Susan McGrath-Champ and Xiaohua Yang 151
The reward component includes salary, housing allowances, education for children, medical insurance, and one return home trip per year. This is in accordance with the firm’s standard overseas business policy. The expatriates have found the package adequate, although they are aware that the expatriate package has been trimmed recently in an effort to cut costs.
The expatriate training component in the performance management ap- peared to be lacking in this company. It did not provide any training for the expatriate from Taiwan probably because he could speak Mandarin and under- stands the culture in China. Neither did the company provide any cross- cultural training for the expatriate from Australia and only some brief technical training prior to departure. Although career development programmes were provided for employees in Australia, this was not apparent in the Chinese oper- ations. Mentoring, one element of employee development and support, was entirely informal in the overseas subsidiary. The Australian commodity and trade finance manager who considered that appropriate recruitment obviated the need for formalized mentoring arrangements perceived this as acceptable:
In Australia, the company does have one [a mentoring programme] and [prior to taking up the international assignment] I had a mentor. Here, it’s informal. They choose people who are able to adjust already. I could tell you that mentoring has not helped me adjust to my overseas assignment but that is because I haven’t needed any help. I have four or five friends who are based in Australia and I still call them and ask for advice – they don’t need to be here [in Beijing].
The Taiwanese branch manager, however, reported a need for mentoring and related developmental programmes: ‘For mentoring you rely on your line managers and colleagues in the same field, but it is very informal. The company needs to have some [expatriate development] programmes and some mentoring system.’
At the time of the interviews, no provision had been made for the employees’ repatriation or development beyond the assignment. Again, there were contrasts in how this was perceived by the expatriates. The Australian considered it ‘unrealistic to expect a job waiting for him in two years’.
However, the Taiwanese branch manager contrasted this with the guaranteed
‘job-on-return-home’ policy of his previous finance-sector employer, indi- cating a preference for the latter arrangement.
Company B
Compared to other firms in the study, Company B is bigger and has much more extensive experience overseas. It is a global resources company with production and sales facilities in many countries. The sales function of this
Susan McGrath-Champ and Xiaohua Yang 153
company has been established since the 1970s but the firm is at an ‘entry’
phase in terms of production in China. The interviewee is a ‘career expatriate’, with ten previous international assignments with several companies spanning 25 years. This is his first assignment in China – as a specialist upper-middle level manager. He is from the United Kingdom and was selected internally to develop new production business in China. This company sets the following three goals for its employees worldwide: first, to establish a win–win relation- ship with customers, second, to maintain high safety standards and, third, to invest in the environment.
Details about performance management are set out in the expatriate’s contract. Performance management processes are generally similar throughout the company, with adaptation to suit different business units. Specifically, the firm uses a balanced scorecard system; goals are set out at the beginning of the year by expatriates’ supervisors, accepted by expatriates, and assessed at the end of the year, usually with an interim review. Performance goals are identi- fied by expatriates’ supervisors and accepted by the expatriates. The perform- ance evaluation criteria include behavioural and outcome indicators. Financial indicators used depend 40 per cent on firm-level performance and 60 per cent on performance at an individual level. Other criteria include health and safety and personnel management. The reward package includes a locally taxed salary set according to European standards, a housing allowance with a given ceiling, education for children with a given ceiling, one return home trip per year, and a 25–30 per cent bonus based on performance.
The interviewee articulated the difficulty in applying numerical outcome criteria to his work, which is not well suited to this type of appraisal:
In business development, the dilemma is that you can do a very good job all year and not develop any [new] business. So, if I was measured purely on my achievement in China I would have got zero bonus because I haven’t got anything to show for it. But on the other hand, if the right outcome was not to invest in China, then I have done the right thing. So I’d save the company a lot of money. That is the problem. In my area it’s a bit difficult to measure.
He proposed that this could be addressed ‘. . . by trying to give me some credit for what the company has done during the year. So if my division does really well I get some benefit, even though it is not within my control to influence that.’ This bears out some of the inadequacies that exist in assessing performance.
The company did not provide any form of training to the expatriate. The extent of his prior international experience obviated the need for some poten- tial areas of training. He spoke no Chinese language on arriving in China and began to take Chinese language lessons on his own initiative after arrival.
There is a self-initiated informal mentoring relationship but no formal mentoring.
No formalized repatriation arrangements existed.
