ASAP - Career development paper (just the limitations section)

Focusing the International Personnel Performance Appraisal Process

Michael Harvey

Performance appraisal for managers assigned to overseas positions is an extremely difficult task. The diversity of environments, differences in cultural backgrounds of managers, the geographic separation of raters and managers, and a host of technical measurement issues need to be addressed in an inter- national appraisal process. This article develops an evaluation process for home, host, and third country nationals working in a variety of intemational environments.

Effective management of selection, training, evaluation, and compensation of international managers has become a critical issue to practitioners and the focus of academic researchers (Adler and Ghadar, 1991; Black, Gregersen, and Mendenhall, 1992; Marquardt and Engel, 1993; Dowling, Schuler, and Welch, 1994; Shenker, 1995). Recently researchers have also recognized the need to adapt performance appraisal processes to assess intemational managers while in a foreign assignment (Solomon, 1995c). Perfonnance appraisals are of par- ticular imponance for intemational managers because of the need to have both developmental action plans and remedial action programs for each manager (Cummings and Schwab, 1973). The difficulty of operating in a foreign envi- ronment, with differences in culture, competitive structure, and legal con- straints, requires that expatriates have a personal developmental program established prior to departure from their domestic assignments (Hofstede, 1994; Kovach, 1994), In-depth appraisals of expatriate managers must be designed with the foreign environment in mind plus the distinctive personal development plan of the manager during the foreign assignment.

Throughout the past three decades, researchers have probed the dimen- sions of the selection process used for identifying international managers (Tung, 1982; Mendenhall, Dunbar, and Oddou, 1987; Barham and Devine, 1990; Hofstede, 1994), training managers prior to expatriation and after

HUMAN RESOURCE DEVELOPMENT QUARTERLY, vol, 8, no, 1, Spring 1997 ©Jossey-Bass Publishers 41

42 Harvey

repatriation to their home country (Adler and Ghadar, 1991; Black and Mendenhall, 1989, 1990, 1991; Harvey, 1983, 1989; Black and Gregersen, 1991), and design and implementation of international compensation pro- grams (Gomez-Mej'a and Wilbourne, 1991; Harvey, 1993a, 1993b). One dimension of the intemational human resource management process that has received significantly less attention is the evaluation and assessment of man- agers' performance while on intemational assignment (Schuler, Fulkerson, and Dowling, 1991).

Deciphering the complex web of issues associated with international man- agers' performance appraisal is a difficult task (Black, Gregersen, and Menden- hall, 1992). The performance appraisal process must develop valid performance criteria, train raters to increase their competence and reduce bias, provide for a customized appraisal process related to a wide variety of exter- nal environments, identify who should evaluate international managers, and determine when the appraisals should be done and how to evaluate the per- formance appraisal process over time. Performance evaluation is a measure- ment process as well as a subjective, emotional process, and therefore it is inexact (Casio, 1986). Most published research on performance appraisal indi- cates that rarely have companies been able to design and implement a credi- ble multinational performance appraisal system (Black, Gregersen, and Mendenhall, 1992).

The intent of this article is to explain why the performance process for intemational managers v îll differ from systems used to assess domestic man- agers' productivity. The multiple uses of an intemational appraisal process are discussed, illustrating the developmental dimensions of appraisal of managers in foreign assignments. In addition, intemational environments are clustered into four categories, and the evaluation process is standardized for ratees in these categories. The basic thrust of the article is to define the appraisal process for international managers and to operationalize the performance evaluation process in diverse intemational markets. The accuracy of rating instruments and of raters is not the primary issue being examined and therefore receives less attention.

Performance Appraisal for Domestic and International Managers

Why should there be a unique performance appraisal process for managers dur- ing an overseas assigrmient? A fundamental rule of performance appraisal is to maintain consistency among those being evaluated (Bemardin and Beatty, 1984; Bemardin and Villanova, 1986; Ilgen, Bames-Farrell, and McKellin, 1993). Without some modification to a domestically oriented performance appraisal system, an equally important mle of evaluation, fairness, cannot be achieved. A variety of circumstances necessitate an internationally articulated performance evaluation process for managers during their overseas assignments.

