An important performance management requirement for MNCs seems to
be ensuring that individuals are not financially disadvantaged by accepting an
international assignment, moving to another location or re-entering head-
quarters (Crandall and Phelps, 1991). In terms of integrated performance man-
agement, the major concern if this occurs is the finding that there may be no
link to expatriate performance. This contradicts the performance-based empha-
sis in reward systems currently occurring elsewhere in MNCs, as evidenced by
recent research in European, Japanese and American MNCs (Hiltrop, 1999).
This discussion has illustrated the strategic and operational complexities
around managing the performance of MNC staff. The ensuing section will now
examine the core performance management activities of determining perfor-
mance criteria and appraising performance.
Performance criteriaBoth quantitative and qualitative criteria for measuring performance are
necessary for effective performance management (Kaplan and Norton, 1992).
Performance criteria may be classified according to time-span covered, speci-
ficity and closeness to organizational goals. In essence, it is important for per-
formance criteria to be relevant, practical and reliable.
Organization level criteria. Within MNCs, specific performance expectations
for each MNC subsidiary exist relative to the market performance and contri-
bution of each to total profit and competitiveness. Based on Pucik’s (1985)
analysis, Dowling et al. (1999) presented five key variables likely to affect the
evaluation and performance of each subsidiary management team. First, ‘whole
vs part’ decisions may influence subsidiary performance such that subsidiary
performance in the short term might be sacrificed in the interests of the ‘whole’
MNC. Second, incomparable data across the MNC’s operations can cloud the
ability for objective appraisal of subsidiary performance, and therefore manage-
ment. Third, the volatility of the international environment means that if
inflexible performance goals are set from a headquarters perspective, local con-
ditions might be mismanaged. Fourth, separation by time and distance further
complicates assessments about congruence between MNC and subsidiary activ-
ities. Fifth, variable levels of market maturity might necessitate additional time
for foreign subsidiaries to achieve performance goals compared to that which is
customary in the domestic market. These are constraints that might affect MNC
performance management. Consideration of the industry in which the MNC
operates when determining performance criteria might facilitate management
of these constraints. For example, it has been suggested that performance crite-
ria should emphasize sets of decisions and behaviours that focus on corporate
and regional performance in MNCs competing in global industries, whereas for
MNCs competing in a multi-domestic industry, decisions and behaviours
should focus on subsidiary, not corporate, performance (O’Donnell, 1999). Of
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