Nordson has 3,000 employees. It manufactures and markets equipment to apply adhesives, sealants and coatings to consumer or industrial products such as automotive parts, home appliances, soda cans and food packaging. To hear Torma talk, you realize he knows what it takes to get things done in a global company that derives about 60% of its half-billion dollars in sales from outside the United States. He thinks big: "Globalization is no longer a program; it's now part of Nordson's culture," he says.
Part of that culture is reflected in Torma's knowledge that hiring and training individuals are just the beginning of any effective global effort. Making sure people perform well is critical to the company's success. Ask him why performance is so important and he'll recount the time in 1988 when he was told to prepare for the company's entry into a new market. Nordson was going to sell equipment to Japanese automotive companies and their suppliers in the United States. He had three years to find and prepare people for the pipeline and manage their performance so they could develop the business. The employees needed to have Japanese language ability, Japanese cultural awareness and a good game of customer golf.
Not only did Torma scour the world to find talented young people with business majors and Japanese fluency, but since Nordson clearly identifies its business strategy with its human resources needs, he knew the skills these individuals had to develop. Once he selected and placed his candidates, he—and the employees' two supervisors (one local, one corporate)—made sure their performance goals matched the business needs. They were able to do this because they had already identified many of the areas in which performance was crucial: sales, oral communication, planning and organization, Japanese language and cultural ability and product knowledge. "We do this, and as a result we can meet our growth goals of 15% a year," he says.
Achieving goals in the global marketplace hinges on people. "In certain parts of the world, our human resources technology is more important than our product technology," says Torma. "It's finding, retaining and managing the right people."
It's no easy task. "Performance management is one of the most challenging aspects of international business," says J. Stewart Black, associate professor of international management at Glendale, Arizona-based Thunderbird (the American Graduate School of International Management). "Multinational businesses have different strategies in different parts of the world. Consequently, the kind of performance needed is different depending on the situation," says Black, co-author of Global Assignments: Successfully Expatriating and Repatriating International Managers, Organization Behavior, and International Business Environments: Text and Cases.
As companies attempt to manage performance globally, they face myriad issues. For one thing, the human resources staff has to understand the company's business goals and how expats help accomplish those objectives. For another, they need to know what constitutes a good job. In some cases that will be affected by the culture in which the expat is working. Also, many human resources professionals grapple with the question of who should do the performance management. People agree that it's best to have people closest to the employee provide that feedback.
Finally, what does performance management mean in a global arena? Says Black, "You could almost say it means everything. On the employee's end, if you were selected well and do well, and your performance is not fairly evaluated, what's your motivation to stay with the company or to work hard to perform in the future? It goes to near zero—no matter how much you're paid."
On the corporate side, performance management is crucial because you need to know what the individual is doing in relation to the company's strategy overseas. "If you think the employee is doing well, and the person is doing poorly, but the business takes no action, all of a sudden you get terrible results. On the other hand, if the employee is doing well and the company takes inappropriate action, it could hurt good performance," he says.
Indeed, there's a lot at stake, and the task may seem overwhelming. But, a few global corporations such as Nordson, Monsanto, Asea Brown Boveri (ABB) and Bechtel are creating innovative performancemanagement techniques. "The implications of globalization on human resources and management practices are very profound, especially in the areas of performance management and appraisal," says Eleanor Haller-Jorden, managing director of the Paradigm Group, an international human resources research and consulting firm in Zurich, New York, Tokyo and London. "One of the reasons is that the unrelenting demand for global talent has had a very significant impact on the recruitment, retention and development practices of most global firms."
Match strategic goals with the right global expatriate.
The complexity of managing global performance points out why so few companies and HR professionals do it well. "Very few companies have good appraisal and performance standards with people on international assignments," says Ronald J. Barton, a consultant with New York-based Towers Perrin. "It's a big problem."