Intemational Personnel Performance Appraisal Process 43

1. There may be a significant diversity in employees. Managers assigned to intemational positions may be home country expatriates but also may be host country or third country nationals. There may be significant differences in their initial employment contracts, compensation and benefits packages, career paths and opportunities, and performance expectations (Adler and Ghadar, 1991; Schuler, Fulkerson, and Dowling, 1991; Harvey, 1993b). The adminis- tration of a diversified workforce may require performance appraisal policies and procedures customized to the composition of those being evaluated (Hof- stede, 1994; Hoecklin, 1995), The instruments of assessment may also need to be modified to measure subjective information in a cultural context accu- rately (Harris and Moran, 1991), The values, norms, attitudes, beliefs, and myths of performance appraisal may be strongly influenced by the culture of the individual being evaluated and the rater;; therefore, the rating process must take these differences into account during the performance appraisal (Hall, 1989; Flashmawi and Harris, 1993), At the same time, the performance review system should go beyond collecting annual compensation data by encourag- ing managers to develop professional capabilities during an international assignment, motivate them during the assignment, and help ensure their devel- opment in becoming successful intemational managers (Fairlamb, 1995),

2. Multiplicity of external environments. One element that influences per- formance beyond the control of managers is the prevailing economic condi- tions during their tenure overseas. There may be a widt array of events taking place in the external environment beyond the control of the manager being evaluated that can impede or benefit this person. The level of economic devel- opment, the rate of change in key economic variables (inflation, unemploy- ment, and interest rates), the government's involvement in the economic process, and legal constraints can have a direct impact on performance. The level of variation and the resulting impact of these exogenous variables from that of the domestic environment may have a formidable effect on appraising managers in overseas assignments. Certainly there may be environmental fluc- tuations in the domestic market, but they are more or less equal across regions, or if there is a difference, it generally is not as significant as those found in for- eign markets. Without a performance appraisal process that addresses these issues, the likelihood of a consistent and fair appraisal system is diminished (Barham and Devine, 1990; Schuler, Fulkerson, and Dowling, 1991; Javiden and Dastmalchian, 1993),

3. Limited understanding of the differences in the intemational marketplace. If performance raters are not familiar with or experienced in the unique aspects of intemational management, they may not provide equitable evaluations. When domestic human resource managers are directly involved in the perfor- mance appraisal of managers in international assignments, the evaluation instmments and process must be separated to highlight differences in domes- tic and intemational performance process. Frequently the domestic orienta- tion of human resource managers accentuates the performance evaluation

44 Harvey

difficulties for international managers (Latham, 1986; Hall and Gudykunst, 1989; Javiden and Dastmalchian, 1993). Separation of domestic and intema- tional performance appraisals highlights the differences and can improve the overall evaluation of managers assigned overseas (Kingstrom and Mainstone, 1985; Mendenhall and Oddou, 1991).

4. Consequential differences among organizational structure, strategy, and cul- ture. There may be significant inconsistencies between domestic headquarters and the international subsidiaries in a variety of important issues, and the resulting differences may cause performance evaluation inconsistencies. The degree of the inconsistency may be attributed to different goals and strategies between the domestic and intemational operations. The degree of centraliza- tion of decision making in the domestic organization highlights the difference in authority and autonomy of expatriate managers. In addition, the cultural fit between headquarters and the intemational subsidiary may be quite different, thereby directly affecting the performance appraisal process (Baird and Meshoulam, 1988; Milliman, Von Glinow, and Nathan, 1991).

5. Noncomparable or missing data. The comparison of managers' perfor- mance must be based on comparable data and standards. The variance of data among intemational subsidiaries and domestic headquarters can be significant. Frequently data are not comparable, so standardized performance evaluations do not accurately appraise intemational managers. Developing rating accuracy within the context of performance appraisals has been a major impediment to identifjdng and developing appropriate criteria for accuracy (Latham and Wex- ley, 1981; Latham, 1986). Good appraisals should be based on reliable data and should be valid, practical, and accepted by the raters (Thomdike, 1949; Latta, 1992). These discrepancies are particularly evident in intemational set- tings due to the lack of known performance standards across economies when compared to the domestic headquarters. Exogenous factors in the external environment and errors of exclusion or inclusion reduce the universality of performance appraisals (Cornbach, 1958; Lord, 1985; Smither, Barry, and Reilly, 1989; Padgett and Ilgen, 1989). A survey of expatriate managers sup- ports the problems associated with equitable performance appraisals: 77 per- cent of those surveyed were dissatisfied with their salaries, benefits, and performance appraisals (Black, 1991).

6. Time, cost, and distance issues. The amount of time and the costs associ- ated with performing equitable international performance appraisals are extended beyond those in a domestic context and therefore require a modifi- cation in the performance evaluation. Due to the geographic separation of rater and ratee in many cases, the need to make allowances for performance evalu- ations must be accommodated to the intemational environment (Schuler, Ful- kerson, and Dowling, 1991). The performance review process must be able to accommodate the various extemal and intemal environments and provide for consistency across those environments. Additionally, the time to adjust to an intemational assignment must be reflected in the frequency of intemational performance appraisals.

