture can cause problems for an expatriate. Expatriates are not always told how their performance will be evaluated so they do not know where to expend their energy (Mendenhall and Oddou, 1988). The issue of deciding what criteria will be used to appraise an expatriate’s performance becomes critical to this process. The appraisal criter i a may be local, from the home office, worldwide, or a combination of these sources (Janssens, 1994). Managers in some countries do not share the same beliefs as American managers about how employees should be evaluated. According to one researcher, allegiance and general issues of conduct are more important indicators of performance in some geographical areas than is actual job performance (Seddon, 1987). Knowing what to do and when to do it is extremely important in some environments. At one large multinational, individuals who are going to be assigned overseas speak with their sending and receiving line managers to produce an action plan for their development. This becomes their performance plan, which includes both business goals and the expectation for the degree of cross-cultural competency they are expected to achieve on site (Solomon, 1994). The mutual setting of performance goals plays a major role in the motivation-appraisal process. The three parts of this process, direction, effort, and persistence are initiated during the mutual goal setting process. Direction includes the identification of what is to be done; effort addresses the amount of energy to be devoted to a goal; and persistence is that drive which causes one to stick to and complete a task (Katzell, 1994). Research indicates that participation in the performance appraisal process by the person being evaluated assists in clarifying what is expected to be accomplished and the respective goals to be attained. Specifying the goals and who will appraise the performance associated with each in advance assists in understanding what is to be done and when it should be accomplished (Harzing and Van Ruysseveldt, 1998). Knowing those goals before the rating period begins allows the expatriate to plan how the goals will be accomplished. This further facilitates the marshalling of resources, effort, and energy to ensure the goal is achieved, and allows proper time to be programmed to produce the best result. It also results in greater acceptability of goals and higher performance (Erez et al., 1985). Further, the commitment to goals is enhanced through participation in goal setting (Locke and Latham, 1990). Hypothesis 1: A performance appraisal system that clarifies performance expectations will be positively related to the success of expatriate performance appraisal systems.

3.2. Consideration of local environment

The significance of recognizing the impact of the local environment in appraising the performance of an expatriate has been discussed by many researchers (Briscoe, 1995; Cascio and Serapio, 1991; Dowling et al., 1994; Harvey, 1997; Oddou and Mendenhall, 2000). The local foreign environment may differ dramatically from that of the domestic headquarters.


119

These differences could be in several areas, such as culture, degree of technical sophistication and automation, availability of trained human resources, and local markets. Learning to balance the requirements of corporate and national culture can be a very difficult task in some areas (Schneider, 1988). Learning what to do and when requires more time in a foreign versus a domestic environment. Frequently the major issue is becoming familiar with the local culture. The advisability for allowing additional time to achieve results in a foreign environment, as opposed to a domestic situation, has also received attention in the extant literature (Briscoe, 1995; Cascio and Serapio, 1991; Harvey, 1997). Research indicates that it will normally take about 6 months for the introduction and adjustment to local conditions before the expatriate will be able to fulfill the assigned duties (Logger and Vinke, 1995). Similarly, expatriates have reported that it takes 3–6 months at the minimum to even begin to perform at the same level as in a domestic operation because of local environmental factors (Oddou and Mendenhall, 1995). In fact, Japanese firms typically do not expect any business result s from an individual for 6–12 months, because the expatriate is adapting to the local culture (Solomon, 1994). Researchers have indicated that expatriate performance appraisal systems should allow time for the individuals to adjust to local conditions and the local environment in evaluating results obtained in a foreign environment (Harvey, 1997; Cascio and Serapio, 1991). Hypothesis 2: Recognition of the need to consider the local environment factor will be positively related to the success of expatriate performance appraisal systems.

3.3. Frequency of performance evaluations

Formal performance appraisal can be accomplished after any period, although it is normally conducted on an annual basis. Sometimes organizations require that it be done more frequently, quarterly, or semiannually. Frequent performance appraisals can result in greater understanding of the job and improvement in job performance (Nathan et al., 1991). The support for frequent performance appraisals is well documented (Cascio, 1998), particularly for new employees and poor performers (Cederblom, 1982; Meyer, 1991). Earlier research (Carroll and Schneier, 1992) has pointed out that feedback is likely to be more precise, more noticeable, more timely, and delivered in a more acceptable manner when it is given often. When feedback is received in a timely manner, changes can be made and goals that otherwise may not be achieved might be realized. Recently, researchers (Gregersen et al., 1996) reported results that both semiannual and annual expatriate performance appraisals related positively to perceived expatriate performance appraisal accuracy. Those results may support the notion that frequency of performance appraisal may be associated with more effective systems. In a study of performance appraisal principles in different cultures (Vance et al., 1992), Thai managers led American, Indonesian, and Malaysian managers in giving performance feedback to their subordinates. Further, the career development literature points out that performance feedback is necessary as it gives employees the signal they are being ‘‘let in’’ the organization (Feldman, 1988).

