To be accepted by employees, performance management systems in multinational corporations must be tailored to contextual factors, including the cultural context of the countries where the subsidiaries are located.
A study by a team of Australian and Turkish academics focuses on one of the major cross-cultural challenges of multinational corporations (MNCs): developing a performance management system that can be accepted by employees from different countries with different cultural norms.
Performance management (PM) systems, developed by HR to measure and ensure high employee performance, typically consist of:
In MNCs, the relationship between the home office and subsidiaries plays a major role in the control of HR and PM policies. Some MNCs consider the subsidiary as an extension of the MNC, or are focused on cost efficiency and centralization; PM decisions are thus made at the MNC level. Other MNCs give subsidiaries substantial operational autonomy including control over their HR and performance management policies and systems.
This political context is one of a number of contextual influences on performance management systems. The economic context will have an impact for example, employee pay, benefits, and job security are under pressure during times of economic crises. The legal framework of the countries in which MNC subsidiaries operate, notably labour and employment laws, also greatly influences HR policies.
While political, economic, and legal contextual factors will influence the design of PM systems, cultural contextual factors play a key role in whether or not the PM systems are accepted and specifically, whether a culture is individualist or collectivist. Individualist cultures celebrate autonomy and self-reliance and prioritise personal goals. Collectivist cultures focus on group needs and goals and the responsibility of individuals to work for the good of the others.
A country’s culture influences employee views on the core purpose of performance management. For instance, in collectivist cultures, employees see the purpose of PM as fostering relationships, respect, and trust; supporting team success; and applying policies consistently. In contrast, the purpose of performance management in individualist cultures is viewed by employees as supporting training and professional development, ensuring valid and reliable performance appraisals, and enabling employees to have a voice. Even with countries of similar cultures there can be degrees of differences. China and Turkey have collectivist cultures with the former focused more on relationships and the latter on teams. Employees in the U.S., Germany, and Australia, all considered individualist countries, expect PM policies to focus on validity and reliability, training and professional development, and employee voice and equity respectively.
Another facet that can influence employee acceptance of performance management systems is employee perceptions of being treated fairly and trusting the organization’s leaders perceptions driven by the organization’s culture, team characteristics, and relationships between supervisors and employees. Perceptions of trust and fairness will inspire employees to reciprocate with organizational citizenship behaviours (OCB), which refers to employee behaviours that are outside evaluated and rewarded work. Employees willing to voluntarily put more effort into their work or to accept extra duties for the good of the organization are examples of positive organizational citizenship behaviours. The positive reciprocity evidenced in OCB is also reflected in greater acceptance of PM policies.
Based on the insights and conclusions described above, the authors present a four-step performance management framework to ensure employee acceptance of cross-border performance management systems.
The first step is to identify the contextual factors, notably the collectivist versus individualist culture in each subsidiary, and the resulting purpose of performance management from the employees’ perspective in that subsidiary.
The second step is to develop and apply key management actions that are tailored to these cultural factors and country-specific PM purpose. Thus, respect (guanxi) is at the heart of PM-related management actions in China (performance appraisals are unerringly courteous). At the same time, the PM in France or Germany incorporates discussion of training needs and ensures that employee capabilities are maintained. Key management actions in other individualistic countries also reflect different purposes of performance management (PM). For instance, 360-degree feedback, which ensures the greater validity and reliability of a performance assessment, is popular in the U.S.. In contrast, performance management systems in Australia prioritize time for employees to express their concerns and ensure equal treatment of all employees.
The third step is to focus on the fairness and trust-building characteristics of PM policies and systems to strengthen OCB and employee acceptance.
The fourth step is to organizationally embed and institutionalize the previous three steps: identifying the culture and resulting purpose for each subsidiary, developing customised key management actions that align with the purpose and culture of the subsidiary, and ensuring perceptions of trust and fairness, which increase OCB and increase PM acceptance across the different subsidiaries of the MNC.
Alain Neher’s profile at Sturt University School of Business
https://bjbs.csu.edu.au/schools/business/staff/profiles/professorial-staff/alain-neher
Jane Maley’s profile at Sabanci University School of Management
https://myweb.sabanciuniv.edu/janemaley/
Lucia Wuersch’s profile at Sturt University School of Business
https://bjbs.csu.edu.au/schools/business/staff/profiles/lecturers/lucia-wuersch2
Branka Krivokapic-Skoko’s profile at Sturt University School of Business
https://bjbs.csu.edu.au/schools/business/staff/profiles/professorial-staff/branka-kivokapic-skoko
Improving Employee Acceptance of Performance Management Across Borders: A Reciprocity Perspective. Alain Neher, Jane Maley, Lucia Wuersch, Branka Krivokapic-Skoko. European Management Review (December 2024).
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