GLOBAL PERFORMANCE MANAGEMENT SYSTEMS:THE ROLE OF TRUST AS PERCEIVED BY COUNTRY MANAGERS
GLOBAL PERFORMANCE MANAGEMENT SYSTEMS:
THE ROLE OF TRUST AS PERCEIVED BY COUNTRY MANAGERS
Jane F. Maley, Macquarie University, Sydney
Miriam Moeller, University of Queensland
This study focuses on a critical mechanism of the international human resource management process: performance management. The study specifically explores how the process of global performance management is perceived by the country managers of multinational corporations’ subsidiaries in Australia. The study reveals that: a multinational corporation's systemic demand for short-term profit has the potential for inhibiting employee-supervisor relationships and perceived effectiveness of performance management appears to be dependent on the relationship and level of trust between the country manager and her/his supervisor. On the basis of the research findings, relational communication and psychosocial factors such as trust play an important role in the functioning of a country manager vis-à-vis their perceptions of the performance management process. The study suggests that, with the current approach to global performance management for country managers, despite the expense involved in the process, many of the potential benefits may not be realized. Social Exchange Theory is proposed as the foundation for developing more effective and fluent global relationships based on trust.
Keywords: multinational corporation, country manager, global performance management, trust
GLOBAL PERFORMANCE MANAGEMENT SYSTEMS:
THE ROLE OF TRUST AS PERCEIVED BY COUNTRY MANAGERS
The country manager of a multinational corporation’s (MNCs) subsidiary is usually a local national, typically geographically isolated from her/his supervisor, and is routinely responsible for the functioning of the subsidiary and the operationalization of strategically significant tasks, such as the management of a number of staff and the achievement of the revenue and profitability targets of the subsidiary (Schmid and Kretschmer, 2010).
Past theoretical and empirical research has heavily focused on expatriation-based staffing for managing the MNC subsidiary. This fact gives the impression that the expatriate manager is the sole principal global player of interest to global performance management (PM) studies, and that the contributions of the country manager are only of minor consequence and therefore not worthy of study in the overall representation of MNC operations (Vance, Vaiman and Andersen, 2009). The disregard by many scholars of country managers is surprising considering there are currently 850,000 subsidiaries of MNCs operating globally (Colakoglu and Caligiuri, 2008) and 75 percent of these subsidiaries have country managers at the helm (Brookfield Global Relocation Survey, 2010). These figures underline the worldwide growth in recent years in the number of country managers. In the light of the important function that country managers perform, they are expected to have a significant impact on the success of MNCs. Thus, the MNC’s understanding of and control over the subsidiary and its country managers is central in understanding the dynamics between the country manager, their supervisors, and the MNC (Birkinshaw and Hood, 1998).
Effective PM of this key resource (i.e., country managers) is, therefore, imperative to the success of the MNC and deserves some reflection (Harvey, Novicevic and Speier, 2002). PM is an activity that enables the MNC to evaluate corporate performance and is part of the coordination and control process within MNCs (Claus and Briscoe, 2009Schmid and Kretschmer, 2010). Furthermore, PM has been found to play an important role in trust building between international managers and their supervisors (Harvey, et al. 2011; Mayer and Gavin, 2005). Therefore, MNCs who neglect attention to the country manager as a critical source of expertise and information may greatly limit their global management success (Vance et al., 2009). This claim is consistent with a growing call for a refocus in international management research on the needs and contributions of country nationals in the success of MNC subsidiaries (Chung and Gibbons, 2006; Schmid and Kretschmer, 2010; Vance et al., 2009).
The limitations of extant research urge us to focus our study on the PM of country managers in Australia. The paper is organized as follows. First, we articulate pertinent and fundamental characteristics of the global PM process, while highlighting implications of the relationships between PM and feedback, trust, culture, and language, among others. We then review and discuss Social Exchange Theory (SET) as a framework for developing more effective PM procedures, at which point we present our research questions. Next, we describe our grounded theory approach to explore the nature of PM for country managers. We conclude by highlighting the results including a discussion of the key factors that influence the global PM from a country manager perspective.
