Factors Influencing Expatriate Performance Appraisal System Success- An Organizational Perspective...

Journal of International Management

9 (2003) 115–132

Factors influencing expatriate performance appraisal

system success: an organizational perspective

David C. Martina,*, Kathryn M. Bartolb

aDepartment of Management, Kogod School of Business, American University,

4400 Massachusetts Avenue Northwest, Washington, DC 20016-8044, USAbDepartment of Management and Organization, Robert H. Smith School of Business,

University of Maryland, College Park, MD, USA

Abstract

This study examines the factors that influence the success of expatriate performance appraisal

systems in U.S. multinationals, as perceived by the organizations. Results involving 94 firms suggest

that clarifying performance expectations prior to the performance rating, the fairness of the

performance appraisal system, and the incorporation of career development positively influence

perceptions of expatriate performance appraisal system success. The frequency of evaluating

expatriates performance approached significance and consideration of the local environment in the

performance appraisal process was not a significant contributor to the perceived success of the system.

Research and practical implications, as well as suggestions for future research, are discussed.

D 2003 Published by Elsevier Science Inc.

1. Introduction

Appraising the performance of expatriates is gaining deservedly increased research

attention. Recent studies have been primarily descriptive or prescriptive in nature. They

have focused on such issues as the process used for appraising expatriates (Harvey, 1997),

practices used by multinationals in appraising the performance of expatriates (Gregersen et

al., 1996), performance appraisal as both a strength and an area needing improvement in the

world’s largest multinationals (Petersen et al., 1996), the necessity for identifying top

1075-4253/03/$ – see front matter D 2003 Published by Elsevier Science Inc.

doi:10.1016/S1075-4253(03)00030-9

* Corresponding author. Tel.: +1-202-885-1922; fax: +1-703-319-1262.

E-mail address: [email protected] (D.C. Martin).

D.C. Martin, K.M. Bartol / Journal of International Management 9 (2003) 115–132116

management potential early as part of the human resource planning effort of multinationals

(Cascio, 1993), and the transfer of traditional performance appraisal principles across cultural

boundaries (Vance et al., 1992). As Gregersen et al. (1996) have noted, much more remains to

be done to acquire sufficient understanding to develop effective expatriate performance

appraisal systems.

2. Background

Expatriate performance appraisal systems play a very significant role in the management of

multinationals. Not only are the results of these systems used in almost every major decision

involving the expatriates of the organization, they play a major role in ensuring the perpetuity

of the multinationals, and greatly assist in achieving the goals of the firms. One of the prime

uses of expatriate performance appraisal systems is the identification, selection, and

development of the future leaders of multinational organizations. Developing internal

management talent is one of the key functions of multinational organizations (Bartol and

Martin, 1998).

The need for managers with international experience is steadily increasing as more

organizations are joining the global marketplace. During the period 1990–1998, the number

of nonfinancial U.S. multinationals rose more than 20% to over 2500 (U.S. Direct

Investment Abroad, 1998). One study of multinationals shows that international experience

among senior executives is rare, with less than 15% reported to have it (Black et al., 1998).

Another study reported that the leaders of General Motors, Avon, Campbell’s Soup, Ford,

Gillette, Tupperware, Goodyear, General Mills, Case, and Outboard Marine all have

significant overseas experience in their careers (Carpenter et al., 2000). Research by

Gregersen et al. (1998) reports that senior executives of multinationals who have had

international assignments indicated those jobs provided their single most influential lead-

ership experience.

The experience gained while an expatriate is invaluable. The expatriate is frequently called

upon to perform many functions that go well beyond their primary function. These provide

unique learning opportunities for the expatriate. The ability to handle myriad responsibilities

using individual innovation and ability to make things happen through others has proved to

be superb preparation for senior level positions in multinationals. Further, the skills

developed by expatriates add positive dimensions to their parent organizations. These

additional capabilities play a significant role in a multinationals’ ability to scan, organize,

and reorganize resources rapidly so that regional boundaries are not barriers to potential

products, business opportunities, or manufacturing locations (Rhinesmith et al., 1989). These

newly acquired and practiced capabilities are normally recorded during the performance

appraisal process. Thus, they become the basis for future actions and activities of the

multinational.