Company C
This is a non-profit organization serving Australian firms in China through business support, government liaison and so forth. The expatriate, an unmarried Australian, was hired in China and had five years’ prior international working experience. As the general and most senior manager of the organization, he answers to a board of directors. The unwritten organizational goals include to:
(1) ensure organizational survival; (2) establish a stronger financial base;
(3) create a sustainable business, and (4) attract new members/clients. Of these goals, the task of making the organization survive, primarily by strengthening its financial situation, and improving board accountability, were the most important. There are no specific criteria or quantifiable indicators for evalu- ating the organization’s performance nor any specific goals or performance management processes in place for the expatriate. The reward component includes salary, paid and taxed locally, and one return home trip per year but no bonus. No training was provided to the expatriate and mentoring was informal – the incumbent would seek advice from members of its subcommit- tees or the organization’s directors as needed. The expatriate expressed a desire for more structured goal setting and performance:
I’m hoping that in the future, for whoever, has this role, there will be a bit more structure for them to be managed. At the moment, the community [organization’s members] looks at what I’ve done and [it would be better] if performance was managed more on a calculated basis.
Company D
Company D is a small, project-based construction company with limited inter- national business. The company was at an entry stage of business in China, this project being the company’s first in that country. It had not formalized its performance goals; instead informally established goals include finishing the nine-month project and developing new business, without specifying any targets. This was the first expatriate assignment for the young, unmarried Australian who was deployed as a project manager for the purpose of managing a construction project. He had worked with the company previously in Australia and also had overseas (UK) work experience outside this firm.
There is no formal performance appraisal process specified. The evaluation criteria were rather vague: simply an implicit expectation that the project would be completed on time and new business established. Compensation included a salary and daily living allowance, a housing allowance and one
Susan McGrath-Champ and Xiaohua Yang 155
return home trip during the nine-month project. The expatriate did not receive any training prior to departure nor during the project in China. He could not speak Chinese upon arrival and expressed a desire for assistance of an inter- preter to enhance communication. Four months into his assignment, it was evident that cultural adjustment was still challenging. There was no for- mal mentoring. Instead the expatriate sought advice informally from two Australian-based mentors in light of a lack of rapport with his immediate (also Australian-based) superior ‘who expected deliverables should be the same as in Australia [when] they just can’t be’. No provision had been made for repatriation.
Discussion
Table 9.3 summarizes these findings and shows that there was enormous variation in the performance management systems across the four organizations studied.
The research showed that Companies A and B have adopted a more formal and standard performance management system for expatriate assignments. Both are very specific about goal setting and appraisal and reward systems, whereas performance management is almost non-existent in Companies C and D. The findings show polarized approaches to performance management among the different companies with larger firms adopting more formal performance management systems and smaller firms with informal procedures. This is consistent with other findings concerning the influence of company size as reported by Tahvanainen and Suutari (2005). In Companies A and B, performance management inclined towards a developmental-style system, though the dis- position was still one of fulfilling a mandatory organizational ‘obligation’.
Generally, the higher the level of management positions, the more likely it is that there will be written performance management goals (Tahvanainen and Suutari, 2005, p. 103). There appears to be some deviation among this small group of companies compared with broader research. In Company C, the top manager has no formal performance arrangements at all. However, this was a small organization and, as a non-profit organization, it was atypical in terms of organizational form. In this instance, organization size and form may override status/level of management and suggest that the mixture of influences affecting performance appraisal is complex. The absence of performance assessment for the expatriate in Company D, a project construction company, is consistent with wider research (Tahvanainen and Suutari, 2005, p. 105) that performance management and training are commonly non-existent in project organizations.
None of the companies studied has integrated training and development in performance management except for Company A which provided six weeks of technical training for one of the expatriates. This was carried out pre-departure as a preparatory step and there was no evidence of any follow-up to evaluate whether this training had been of benefit to the individual or whether it
Table 9.3 Performance management (PM) components Performance
management components
Company A Company B Company C Company D
Goal setting Specific goals are set in line with corporate goals:
(1) growth in sales and revenue;
(2) achieve customer satisfaction
Specific goals are set by expatriate and supervisor at the beginning of the year: (1) financial indicators; (2) health and safety; (3) personnel management. 60 per cent of goals are set at individual level and 40 per cent are set at firm/unit level
Goals: (1) make organization survive; (2) get financial base;
(3) have sustainable business;
(4) attract new members/clients
Goals not specified in the contract: finish the project and develop new business in China
Performance appraisal
Appraisal carried out every 6 months using KPIs originally identified;
individual submits own rating and confirmed by his/her boss. 15 per cent of performance is on customer satisfaction
Appraisal carried out at the end of the year and interim check points are arranged with the manager.