2. THEORETICAL FOUNDATION
2.1 The Global Performance Management
Global PM is a critical strategic international human resource management activity that refers to a large range of activities engaged in by organizations to enhance organizational effectiveness (Claus and Briscoe, 2009). Activities that fit within this definition are for example, the setting of corporate, departmental, team and individual goals and the use of appraisal systems, reward strategies, training schemes and individual career plans (Biron, Farndale and Pauwe, 2011). While there is wide recognition of the importance of PM, most MNCs have not effectively administered their international PM (Claus and Briscoe, 2009; Taormina and Goa, 2009; Shen, 2004). The fundamental characteristics of global PM are identified as purpose, criteria, feedback, trust, and other matters relating to cultural distance and language. We briefly explore these themes and their relevance to the country manager.
Purpose of the PM
The key purpose of PM has been defined narrowly as the achievement of the organization’s strategic goals through three basic principles: increasing individual employee performance, development of the employee and administrative tasks such as compensation (; Milliman, Nason and De Cieri, 2002; Murphy, Cleveland, Kinney and Skattebo, 2004). It is important that the purpose of the PM be clearly defined to the employee and directly linked to the MNC strategy (Maley and Kramar, 2007; Milliman et al., 2002). An effective PM has been described as one that fulfills the key purposes of the process (Murphy et al., 2004) and ensures country managers and their overseas subsidiaries are acting in accordance with the parent MNC's interests (Shen, 2004).
Criteria of the PM
Gibbs (2008) argues that too often employees do not understand the criteria by which they are measured. As such, the behavioral criterion of ‘acceptability’ of the PM process by employees is a fairly recent addition to the field (e.g. Taormina and Goa, 2009). In a global context, acceptability of the PM is likely to occur (a) when the ratee has regular communication and a positive relationship with the rater (Milliman et al., 2002), (b) when the ratee perceives PM to be fair (Bradley and Ashkanasy, 2001), (c) when the feedback received from the appraiser is timely and accurate (Sully De Luque and Sommer, 2007), and (d) when employees generally feel encouraged and motivated by the PM process (Tuytens and Devos, 2012; Kramar and Bartram, 2011). Steps taken to improve perceptions of fairness, such as providing due process through adequate notice and allowing employees the chance to offer input into the evaluation process, tend to increase acceptance of the PM as well as satisfaction with the process (Tuytens and Devos, 2012). Similarly, Kramar and Bartram (2011) argue that PM fairness and acceptability are necessary for PM to act as a motivator. Research by Hedge and Teachout (2000) proposes that acceptability is the critical criterion for the success of the entire PM.
Employee feedback and an opportunity for subordinate expression have been found to be important for effective PM (Milliman, et al., 2000), particularly where a subordinate and supervisor are geographically distant (Harzing and Noordhaven, 2005). Tuytens and Devos (2012) claim supervisors should take into account that they have an important function to fulfill in giving employee feedback as part of conducting PM and not see the process just another perfunctory system in human resource management. Furthermore, when supervisors take feedback seriously it has been found to help build a level of trust between the employee and the supervisor (Dirks and Ferris, 2002).
Scholars have focused on trust in two ways: trust between the employee and the supervisor and trust between the employee and the MNC. Dirks and Ferris (2002) report that, in these two different relationship dyads, trust has systemically different relationship characteristics, with different antecedents and outcomes. The employee-supervisor relationship, they suggest, is not only the more important relationship dyad, but it also has a substantial impact on job satisfaction and job performance. Likewise, a frequently cited conceptualization of trust emphasizes interpersonal relationships and a willingness of a manager to be vulnerable to the actions of another party (Mayer and Gavin, 2005). Trust defined in this manner involves cooperation, sharing sensitive information, and voluntarily allowing the trustee to have control over issues that are important to the trustor. In relation to country managers, when trust between the headquarters and the country manager is diminished, there is a tendency for more formal bureaucratic controls to appear.