International Personnel Performance Appraisal Process 45

7. Need to use appraisal information for developmental purposes. It has been widely documented that the failure rate of expatriate managers from the United States is very high when compared to other countries (Wederspahn, 1990; Fuchsberg, 1992; Dowling, Schuler, and Welch, 1994), Expatriate failures have been attributed to a multitude of reasons, including lack of training, family issues, dual careers, and compensation programs. Regardless of the reasons for the high failure of expatriates, the performance appraisal must provide data on how to develop expatriate managers, thereby reducing the probability of fail- ure. The use of the appraisal process to improve managers' performance and to develop additional skills while on overseas assignments provides future opportunities for these managers. The appraisal system should increase the international managers' understanding of career opportunities and how the intemational assignment augments their career,

A properly instituted intemational appraisal process should encourage a continuation of motivation for the intemational manager. An accurate assess- ment and recognition of performance encourages managers to continue to develop their skills and expand their capabilities. If properly instituted, this process can be used to diagnose problems that an expatriate manager has dur- ing the foreign assignment. When these problems are detected early, corrective actions can be taken. If expatriate managers are encouraged to continue to develop their skills, they vî ll be more committed to the company They will have developed a better understanding of how to improve their performance, and they will support the company because of the equitable treatment they received during the expatriation.

As these seven issues illustrate, there is a significant difference between domes- tic and intemational perfonnance appraisals. It could be argued that a sepa- rate assessment process for international managers should be developed because of the magnitude of the differences. Adaptation of a domestic perfor- mance appraisal would have to he so extensive that the remaining common elements would provide little consistency between the two processes. To this end, the intemational performance appraisal process developed in this article was undertaken at the request of a multinational corporation (MNC) located in the United States and competing in the global energy market. The design and implementation of the new appraisal system took nine months. The MNC instituted the change in performance assessment by region and as new expa- triates were assigned overseas.

Development of an International Performance Appraisal Process

Intemational performance appraisals should be a systematic assessment of both employees and the organization, A performance appraisal process should rec- ognize the interdependence of both types of performance evaluations (Weiner,

1^ J Harvey

1987). The issue of how to measure outcomes is vital in the human resource management function if the linkage of job satisfaction, worker performance, and organizational outcome is to be effective. The critical goal is to obtain accu- rate measures for both the individual and the company. Managers in interna- tional settings are frequently in need of a remedial action program (RAP) because of the significant adjustments required to be effective in an intema- tional context. An RAP can be developed using the following procedures:

1, Clear feedhack to the intemational manager ahout why the domestic and intemational superior feels the performer has perfonnance problems,

2, Frequent use of behavioral critical incidents relative to the manager's behavior in an international context to point out examples of both poor and acceptable performance,

3. A highly specified, imposed program for corrective action, with perfor- mance measures and time perspectives consistent with the international environment clearly and formally established,

4. Quarterly review sessions, or more frequent ones if performance is con- tinuing to deteriorate, with the focus of these sessions on the superior's communicating to the employee how the superior feels the employee is doing in relation to the program established for corrective action,

5, Extension of the review process to longer time intervals of perfonnance specifications and measurement if performance improves. If improvement continues over a sustained period, then focus attention on other activities that need improvement.

6. If performance does not improve or even decreases, establishment of a highly specified sequence of events in terms of activities, measurements, and short-time perspectives, with the explicit conclusion being termina- tion if no performance improvements are shown. This step frequently results in voluntary self-termination, A key element here is the interna- tional manager's understanding that the individual has moved into this phase; therefore, explicit communications to this effect are crucial (Cum- mings and Scihwab, 1973),

There are at least three indexes of accuracy that need to be considered when developing a performance appraisal process: (1) behavioral accuracy (the rater observes, accurately records or recalls, and correctly recognizes particu- lar ratee behavior); (2) classification accuracy (the rater correctly recognizes that the ratee has behaved consistently with a performance standard for a par- ticular category or skill and correctly recalls the category or skill, but the behavior was not necessarily observed); and (3) decision criteria (the rater's assessment is lenient but also consistent with the ratee's actual performance) (Lord, 1985), The first category of accuracy, behavioral accuracy, is more than likely the most important gauge of performance; therefore, the process of eval- uation should ensure that the behavioral accuracy standard is met.

International Personnel Performance Appraisal Process 47_

A performance appraisal process model for intemational managers must incorporate the purpose of the appraisal, the position and task characteristics, the environmental context of the performance being appraised, the ratee char- acteristics beyond performance, the rater characteristics, the quantitative and qualitative assessment criteria established, and the process of appraisal itself. The intemational performance appraisal process model depicted in Figure 1 shows the procedural steps to be taken in conducting an evaluation of an employee's performance in an intemational setting; the rater's role as an accu- rate observer and recorder, as well as the qualitative dimension of his or her assessment, as evaluator or judge, must be accommodated in the model. The measurement of performance is a two-step process that must map events, that is, ratee actions, as well as the amount and quality of the actions of the ratee. These differing assessments overlap chronologically, and at the same time they mutually affect one another (Norther and Alexander, 1985; Ilgen, Barnes- Farrell, and McKellin, 1993).