The expatriate performance appraisal system is also normally linked to the organization’s

strategic planning process (Cardy and Dobbins, 1994). A multinational’s strategic planning

process begins with the designation of corporate goals and strategies to support the

D.C. Martin, K.M. Bartol / Journal of International Management 9 (2003) 115–132 117

achievement of the goals. The relevant parts of the corporate goals and associated strategies

are then cascaded to subordinate organizations and the individuals therein (Latham and

Wexley, 1994). Expatriate managers receive goals that come from corporate or subordinate

levels in the organization. These become individual performance goals that are used to

describe expected actions and anticipated accomplishments by the expatriate. The expatri-

ates achievements can contribute to administrative decisions that can both enhance and

facilitate the multinational’s global strategy. They may also have the potential to identify

and lead to the formulation and implementation of new goals and strategies (Butler et al.,

1991). The new organizational strategies become the basis for the subsequent goals of the

expatriate (Gregersen et al., 1995). The achievement of these goals leads to the accom-

plishment of the organizational strategy and possibly a competitive edge (Geringer and

Frayne, 1990).

Expatriate performance appraisal systems encompass many issues not normally addressed

by domestic systems. The numerous concerns related to divergent cultures, legal and

political factors, different criteria, and varying environments requires considerations that

are beyond those generally associated with domestic performance appraisal (Davis, 1998;

Dowling et al., 1994; Mondy et al., 1999; Oddou and Mendenhall, 2000). The emphasis on

developing global managers is a major consideration. And, the expatriate performance

appraisal system would normally be expected to include employees from different back-

grounds and cultures. Such a system could include parent (PCNs), host (HCNs), and third

country nationals (TCN).

As a management tool, the expatriate performance appraisal system can make a substantial

contribution in assisting the organization reach its goals. However, at least one group of

researchers has noted that the published research on performance appraisal indicates that

rarely have companies been able to design and implement a credible multinational

performance appraisal system (Black et al., 1992). Thus, there is a need for a better

understanding of the factors, or key components, that lead to a successful expatriate

performance appraisal system. Therefore, this study attempts to identify those major factors,

or key components, that relate to making an expatriate performance appraisal system in a U.S.

multinational organization successful, from the organizational perspective.

3. Hypotheses

Our review of the research and discussions with professionals responsible for expatriate

performance appraisal systems revealed several factors, or key components, that were

considered essential to a successful system for expatriates (Cascio, 1993; Gregersen et al.,

1996; Harvey, 1997; Mendenhall and Oddou, 1988). These factors, or key components,

include the degree to which performance expectations are clarified prior to the performance

rating, the frequency of evaluating expatriates performance, the fairness of the performance

appraisal system, the incorporation of career development, and the consideration of the local

environment in the appraisal process. These factors, or key components, are reviewed

below.

3.1. Performance expectations clarification

The ambiguity of performance criteria in a foreign culture can cause problems for an

expatriate. Expatriates are not always told how their performance will be evaluated so they do

not know where to expend their energy (Mendenhall and Oddou, 1988). The issue of deciding

what criteria will be used to appraise an expatriate’s performance becomes critical to this

process. The appraisal criteria may be local, from the home office, worldwide, or a

combination of these sources (Janssens, 1994).

Managers in some countries do not share the same beliefs as American managers about

how employees should be evaluated. According to one researcher, allegiance and general

issues of conduct are more important indicators of performance in some geographical areas

than is actual job performance (Seddon, 1987). Knowing what to do and when to do it is

extremely important in some environments. At one large multinational, individuals who are

going to be assigned overseas speak with their sending and receiving line managers to

produce an action plan for their development. This becomes their performance plan, which

includes both business goals and the expectation for the degree of cross-cultural competency

they are expected to achieve on site (Solomon, 1994).