Most importantly, trust has been found to be essential for employee innovativeness (Rabbiosi, 2010), commitment and loyalty (Harvey et al., 2011) and overall performance (Dirks and Ferris, 2002), all of which are fundamental to an effective PM (Mayer and Gavin, 2005). Recent studies, however, document pervasive deficits in workplace trust (see Kramer and Lewicki, 2010); where such trust is difficult to build and is too easily misunderstood (Mayer and Davies, 1999; Zeffane and Connell, 2003).
PM and Culture
National cultural differences have been found to impede information flow between individuals and, consequently, between firms and subsidiaries of MNCs (Chung and Gibbons, 2006; Gupta and Govindarajan, 2000; Hofstede, 1980;; Tung and Verbeke, 2010), and as well as between the country manager and her/his supervisor (Maley and Kramar, 2010). The eventual outcome of poor communication is likely to be increased levels of misunderstanding (Gupta and Govindarajan, 2000), disharmony (Boyacigiller, 1990), a perception gap (i.e., a gap between how the manager and the supervisor perceive or interpret events and outcomes, and loss of autonomy (Birkinshaw and Hood, 1998), resulting in further impairment of trust (Dirks and Ferrin, 2002).
Additionally, Chung and Gibbons (2006) provide strong evidence that MNCs of all nationalities place the greatest emphasis on financial metrics compared to other performance metrics. Moreover, there are differences in the degree of emphasis on performance metrics across MNC nationality, for example, Japanese and German MNCs place significantly less emphasis on financial measures than MNCs headquartered in the UK or US.
PM and Language
Language incompetence has been found to lead to dissatisfaction and uncertainty in interpersonal interactions which can subsequently lead to a lack of trust and to increased anxiety, and avoidance to collaborate with members from different groups (Gudykunst, 1995). In a recent study, Harzing and Freely (2008) contend that differences in language between headquarters and subsidiaries can influence the way MNCs manage and trust their subsidiaries. For example, managers in MNCs may exert more control on the subsidiary when a difference in language between headquarters and the subsidiary exists.
2.2 Social Exchange Theory
Social Exchange Theory (SET) provides a useful framework from which to analyse country manager’s PM, because it helps to explain the motivation behind attitudes and behaviours exchanged between individuals, in terms of interpersonal features such as trust and unspecified obligations (Blau, 1964). According to SET, employees will discharge obligations but expect to receive continual resources from the other party (Buchan, Croson and Dawes, 2002). Eisenberger, Huntington, Huntington and Sowa (1986) propose that SET explains aspects of the relationship between the MNC and its employees. They note that the employees form general perceptions about the intentions and attitudes of MNCs towards them based on the policies and procedures enacted by their supervisors. If a country manager perceives the PM process as being dysfunctional, she/he may perceive that there is an unbalanced exchange. This construct may help to explain employees’ attitudinal and behavioural acceptance to PM and ultimately the PM effectiveness.
In sum, the literature reveals that the country manager is an important global employee who has been neglected by scholars. The global PM process is a vital instrument for managing the country manager; however, it has some fundamental limitations. The purpose, criterion of acceptability, feedback and trust features of PM is identified as being especially challenging. Additionally, cultural and language differences add an increased layer of complexity to the PM process. SET is advanced as a suitable theory which may help interpret the country manager’s behaviour and acceptance of PM. As a consequence of the findings in the literature, namely, the numerous issues relating to the global PM combined with the neglect of the country manager perspective; this research explores the PM as experienced by the MNC’s manager of the subsidiary, otherwise known as the local country manager.
2.3 Research Question
Based on the literature review above, the paper identified the following key research question:
· What do country managers’ perceive as the factors that impact on their satisfaction with performance management?
More specifically, the paper addresses the following sub question:
· How do these factors impact on country managers’ degree of trust towards their supervisor?
Having identified the issues at hand, the following section describes the research design.
3.1 Research approach
This study employs grounded theory, a qualitative methodology that involves identifying the relevant variables in data, rather than focusing on predetermined perspectives or variables. This approach is subjective, humanistic and interpretist. The grounded theory approach is useful when little is known about a situation (Glaser and Strauss, 1967), and for this reason it is a valuable methodology for studying country managers. The approach involves both an inductive and deductive approach to theory construction and generates theory from the data. Thus, if it succeeds, an original contribution to the knowledge of PM is achieved (Strauss and Corbin, 1990).