120


Hypothesis 3: Frequency of formal performance evaluations leads to perceptions of a successful expatriate performance appraisal system.

3.4. Fairness

The perceived fairness of performance appraisal systems is an area of growing significance. Being able to challenge and perhaps change a performance rating through an appeals system adds to the perception that the performance appraisal process is fair (Greenberg, 1986). An appeals process also assists in incr easing the legal defensibility of the performance appraisal system (Barret and Kernan, 1987). Features of legal decisions that withstand legal scrutiny are also issues and areas that tend to promote perceptions of fairness, including such considerations as a formal mechanism for employees to review and appeal appraisal results (Werner and Bolino, 1997). It has been suggested that there are three features of due process that are important in determining perceptions of procedural fairness of performance appraisal systems. First, performance standards must be adequately publicized and explained. Secondly, the individuals evaluated must have an opportunity to present their own point of view on their appraisals and to challenge those that they regard as unfair. Thirdly, appraisals must be regarded as being based on real performance, as opposed to personal biases and favoritism (Folger et al., 1992). It has been demonstrated that when employees have the opportunity to have input into the evaluation process, they tend to have increased acceptance of the evaluations and satisfaction with the overall performance appraisal process. In a recent study of the impact of due process on a performance appraisal system, the researchers found that although some employees received lower evaluations, they displayed more favorable reactions, such as perceived system fairness, appraisal accuracy, attitudes toward the system, evaluation of managers, and intention to remain with the organization (Taylor et al., 1995). The impact of procedural fairness in a performance appraisal system was exhibited in another recent study in which managers who perceived unfairness in their own most recent performance evaluations reacted more favorably to the implementation of a procedurally just system than those who did not perceive unfairness (Taylor et al., 1998). Hypothesis 4: Fairness of policies and processes is positively related to the success of expatriate performance appraisal systems.

3.5. Career development

Career development is a very important international human resource function. Both the organization and the individual are responsible for expatriate career development. To have a successful career, the expatriate must perform satisfactorily on the job. The performance appraisal system provides a means of evaluating how well the individual achieves the assigned goals of the organization. It also identifies the individual’s skills and behaviors. Those skills and behaviors that are noteworthy and those that could be improved are


121

identified in this process (Hall, 1976). Training programs that strengthen those areas that can make the person more successful can be designed from the results of the performance appraisal process (Logger and Vinke, 1995). The use of the performance appraisal process to improve expatriate’s performance and skills while in an overseas assignment provides additional career opportunities for the future. For example, expatriates are frequently called on to perform functions in an overseas environment that would be done by more senior, or other, members of the organization domestically. The manner in which these functions are performed would be considered as part of the expatriate’s performance evaluation. If the expatriate truly excelled in a given situation, this would be considered a strength, and if additional training or experience may be helpful, it could be arranged. Thus, the additional developmental opportunities that may become available to expatriates could greatly assist in enhancing their future careers (Harvey, 1997). One model of career development, applicable to expatriates, includes several key factors that lead to success (Dill et al., 1962). The expatriate is first a decision maker, accepting varying levels of uncertainty and subsequently reducing them with rational search and good information. Secondly, the expatriate must understand the environment recognizing opportunities to act and learn, receiving feedback on performance, and understanding how performance is to be judged. Thirdly, the expatriate learns how to interpret the environment, sorting out vast amounts of information to select that which will facilitate achievement of performance goals. One of the key areas valued by multinationals is the experience gained by expatriates in foreign environments (Oddou and Mendenhall, 1995). The need for international experience is also growing. One study indicated that over two-thirds of senior managers in U.S. multinationals had no real overseas experience (Adler, 1986). The increasing number of organizations joining in the global marketplace further exacerbates the need for international experience. Hypothesis 5: The extent of career development emphasis is positively related to expatriate performance appraisal success.