The mutual setting of performance goals plays a major role in the motivation-appraisal

process. The three parts of this process, direction, effort, and persistence are initiated

during the mutual goal setting process. Direction includes the identification of what is to

be done; effort addresses the amount of energy to be devoted to a goal; and persistence is

that drive which causes one to stick to and complete a task (Katzell, 1994). Research

indicates that participation in the performance appraisal process by the person being

evaluated assists in clarifying what is expected to be accomplished and the respective goals

to be attained. Specifying the goals and who will appraise the performance associated with

each in advance assists in understanding what is to be done and when it should be

accomplished (Harzing and Van Ruysseveldt, 1998). Knowing those goals before the rating

period begins allows the expatriate to plan how the goals will be accomplished. This

further facilitates the marshalling of resources, effort, and energy to ensure the goal is

achieved, and allows proper time to be programmed to produce the best result. It also

results in greater acceptability of goals and higher performance (Erez et al., 1985). Further,

the commitment to goals is enhanced through participation in goal setting (Locke and

Latham, 1990).

Hypothesis 1: A performance appraisal system that clarifies performance expectations will be

positively related to the success of expatriate performance appraisal systems.

3.2. Consideration of local environment

The significance of recognizing the impact of the local environment in appraising the

performance of an expatriate has been discussed by many researchers (Briscoe, 1995; Cascio

and Serapio, 1991; Dowling et al., 1994; Harvey, 1997; Oddou and Mendenhall, 2000). The

local foreign environment may differ dramatically from that of the domestic headquarters.



These differences could be in several areas, such as culture, degree of technical sophistication

and automation, availability of trained human resources, and local markets.

Learning to balance the requirements of corporate and national culture can be a very

difficult task in some areas (Schneider, 1988). Learning what to do and when requires more

time in a foreign versus a domestic environment. Frequently the major issue is becoming

familiar with the local culture. The advisability for allowing additional time to achieve results

in a foreign environment, as opposed to a domestic situation, has also received attention in the

extant literature (Briscoe, 1995; Cascio and Serapio, 1991; Harvey, 1997). Research indicates

that it will normally take about 6 months for the introduction and adjustment to local

conditions before the expatriate will be able to fulfill the assigned duties (Logger and Vinke,

1995). Similarly, expatriates have reported that it takes 3–6 months at the minimum to even

begin to perform at the same level as in a domestic operation because of local environmental

factors (Oddou and Mendenhall, 1995). In fact, Japanese firms typically do not expect any

business results from an individual for 6–12 months, because the expatriate is adapting to the

local culture (Solomon, 1994). Researchers have indicated that expatriate performance

appraisal systems should allow time for the individuals to adjust to local conditions and

the local environment in evaluating results obtained in a foreign environment (Harvey, 1997;

Cascio and Serapio, 1991).

Hypothesis 2: Recognition of the need to consider the local environment factor will be

positively related to the success of expatriate performance appraisal systems.

3.3. Frequency of performance evaluations

Formal performance appraisal can be accomplished after any period, although it is

normally conducted on an annual basis. Sometimes organizations require that it be done

more frequently, quarterly, or semiannually. Frequent performance appraisals can result in

greater understanding of the job and improvement in job performance (Nathan et al.,

1991). The support for frequent performance appraisals is well documented (Cascio,

1998), particularly for new employees and poor performers (Cederblom, 1982; Meyer,

1991).

Earlier research (Carroll and Schneier, 1992) has pointed out that feedback is likely to be

more precise, more noticeable, more timely, and delivered in a more acceptable manner when

it is given often. When feedback is received in a timely manner, changes can be made and

goals that otherwise may not be achieved might be realized. Recently, researchers (Gregersen

et al., 1996) reported results that both semiannual and annual expatriate performance

appraisals related positively to perceived expatriate performance appraisal accuracy. Those

results may support the notion that frequency of performance appraisal may be associated

with more effective systems. In a study of performance appraisal principles in different

cultures (Vance et al., 1992), Thai managers led American, Indonesian, and Malaysian

managers in giving performance feedback to their subordinates. Further, the career devel-

opment literature points out that performance feedback is necessary as it gives employees the

signal they are being ‘‘let in’’ the organization (Feldman, 1988).


Hypothesis 3: Frequency of formal performance evaluations leads to perceptions of a

successful expatriate performance appraisal system.