3.2 Sample characteristics
The focus of the study is the PM of country managers in the Australian healthcare industry. Twenty-four country managers from the subsidiaries of healthcare MNCs were approached to be interviewed, and 18 accepted. All except one were male, with an age range from 35 years to 63 years, with a mean age of 48 years. Country managers from subsidiaries of US (six), UK (three), German (two), Danish (two), Swedish (two), Norwegian (one), French (one) and Swiss (one) MNCs were represented in the study. The participants were selected from an industry salary survey directory and were chosen for the study on the basis on the basis of (a) holding a position as a country manager of a medium-sized Australian subsidiary of a healthcare MNC (subsidiary turnover between $A10–$A100m) at the time of the study; (b) reporting directly overseas; (c) being in their country manager role for more than two years; and (d) having experienced at least two performance appraisals as country manager.
3.3 Data Collection
The interview questions were semi-structured (see appendix 1). Direct questions about trust were not asked; rather trust emerged from the country managers themselves as being important. As the study progressed, theoretical sampling (Glaser, 1978) was employed, with the researcher seeking informants and other data sources as directed by the initial findings of data analysis. Additional informants included a supervisor of country managers based in the UK, two international human resource managers, two industrial psychologists, and two professional recruiters. These informants helped to corroborate the information given by the country managers.
The initial interview with each informant lasted an average of 65 minutes. Seven key informants were interviewed twice and two were interviewed three times. Interviews ceased when saturation of the main theoretical category (or in grounded theory terms, core category) had occurred; that is, when no additional data were found from which new theoretical categories or properties of the categories could be developed. All interviews were conducted in English.
3.4 Data analysis
The recorded interviews were transcribed verbatim. The constant comparative method of qualitative analysis using QSR INvivo software was used as a means of coding the data. Collection, coding and analysis of data were a major operation. Data analysis, including coding and memoing, was conducted utilizing the method described by Glaser and Strauss (1967), Glaser (1978), Strauss (1987) and Strauss and Corbin (1990). Open coding, axial coding and selective coding were used and involved the selection of the central phenomenon from the key concepts and its designation as the core code, which was then related to the other key concepts directly and indirectly. This provided the derived grounded theory framework. Once this task was completed, the analysis was directed towards identifying the core category or main theme.
The data obtained in the interviews with the country managers was used to assess the effectiveness of the PM. The PM experiences that emerged from the data as being effective for the country managers were initially labelled "exemplary". Effectiveness of the PM became apparent in three ways: firstly, the contribution of the PM to the country manager’s own development; secondly, the effect of the PM on her/his motivation; and, thirdly, the country manager’s perceptions of the PM’s overall benefit to the organization. Thereafter, the term "exemplary" was used when the participants considered their PM to be effective.
4.1 Satisfaction with performance management
Three MNC’s subsidiaries constructed exemplary PM systems. The most remarkable qualities to emerge from these subsidiaries is that their country manager’s PM incorporates frequent face-to-face contact between the country manager and the supervisor, timely and appropriate feedback, PM appraisal follow-up, and the PM is directly linked to individual career development. The country managers in this exemplary group reported that their PM significantly supports their long-term retention in the MNC, which they consider gives their PM a definitive purpose. Evidence suggests that there is strong relationship between the country manager’s perception of PM effectiveness and their acceptability of the PM (also see Bradley and Ashkanasy, 2001; Kramar et al., 2011; Milliman et al., 2002). As a result, this group of country managers perceive that their PM meets the criteria of acceptability.
In contrast, the remaining fifteen country managers had non-exemplary PM experiences. They referred to insufficient face-to-face contact with the supervisor, lack of opportunity for feedback, and limited (or total absence of) follow-up after their PM appraisal interview. This group furthermore reports that they do not have a definitive career path with their MNCs and as a consequence they consider that their expectations for career advancement will not be accomplished. The data reveals that all the participants perceive that the PM should assist in their career development. The lack of career advancement emerges as a significant factor that contributes to these participants perceiving that their PM serves no practical purpose. In the eyes of the participants who experienced non-exemplary PM, their PM failed to meet the criteria of acceptability.
