physical operations outside their home nation. Cross-national operations permit
closer contact with customers in markets outside the organization’s home base, ac-
cess to local labor markets, and penetration of political systems, which may be cru-
cial in shaping the environment for trade. The globalization of business has spurred
growth in new organizational forms such as alliances, joint ventures, and virtual cor-
porations, as well as the more traditional multinational corporation (MNC).
Every year, Fortunepublishes a list of “the world’s most admired companies.” In
the current, extremely volatile, world environment, “this year’s winners have in com-
mon... global reach and vision.”^3 The author, Jeremy Kahn, explained that “as the
planet shrinks, many organizations are clearly struggling to find the right balance be-
tween localization and globalization, between the organization’s culture and that of
the countries in which the corporation operates.”^4 Kahn noted that we have moved
from a time when international operations were viewed as of little value to a time
when “[p]ower has shifted to business units responsible for performing a given func-
tion globally, and the empasis is on optimizing processes worldwide.”^5
Indeed, there has been increasing attention to the need for coordination between
units in different geographic locations of companies that have operations dispersed
across the globe.^6 The rising tide of international operations may suggest that mana-
gerial experience in dealing with operations outside the home country is essential for
the development of organizational leaders.^7 A large body of empirical evidence has
confirmed that cultural variables affect the success of many common management
strategies,^8 including attempts by organizations to assess the performance of their
multinational operations. The general importance of the issue of assessing the per-
formance of global units and subsidiaries is highlighted by the specific situations of
firms in the United States and Canada. For these firms, trade liberalization and other
forces have made even more acute the need to address the issues of globalization and
trade liberalization.^9 However, the kind of information and analysis that management
needs in making such decisions remains unclear.
In a recent article in CFO, The Magazine for Senior Financial Executives, the
problems encountered by firms seeking to evaluate potential and existing foreign op-
erations were presented.^10 According to the author, the task of determining a requi-
site level of performance is complicated because “multinationals can find themselves
confronted with hyperinflation, currency risks, and volatile, underdeveloped capital
markets.”^11 When Timothy Smith, director of capital and business planning for the
Latin American unit of General Motors Corporation “tried to determine how accu-
rately [GM’s hurdle] rates reflected the cost of operating in the parts of the world for
which his unit was responsible, he came up empty-handed. And that was unset-
tling.”^12 Explaining his reaction further, Smith stated: “We thought we had been
26 • 2 DYNAMIC PERFORMANCE MEASUREMENT SYSTEMS FOR A GLOBAL WORLD(^3) Kahn, 1998, p. 207.
(^4) Id., p. 226.
(^5) Id.
(^6) Black, Gregersen, and Mendenhall, 1992.
(^7) Bowman, 1986.
(^8) For example, see Erez, 1992, 1986; Cheng, 1995; Cox, Lobel, and McLeod, 1991; and for reviews,
see Adler, 1992; Bhagat, Kedia, Crawford, and Kaplan, 1990.
(^9) De Grandpre, 1989.
(^10) Meyers, 1998.
(^11) Id.
(^12) Id.