Purpose of the Appraisal. Performance appraisal of international man- agers may have a variety of uses. Frequently it is thought that the performance appraisal's sole use is to evaluate yearly performance. Although this is a signif- icant dimension of any international performance appraisal, there are other important functions. The development of expatriate managers may be as sig- nificant a goal of the appraisal as accurate assessment of their performance. The goals of an appraisal should not be assumed to be unidimensional but rather multidimensional and developmental in nature (Black, Gregersen, and Mendenhall, 1992), This is essential in an intemational appraisal. Frequently managers experience insecurity due to the level of complexity in the interna- tional environment and therefore need the appraisal to point to areas where the manager can improve performance.

An intemational performance system can be used in four ways:

1. Between-individuals comparison. The performance appraisal focuses on comparing individual managers in terms of their overall performance lev- els in similar and dissimilar environments.

2. Within-individual comparison. Repeated measures of performance con- centrate on identifying and using data to construct profiles of managers' strengths and weaknesses in different environments.

3. System maintenance. The international human resource performance appraisal process is implemented, evaluated, and modified over time as the organization evolves in its international involvement (Adler and Ghadar, 1991),

4. Documentation. The performance appraisal is used to document or jus- tify personnel decisions.

Each of these categories has a number of individual uses for the intemational performance appraisal.

International Personnel Performance Appraisal Process 49^

Intemational perfonnance appraisals have a multitude of uses for both the individual manager and the organization. For the expatriate manager, the appraisal may used to review the manager's salary, identify the manager for a promotion, determine facets of the manager's performance that indicate a need ioT additional training, or evaluate whether the manager should be terminated. At the same time, the performance appraisal provides the organization with information: it shows where the organization stands in relation to achieving its goals, establishes the fundamental dimensions for succession planning, bench- marks the organization's performance relative to competitors from the United States and foreign markets, and can document equitable treatment of managers to comply with local labor regulations and laws. The process of performance evaluation must accommodate each of these potential uses for the appraisal.

The purpose of the performance appraisal is a logical starting point in the evaluation process, in that the individuals involved may vary the time allocated to the review relative to the ultimate use of the performance appraisal. Domes- tically, it has been determined that performance appraisals are primarily used for performance feedback (Rendero, 1980; Levine, 1986; Cleveland, Murphy, and Williams, 1989). Due to the number of environments and the almost con- stant state of fluctuation in the evolving intemational operations of many com- panies, systems maintenance and documentation regarding individuals in different environments may constitute the primary objective of the perfor- mance evaluation process. In addition, the need to provide the manager with developmental training to make up for deficiencies discovered during the appraisal process is common.

Position Characteristics. The type of position being evaluated has an influence on the appraisal process. Four related issues conceming the position have a direct impact on the performance appraisal process: (1) the level in the intemational organization being evaluated, (2) the role of the manager in the intemational organization setting, (3) the nature of the task being performed, and (4) the quality of the infrastructure to support accomplishment of the posi- tion. The organizational level of the position being evaluated modifies the process due to the differences in roles, expectations, and the nature of the data available to assess performance. The review process for top management takes on a more abstract, subjective appraisal orientation when compared to super- vising managers (Landry and Farr, 1980; Janssens, 1994). In addition, the type of rater and the sophistication of the review process will reflect the relative organizational importance of the ratee (Bemardin and Beatty, 1984). Fre- quently performance evaluation processes vary by level of the manager being evaluated, and the length of time to evaluate managers at different levels will also vary.

The role performed by the manager being evaluated—visionary, symbol- izer, mobilizer, innovator, auditor, or ambassador (Buss and Craik, 1983, 1985)—may also influence how the evaluation process functions. The role expected of an intemational manager is predicated to a degree on the tasks

50 Harvey

required of the position to which this person is assigned when overseas. Hays (1974) has identified four types of typical intemational assignments. The struc- ture reproducer task requires the development of a structure and process sim- ilar to that of the domestic operation: replication. The technical troubleshooter is an individual sent to the foreign operation to analyze and solve a particular problem: a problem solver. The operational assignee is required to operate the foreign operation as an ongoing entity; whereas, the chief executive officer is to oversee and direct the strategic thrust of the foreign operations (Schuler, Fulkerson, and Dowling, 1991), In practice, the delineation of roles may not be as well articulated as researchers have portrayed, and therefore role ambi- guity creates problems in the evaluation process.

