performance brings individuals from all participating organizations together to form
ongoing relationships. For employees throughout the MNC possibly performing
very similar international work yet being paid different amounts, conflict and dis-
satisfaction might develop in spite of the existence of any particular national cul-
tural norms defining what is equitable. Also, questions like, ‘what are the
compensable factors in virtual assignments?’ and ‘how might compensation for vir-
tual assignees fit with global compensation strategy?’ will need to be resolved.
In relation to performance management in MNCs, virtual assignments
challenge the characteristics of integrated performance management discussed
earlier in the chapter. For instance, the already difficult challenge of effectively
communicating the strategic links between the employee’s performance and
MNC strategy is likely to be magnified for virtual assignments. Also, in terms
of performance criteria, what are the critical success factors of virtual assign-
ments? These will need to be identified. In relation to performance appraisal,
those enduring concerns of who conducts them, how they are implemented
and based on what performance data, may be intensified when it involves
those outside head office with whom the virtual assignee is working.
It might not be so easy to identify the international aspects of job perfor-
mance in a virtual assignment as in international assignments involving
physical relocation, so determining individual performance levels – outstanding
performance, under-performance or failure in virtual assignments – will present
a challenge (Welch and Fenwick, 2003). Given that effective performance of
virtual assignments is most likely to rely substantially on competence with
communication technology and with interpersonal communication, up-front
training in, and maintenance and updating of those competencies might well
emerge as a development priority.
5 CONCLUSION
This chapter has outlined the definition and purposes of international compen-
sation; the variables influencing international compensation strategy; options
for compensating those on international transfer within MNCs; and problems
and enduring issues with international compensation. From the employee’s per-
spective, international compensation is one of the most visible and contended
aspects of international HRM. The contention often arises as, from the organi-
zation’s perspective, international compensation policy and practice seek to recon-
cile principles of capacity to pay and equity across the complex operating
environment of the MNC. Further, while it has been ignored in favour of a focus
on expatriate compensation in research and practice, the role of international
compensation in achieving MNC strategic goals and objectives is now receiving
increasing attention. Many external and internal environmental variables
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