3.4. Fairness

The perceived fairness of performance appraisal systems is an area of growing signific-

ance. Being able to challenge and perhaps change a performance rating through an appeals

system adds to the perception that the performance appraisal process is fair (Greenberg,

1986). An appeals process also assists in increasing the legal defensibility of the performance

appraisal system (Barret and Kernan, 1987). Features of legal decisions that withstand legal

scrutiny are also issues and areas that tend to promote perceptions of fairness, including such

considerations as a formal mechanism for employees to review and appeal appraisal results

(Werner and Bolino, 1997).

It has been suggested that there are three features of due process that are important in

determining perceptions of procedural fairness of performance appraisal systems. First,

performance standards must be adequately publicized and explained. Secondly, the individ-

uals evaluated must have an opportunity to present their own point of view on their appraisals

and to challenge those that they regard as unfair. Thirdly, appraisals must be regarded as

being based on real performance, as opposed to personal biases and favoritism (Folger et al.,

1992).

It has been demonstrated that when employees have the opportunity to have input into the

evaluation process, they tend to have increased acceptance of the evaluations and satisfaction

with the overall performance appraisal process. In a recent study of the impact of due process

on a performance appraisal system, the researchers found that although some employees

received lower evaluations, they displayed more favorable reactions, such as perceived

system fairness, appraisal accuracy, attitudes toward the system, evaluation of managers, and

intention to remain with the organization (Taylor et al., 1995). The impact of procedural

fairness in a performance appraisal system was exhibited in another recent study in which

managers who perceived unfairness in their own most recent performance evaluations reacted

more favorably to the implementation of a procedurally just system than those who did not

perceive unfairness (Taylor et al., 1998).

Hypothesis 4: Fairness of policies and processes is positively related to the success of

expatriate performance appraisal systems.

3.5. Career development

Career development is a very important international human resource function. Both the

organization and the individual are responsible for expatriate career development. To have a

successful career, the expatriate must perform satisfactorily on the job. The performance

appraisal system provides a means of evaluating how well the individual achieves the

assigned goals of the organization. It also identifies the individual’s skills and behaviors.

Those skills and behaviors that are noteworthy and those that could be improved are


identified in this process (Hall, 1976). Training programs that strengthen those areas that can

make the person more successful can be designed from the results of the performance

appraisal process (Logger and Vinke, 1995).

The use of the performance appraisal process to improve expatriate’s performance and

skills while in an overseas assignment provides additional career opportunities for the future.

For example, expatriates are frequently called on to perform functions in an overseas

environment that would be done by more senior, or other, members of the organization

domestically. The manner in which these functions are performed would be considered as part

of the expatriate’s performance evaluation. If the expatriate truly excelled in a given situation,

this would be considered a strength, and if additional training or experience may be helpful, it

could be arranged. Thus, the additional developmental opportunities that may become

available to expatriates could greatly assist in enhancing their future careers (Harvey, 1997).

One model of career development, applicable to expatriates, includes several key factors that

lead to success (Dill et al., 1962). The expatriate is first a decision maker, accepting varying

levels of uncertainty and subsequently reducing them with rational search and good informa-

tion. Secondly, the expatriate must understand the environment recognizing opportunities to act

and learn, receiving feedback on performance, and understanding how performance is to be

judged. Thirdly, the expatriate learns how to interpret the environment, sorting out vast

amounts of information to select that which will facilitate achievement of performance goals.

One of the key areas valued by multinationals is the experience gained by expatriates in

foreign environments (Oddou and Mendenhall, 1995). The need for international experience is

also growing. One study indicated that over two-thirds of senior managers in U.S. multina-

tionals had no real overseas experience (Adler, 1986). The increasing number of organizations

joining in the global marketplace further exacerbates the need for international experience.

Hypothesis 5: The extent of career development emphasis is positively related to expatriate

performance appraisal success.

3.6. Success of performance appraisal system

The need for performance appraisal grows steadily. Its earliest uses were for basically

administrative functions such as promotions and salary decisions. Subsequently, performance

appraisals were used for employee development and feedback, corporate planning, legal

documentation, and other human resource actions (Murphy and Cleveland, 1995). The

extension of Title VII of the Civil Rights Act, the Age Discrimination in Employment Act

and the Americans with Disabilities Act, to cover American personnel who work for U.S.

multinationals overseas brought more oversight to the human resource management of

expatriates. In addition, the recent increase in employment discrimination claims has

triggered increased reliance on performance appraisal as an important management tool

(Martin and Bartol, 2000). Performance appraisal systems can assist an organization by

enriching the quality of information used in organizational decisions, increasing the

individual’s ability to make effective choices, enhancing the attachment between the

organization and its members, and providing a foundation for organizational diagnosis and


change (Murphy and Cleveland, 1995). The degree to which a performance appraisal system

meets the needs of the organization is sure to influence its perceived success.