In management positions, the task of individual managers may be defined functionally by rating the following factors (Olson, Fine, Meyers, and Jennings, 1981; Bemardin and Beatty, 1984):

• Things (the machinery, tools, and computers required to perform the task) • The duties, knowledge, or mental capabilities required • People skills or interpersonal requirements of the position • Instructions needed to accomplish the job effectively • Reasoning or judgment needed to be successful in the position • Mathematics or quantitative facility required • Language capabilities to manage successfully

Each dimension of a position should be assessed by the rater and some determination of the relative importance of each established. Frequently the relative importance of individual elements of a position are modified over time and therefore need to be monitored and updated.

The components that make up the intemational manager's position need to be identified and assessed as to their value and importance to the organiza- tion, A component weighting system of a position has to be constructed when summary judgments of a manager's performance are compiled. In addition, each component of the position must be measured relative to the following factors:

• Uncertainty The inability to define the elements of a position and their rel- ative importance concisely,

• Likelihood. The level or probability of successful completion of individual elements in the overall position,

• Observability, Whether it is feasible for the rater to observe or gain insight into the degree of completion of each element in the task,

• Noncontamination, Whether the outcomes or performance can be directly attributed to the efforts of the rater,

• Exclusiveness, That the rating is due to the quality of job performance rather than to exogenous variables that artificially inflate the performance measure.

Intemational Personnel Performance Appraisal Process 51

• Verifiability, That the rater can demonstrate that the performance appraisal was directly observed or supported through quantifiable records taken rel- ative to the position.

As performance measures are taken, it must be understood that the abili- ties of intemational managers transferred to foreign assignments to perform a particular job may not match the assignment's demands (Schuler, Fulkerson, and Dowling, 1991). When a mismatch occurs, the manager's performance will typically be lower than that of managers in similar positions where their skills and tasks are consistent. The transfer of managers into the international mar- ket must focus on the consistency between skills and task requirements. A mis- alignment problem becomes an issue as the requirements of the manager's position change over the duration of the assignment.

The quality of the infrastructure refers to the administrative system in the foreign organization. The level and quality of staff, computer systems, person- nel policies and procedures, and the like represent the supporting infrastruc- ture for operating managers. The lack of a supporting administrative system reduces the effectiveness of managers and therefore their operating perfor- mance. The performance appraisal must take into consideration the level of support before making comparisons among managers in different foreign loca- tions. Without some recognition of the supponing infrastructure, an equitable assessment among managers cannot be accomplished. The length of time the organization has been functioning in a particular international market may have a direct impact on the quality of infrastructure available to each intema- tional manager. The level of heterogeneity would be unusual relative to the homogeneous domestic infrastructure, thereby reducing the impact on per- formance differences among managers in the domestic marketplace.

External and Intemal Environments. The design of a performance appraisal system must take into consideration the environmental context of where the assessment is to take place. Both the intemal organizational envi- ronment and the external environment need to be taken into consideration. The internal environment or organizational culture of the foreign operation must be evaluated to determine the similarity or dissimilarity of a variety of issues related to performance appraisal, such as organizational autonomy, con- sistency of policies and procedures, commonality of human resource processes, organizational structure, organizational strategy, ownership, and the level of decentralization in the intemational organization. The interunit linkages of the domestic and international organizations are also of significant importance when assessing managers' performance (Doz and Pralahad, 1986; Rosenzweig and Singh, 1991), The organizational fit between the domestic organization and the intemational company will have an impact on the degree of cus- tomization of the intemational performance appraisal process (Milliman, Von Glinow, and Nathan, 1991), An organization must strive to reach a fit among

52 Harvey

its stage of globalization, its competitive strategy, and its personnel assessment process (Black, Gregersen, and Mendenhall, 1992).

Intemal fit can be classified into six strategic components relative to inter- national human resource management (Baird, Mashoulam, and DeGive, 1983; Baird and Meshoulam, 1984):

1. Management awareness. The management's focus on administrative needs viathin the intemational organization.

2. Management of the function. The structure of the international human resource function and the planning, allocation, and control of its resources.

3. Portfolio of programs. The range from routine salary administration and training of perfonnance appraisals to complex customization of compen- sation packages and performance appraisals to each intemational envi- ronment.

4. Personnel skills. The necessary skill levels of personnel involved in per- formance evaluations, in particular, the raters in the assessment process.

5. Information technology The level of sophistication of information collec- tion, analysis, and storage technology among domestic and international operations.

6. Awareness of the environment. Recognition of the level of difference in the intemal and extemal environment and its impact on performance appraisal.

The degree of congmence among domestic and intemational operations may influence which aspects of the performance appraisal process need to be mod- ified in the intemational operations.