The first step in performance management of international assignments is to match the strategic business purpose of the position with the person doing the job. Simply put, how can you measure someone's performance unless you know what the business unit is supposed to accomplish and how that individual fits in? Sounds obvious, but in many organizations, human resources professionals aren't involved in the business planning process and aren't brought in early enough during the definition of the assignment. So it's difficult to adequately manage performance overseas.
"For example, many organizations don't have effective succession planning or performance management in place, and they develop major pieces of business in Europe or Asia led by one key individual. As the added-value of these businesses goes up, these people can make whatever demands they want in terms of compensation," says Barton.
As often as not, the domestic managers don't even understand what's needed overseas. And, if they comprehend the work requirements, they might not understand the environment in which the expat is going to work. "That makes it very difficult for anyone to set reasonable expectations about what expats should achieve during their assignment," he says.
Barton suggests conducting feasibility studies before the assignment. Potential expatriates would go on short-term assignments to identify tasks they should accomplish. They'd also investigate the environment in which they'll work. Then, he suggests, they would return to the sending location with a plan intact. The individual would speak with the sourcing manager to agree on performance objectives that tie into the business plan.
Clearly, the challenge is to identify the criteria for success that drive competitive advantage. "Some companies, for example, are preoccupied with the extent to which their employee pool is capable of managing change across cultures, coping with cultural diversity, driving innovation and showing a capacity for creativity, flexibility, autonomy and entrepreneurship," says Haller-Jorden.
"The fundamental interest that's driving this need to identify critical success criteria is the idea that what's measured can be better managed," she says.
Companies identify skills and attitudes to develop and measure.
Monsanto Company is a good example of an organization that created a performance-management plan. Talk with people who know international human resources, and you'll find St. Louis-based Monsanto (the $7.9 billion food, chemical and pharmaceutical firm with 30,000 employees) referred to again and again for its exemplary practices. Specifically, the company has an integrated, strategic international human resources policy. Case-in-point: In 1992, John Amato, manager for human resources for international assignments, and Carol Jones, a human resources specialist in international assignments, decided to tackle the high rate of attrition of repatriates. They developed a formal program that was quite successful. (This program will be featured more in Personnel Journal, January 1995.) But they didn't stop there. Says Amato: "We were doing a good job on the front end in preparation for the assignment, and we were doing a pretty good job on the back end of the assignment [in repatriation], but we wondered what was happening in the middle."
They created a performance management plan. Monsanto employees who are going overseas on assignment speak with their sending and receiving line managers to produce an action plan for development. It includes not only the business goals, but also the cross-cultural competency they need to achieve onsite.
Before employees attend cross-cultural training—whether they're functional or developmental assignees—they take time to think about the position. They write a job description and what they're supposed to accomplish while on assignment. Cross-cultural counselors (from Chicago-based Bennett/Associates) move the training into a bottom-line business briefing that helps flesh out the action plan.
When the expatriate goes abroad, he or she sits down with the receiving manager and asks the supervisor to buy off on the action plan. They also ask the supervisor to help them accomplish the action plan. "The sending manager and the host manager will be jointly accountable for the development and progress of that action plan," says Jones.
One of the most important aspects of this type of performance assessment to Monsanto has to do with the company's goal of globalizing its work force. Amato and Jones questioned whether developmental assignees were really making use of their cross-cultural experiences. They wondered whether some of the education for all assignees couldn't be managed more effectively.
"We thought about how to really appreciate the return from the huge investment we were making. We're trying to internationalize [Monsanto] people, and one way to do that is to come up with a plan that links together all of our processes," says Amato. When employees return to St. Louis, they go through a formal repatriation process during which time they showcase their knowledge to U.S. peers, subordinates and superiors through formal presentations and informal get-togethers.
A good job is tied to the nature of the assignment.
Individuals can be placed on different kinds of jobs. They can join another part of the company in a foreign location; work on a specific project or on a developmental assignment. But regardless of the required technical expertise in each case, some companies insist that cultural adeptness is just as important.