Appraisal is done by supervisor Standard appraisal form is used throughout the company, but tailored to the specific tasks for expatriates
No specific appraisal process and no quantitative assessment
No specific appraisal process
Standard appraisal form is used throughout the company
157 Rewards Normal expatriate packages:
salary, housing, education, medical, insurance and one return home trip per year
Normal expatriate package: salary, housing (with ceiling), education (with ceiling), one return home trip per year
Salary paid and taxed locally;
one return home trip per year
Salary plus daily allowance net of tax;
housing, one return home trip during the 9-month project term No specific bonus Bonus is performance based: 25–30
per cent of salary
No bonus No bonus Training 6 weeks’ technical training was
provided, but no cross-cultural training
No training was provided No training was provided No training was provided
Development No formal mentor No formal mentor No formal mentor No formal mentor No repatriation arrangement No repatriation arrangement No repatriation arrangement No repatriation
arrangement
contributed to his achievement of the organization’s goals. While training is not an automatic panacea, as discussed above, the almost entire lack of connection between performance management and training indicates an underdevelopment of the interface between these human resource functions.
Performance management as a means of support for employee development in an ongoing manner is missing.
There also appears to be relatively little connection between performance management arrangements and rewards in terms of the expatriate’s remunera- tion and benefits package. As is common with expatriate packages, some elements of the interviewees’ rewards packages are based on needs – the need to visit home (the annual airfare), the need for affordable housing and child education (the housing allowance and schooling allowance or fees payment).
Such benefits are commonly incentives that attract employees to take up a package or to ‘equalize’ the differences with rewards at home, rather than acting as an incentive and reward connected with the organization’s desired levels of performance. In only one instance (Company B) was performance-related pay a substantial component of the compensation package. Increasingly, the rede- sign of performance and reward systems is directed at tightening the connec- tion between these in a manner that ‘help[s] companies to bring strategy to employees, and turn employees’ potential into the desired results’ (Delery and Doty, 1996, cited in Tahvanainen and Suutari, 2005, p. 92). There appears to be some way to go to achieving this among Australian companies in China.
Conclusion
This chapter has examined performance management practices in four con- trasting western (Australian) companies operating in the world’s largest (and arguably most ‘foreign’ – Selmer, 2005b) developing economy, China.
The exploratory study provides some evidence supporting the discrepancies in organizational performance management practices in the global realm.
Though the scale of the initial phase of this project means that the findings must be interpreted with caution, it was evident that the companies which were more established and experienced in international business deployed more developed performance management arrangements. Those that were newly internationalized and smaller had not developed performance manage- ment systems for their international operations. Consequently, the achieve- ment of strategic goals in the latter companies would occur more through chance than through linking with employee performance. It is possible that the human resource function generally in the international operations of the two larger organizations was also more fully established than in the smaller, less internationally established firms, though a wider evaluation was outside the scope of this study. Generally, the contrasts captured in these findings
Susan McGrath-Champ and Xiaohua Yang 159
accord with the effect of key contextual variables of company size, level of internationalization, organizational structure and position of the expatriate in the organizational hierarchy.
Tahvanainen and Suutari (2005) comment that the performance management process can provide frequent information about the training and development needs of expatriates, over and above needs related to cultural training, and help organizations to support and train their expatriates. They also observe that there is ‘fairly little evidence’ on how well the existing performance management systems succeed in this task and that the involvement of training in performance management differs with the type of expatriate, as does the expatriate’s satisfaction with performance management. The evidence from this study reflects a disconnection between performance management and training. It also indicated less usage of performance management systems for performance-related pay than found in other studies (Suutari and Tahva- nainen, 2001 cited in Tahvanainen and Suutari, 2005).
It appears that the lack of theoretical development and empirical studies is reflected in the inadequate consideration of training and development in expa- triate performance management systems. The small scale of this study notwith- standing, it seems this is a deficiency in international business practice.
It suggests that theoretical models of expatriate performance management systems should connect with training and development to provide compre- hensiveness and relevance, and to enhance the adequacy of the both the HRM literature and global business practice.
Acknowledgements
The authors acknowledge assistance from the Australian Academy of Social Sciences and the Chinese Academy of Social Sciences that has made the field study in Beijing possible. The advice and assistance of Rongping Kang are also gratefully acknowledged.
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