Setting theory suggests that goals pursued by employees potentially play an
important part in enhancing performance: challenging or difficult goals provide
directional cues and motivate employees to exert effort. Goals also encourage
consideration of the performance and goal setting processes (Fenwick and De
Cieri, 2001).
Understanding of the nature of the job together with equitable, accurate
and timely performance evaluation, the provision of feedback about perfor-
mance to employees and equitable distribution of development opportunities
and pay are aspects of performance management that form an employee’s
psychological contract (Stiles et al., 1997). The concept of the ‘psychological con-
tract’ has received considerable attention in relation to HRM. It is a concept
referring to an employee’s belief regarding the terms and conditions of a recip-
rocal exchange agreement between that employee and the employer (Robinson
and Rousseau, 1994). It establishes the nature of the employee’s psychological
relationship with the MNC and directs work-related attitudes and behaviours.
For example, in international HRM, particularly with regard to interna-
tional staff transfers, it is often assumed that assignees have strong loyalties
and commitment to the MNC. In practice, these attributes seem more likely to
be present when assignees have relational rather than transactional psycho-
logical contracts (Welch, 1998). The former contract is viewed as longer lasting
and based on some sense of emotional attachment to the MNC; the latter is
more a short-term, exchange-based contract typified by the view, ‘a fair day’s
work for a fair day’s pay’. This distinction is important in relation to the per-
formance management of international assignees because often the assignee is
expected to engage in extra-role activities, to go beyond his or her position
description, due to his or her presence in a foreign country.
In an MNC, performance management is more complex as it occurs across
national and cultural boundaries. The impact of this additional complexity on
each of the characteristics of an integrated performance management system
listed above will now be considered for all MNC employees.
Links to the MNC strategyIn the performance management literature, the need for links between perfor-
mance management and organizational strategy for achieving a shared vision
of organizational objectives has been emphasized (Armstrong, 1994; Bevan and
Thompson, 1991). This necessitates the relationship between each individual’s
performance and the achievement of strategic goals and objectives being
clearly established and understood. It reflects the desirability of alignment of
international HRM practices with the organization context, or vertical fit,
advocated for organizational performance outcomes such as competitive
advantage in the strategic international HRM literature (Schuler et al., 1993;
Taylor et al., 1996).
International Compensation and Performance Management 319