3.6. Success of performance appraisal system

The need for performance appraisal grows steadily. Its earliest uses were for basically administrative functions such as promotions and salary decisions. Subsequently, performance appraisals were used for employee development and feedback, corporate planning, legal documentation, and other human resource actions (Murphy and Cleveland, 1995). The extension of Title VII of the Civil Rights Act, the Age Discrimination in Employment Act and the Americans with Disabilities Act, to cover American personnel who work for U.S. multinationals overseas brought more oversight to the human resource management of expatriates. In addition, the recent increase in employment discrimination claims has triggered increased reliance on performance appraisal as an important management tool (Martin and Bartol, 2000). Performance appraisal systems can assist an organization by enriching the quality of information used in organizational decisions, increasing the individual’s ability to make effective choices, enhancing the attachment between the organization and its members, and providing a foundation for organizational diagnosis and

122


change (Murphy and Cleveland, 1995). The degree to which a performance appraisal system meets the needs of the organization is sure to influence its perceived success.

4. Method

A questionnaire was developed based on existing research and input from several professional human resource managers responsible for expatriate performance appraisal systems. It was pilot tested by having three experienced international human resource professionals who were responsible for expatriate performance appraisal systems, complete it, and suggest improvements. A survey was prepared and mailed to 450 companies. They were randomly selected from a list of clients of an international relocation organization. There were three mailings: an initial questionnaire, a second questionnaire, and a postcard to the nonrespondents at 5-week intervals. The letter to the addressee requested that the questionnaire be completed by the person responsible for the expatriate performance appraisal system. Ninety-four usable questionnaires were returned, with a response rate of 21%. 4.1. Independent variables

The independent variables in this study, factors hypothesized to be associated with expatriate performance appraisal success, were measured as follows. 4.1.1. Performance expectations clarification A four-item measure asked respondents to indicate the degree to which the performance appraisal system clarified performance expectations (1 = always; 7 = never ) , the degree to which the system informed expatriates about how their performance would be rated at the beginning of the rating period (1 = always; 7 = never ), the level of involvement of expatriates in decisions regarding their work assignments (1 = fully involved ; 7 = seldom involved ), and the frequency with which the system calls for feedback from subordinates (1 = always; 7 = seldom). Coefficient alpha was .70. 4.1.2. Local environment consideration A four-item measure asked respondents to indicate the degree to which local conditions, such as culture, laws, language, values, and others, are considered in evaluating the job performance of an expatriate (1 = always; 7 = never ); the degree to which additional time that may be required to complete a task/function in a foreign environment is considered in evaluating the job performance of an expatriate (1 = always; 7 = never ); the extent to which expatriates are given a minimum period (60 days, 90 days, 6 months) during which their job performance is monitored prior to a formal evaluation (1 = always; 7 = never ); and the amount of special training (to ensure that any local/unique circumstances are recognized) that is given to raters of expatriates prior to completing an expatriate’s evaluation (1 = a great amount ; 7 = none). Coefficient alpha was .67.


123

4.1.3. Frequency of performance evaluation Respondents indicated the frequency of expatriate performance appraisals: annually, semiannually, quarterly, or other. 4.1.4. Fairness Respondents were asked if their organization could do more to improve the fairness of its procedures for handling the performance appraisal of expatriates (1 = strongly agree ; 7 = strongly disagree), the organization receives few complaints regarding the fairness of the performance appraisal process (1 = strongly agree; 7 = strongly disagree), and if the expatriate performance appraisal policies and procedures seemed fair (1 = strongly agree; 7 = strongly disagree). Coefficient alpha for this three-item measure was .71. 4.1.5. Career development Respondents were queried about: the significance of international experience in a career in their organization (1 = essential ; 7 = may be harmful ), the linkage between performance appraisal and career development is clear and consistent (1 = always; 7 = never ), performance ratings are an important factor in promotion decisions (1 = strongly agree; 7 = strongly disagree ), and the system is successful in improving the performance of expatriates (1 = strongly agree; 7 = strongly disagree). Coefficient alpha for this four-item measure was .70. 4.2. Dependent variable 4.2.1. Successful system Respondents were asked to indicate to what degree their expatriate performance appraisal system was successful (1 = highly successful ; 7 = highly unsuccessful ) , the extent of their agreement with whether the expatriate performance appraisal system had been successful in meeting its goals (1 = strongly agree; 7 = strongly disagree) and the extent of their agreement with whether the expatriate performance appraisal system was successful in helping to motivate expatriates (1 = strongly agree; 7 = strongly disagree). The coefficient alpha for the three-item measure combining these issues was .79. 4.3. Control variables 4.3.1. Number of employees and number of expatriates Respondents indicated both the number of employees and the number of expatriates in the multinational. These items were used as controls because they could potentially influence the factors that are important in expatriate performance appraisal success.