As the formal corporate organization differs among the domestic and inter- national operations, the type of appraisal also needs to be modified. If the own- ership of the foreign operation is shared (for example, joint venture, strategic alliance) the process of' evaluating the employees more than likely would not be the same as in the domestic operation. The more the company's competi- tive strategy is differentiated from that of the domestic operation, the more comprehensive and complex the performance appraisal needs to be (Black, Gregersen, and Mendenhall, 1992).

The intemational organizational culture may be significantly different from that of the domestic operation, if for no other reason than the composition of the workforce, with employees from the home country, the host country, and third countries. The greater the cultural dissimilarity, the greater attention is needed to modifications in appraisal criteria, instruments, and ultimately the process of personnel evaluations (Solomon, 1995a). Past academic research has focused on the evaluation of expatriate performance appraisal. To manage a culturally diverse group effectively, the appraisal process must be designed to deal with a variety of cultures at the same time (Vance, McClaine, Boje, and Stage, 1992). The compensation and appraisal system has to be effective to

Intemational Personnel Performance Appraisal Process 53

attract, retain, and motivate a broad spectrum of managers with diverse back- grounds (Fairlamb, 1995).

The extemal environment has an impact on perfonnance appraisal too. The key extemal environmental issues are level of economic development, the gen- eral population's cultural distance from that of the domestic country, the level of development of the infrastructure and economic institutions, the host indus- try structure and the magnitude of difference to the home country, the level of govemment intervention into personnel-related issues (Schuler, Fulkerson, and Dowling, 1991), and the strategic attractiveness and importance of the host economy to the strategic plans of the organization (Korbin, 1994), The more diverse the host country's environment is from that of the organization's home country, the higher the probability is that the performance evaluation will need to be modified. For example, the greater the manager's adjustment to the cul- tural and economic setting, the longer the time that should be allowed before performance appraisals are made (Davidson, 1984; Mendenhall and Oddou, 1988), Because adjustment will take longer, the appraisal process will need to be modified to take the adjustment period into account,

Ratee and Rater Characteristics. The issues surrounding the ratee and the rater in an intemational performance appraisal process may be significantly different from those of a domestic performance evaluation system. Due to the different cultures of ratee and rater, their thoughts on appraisal criteria, the process, and the use of the results of the appraisal are frequently in conflict (Hoecklin, 1995), There are differences in qualities that are important and val- ued in various cultures (Thome, 1992; Hofstede, 1994). The concepts of lead- ership, control, participation, authority, communications, and assessment may also vary by culture; therefore, the ratee and rater are critical dimensions in an intemational performance appraisal process. The ratee may be from the home, host, or third country; at the top, middle, or supervisory level in the organi- zation; and with performance assessed quarterly, semiannually, or annually. The rater may be also be the ratee, a supervisor (domestic or foreign), peers, subordinates, or outside stakeholders, and each of these raters may use quan- titative or qualitative data to assess the manager's performance. Figure 2 pro- vides a template for determining when, who, and how managers in intemational assignments are to be evaluated. The variation in performance appraisal is highlighted, but at the same time consistency can be maintained by treating mangers at the same level in the organization with consistency.

Although six raters will not always be used in an assessment, it is impor- tant to note that the more comprehensive the system and the strategic impor- tance of the intemational operation, the greater the number of raters will be employed for each ratee (Davidson, 1984; Doz and Pralahad, 1986; Black, Gregersen, and Mendenhall, 1992),

The problems associated with ratee and rater go beyond the sheer mag- nitude of numbers of individuals involved in the appraisal process. The cul- tural variance among raters and ratees is a significant issue in developing a

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dependable appraisal process. Research in the past has primarily focused on appraisal of home country managers transferred to a foreign assignment, for example, expatriate performance appraisal (Davidson, 1984; Schuler, Fulker- son, and Dowling, 1991; Black, Gregersen, and Mendehhall, 1992), Although expatriates constitute a significant segment of managers overseas, the absence of research and managerial attention to home country and third country man- agers is a significant oversight in the existing research on intemational perfor- mance appraisals. This stems primarily from the fact that the cultural heritage of the host and third country nationals is different from that of the home coun- try nationals. These differences in predisposition to the critical variables, the Ttvitw process, and the use of the results of the performance appraisal are issues that need attention in multinational, transnational, and global compa- nies' performance appraisal process.

