course, MNCs often have simultaneous, different strategies for different business
units competing in different industries.
The propensity to rely on accounting measures as the basis for MNC per-
formance criteria has also been problematic. For example, measures such as
return on investment (ROI) do not consider the nature of each subsidiary’s
assigned role within the MNC: ‘successful performance for a subsidiary with a
primary role of R & D or market development would not necessarily be
reflected in an increase in ROI’ (O’Donnell, 1999: 158). Further, for MNCs seek-
ing to be global, since the motive for globalization is value creation, adherence
to accounting-based measures might cause managers to avoid value-creating
opportunities. The short-term focus on accounting and transfer pricing for
transactions between units of globalizing firms may also be poor measures of
employee performance. Transfer pricing is often set ‘with the objectives of
minimizing taxes, avoiding tariffs, and circumventing exchange controls’, so the
profit outcome for a particular subsidiary is not necessarily an accurate indica-
tor of its employees’ performance (Reilly and Campbell, 1990: 65).
Individual level criteria. For individuals working in MNCs, their international
work often involves additional dimensions to those in their domestic work.
Repatriates interviewed in an Australian MNC with approximately 75 expa-
triates at any one time revealed changes to their positions that were not
acknowledged in the performance criteria upon which the MNC’s perfor-
mance management system was based. Although not necessarily in senior
management roles, the repatriates found they were often expected by the
company to act as ‘envoys’ or ‘diplomats’ representing the company in the
communities of the locations to which they were expatriated. This involved
such activities as entertaining local government representatives, and attend-
ing invitation-only official functions such as ceremonies and social events at
foreign embassies, usually with their spouses. They reported that this
required considerable interpersonal skills. It also involved their families in
extra-role activities they felt went unrecognized by the MNC. There were no
criteria related to such activities in the MNC’s performance appraisal form,
even though successful performance of these activities greatly benefited
their organization in its relationships with the local community. The repatri-
ates felt this disadvantaged them in relation to others during the annual per-
formance review, and that it was a function of the standardized
position-based performance criteria implemented throughout the MNC.
(Fenwick, 2000)Individual performance criteria and standards in MNCs need to be relevant
to the international context in which they are performing (Harvey, 1997). For
those on international assignments, for example, in addition to recognizing
any increase in job scope, the cultural distance between them and their
International Compensation and Performance Management 323