4. Method

A questionnaire was developed based on existing research and input from several

professional human resource managers responsible for expatriate performance appraisal

systems. It was pilot tested by having three experienced international human resource

professionals who were responsible for expatriate performance appraisal systems, complete

it, and suggest improvements. A survey was prepared and mailed to 450 companies. They

were randomly selected from a list of clients of an international relocation organization.

There were three mailings: an initial questionnaire, a second questionnaire, and a postcard to

the nonrespondents at 5-week intervals. The letter to the addressee requested that the

questionnaire be completed by the person responsible for the expatriate performance

appraisal system. Ninety-four usable questionnaires were returned, with a response rate of

21%.

4.1. Independent variables

The independent variables in this study, factors hypothesized to be associated with

expatriate performance appraisal success, were measured as follows.

4.1.1. Performance expectations clarification

A four-item measure asked respondents to indicate the degree to which the performance

appraisal system clarified performance expectations (1 = always; 7 = never), the degree to

which the system informed expatriates about how their performance would be rated at the

beginning of the rating period (1 = always; 7 = never), the level of involvement of expatriates

in decisions regarding their work assignments (1 = fully involved; 7 = seldom involved), and

the frequency with which the system calls for feedback from subordinates (1 = always;

7 = seldom). Coefficient alpha was .70.

4.1.2. Local environment consideration

A four-item measure asked respondents to indicate the degree to which local conditions,

such as culture, laws, language, values, and others, are considered in evaluating the job

performance of an expatriate (1 = always; 7 = never); the degree to which additional time that

may be required to complete a task/function in a foreign environment is considered in

evaluating the job performance of an expatriate (1 = always; 7 = never); the extent to which

expatriates are given a minimum period (60 days, 90 days, 6 months) during which their job

performance is monitored prior to a formal evaluation (1 = always; 7 = never); and the amount

of special training (to ensure that any local/unique circumstances are recognized) that is given

to raters of expatriates prior to completing an expatriate’s evaluation (1 = a great amount;

7 = none). Coefficient alpha was .67.


4.1.3. Frequency of performance evaluation

Respondents indicated the frequency of expatriate performance appraisals: annually,

semiannually, quarterly, or other.

4.1.4. Fairness

Respondents were asked if their organization could do more to improve the fairness of its

procedures for handling the performance appraisal of expatriates (1 = strongly agree;

7 = strongly disagree), the organization receives few complaints regarding the fairness of

the performance appraisal process (1 = strongly agree; 7 = strongly disagree), and if the

expatriate performance appraisal policies and procedures seemed fair (1 = strongly agree;

7 = strongly disagree). Coefficient alpha for this three-item measure was .71.

4.1.5. Career development

Respondents were queried about: the significance of international experience in a career in

their organization (1 = essential; 7 =may be harmful), the linkage between performance

appraisal and career development is clear and consistent (1 = always; 7 = never), performance

ratings are an important factor in promotion decisions (1 = strongly agree; 7 = strongly

disagree), and the system is successful in improving the performance of expatriates

(1 = strongly agree; 7 = strongly disagree). Coefficient alpha for this four-itemmeasure was .70.

4.2. Dependent variable

4.2.1. Successful system

Respondents were asked to indicate to what degree their expatriate performance appraisal

system was successful (1 = highly successful; 7 = highly unsuccessful), the extent of their

agreement with whether the expatriate performance appraisal system had been successful in

meeting its goals (1 = strongly agree; 7 = strongly disagree) and the extent of their agreement

with whether the expatriate performance appraisal system was successful in helping to

motivate expatriates (1 = strongly agree; 7 = strongly disagree). The coefficient alpha for the

three-item measure combining these issues was .79.