Not only are the cultural differences of the ratee important in an interna- tional appraisal process, but the cultural differences between ratee and rater may play a compelling role in the administration of the performance appraisal process. For example, a conflicting view of the reward system between a ratee and rater may reduce the effectiveness of the entire appraisal process. The basic cultural differences as to the relationship between the individual and the group in the appraisal process can distort the relationship between performance and performance appraisal. The cultural differences among categories of raters and ratees must be understood and dealt with when an intemational performance appraisal system is being developed and then administered. The rater will be making judgments about the consistency of the ratee's behavior over time, over situations, and relative to others (Bernardin and Beatty, 1984), Cultural.bias that exists between ratee and rater should not become a part of the measure- ment of performance of the ratee or between ratees.

The cultural differences between categories and individual ratees and raters may create fundamental errors in the appraisal process, v^th an impact on performance evaluation—for example (Feldman, 1981; Bernardin and Beatty, 1984):

• Raters may underestimate the importance of situational factors and overes- timate ratee factors as the primary impact on performance level.

• Raters and ratees may differ in their causal attributions, with ratees empha- sizing situational or cultural factors and raters using ratee factors.

• Raters may attribute causes to the most salient features of the culture or environment, including culturally novel or culturally different ratees,

• Raters may tend to weight ratee behaviors that are consistent v̂ dth the rater's cultural biases more heavily than other behaviors, especially if these conse- quences are not culturally consistent with the rater,

• Ratees may be held more responsible for behavior that leads to reward than for behavior that prevents losses.

56 Harvey

• Attributions may be related to the cultural, social, or personal effectiveness of the rater and the ratee.

Qualitative and Quantitative Assessment Criteria. Figure 2 illustrated the relationship between the ratee and rater and the means to measure inter- national managers' performance. The combination of qualitative and quanti- tative data necessitates a variety of collection instruments and means to record general observations. There are a wide variety of different techniques that can assist raters in quantifying ratee performance characteristics. Some of the more frequently used quantitative performance appraisal formats are trait rating, weighted checklist, summated scales, critical incidents, behavioral anchored rating scales, mixed standards scales, forced-choice scales, behavioral dis- crimination scales, personnel-comparison system, and forced distribution (for details of each of these techniques, see Bemardin and Beatty, 1984).

Techniques to quantify performance characteristics must guard against biases that can skew data due to the scaling or recording techniques used, such as halo error (Saal, Downey, and Lahey, 1980), central tendency, range restric- tion (Landry and Farr, 1980), first impression error (Cooper, 1981), primacy and recency effects (Feldman, 1981), correlation bias (Kenny and Berman, 1980), proximity error (Blum and Naylor, 1968), and similarity and contrast errors (Bemardin and Beatty, 1984). But it should also be noted that human resource managers as well as raters will want to quantify as much of the per- formance evaluation as possible (Kovach, 1994). Quantification leads to the belief that personal, subjective bias has not directly influenced the performance evaluation.

Due to the measurement problems with standardized evaluation tech- niques and instmments and the probable cultural differences present in inter- national managers, many performance evaluations are becoming more qualitative. The need to have equitable and consistent appraisals across cul- tures almost in itself necessitates assessment that is not tied to a culturally bound measurement or instmment. To reassure ratees that the performance appraisal takes into consideration the uniqueness of the intemal and external environment, at least a portion of the assessment must be qualitative. This uni- versality of the appraisal system is particularly important if there are negative sanctions associated with the review when an intemational manager's perfor- mance does not achieve the designated targets (Freedland, 1993).

One justification for the use of qualitative assessment techniques in the intemational performance appraisal is to increase the ratee's opinion of per- ceived faimess and accuracy, as well as to demonstrate the sensitivity to issues beyond the control of the ratee. As complex as the environment of interna- tional business is, the need will increase to adapt standardized evaluation tech- niques, thereby making the appraisal more subjective.

The integration of quantitative and qualitative measures of perfonnance will continue as the operative means to assess performance in an intemational

International Personnel Performance Appraisal Process 57

context.- The balancing of these two methods between rater and ratee's cultural background is the human resource manager's challenge. Without adequate attention to the cultural implications of quantitative measures, the probability of ratee acceptance of the appraisal system as fair and consistent is diminished greatly.

Rating Process Characteristics. The actual process of rating becomes more demanding in the intemational marketplace because of the time and geo- graphic separation of the raters and ratees. Just as the assessment criteria need to be modified because of the cultural differences among ratees in the inter- national portion of the organization, so does the actual evaluation process, that is, the step-by-step procedure of evaluating ratees.

The observations of the ratees may vary by a number of variables, such as level in the organization of the ratee in the intemational operation (for exam- ple, top, middle, or supervisory), cultural distance from home country (for example, third country national), type of role (for example, structure repro- ducer, technical troubleshooter), strategic linkage between domestic and inter- national location of ratee, and the ownership structure of the international operation (for example, wholly owned, joint venture, or strategic alliance).

