Performance Management in Mncs
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Introduction
Multinational companies are the organisms operating with global workforces, and their “state of health” usually is heavily dependent on their capabilities to manage diverse operations in diverse environments (Schuler, Fulkerson & Dowling, 1991). The management of employees performance, also known as “performance management” has become one of the important strategic elements in many MNC HRM (Lindholm, 1999). Companies across different countries continuously develop and improve their performance management practices in order to stay competitive on the global arena. Expanding globalization and fierce competition has switched focus of many MNCs on the knowledge, competence, abilities and skills of the employees as on one of the key competitive advantages (Sheehan, 2012).
The aim of this report is to provide an overview of the principles of a performance management in MNCs, to identify key challenges faced by the company in introducing/implementing a performance management scheme (PMS), and based on this information to develop a performance management scheme for XXX Company supplemented with relevant recommendations necessary for ensuring effective introduction of PMS. The remainder of this report is structured in the following way: Section I provides of the theoretical framework of performance management in MNCs and the key principles; Section 2 defines challenges which the MNCs are more likely to face while introducing PMS; Section 3 provides recommendations of effective implementation of PMS. The Conclusion section summarizes the issues covered in the report and defines the limitations of the study.
Section I: The Principles of Performance Management in MNCs
Practically all types of businesses strive to improve their performance by integrating various practices and strategies. This practice is called “performance management”, which enables organization to get better results from the individuals, teams, and organizations by understanding and managing performance in accordance with set strategy, goals, objectives, and standards (Chaneta, 2014). The term “Business Performance Management” has many different alternative names, such as: Enterprise Performance Management, Business Process Management and Corporate Performance Management (Scheer, et al., 2006).
The concept of Business Performance Management in MNC is slightly different from the general definition of Performance management, and is defined as a “strategic HRM process that enables the MNC to continuously evaluate and improve individual, subsidiary unity, and corporate performance against clearly defined, preset objectives that are directly linked to company strategy” (Lindholm, 2000: 45). The definition of PM by itself stresses that strategic international human resource management is specifically crucial for performance management in multinational corporations (Schuler, Fulkerson & Dowling, 1991). Therefore, in order to increase the performance of multinational organizations, many HR managers work hard to identify and actively promote talents with the organization (Muntean, 2014).
Performance Management is an important process, which enables organizations to influence on understanding and perception of job tasks among the employees, and thus, to increase their motivation and job satisfaction (Lindholm, 2000). As Lindholm (1999) explains, effectiveness of performance management implementation and employees attitudes towards it are two highly correlated factors. There were carried out many studies and researches investigating the association between enhanced corporate performance and effective talent management (Sheehan, 2012a). Subsidiary performance in MNC is closely interrelated with the management development and requires certain HR initiative and efforts (Sheehan, 2012a). While talent management is an important part of corporate performance, Management Development is recognized to be even more important aspect for corporate, national and international competitive performance (Sheehan, 2012a). The main argument here is referred to the fact that managers, being a key resource to the firms and therefore, are the people who drive the organization towards positive performance. As Sheehan (2012b: 2492) explained “managerial capital is of particular importance in the context of organisational performance, reflecting its potentially higher value, rarity, inimitability and non-substitutability when compared to non-managerial employees”. Therefore, it is important to put in place effective training and development programs for executive management, which will enable them to provide direction, work with different stakeholders, use effectively resources, facilitate change, manage self and personal skills, and achieve results (Sheehan, 2012b).
In addition to recognizing HRM as one of the key principles of Performance Management, there are some other principles which also should be taken into consideration:
The company should emphasize its future-oriented goals and coaching rather than refer to the short-term results and past mistakes;
The company should find a balance between its long-term, team oriented goals and short-term, specific objectives;
Managements time should be increased for addressing personnel matters on a daily basis;
There should be introduced timely and honest communication with each ermployee; employees should be more actively involved in defining performance standards and goal setting processes (Chaneta, 2014).
Many studies indicate that Performance Management approach in MNC is subject to cultural differences influence and therefore it cannot be transferred or duplicated for 100% from one country to another one. Therefore, it is important to recognize the need of adapting management practices to the local culture and environment (Lindholm, 1999). Despite this theory of cultural divergence, many MNC tend to implement standardized Performance Management practices and policies in both home country and international subsidiaries (Lindholm, 2000). However, many studies indicate that cultural differences may influence the elements of Performance Management (Lindholm, 1999). This, MNCs often face with a challenge of adjusting their global performance strategy to the local subsidiary. Below is provided more detailed overview of the challenges, the MNCs face while introducing PM practices and policies.
Section II: The Challenges Faced by the MNC in Introducing a Performance Management Scheme
While introducing