Certainly, one of the most highly praised international organizations, Asea Brown Boveri (ABB), is a company without borders. Owned jointly by ASEA AB in Sweden and BBC Brown Boveri Ltd. in Switzerland, with major operations in the United States and Germany, the electrical engineering giant has revenues topping $30 billion. Part of the company's mission is to transcend national boundaries and barriers. And it's no wonder. ABB operates more than 1,300 companies worldwide, has more than 5,000 profit sectors with 220,000 employees in more than 140 countries. They consider expatriates anyone on assignment out of their home country for one to five years. The company has a matrix structure. Obviously, they can't have one uniform system when it comes to performance management. What's applicable in Japan would not be so in Australia, the United States or Italy.
ABB has three different categories of people on international assignments. There are employees who join another division (what ABB calls another company) for three to five years; people who work on extended projects for one to two years; and expats on developmental or training assignments. When expatriates join another division, the local practices relative to performance prevail.
"Individuals who work in another part of the company basically assume the full responsibilities of that assignment. They're considered a full-fledged employee of that country and company to which they're charged," says Richard P. Randazzo, senior vice president of human resources for ABB's Americas region. That's with the exception of how their taxes, benefits and housing are handled. "With regard to anything else—bonuses, assessments or ranking systems—they're subject like other employees in that local country."
But the largest number of expats goes overseas on projects. Indeed, about 50% of revenues as a corporation come out of multi-million or multi-billion dollar projects. For example, ABB is currently building a boiler complex in China. People are there for one to two years. Management in the United States will judge their performance on the project either through site visits or through other managers who are working on the project.
People on developmental assignments or training exercises are judged on how well their training goes. For instance, if ABB expands its robotics business in China, they would take locally hired Chinese and send them to the United States, Sweden or Norway to learn about robotics and how to function in that business. Their appraisals—conducted by people in the sending organization but based upon the feedback of the manager the individual was assigned to—would cover things such as: were they attentive, did they learn a lot and were they able to successfully handle several jobs?
But performance isn't restricted to job function. It's also about accommodating the culture to which expats are assigned. In fact, it's an important component of job performance. Cultural issues can have a big impact on performance in the business arena—when dealing with customers, when supervising a group of local nationals, even in the office environment.
"We ask that each company have an appraisal system, but it isn't one uniform system. So, values that are being asked may differ," says Karl Schmid, vice president of human resources in the Zurich headquarters. The tendency is that in industrialized countries, "soft issues" are a new value that they address. At ABB, the culture dictates that employees have an international perspective. They're evaluated on their cultural sensitivity and how they affect business relations. "For example, how does he or she mingle with local people, how do they try to adapt with local people and not just remain like expatriates?" poses Schmid.
In this case, the host unit's local manager usually makes the evaluation. ABB uses the grandfather principle. It's the immediate supervisor and the next higher up who make the appraisal. It's done annually with the normal business-performance appraisal.
Black believes that one of the key measurements early on should be how well the individual is adjusting to the culture. "You have to adjust before you can get anything done," he says. Typically, in the United States, companies don't allow much time for adjustment or even monitor it. Contrast this to Japanese firms that typically don't expect any business results from an individual for six to 12 months because the person is adapting to the culture. "They know people have to first adapt before they can make good business decisions.
Performance managers are as important as what's being appraised.
At Nordson, employees' performance is managed by the people closest to them. Skills are assessed by different individuals, depending on the location. Typically, if the employee is part of the local operation, a local person is the one who does the assessment; the general manager is responsible for the performance in a small subsidiary; and a functional manager is responsible in a large division. Torma also manages performance from the overall corporate perspective.
Likewise at ABB. Says Randazzo: "The basic principle is the person doing the appraisal should be the person who understands the individual's performance. The further you get away from what these individuals are doing, the less competent you are in appraising them."
San Francisco-based Bechtel Corporation is another example of a company that wrestles with these issues. The $8 billion engineering-construction firm with more than 30,000 employees in more than 70 countries is changing its 20-year-old performance evaluation process. The company has developed a leadership model that links performance management with the company's vision, called Toward 2001, which articulates a global vision and a commitment to analyze and alter the organization within a global context.