4.3. Control variables

4.3.1. Number of employees and number of expatriates

Respondents indicated both the number of employees and the number of expatriates in the

multinational. These items were used as controls because they could potentially influence the

factors that are important in expatriate performance appraisal success.

5. Analyses

Descriptive statistics and bivariate correlations were calculated to summarize character-

istics of the expatriate performance appraisal systems, the number of employees and

Table 1

Geographical areas where participating organizations have expatriates

Area Number of participating organizations

conducting business there

Australia/New Zealand 15

Africa 4

Asia 44

Central America 10

Europe 54

Middle East 10

North America 26

South America 30

World 26

Other 7


expatriates, and the relationships with one another. Regression analysis was then performed to

determine the factors associated with a perceived successful expatriate performance appraisal

system. There were two tests for robustness of the regression data. First, the regression

Table 2

Industry of respondent organizations in this study

Industry Number of organizations

participated in study

Accounting/auditing services 1

Aeronautics/space electronics 5

Agricultural products/services 1

Automotive machinery/industrial 12

Chemicals 4

Communications 1

Computer hardware/software 5

Engineering/construction 4

Entertainment 1

Financial services 4

Food and beverage 4

Healthcare 2

Lending institutions 2

Manufacturing consumer products 6

Metal and alloys 4

Petroleum and gas 4

Pharmaceuticals 5

Restaurants 1

Retail/wholesale sales 1

Telecommunications 9

Transportation 2

Utilities 2

Wood and paper 2

Other 12

Total 94


coefficients and the coefficients of bivariate correlations were compared for signs, values, and

relative importance. Secondly, the consistency of the regression results was tested by

removing variables from the equation and verifying the results. The remaining variables

kept their sign, values, and level of significance after others were removed from the

regression (Engle and McFadden, 1994).

6. Results

The 94 participating U.S. multinationals represented a diverse group of organizations.

They varied in size from those included in the Fortune International 100 to small firms. The

average number of employees was 23,563, and the average number of expatriates in each

organization was 125. Sixty-three of the organizations were publicly held and 31 were

privately owned. Thirty-one percent of the senior executives of the organizations had

completed at least one international assignment. The respondent organizations had expatriates

located throughout the world. The geographical areas where they were located are indicted in

Table 1.

The participating organizations represent a wide array of industries. The industries and

number of respondents from each are indicated in Table 2.

Some sense of the importance of the expatriate performance appraisal system could be

derived from how the results are used in making human resource decisions. Respondent

organizations reported using the results of expatriate performance appraisal for many issues.

These uses are indicated in Table 3.

Table 4 shows means, standard deviations, and correlations among the independent,

dependent, and control variables. This table suggests that on a bivariate basis, performance

expectations clarifications, consideration of local environment, frequency of evaluation,

Table 3

Respondent organizations use of expatriate performance appraisal results

Decisions concerning Number of organizations using

performance appraisal results

Compensation 81

Promotion 73

Feedback 51

Bonus 47

Selection 35

Terminationa 30

Training 28

Layoff b 11

Profit sharing 9

Other 4a Termination is severing the employment relationship with the organization.b Layoff is temporary unemployment. An example is when United Airlines recalled some employees who were

laid off following the curtailment of domestic U.S. travel after the September 11, 2001, attacks at the World Trade

Center.

Table 4

Descriptive statistics and correlations among variables

Variable Mean S.D. 1 2 3 4 5 6 7

1. Performance

expectations

9.03 3.9

2. Local environment 15.31 5.53 .37**

3. Frequency of

evaluation

1.2 .69 .17 .07

4. Fairness 8.4 3.12 .54** .25 * .14

5. Career development 10.72 3.81 .65** .5** .02 .34**

6. Number of expatriates 125.4 330.63 .04 � .03 � .1 .09 � .001

7. Number of employees 23,563.4 37,093.1 � .106 .19 .03 .17 .10 .42**

8. Successful system 7.9 2.97 .79** .35** .23 * .53** .71** .17 .11

* Correlation is significant at the .05 level.

** Correlation is significant at the .01 level.


fairness, and career development are positively and significantly associated with a perceived

successful performance appraisal system.