5. Analyses

Descriptive statistics and bivariate correlations were calculated to summarize characteristics of the expatriate performance appraisal systems, the number of employees and

124


Table 1 Geographical areas where participating organizations have expatriates Area

Number of participating organizations conducting business there

Australia/New Zealand Africa Asia Central America Europe Middle East North America South America World Other

15 4 44 10 54 10 26 30 26 7

expatriates, and the relationships with one another. Regression analysis was then performed to determine the factors associated with a perceived successful expatriate performance appraisal system. There were two tests for robustness of the regression data. First, the regression Table 2 Industry of respondent organizations in this study Industry

Number of organizations participated in study

Accounting/auditing services Aeronautics/space electronics Agricultural products/services Automotive machinery/industrial Chemicals Communications Computer hardware/software Engineering/construction Entertainment Financial services Food and beverage Healthcare Lending institutions Manufacturing consumer products Metal and alloys Petroleum and gas Pharmaceuticals Restaurants Retail/wholesale sales Telecommunications Transportation Utilities Wood and paper Other Total

1 5 1 12 4 1 5 4 1 4 4 2 2 6 4 4 5 1 1 9 2 2 2 12 94


125

coefficients and the coefficients of bivariate correlations were compared for signs, values, and relative importance. Secondly, the consistency of the regression results was tested by removing variables from the equation and verifying the results. The remaining variables kept their sign, values, and level of significance after others were removed from the regression (Engle and McFadden, 1994).

6. Results

The 94 participating U.S. multinationals represented a diverse group of organizations. They varied in size from those included in the Fortune International 100 to small firms. The average number of employees was 23,563, and the average number of expatriates in each organization was 125. Sixty-three of the organizations were publicly held and 31 were privately owned. Thirty-one percent of the senior executives of the organizations had completed at least one international assignment. The respondent organizations had expatriates located throughout the world. The geographical areas where they were located are indicted in Table 1. The participating organizations represent a wide array of industries. The industries and number of respondents from each are indicated in Table 2. Some sense of the importance of the expatriate performance appraisal system could be derived from how the results are used in making human resource decisions. Respondent organizations reported using the results of expatriate performance appraisal for many issues. These uses are indicated in Table 3. Table 4 shows means, standard deviations, and correlations among the independent, dependent, and control variables. This table suggests that on a bivariate basis, performance expectations clarifications, consideration of local environment, frequency of evaluation, Table 3 Respondent organizations use of expatriate performance appraisal results Decisions concerning

Number of organizations using performance appraisal results

Compensation Promotion Feedback Bonus Selection Termination a Training Layoff b Profit sharing Other

81 73 51 47 35 30 28 11 9 4

a

Termination is severing the employment relationship with the organization. Layoff is temporary unemployment. An example is when United Airlines recalled some employees who were laid off following the curtailment of domestic U.S. travel after the September 11, 2001, attacks at the World Trade Center. b

126


Table 4 Descriptive statistics and correlations among variables Variable

Mean

S.D.

1. Performance 9.03 3.9 expectations 2. Local environment 15.31 5.53 3. Frequency of 1.2 .69 evaluation 4. Fairness 8.4 3.12 5. Career development 10.72 3.81 6. Number of expatriates 125.4 330.63 7. Number of employees 23,563.4 37,093.1 8. Successful system 7.9 2.97

1

2

.37** .17

3

4

.14 .02  .1 .03 .23 *

.34** .09 .17 .53**

5

6

7

.07

.54** .65** .04  .106 .79**

.25 * .5**  .03 .19 .35**

 .001 .10 .71**

.42** .17 .11

* Correlation is significant at the .05 level. ** Correlation is significant at the .01 level.