The majority of the country managers and their supervisors met face-to-face infrequently. One participant met his boss once every three months, but another had not had face-to-face contact with his boss for over two years. In eight cases the supervisor held the PM appraisal over the telephone only. With country managers typically visiting the head office once or twice a year only, answers to the location, frequency, and quality varied enormously. On average, the country managers and their supervisors met twice a year. For example: “When I go there I don’t get much time with F. Well, the last time I hardly saw him. I run around like a headless chicken, with so many people to see.”
A major grievance from the participants was that, when their supervisors visited the subsidiary, their trips were too short, which had the effect of not allowing time for sufficient face-to-face contact or feedback. This is unlikely to strengthen the relationship between the county manager and her/his supervisor. The participants whose PM appraisals were conducted over the phone, in all cases, did not think that this is appropriate. This may in part be because they feel they do not know their supervisor very well and want more opportunity to build up rapport.One participant expressed a typical view of the situation: “For the last three years my appraisal has been over the phone. It’s as though he doesn’t have the courage to face me. It’s really a joke. I find the whole process farcical.”
Inadequate feedback is another recurrent subject of discontent. This is understandable considering the poor regularity of face-to-face contact. Fourteen participants were dissatisfied with their feedback, for example, “I get no time to air my grievances because it’s just not possible with the kind of management that I get. There is no time for feedback.” In some cases feedback was felt to be problematic because the setting of the PM appraisal was unsuitable, as in the case of a country manager whose only opportunity for feedback and follow-up is the performance appraisal itself, which was held in a noisy hotel restaurant:
Researcher: “Were you given any opportunity for feedback?”
Participant: “Well no, not really, er ... not at all, well, how can you do that when you have your appraisal in a busy restaurant in Singapore? Anyway, feedback wasn’t on the agenda, so I really didn’t push the issue.”
Follow-up was the third area of common dissatisfaction. Seventeen participants stated that they did not receive any appraisal follow-up. For example:
‘After he has finished the appraisal, well, that’s it for another year. I can guarantee that we will never talk about what we discussed until the same time next year. It’s like an annual ritual, a bit meaningless and it really doesn’t fit with the real business. This year I was hoping he would follow-up the appraisal and discuss some possible future career moves within the firm.’
Some of the country managers imagine that their PM appraisal follow-up should include discussions about career development. This may be due to the fact that career is not discussed alongside performance in the appraisal interview. The PM and results of the appraisal interview were used to make bonus decisions in sixteen of the MNCs, but only four of the country manager’s supervisors used the PM and appraisal to make training and development decisions. In sum, poor face-to-face contact, inadequate feedback, and almost non-existent appraisal follow-up are the most noteworthy areas of dissatisfaction articulated by the participants and are identified by the researcher as being directly related to the key factors that influence country manager PM processes.
5.1 Influences on performance management
The primary research question of the current study investigates the main factors that influence the PM experience of the country manager. The data reveals two core issues that represent major negative influences on the PM for country managers. The first issue answers the primary research question ‘What do country managers’ perceive as the factors that impact on their satisfaction with performance management?’ The PM for country managers is limited because of MNCs' overpowering short-term stress on sales and profit, which is termed the bottom-line. All country manager participants in the study repeatedly expressed the need to achieve financial results and quantitative aspects of their job, which included market shares and volumes of sales.
The evidence is prominent throughout the study: the participants are aware that financial performance is paramount. However, even though their MNCs' survival depends on the sales and profit of the subsidiary, the country managers’ respective MNCs did not have a single-minded short-term focus on quantitative results, as they also considered other qualitative and holistic aspects of the country managers' performance and development. The MNC’s emphasis on financial metric is in line with the findings of Chung and Gibbons (2006), though we did not find any inter-country differences. For example, German MNC’s did not place any less emphasis on financial metrics than the UK or US MNCs.