The two tests for robustness of the regression data resulted in the signs, values, and relative

importance being consistent and the remaining variables retaining their sign, values, and

relative level of significance after other variables were removed from the regression. Thus,

the regression data proved to be robust. Table 5 suggests, as hypothesized, that expatriate

performance appraisal systems were perceived as being more successful when they included

performance expectations clarification (Hypothesis 1), were regarded as being fair (Hypo-

thesis 4), and were linked to the expatriate’s career development (Hypothesis 5). These results

were as expected being both positive and significant. Frequency of evaluation (Hypothesis 3)

Table 5

Regression analysis of factors associated with perceived success of the organizational expatriate performance

appraisal system

Variable B Significance

Control

Number of employees .049 .670

Number of expatriates .150 .191

Performance appraisal system

Performance expectations .334 .000***

Local environment .005 .941

Frequency of evaluation .111 .074

Fairness .196 .008**

Career development .419 .000***

F 27.775

R2 .693

Adjusted R2 .668

**P < .01.

*** P < .001.


was positive and approached significance. Conversely support was not found for considera-

tion of the local environment (Hypothesis 2) as an important factor.

7. Discussion

This exploratory study began with the understanding that to gain the greatest insight into

how an expatriate performance appraisal system meets the objectives established for it would

require going to the focal point of information about how the system operates and the results

are used. We determined this to be the person responsible for the operation of the system. In

selecting this person as the source for our information, we recognized that there are three

possible stakeholder groups that may have differing opinions about the perceived success of

an expatriate performance appraisal. These include the raters who may be located in the same

or vastly different environments from the expatriates being appraised, the expatriates whose

performance is appraised and who may or may not have insight into the corporate concerns

concerning the uses of the system (see Table 3), and the individuals responsible for the

operation of the system who arguably have the best overall oversight position for how the

system meets the corporate expectations. These individuals are in a very unique position to

receive feedback from both expatriates who are evaluated using the system and managers

who make significant human resource decisions based on information in the performance

appraisals. Further, these people are responsible for guiding the design of the system,

implementing the system, overwatching the system in operation, preparing information for

human resource actions from the system, receiving feedback from both raters and expatriates,

and ensuring that modifications are suggested when the system does not produce the results

desired. Thus, the data provided for this study came from those people responsible for the

expatriate performance appraisal systems in the U.S. multinationals. These people have been

the source of research information for similar input concerning processes used in expatriate

performance appraisal systems (Gregersen et al., 1996).

The diverse combination of organizations from which our data are drawn is advantageous

in at least two ways. The mixture of both industry (Table 2) and varied size of organizations

represented not only precluded an industry affect but also provided a rich foundation for the

information used in our study.

The results of this research suggest a number of interesting insights into factors that make

expatriate performance appraisal systems successful. In most cases the projections were

confirmed, yet there was one area that did not conform statistically to the original thinking.

The expectations for the hypotheses concerning clarifying performance expectations, the

frequency of evaluation, perceived fairness of the expatriate performance appraisal system,

and career development were confirmed. Consideration of the local environment was not

supported.

The data in this study indicated support for the hypothesis that clarifying performance

expectations is related to the success of an expatriate performance appraisal system (Table 5).

The input from the respondents is comparable with earlier research in this area. Locke and

Latham (1990) posited that commitment to goals is enhanced through participation, and


clarifying performance expectations results in greater acceptability of goals and higher

performance (Erez et al., 1985). The implications of the findings are quite clear; when

performance expectations are well understood there is a better chance of reaching organiza-

tional objectives and achieving a competitive edge.

The frequency of performance evaluation was also associated with a successful expatriate

performance appraisal system (Table 5). The results were close to those of recent researchers

(Gregersen et al., 1996) who reported that both semiannual and annual expatriate perform-

ance appraisals related positively to perceived expatriate performance appraisal accuracy.

Earlier research (Lazer and Wikstrom, 1977) has indicated several good reasons for more

frequent performance evaluations. Among these are more current information that is fresher

in the minds of those participating in the evaluation, more flexibility in the review process,

and more meaningful and timely information when received more frequently. The respond-

ents in this study confirmed that more frequent communications concerning the expatriate’s

performance is related to the perceived success of the expatriate performance appraisal

system.