fairness, and career development are positively and significantly associated with a perceived successful performance appraisal system. The two tests for robustness of the regression data resulted in the signs, values, and relative importance being consistent and the remaining variables retaining their sign, values, and relative level of significance after other variables were removed from the regression. Thus, the regression data proved to be robust. Table 5 suggests, as hypothesized, that expatriate performance appraisal systems were perceived as being more successful when they included performance expectations clarification (Hypothesis 1), were regarded as being fair (Hypothesis 4), and were linked to the expatriate’s career development (Hypothesis 5). These results were as expected being both positive and significant. Frequency of evaluation (Hypothesis 3) Table 5 Regression analysis of factors associated with perceived success of the organizational expatriate performance appraisal system Variable Control Number of employees Number of expatriates Performance appraisal system Performance expectations Local environment Frequency of evaluation Fairness Career development F 2 R Adjusted R2

** P < .01. *** P < .001.

B

Significance .049 .150

.334 .005 .111 .196 .419 27.775 .693 .668

.670 .191

.000*** .941 .074 .008** .000***


127

was positive and approached significance. Conversely support was not found for consideration of the local environment (Hypothesis 2) as an important factor.

7. Discussion

This exploratory study began with the understanding that to gain the greatest insight into how an expatriate performance appraisal system meets the objectives established for it would require going to the focal point of information about how the system operates and the results are used. We determined this to be the person responsible for the operation of the system. In selecting this person as the source for our information, we recognized that there are three possible stakeholder groups that may have differing opinions about the perceived success of an expatriate performance appraisal. These include the raters who may be located in the same or vastly different environments from the expatriates being appraised, the expatriates whose performance is appraised and who may or may not have insight into the corporate concerns concerning the uses of the system (see Table 3), and the individuals responsible for the operation of the system who arguably have the best overall oversight position for how the system meets the corporate expectations. These individuals are in a very unique position to receive feedback from both expatriates who are evaluated using the system and managers who make significant human resource decisions based on information in the performance appraisals. Further, these people are responsible for guiding the design of the system, implementing the system, overwatching the system in operation, preparing information for human resource actions from the system, receiving feedback from both raters and expatriates, and ensuring that modifications are suggested when the system does not produce the results desired. Thus, the data provided for this study came from those people responsible for the expatriate performance appraisal systems in the U.S. multinationals. These people have been the source of research information for similar input concerning processes used in expatriate performance appraisal systems (Gregersen et al., 1996). The diverse combination of organizations from which our data are drawn is advantageous in at least two ways. The mixture of both industry (Table 2) and varied size of organizations represented not only precluded an industry affect but also provided a rich foundation for the information used in our study. The results of this research suggest a number of interesting insights into factors that make expatriate performance appraisal systems successful. In most cases the projections were confirmed, yet there was one area that did not conform statistically to the original thinking. The expectations for the hypotheses concerning clarifying performance expectations, the frequency of evaluation, perceived fairness of the expatriate performance appraisal system, and career development were confirmed. Consideration of the local environment was not supported. The data in this study indicated support for the hypothesis that clarifying performance expectations is related to the success of an expatriate performance appraisal system (Table 5). The input from the respondents is comparable with earlier research in this area. Locke and Latham (1990) posited that commitment to goals is enhanced through participation, and