The second important issue discovered in the research specifically addresses the research sub question, ‘How do these factors impact on country managers’ degree of trust towards their supervisor’? The country manager is disadvantaged by being solely dependent on the remote relationship with her/his supervisor, who rarely appears to have any commitment to the country manager’s PM because the supervisor's primary concern is the sales and profits of the business. Most of the country manager participants sensed that the success of their appraisal interview and their all-encompassing PM depended on the nature and frequency of the interactions with their supervisor, and most often detracts from building a constructive personal relationship The paucity in communication and feedback to the employee engenders mismanagement of the PM, and the limited face-to-face contact does not help build trust and accordingly an effective PM process (also see Milliman et al., 2002). The short-term emphasis on the bottom-line is the chief finding, which addresses the primary research question while the relationship with the supervisor is a secondary finding, which addresses the research sub question.
5.2 How these factors influence the country managers’ relationship with their supervisors
The country managers in the exemplary group reported that their PM had a clearly defined purpose, their expectations were aligned with their supervisors, they had a clearly outlined career path and they found their PM to be acceptable. They considered that their supervisors understood their implicit overarching vision, approach and motivations. Additionally, they reported that they had a positive and trusting relationship with their supervisors and felt that the entire PM process was fair.
On the other hand, the country managers in the non-exemplary group reported that their PM had an ill-defined purpose; their expectations of their PM were not congruent with their supervisors, they did not have a clearly defined career path and they found their PM to be unacceptable and that the process was unfair (see Taormina and Goa, 2009).
Career prospects emerge as being very important to all the country managers; however, the prospects for career advancement and a definitive career path are ambiguous for the non-exemplary group. \From the perspective of these country managers, there is an unbalanced exchange between the two parties, which inhibits the development of trust between the country manager and the supervisor. When trust is lowered, the relationship suffers.
Trust has been identified by Dirks and Ferris (2002) as occurring between the employee and her/his supervisor and between the employee and the company. In this study, trust with the supervisor emerges as being extremely significant for the country managers. The data reveals that trust is a two-way relationship for the managers, being important from above and below. For example one country manager talked about supervisors undermining trust as follows:
“I have heard of instances where bosses have actually started interviewing the subsidiary staff to find out whether they are happy with the country manager’s performance but I think this is rather difficult for most managers to take because I think it rather undermines them. Well it also shows that there is not a good level of trust going on, doesn’t it?”
Another country manager talked about trust from subordinates:
“Like if you open up and start trusting them, you know hopefully they’re going to trust you too. One of our biggest challenges as bosses is getting their trust, without trust you’re finished.”
Trust is also linked to the national culture of the company and the supervisor. Mistrust appears to be aggravated when there is a larger cultural distance between the country manager and her/his supervisor, for instance, between Scandinavian and Australian or Asian and Australian nationalities (see Tung and Verbeke, 2010). Trust is evident between the Australian country managers and their supervisors who are from the UK or US. Interestingly, these informants have a shorter cultural distance, share a common first language, and have exemplary PMs. Conversely, mistrust is evident between country managers with Norwegian, French, Danish and Singaporean supervisors. These informants are separated by a larger cultural distance, do not share a common first language, and do not experience exemplary PM. For example:
(With Swedish Supervisor)“Yes, he put a Swede in there for a few years until they got someone that’s capable of taking over, and then he put in another Swede, in Spain. We had a Swede in Spain some years ago and he was there for 3 or 4 years, got a Spanish understudy, and he prepared the Spaniard to manage the company but they found they could never really trust southern Europe at that time with Latin Managers, so they kept circulating Swedes.”
Nevertheless, caution must be taken before drawing the conclusion that mistrust is greater when a larger cultural distance exists between the country manager and her/his supervisor. Six US and three UK MNCs' subsidiaries participated in this study. Country managers from four US and two UK parent subsidiaries experienced non-exemplary PMs. This suggests that in agreement with Harzing and Freely (2008), cultural and language congruency may assist the establishment of trust, however other endeavors may also be necessary.