Fairness was also positively related to the perceived success of the expatriate performance

appraisal system. The issue of fairness is particularly critical in the performance evaluation of

an expatriate. Frequently, expatriates have limited communications with the individual who

evaluates their performance. Thus, mutual trust is a significant issue in expatriate perform-

ance appraisal. Expatriates should be able to expect that their performance will be rated fairly

and the appropriate decisions (e.g., bonus, pay raise, selected for a significant position or a

promotion) would follow a positive evaluation. On the other hand, referring to a performance

appraisal system as being unfair could be one of the most serious accusations that could be

associated with it. The impact of fairness in a performance appraisal system was exhibited in

a recent study in which managers who perceived unfairness in their own most recent

performance evaluations reacted more favorably to the implementation of a procedurally just

system than those who did not perceive unfairness (Taylor et al., 1998).

The extent of emphasis on career development was both positively and significantly

related to perceived performance appraisal success. The results of this study confirm the

recognition that the development of expatriates is one of a multinational’s crucial human

resource concerns (Bartol and Martin, 1998) and that performance appraisal plays a major

role in this process. Earlier research indicated that international experience is significant in the

career of an expatriate (Oddou and Mendenhall, 1995). The respondents in this study

supported this view. The respondents to our study also indicated that 31% of the senior

executives at their multinationals had completed at least one international assignment. This

finding was in agreement with that of Adler’s (1986) research, exceeding the 15% reported by

Black et al. (1998). Their responses are also in agreement with the previous research that

suggested that the relationship between the performance appraisal and a successful career

development process is clear and consistent.

Consideration of local environment was not predictive of perceived expatriate performance

appraisal system success (Table 5). There are two possible explanations for this result. First,

some of the statistical support for this variable may have been captured by other factors in the

regression process. Second, companies may be underestimating the importance of this factor.


Although the significance of recognizing the impact of the local environment (Briscoe, 1995;

Cascio and Serapio, 1991; Dowling et al., 1994; Harvey, 1997; Oddou and Mendenhall,

2000) and allowing additional time to achieve results in a foreign area in the expatriate

performance appraisal process (Briscoe, 1995; Cascio and Serapio, 1991; Harvey, 1997) has

been discussed in the current research, the research/practitioner linkage does not appear to be

firm. Clearly more research is needed on this topic.

8. Limitations of this study

To our knowledge, this is the first study to look analytically at the factors that make an

expatriate performance appraisal system successful. Our study provides some insights but

also has limitations.

For one thing, the selection of the person responsible for the expatriate system to complete

the questionnaires represents both a strength and a limitation. The strength of this decision is

based on the recognition that this individual is in the best overall position to evaluate how the

expatriate performance appraisal system is satisfying the goals set for it by the organization.

The reasons for selecting this individual have been explained earlier. As previously indicated,

it is recognized that this individual represents only one of three groups of stakeholders who

use the expatriate performance appraisal system. The other two groups, raters and expatriates,

may have views that differ from those of the person responsible for the system. This is an area

where additional research may be helpful.

Another limitation is the fact that the questionnaire was completed at the headquarters of

U.S. multinationals. The results could be expected to be heavily weighted in favor of those

performance appraisal practices used by U.S. firms. They may not be the same for multi-

nationals headquartered in other countries and cultures. Thus, caution should be exercised in

generalizing these findings to multinationals headquartered outside of the United States.

Finally, the impact of performance appraisal on the careers of HCNs was not addressed in

this study. This group of employees comprises a substantial portion of the overseas workforce

and future research addressing performance appraisal issues affecting this group would be

helpful.

9. Conclusions

This exploratory study analyzed the contribution of five factors (performance expectations,

consideration of local environment, frequency of evaluation, fairness, and career devel-

opment) to the perceived success of an expatriate performance appraisal system. Performance

expectations, fairness, and career development contributed both positively and significantly to

the perceived success of the system. Frequency of evaluation approached significance and

consideration of the local environment was not a significant contributor to the success of the

system. Thus, this study provides guidance for both researchers and practitioners regarding

what factors are likely to lead to more successful performance appraisals—at least from the


organization’s point of view. Additional research would be helpful to further consider local

environment factors and directly assess the views of the raters and ratees who use the

expatriate performance appraisal systems.

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