128


clarifying per formance expectations results in greater acceptability of goals and higher performance (Erez et al., 1985). The implications of the findings are quite clear; when performance expectations are well understood there is a better chance of reaching organizational objectives and achieving a competitive edge. The frequency of performance evaluation was also associated with a successful expatriate performance appraisal system (Table 5). The results were close to those of recent researchers (Gregersen et al., 1996) who reported that both semiannual and annual expatriate performance appraisals related positively to perceived expatriate performance appraisal accuracy. Earlier research (Lazer and Wikstrom, 1977) has indicated several good reasons for more frequent performance evaluations. Among these are more current information that is fresher in the minds of those participating in the evaluation, more flexibility in the review process, and more meaningful and timely information when received more frequently. The respondents in this study confirmed that more frequent communications concerning the expatriate’s performance is related to the perceived success of the expatriate performance appraisal system. Fairness was also positively related to the perceived success of the expatriate performance appraisal system. The issue of fairness is particularly critical in the performance evaluation of an expatriate. Frequently, expatriates have limited communications with the individual who evaluates their performance. Thus, mutual trust is a significant issue in expatriate performance appraisal. Expatriates should be able to expect that their performance will be rated fairly and the appropriate decisions (e.g., bonus, pay raise, selected for a significant position or a promotion) would follow a positive evaluation. On the other hand, referring to a performance appraisal system as being unfair could be one of the most serious accusations that could be associated with it. The impact of fairness in a performance appraisal system was exhibited in a recent study in which managers who perceived unfairness in their own most recent performance evaluations reacted more favorably to the implementation of a procedurally just system than those who did not perceive unfairness (Taylor et al., 1998). The extent of emphasis on career development was both positively and significantly related to perceived performance appraisal success. The results of this study confirm the recognition that the development of expatriates is one of a multinational’s crucial human resource concerns (Bartol and Martin, 1998) and that performance appraisal plays a major role in this process. Earlier research indicated that international experience is significant in the career of an expatriate (Oddou and Mendenhall, 1995). The respondents in this study supported this view. The respondents to our study also indicated that 31% of the senior executives at their multinationals had completed at least one international assignment. This finding was in agreement with that of Adler’s (1986) research, exceeding the 15% reported by Black et al. (1998). Their responses are also in agreement with the previous research that suggested that the relationship between the performance appraisal and a successful career development process is clear and consistent. Consideration of local environment was not predictive of perceived expatriate performance appraisal system success (Table 5). There are two possible explanations for this result. First, some of the statistical support for this variable may have been captured by other factors in the regression process. Second, companies may be underestimating the importance of this factor.


129

Although the significance of recognizing the impact of the local environment (Briscoe, 1995; Cascio and Serapio, 1991; Dowling et al., 1994; Harvey, 1997; Oddou and Mendenhall, 2000) and allowing additional time to achieve results in a foreign area in the expatr iate performance appraisal process (Briscoe, 1995; Cascio and Serapio, 1991; Harvey, 1997) has been discussed in the current research, the research/practitioner linkage does not appear to be firm. Clearly more research is needed on this topic.

8. Limitations of this study

To our knowledge, this is the first study to look analytically at the factors that make an expatriate performance appraisal system successful. Our study provides some insights but also has limitations. For one thing, the selection of the person responsible for the expatriate system to complete the questionnaires represents both a strength and a limitation. The strength of this decision is based on the recognition that this individual is in the best overall position to evaluate how the expatriate performance appraisal system is satisfying the goals set for it by the organization. The reasons for selecting this individual have been explained earlier. As previously indicated, it is recognized that this individual represents only one of three groups of stakeholders who use the expatriate performance appraisal system. The other two groups, raters and expatriates, may have views that differ from those of the person responsible for the system. This is an area where additional research may be helpful. Another limitation is the fact that the questionnaire was completed at the headquarters of U.S. multinationals. The results could be expected to be heavily weighted in favor of those performance appraisal practices used by U.S. firms. They may not be the same for multinationals headquartered in other countries and cultures. Thus, caution should be exercised in generalizing these findings to multinationals headquartered outside of the United States. Finally, the impact of performance appraisal on the careers of HCNs was not addressed in this study. This group of employees comprises a substantial portion of the overseas workforce and future research addressing performance appraisal issues affecting this group would be helpful.

9. Conclusions

This exploratory study analyzed the contribution of five factors (performance expectations, consideration of local environment, frequency of evaluation, fairness, and career development) to the perceived success of an expatriate performance appraisal system. Performance expectations, fairness, and career development contributed both positively and significantly to the perceived success of the system. Frequency of evaluation approached significance and consideration of the local environment was not a significant contributor to the success of the system. Thus, this study provides guidance for both researchers and practitioners regarding what factors are likely to lead to more successful performance appraisals—at least from the

