has been examined in a number of studies with consistent findings that high- light cross-cultural capabilities as questionable or deficient (Dawkins et al., 1995; Rosen et al., 2000; Woods, 2003). However, the level of outward foreign investment originating from Australia has reached a historical high following the abolition of Australian restrictions on such investment (Parliament of Australia, 1995/6). In 2003, outward foreign direct investment from Australia was $A117,091 m ($US90,312 m), up from $A30,507 m ($US23,530 m) in 1990.
Of this, the Australian FDI in China was $A37,006 m ($US28,542 m), 31 per cent of the total, up from $A2489 m ($US1917 m) over the same period (UNCTAD, 2004). The time is ripe for a closer look at performance management systems in Australian foreign ventures from both theoretical and practical perspectives, in particular the role of cross-cultural training and development in performance management.
The next section of the chapter reviews the relevant literature and provides a theoretical foundation concerning performance management and training.
The third and fourth sections outline the methods used in the study, and set out the initial empirical findings, respectively. The fifth section discusses the findings and the final section draws conclusions regarding performance man- agement and its connection with training systems.
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with overall organizational strategy (Fenwick et al., 1999). Within performance management systems, individual goal setting takes place with extensive indi- vidual employee involvement and in the context of the job and the organization.
Conducting performance appraisal and providing feedback serve a develop- mental purpose aimed at continuous improvement and socialization to work settings when it is incorporated with training and development. Linking results and reward systems and linking overall organization strategy with the components of performance management mentioned above allow for a con- tinuous process that connects people and jobs to the strategy and objectives of the organization to achieve its maximum benefits and optimum results (Fenwick et al., 1999; Mwita, 2000; Tahvanainen and Suutari, 2005).
Within multinational corporations, performance management is broader and more complicated than in domestic companies, where primarily local employees are managed within the local political, legal and cultural environment (Tahvanainen and Suutari, 2005). In a domestic context, performance goals are usually agreed jointly between individuals and their closest first-level manager.
In contrast, the primary manager with whom an expatriate agrees his or her goals can be in the home or host location, or even some other third country unit (Tahvanainen and Suutari, 2005).
As performance management is an ongoing process aimed at increasing expatriates’ effectiveness in foreign ventures and improving venture performance, identifying training and development needs and using the knowledge gained through training to improve performance of expatriates become critical to achieving corporate goals and objectives (Mwita, 2000). In overseas assign- ments, expatriates are faced with a new set of cultural imperatives and environ- ments. Cross-cultural training is called for to adjust to the new settings.
Cross-cultural training provides expatriates with an opportunity to acquire knowledge and skills that will help them manage ‘culture shock’, prepare them for the initial and continuous challenges they will face, and reduce the likelihood of premature return (Shay and Tracey, 1997). It can also provide expatriates with an understanding of the very different ways of doing business in the host country. Some research findings reveal a positive relationship between cross- cultural training and adjusting to the new environment (Brewster and Pickard, 1994; Waxin and Panaccio, 2005). Successful adjustment and the resulting feeling of comfort can have a positive impact on the expatriate’s performance.
However, not all research concerning the effects of training is consistent. A recent study by Selmer (2005a) indicates that cross-cultural training does not necessarily lead to effective expatriate performance. Indeed, the effectiveness of expatriate performance is contingent on the specific context of the overseas assignment. This is consistent with Waxin and Panaccio’s (2005) findings that the effectiveness of cross-cultural training depends on a number of factors, including the expatriate’s prior international experience and cultural distance.
Black and Mendenhall (1990) reviewed 29 cross-cultural training studies.
Fifteen examined the relationship between cross-cultural training and individual job/task performance. Black and Mendenhall summarized these studies by noting that 11 found a significant relationship between cross-cultural training and performance, two found mixed results, and two found non-significant relationships. The four studies with mixed or non-significant results were published before 1976, and three were laboratory studies using students as subjects. Studies that showed significant relationships between cross-cultural training and performance were more likely to use independent measures of performance, field study designs, and/or use of control groups. Thus, there is some support for the view that cross-cultural training will positively affect individual performance in the new work settings. As expatriates normally face a different environment from the one that they are used to at home, cross- cultural training appears to be a beneficial ingredient in expatriate manage- ment and needs to be integrated into the whole performance management system to ensure that expatriates achieve desirable performance outcomes in culturally different work settings.
IHRM literature suggests that as firms progress towards cross-border strategies, the skills needed by expatriate management change. If expatriates are unable to maximize opportunities because of their limited cross-cultural skills, they are not only unable to achieve their individual task goals, they will also prevent multinational corporations from successfully fulfilling their strategic goals. This calls for relevant cross-cultural training even prior to the manager’s departure for the overseas assignment (Adler and Bartholomew, 1992; Dowling and Schuler, 1990; Schuler et al., 1993). Such training enhances the likelihood that expatriates’ cross-cultural skills will match their task goals and eventually organizational strategic goals, but cannot ensure the achievement of goals.
However, the need for cross-cultural training is not routinely identified in expatriate assignments in either literature or business practice. There is a clear lack of understanding of the importance of cross-cultural training in developing expatriate capabilities for achieving desirable performance and venture success.