Many of the participants in the non-exemplary group gave the impression that their company had an inherent lack of trust in them. They alleged that they did not have sufficient control over important essential local issues, for example, setting subordinates pay and bonus or hiring and firing which agrees with the findings of Harzing and Freely (2008). Subsidiary autonomy surfaced in the literature as being controversial yet probably necessary for satisfactory headquarter-subsidiary relationships (Birkinshaw and Hood, 1998; Harzing and Freely, 2008). It emerged in the study that autonomy was a most significant requirement for the country managers and many of these remote managers found a lack of autonomy unsettling, some even abhorrent. The important issues appear to be that the country manager must at least feel she/he is trusted, especially on issues that are locally orientated.
The general inferences on trust found in the study are in agreement with Mayer and Davies (1999), who report that, when there is no trust between the supervisor and subordinate, there is more likely to be a negative reaction to PM. Conversely Bartlett and Ghoshal (1989) indicate that too much trust in the subsidiary manager could leave the MNC exposed. They make a case against placing too much reliance on the country manager and refer to them as often having been left running around with complete freedom (also see Engle et al., 2008) The findings in this study indicate that a balance must be constructed and that the country manager must at least feel she/he has a degree of trust from her/his supervisor.
Trust appears to be harder to establish for the country manager and her/his supervisor than for a manager and supervisor both working at head office. A number of factors come into play: the lack of contact, consequent difficulties in communication, language barriers, cultural distance, and varied past experiences of the supervisor and the country manager.
5.3 Trust as a Mechanism in Fostering Global Performance Management
The opportunity for country managers to develop and maintain trust is found to be limited, due to the geographic distance and infrequent face-to-face interaction with their supervisors. This study confirms that the relationship with the supervisor is far more meaningful to the country manager than the relationship with the MNC. Country managers who have greater trust in their supervisor appear to have a significant increase in conscientiousness, courtesy, sportsmanship, lower intention to quit and increase in commitment, which are aligned with the findings of Dirks and Ferris (2002). In the context of the country managers, employee-supervisor relationships arguably take on greater levels of significance due to the physical and prolonged distance between the two parties.
In the global context, the role of trust between the country manager and the supervisor is complicated additionally by cultural distance (Milliman et al., 2002) and geographical distance (Harzing and Noordhaven, 2005). Dyer and Chu (2011) highlight the notion that trust varies in dyadic relations across countries and cultures, both in terms of its levels and its determinants. They claim that such differences may interact with dyad-level differences in trust creation and capabilities, and that they influence trust violation and repair, which may consequently lower the level of trust between the supervisor and the employee. Evidence implies that trust may have imperative inferences for the country manager’s PM and is dependent on the direct relationship with the supervisor (Engle, Dowling and Festing, 2008) in a cross border setting (Claus and Briscoe, 2009).
5.4 Core categories and limitations
The three key limitations of PM found in this study, the limited face-to-face contact with the supervisor, the lack of feedback and absence of PM appraisal follow-up, are directly attributable to the manager’s relationship with her/his supervisor, which in turn can be compromised by the supervisor’s emphasis on the bottom-line. The bottom-line, relationship with supervisor and the limitations of appraisal are, therefore, interrelated. Figure 1 displays the two main categories, one of which is the basic social process or core process, namely the bottom-line. The other main category or near core category is the relationship with the supervisor, upon which the PM is contingent. The limitations are shown at the right of the model and are illustrated as a two way process. When the loss of trust between the supervisor and the country manager are integrated into the equation, the fundamental requirements for the PM are thwarted. Thus, the data reveals that trust can be identified as an essential component for an exemplary PM.
Figure 1 here.
5.5 Key factors influencing global Performance Management
A focus on profit is necessary for the survival of a MNC and therefore it is entirely plausible that supervisors must drive the growth of profit income in subsidiaries. On the basis of these findings, the obsessive drive for short-term results-at-any-cost has negative repercussions on the relationship and subsequent trust between a supervisor and a country manager.
The cascading sequence of poor supervisor feedback, insufficient face-to-face contact and limited or no PM appraisal follow-up augment misaligned expectations between the supervisor and the country manager, results in sunken career expectations and ultimately a non-exemplary PM. The supervisor uses the PM to support financial results. The country manager appreciates that her/his chief role is being the facilitator of subsidiary profit but she/he also considers that another key purpose of the PM is to assist with career development. If this aspect of the PM is not included, the country manager will sense that the exchange is unbalanced and will perceive the PM to be dysfunctional. This perception, in turn, causes a loss of trust between the country manager and the supervisor, resulting in a decline in the country manager’s motivation and commitment. In the eyes of the country manager, career development is an indication of employer commitment. The PM fails to achieve one of the three key purposes, employee development, which in turn influences acceptability and perceived effectiveness of the PM.