"With expatriate employees, we want to keep them in a similar system to the one we're using in the U.S.," explains Patrick Morgan, Bechtel's human resources manager for special projects. It's important to consider who would be the most effective individual in doing the appraisal. "Managing performance [of U.S. expats] abroad includes several components. One is the skills and what the job entails. Another is technical development—particularly in high-tech fields, employees have to stay current because their technical expertise can become obsolete in a year. And another is the ability to keep expatriates connected to headquarters so they keep abreast of current developments."
But it comes back to knowing why someone was sent abroad. For instance, says Morgan, in many development assignments, they don't really expect clear business results. They're sending expatriates to build awareness and cultivate interpersonal and language skills. This presents different performance-management questions and is quite different from evaluating the effective performance of launching a new product, for example.
At Bechtel, the system is already set up in this manner. Because Bechtel operates as a matrix organization, many employees have two bosses. One is typically the line supervisor who gives day-to-day direction. The second is a functional manager who gets more involved in how the employee does the job. On international assignments, both of the managers get involved in performance management.
For example, in the case of an expatriate personnel manager working on a highway project in a remote location overseas, performance evaluation would most likely be done by the project manager on site. However, in the United States, the manager of human resources would become involved as the functional boss. The domestic human resources manager would be interested in more long-term issues such as what's the next step, what additional things does the employee need to do, what training might be appropriate.
"Frequently, you hear expatriates complain, 'Out of sight, out of mind,' " says Morgan. "The whole issue of performance management, training and development is one that needs to be addressed. How do you keep them in the loop in all the development plans and bring them along with the company and where it's going?"
That's where the functional manager comes in. He or she is responsible for keeping the employee up-to-speed not only on what's going on currently, but what's developing in the company.
Some businesses are using one of the more recent trends—the multisource appraisal—in which input is pooled from a variety of directions. It makes sense. "There's evidence that on average the immediate supervisor spends about 11% of his or her time in direct contact. That leaves almost 90% of the time when someone else is interacting with the employee," says Black. The thinking goes that all of those people should have input into the evaluation. (See "Global Manager Evaluation Wheel.")
The same rationale applies for managing overseas. In fact, says Black, it becomes even more important because the person's immediate supervisor is often not in-country. Those physical, cultural and distance factors reduce the accuracy of the immediate supervisor's evaluation. "Given that you're spending a lot of money on almost every expat you send—and certainly senior managers—it behooves you to know how they're doing," says Black.
However, you have to implement this process carefully. Haller-Jorden sees this type of appraisal happening more and more. But, she cautions, you want to be sure that anonymity is protected; that whoever is given the responsibility of giving the feedback is effective at doing so, and that you train people to communicate the feedback effectively. "These procedures seem well intentioned and sophisticated, but in practice there needs to be more attention paid to necessary training so the information is useful," she says. Given the cross-cultural implications and the complex nature of the task, it's important to think through the evaluation within its context. "So many companies hear the latest buzzword and decide that's what they're going to do. The real challenge comes in operationalizing and figuring out how to make such an approach work in the culture."
It's clear that organizations must continue to invest energy and resources into efforts to make their assessment and performance-management systems more relevant and useful. Talk to many experts and they'll tell you they think corporate initiatives in this area are still in their infancy. "The barriers are daunting, but the opportunities are unquestionably compelling," says Haller-Jorden. Indeed, increasingly, companies are grappling with the challenge and attempting to make tangible progress.
What's more, if you think about the economics of the situation, mishandling the performance management of expatriates is a very expensive mistake. "In a four-year assignment, the company has spent over $1.2 million," says Black. "If the employee leaves, it's like financing the international education of an employee for a competitor. You'd be better off just to give the competitor the $1.2 million."
Personnel Journal, October 1994, Vol.73, No. 10, pp.96-108.