Lack of an organizational structure for preparing expatriates can erode their confidence and motivation in the new cultural environment. Previous studies demonstrate that training associated with improved individual capabilities is correlated with performance (Lindholm, 2000). For performance management to be effective, a training component needs to be included to enhance expa- triate capabilities and skills and so facilitate the adaptation of expatriates to a foreign cultural environment. In turn, successful adaptation to a new cultural environment will lead to effective performance and more desirable results.
The most usual time for training is before the expatriates’ departure, but various writers (see Tahvanainen and Suutari, 2005, p. 98) have pointed out that training and development also need to continue throughout the assignment.
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Close linking of performance management with training and development is particularly important since it is throughout the process of ongoing evaluation relative to goals that the training needs for expatriates can be identified beyond the need for initial cultural or language training.
Whether in the global setting or within the national/domestic domain, performance management is not unproblematic. While some ‘high performing’
companies have developed sophisticated approaches (Jesuthasan, 2003), perform- ance appraisal – a core component of performance management – is commonly undertaken as a formality, an annual ‘ritual’ whereby managers/supervisors and employees can ‘tick the box’ to show that they have conformed (Nador, 1999; Wilson and Western, 2000). The emphasis on performance appraisal, often entailing numerical assessment scales, can render employees defensive (Nador, 1999). An organizational disposition of development and support deploying more frequent (than annual) assessments is needed to derive real benefits from performance reviews. There is no ‘one-size-fits-all’ solution.
Rather, developing a performance management system that works well for an organization is costly and usually needs to be done specifically for that or- ganization (Weatherly, 2004). There can be a tendency, where performance deficiencies are identified, for these to be directly referred to the training manager or department for correction. Training may be an appropriate correc- tive, but as Wilson and Western (2000) and Vesper (2001) caution, training cannot be assumed to be the appropriate performance ‘solution’. Employees/
managers may be well trained and performance deficiencies may arise from other influences. Training that is identified from performance appraisal can be hard to target and achieve. Training will be effective only if it is the real cause of the performance problem and discerning what the cause really is can be difficult. Wright and Geroy (2001, p. 587) comment that ‘training activity, by itself, may have little direct relationship to results’. Though a powerful tool to achieve performance, training can be successful only if all other performance issues are also addressed (Vesper, 2001). This is particularly challenging in the complexity of international assignments.
Performance management systems can potentially have an important role in the performance-related pay (bonuses, incentives) component of expatriates’
compensation packages. If performance goals are linked to outcomes that are significant to the employee and his/her manager, then these can motivate the employee to work hard to achieve the goals and the manager to facilitate this result. While there has been much discussion about some aspects of expatriate compensation, there is very little literature indicating how the components of performance-related pay are determined on the basis of performance (Tahvanainen and Suutari, 2005, p. 100).
The performance appraisal and feedback mechanism of a performance management system aims to optimize individual performance and enable
individuals to achieve organizational goals. In a dynamic and changing global market, a firm’s goals may be changing and thus the task nature of the expa- triate may be changing. Organizational life cycle models also suggest that corporate strategic goals will change as organizations progress through birth, growth, maturity and revival or decline stages. Thus, performance manage- ment systems should be able to maximize the fit between human resource capabilities and strategic goals through continuous on-the-job training and career development. It is argued that expatriates’ expectancy of the assignment for training and career development will impact job performance during the assignment (Yan et al., 2002). While the effectiveness of the assignment can be increased by selecting expatriates who possess cultural skills matching their task goals and organizational strategic goals, post-departure training and support are crucial for ensuring that the match continues to exist in conjunction with the changing nature of the business environment and business strategic goals (Hutchings, 2002; Katz and Seifer, 1996). Hence, training and career development should be built into the performance appraisal and feedback loop and reward infrastructure to motivate expatriates to achieve organizational goals and objectives in a changing global market environment. Based on the above analysis, a framework has been developed here to depict the perform- ance management and cross-cultural training loop (see Figure 9.1).
The figure shows that performance appraisal, training, goals and rewards all interrelate. Further, the two-way line between training and performance indicates that these, ideally, are directly linked and interrelated. The performance of an individual can affect the goals and rewards associated with an assignment and vice versa, as indicated by the dual-pointing arrows in the diagram. Together, this set of interacting human resource management elements have an influ- ence on the expatriate’s performance outcomes and the success or otherwise of a foreign venture, as represented by the box and thick arrow at the bottom of the diagram.
A variety of contextual factors (summarized by Tahvanainen and Suutari, 2005, pp. 101–6) can influence expatriate performance management. A link has been discerned between the size of a company and expatriate performance management, with bigger companies having more formal performance management practices such as written goals, performance more officially eval- uated and more frequent evaluations that include host country supervisors and which may entail team goals. The position of the expatriate within the organi- zation and the type of tasks performed affect expatriate performance man- agement. Written performance management goals are more common in management and in top management levels than in other positions. As for customer-oriented, project-based international assignments, formal goal setting and evaluation are commonly non-existent, with insufficient feedback on performance and no time to engage in training while on the assignment.
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Evaluations appear to take place more often after repatriation (Tahvanainen and Suutari, 2005, pp. 103–5).