Using SET as our framework, the country manager should perceive the PM to have a balanced exchange and to provide a basis for a trusting long-term relationship with her/his supervisor. In order to improve trust between the supervisor country manager, timely feedback, adequate face-to-face contact and PM appraisal follow-up are essential for the PM. Conducting the PM appraisal interviews by telephone, or even videoconferences and webcam does not compensate for lack of face-to-face contact and will not engender trust, particularly where the supervisor and the country manager do not share a common first language and where there is a large cultural distance. The eight informants who have their appraisal interview conducted by telephone do not find their interview helpful and feel that they are disadvantaged.
The country managers’ expectations of career advancement may be problematic for many MNCs. For economic purposes and to effectively retain knowledge within an organization, it is optimal to keep country managers within the organization long-term. The creation of career opportunities and the retention of country managers with high potential are both longstanding dilemmas for MNCs (Harvey, Mayerhofer, Hartman and Moeller, 2010; Suutari and Brewster, 2003). If a country manager prematurely and inopportunely leaves the organization, recruiting and replacing that manager will be a costly and sometimes challenging endeavour. On the other hand, if that manager can be retained in the organization, the MNC will be building and strengthening its global executive team. Country manager development and retention should be a critical consideration for the MNC.
A final point in improving the sequence of trust involves the fact that the PM is predictably controlled from headquarters in a hierarchical top-down manner with headquarters as the centre. The more MNCs move towards network-type organizational structures, such as transnational organization (Bartlett and Ghoshal, 1989), or horizontal organization (White and Pointer, 1989), the more PM could be modified by changing the direction of the relationship between headquarters and subsidiaries. A shift to geocentric mindset and transnational structure ultimately may prove to be the most effective trust leveller. In addition to exploring PM from a control/structural perspective, we recommend that PM would also benefit from exploring the influence of component of the strategic human resource management systems such as incentives, communication, and leadership activities.
5.7 Practical implications
The findings in this study support the notion that understanding the influence of trust between the supervisor and the country manager is critical to MNCs, particularly when attempting to implement successful global PM strategies. Accordingly, the implications suggest that without a concentrated effort on the part of the headquarters management, and attention from international human resource management, the country manager’s performance level will almost certainly decline. Improvements in the PM will increase retention rates of country managers, who are an important cohort of globally experienced executives within MNCs. Such improvements would help build a considerable intangible asset for any MNC.
6. SUMMARY AND CONCLUSION
The study exposes that the PM of the country manager is limited because of MNCs' overwhelming short-term emphasis on sales and profit. In addition, an effective PM for the country manager is intensely reliant upon the relationship and consequential level of trust between the country manager and her/his supervisor. When there is limited face-to-face contact between the supervisor and the employee, as in the case of the country manager, trust becomes a vitally important component (Henttonen and Blomqvist, 2005). Scholars have not yet empirically investigated the global PM and the role of trust with respect to the country manager, which is surprising, given the important role that country managers play on behalf of MNCs in managing a considerable percentage of the MNC’s revenues and providing cross border links across global organizational units.
This study makes an important contribution to the field of international human resource management by suggesting that with the current approach to global PM for country managers, many of the potential benefits are not accomplished. The findings reveal two major themes: 1) a MNC’s systemic demand for short-term profit has the potential for inhibiting employee-supervisor relationships, and 2) perceived effectiveness of PM is dependent on the level of trust between the country manager and her/his supervisor. As a result, we suggest that this predicament imposes a specific set of demands on international human resource departments to design PM and development programs for country managers. Evidence suggests that without particular attention to PM, the country manager’s performance will almost certainly decline. At the same time, specific improvements to the PM will increase productivity, motivation and retention rates of country managers, and help to build a significant intangible advantage for the MNC.
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