Other researchers have suggested that not only should the raters vary by the type of ratee, but the number of rating observations should be attuned to the potential value of impact of the various raters (Black, Gregersen, and Mendenhall, 1992). This frequency issue ties into the need for constructive feedback to the ratee but also recognizes the potential geographic dispersion of ratees and the strategic orientations of the intemational operation (Adler and Ghadar, 1991). The use of multiple raters as well as having raters evaluate ratees during different time intervals appears to reduce the level of consistency between ratees. It could be argued that within-ratee evaluations are improved, but at the same time, between-ratee comparisons are compromised due to the variety of raters and varying number of ratings per performance evaluation cycle. The comparison of data between ratees and raters of the same manager can be improved by establishing a classification schemata of international man- agers (see Figure 3).

The classification matrix divides ratees by the characteristics of the exter- nal environment, for example, stage of economic development, cultural dis- tance from home country, and level of govemment intervention. This aspect of the matrix would ensure that all managers assigned to similar extemal envi- ronments would be assessed in an equivalent manner. At the same time the internal environment characteristics—similarity of corporate culture between host and home organizations, consistency of organizational structure and own- ership, and the level of consistency of strategy in the home and host markets— could be used to increase the homogeneity of classification. This performance appraisal classification scheme can be used to evaluate home country nation- als, maintaining consistency for the intemal and the extemal environment vari- ables. This classification matrix should raise the consistency among home

58 Harvey

Figure 3. Contextual Performance Appraisal Matrix

I I I

tu re

C ul

il ar

B 1Q

S 2 u

ila r

g in

ti on

rv en

S

|U 31

I o O

-a 12

a o

1 S

g

e o o z

Category III Performance Appraisal Process

Category I Performance Appraisal Process

Category FV Performance Appraisal Process

Category II Performance Appraisal Process

Intemal Environment

Similar Culture Dissimilar Culture

Similar Structure Dissimilar Structure

^ Consistent Strategy Different Strategy

country national performance appraisals by holding key environmental vari- ahles constant. The same type of category analysis can be used for host coun- try and third country, as well as for ratees at differing levels in the organization. A matrix for each group of ratees could be constructed to reduce the hetero- geneity that plagues across-group comparisons among home, host, and third country nationals. The same argument can he used to justify classifying man- agers by level of management due to the differences in roles, means to mea- sure performance, type and numher of raters, and benefits received from the organization. The classification process reduces variance and can be defended to ratees when they want to challenge the performance appraisal process; for example, everyone who has a similar background in similar intemal and exter- nal environments is compared as a group. By placing ratees in categories con- trolled for important intervening variables, the differences in performance levels can be attributed to ratee performance, not to the environment.

No classification system eliminates all discrepancies among ratees, but the performance appraisal matrix process can be defended by human resource managers as being equitable. Each category rater's environment is homoge-

International Personnel Performance Appraisal Process 59

neous, and the level of the individual can also be accounted for by construct- ing a set of categories based on management level rather than nationality. A recurring criticism of compensation and appraisal systems is their lack of sen- sitivity to the cultural context of the position being evaluated and the seem- ingly ad hoc nature of the process (Black, Gregersen, and Mendenhall, 1992; Harvey, 1993a, 1993b). Through this method of establishing categories, ratees will be treated consistently depending on how their position is classified rela- tive to the domestic operation. This procedure not only helps to ensure con- sistency among similar ratees but at the same time simplifies the total intemational performance appraisal process.

Summary and Conclusions

Managers in overseas assignments are highly concemed about their compen- sation, benefits, and evaluation of their performance. In a recent survey, 77 per- cent of the expatriate managers were dissatisfied with their salaries and benefits, and the intemational compensation system in general (Black, 1991). The compensation and performance appraisal process legacy (that is, "we did it this way in the past") presents a considerable obstacle in reorienting inter- national human resource managers. The legacy issue is considered to be a sig- nificant deterrent to modifying the existing appraisal and compensation processes effectively (Harvey, 1993b).

The appraisal of personnel performance in an intemational context is con- sidered significantly more difficult than in a domestic organization. Past research has identified issues that need to be addressed and problems that con- front practitioners when administering an intemational performance appraisal of employees. One major conclusion that can be dravwi from this article is that companies involved in global competition need to globalize their human resource management development process (Greengard, 1995). Given the high level of failure in foreign assignments, intemational human resource managers must begin to focus their attention on the developmental aspect of perfor- mance appraisal. The data collected during the performance appraisal process needs to be assimilated into ongoing development programs for managers. Without ongoing attempts to address shortcomings in intemational managers, the probability that these managers will fail in the intemational assignment increases dramatically

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Michael Harvey is Putterbaugh Chair oJAmerican Free Enterprise and director, Division oJ Management, University oJ Oklahoma, Norman.