130


organization’s point of view. Additional research would be helpful to further consider local environment factors and directly assess the views of the raters and ratees who use the expatriate performance appraisal systems. References Adler, N., 1986. The International Dimensions of Organizational Behavior. PWS Kent, Boston, MA. Barret, G.V., Kernan, M.C., 1987. Performance appraisal and terminations: a review of court decisions since Brito v. Zia with implications for personnel practices. Pers. Psychol. 40, 489–503. Bartol, K.M., Martin, D.C., 1998. Management, 3rd ed. Irwin-McGraw-Hill, Burr Ridge, IL. Black, J.S., Gregersen, H., Mendenhall, M., 1992. Evaluating the performance of global managers. J. Int. Compens. Benefits, 35–40 (September–October). Black, J., Gregersen, H., Mendenhall, M., Stroh, L., 1998. Globalizing People Through International Assignments. Addison-Wesley, Boston, MA. Butler, J.E., Ferris, G.R., Napier, N.K., 1991. Strategy and Human Resources Management. South-Western, Cincinnati, OH. Briscoe, D.R., 1995. International Human Resource Management. Prentice-Hall, Englewood Cliffs, NJ. Cardy, R., Dobbins, G., 1994. Performance Appraisal: Alternative Perspectives. South-Western, Cincinnati, OH. Carpenter, M.A., Sanders, G., Gregersen, H., 2000. International assignment experience at the top can make a bottom-line difference. Hum. Resour. Manag. 39, 277 – 285 (Summer/Fall). Carroll, S.J., Schneier, C.E., 1992. Performance Appraisal and Review Systems. Scott, Foresman and Company, Glenview, IL. Cascio, W.F., 1993. International human resource management issues for the 1990s. Asia-Pac. J. Hum. Resour. 30 (4), 1 – 18. Cascio, W.F., 1998. Applied Psychology in Human Resource Management. Prentice-Hall, Englewood Cliffs, NJ. Cascio, W.F., Serapio, M.G., 1991. Human resource systems in an international alliance: the undoing of a done deal? Organ. Dyn. 19, 63–74 (Winter). Cederblom, D., 1982. The performance appraisal interview: a review, implications, and suggestions. Acad. Manage. Rev. 7, 219–227. Davis, D.D., 1998. International performance measurement and management. In: Smither, J. (Ed.), Performance Appraisal. Jossey-Bass, San Francisco, CA, pp. 95–131. Dill, W.R., Hilton, T.L., Reitman, W.R., 1962. The New Managers, Patterns of Behavior and Development. Prentice-Hall, Englewood Cliffs, NJ. Dowling, P.J., Schuler, R.S., Welch, D.E., 1994. International Dimensions of Human Resource Management, 2nd ed. Wadsworth, Belmont, CA. Engle, R.F., McFadden, D.L., 1994. Handbook of Econometrics, vol. 4. Elsevier, New York. Erez, M., Earley, P.C., Hulin, C.L., 1985. The impact of goal acceptance and performance: a two step model. Acad. Manage. J. 28, 50–66. Feldman, D.C., 1988. Managing Careers in Organizations. Scott, Foresman and Company, Glenview, IL. Folger, R., Konovsky, M.A., Cropanzano, R., 1992. A due process metaphor for performance appraisal. In: Staw, B.M., Cummings, L.L. (Eds.), Research in Organizational Behavior, vol. 14. JAI Press, Greenwich, CT, pp. 129–177. Geringer, J.M., Frayne, C.A., 1990. Human resource management and international joint venture control. Manag. Int. Rev. 30, 103–126 (Special Issue). Greenberg, J., 1986. Determinants of perceived fairness of performance evaluations. J. Appl. Psychol. 71 (2), 340–342. Gregersen, H.B., Black, J.S., Hite, J.M., 1995. Expatriate performance appraisal: principles, practices, and challenges. In: Selmer, J. (Ed.), Expatriate Management: New Ideas for International Business. Quorum Books, Westport, CT.


131

Gregersen, H.B., Hite, J.M., Black, J., 1996. Expatriate performance appraisal in U.S. multinational firms. J. Int. Bus. Stud., 711–738 (Fourth Quarter). Gregersen, H.B., Morrison, A., Black, J., 1998. Developing leaders for the global frontier. Sloan Manage. Rev. 40 (1), 21–32. Hall, D.T., 1976. Careers in Organizations. Goodyear, Santa Monica, CA. Harvey, M., 1997. Focusing the international personnel performance appraisal process. Hum. Resour. Dev. Q. 8 (1), 41–61. Harzing, A.-W., Van Ruysseveldt, J., 1998. International Human Resource Management. Sage, Thousand Oaks, CA. Janssens, M., 1994. Evaluating international manager’s performance: parent company standards as control mechanism. Int. J. Hum. Resour. Manag. 5:4, 853–873 (December). Katzell, R.A., 1994. Contemporary meta-trends in industrial and organizational psychology. In: Dunnette, M.D., Hough, L.M. (Eds.), Handbook of Industrial and Organizational Psychology, 2nd ed., vol. 1, 4. Consulting Psychologists Press, Palo Alto, CA, pp. 1–89. Latham, G.P., Wexley, K.N., 1994. Increasing Productivity Through Performance Appraisal. Addison-Wesley, Reading, MA. Lazer, R.I., Wikstrom, W.S., 1977. Appraising Managerial Performance: Current Practices and Future Directions, Conference Board Report No. 723. Conference Board, New York. Locke, E.A., Latham, G.P., 1990. A Theory of Goal Setting and Task Performance. Prentice-Hall, Englewood Cliffs, NJ. Logger, E., Vinke, R., 1995. Compensation and appraisal of international staff. In: Harzing, A.-W., Van Ruysseveldt, J. (Eds.), International Human Resource Management. Sage, Thousand Oaks, CA. Martin, D.C., Bartol, K.M., 2000. The legal ramifications of performance appraisal: the growing significance. Public Pers. Manage. 29 (3), 379–406 (Fall). Mendenhall, M., Oddou, G., 1988. The overseas assignment: a practical look. Bus. Horiz., 78–84 (September– October). Meyer, H.H., 1991. A solution to the performance appraisal feedback enigma. Acad. Manage. Exec. 5 (1), 68–76. Mondy, R.W., Noe, R.M., Premeaux, S.R., 1999. Human Resource Management. Prentice-Hall, Englewood Cliffs, NJ. Murphy, K.R., Cleveland, J., 1995. Understanding Performance Appraisal. Sage, Thousand Oaks, CA. Nathan, B.R., Mohrman, A.M., Milliman, J., 1991. Interpersonal relations as a context for the effects of appraisal interview on performance and satisfaction: a longitudinal study. Acad. Manage. J. 34, 352–369. Oddou, G., Mendenhall, M., 1995. Expatriate performance appraisal: problems and solutions. In: Mendenhall, M., Oddou, G. (Eds.), Readings and Cases in International Human Resource Management. South-Western, Cincinnati, OH, pp. 383 – 393. Oddou, G., Mendenhall, M., 2000. Expatriate performance appraisal: problems and solutions. In: Mendenhall, Oddou, G. (Eds.), Readings and Cases in International Human Resource Management. South-Western, Cincinnati, OH, pp. 213–223. Petersen, R.B., Sargent, J., Napier, N.K., Shim, W.S., 1996. Corporate expatriate HRM policies, internationalization, and performance in the world’s largest MNC’s. Manag. Int. Rev. 36 (3), 215–230. Rhinesmith, S., Williamson, J., Ehlen, D., Maxwell, D., 1989. Developing leaders for the global enterprise. Train. Dev. J. 43, 25–34. Schneider, S.C., 1988. National vs. corporate culture: implications for human resource management. Hum. Resour. Manag. 27, 231–246. Seddon, J., 1987. Assumptions, culture, and performance appraisal. J. Manage. Dev. 6, 47–54. Solomon, C.M., 1994. How Does Your Global Talent Measure Up. Pers. J., 96–108 (October). Taylor, M.S., Tracy, K.B., Renard, M.K., Harrison, J.K., Carroll, S.J., 1995. Due process in performance appraisal: a quasi-experiment in procedural justice. Adm. Sci. Q. 40, 495–523. Taylor, M.S., Masterson, S.S., Renard, M.K., Tracy, K.B., 1998. Managers’ reactions to procedurally just performance management systems. Acad. Manage. J. 41 (5), 568–579.

132


U.S. Department of Commerce, 1998. U.S. Direct Investment Abroad, Operation of US Parent Companies and Their Foreign Affiliates. U.S. Government Printing Office, Washington, DC. Vance, C.M., McClaine, S.R., Boje, D.M., Stage, H.D., 1992. An examination of the transferability of traditional performance appraisal principles across cultural boundaries. Manag. Int. Rev. 32 (4), 313– 326. Werner, J.M., Bolino, M.C., 1997. Explaining U.S. courts of appeals decisions involving performance appraisal. Pers. Psychol. 50, 1 – 24.

Factors Influencing Expatriate Performance Appraisal System Success- An Organizational Perspective David C. Martina,*, Kathryn M. Bartolb

Recommend Documents