How and why can performance appraisal systems vary across nations?
Performance appraisal systems are used to evaluate the performance of managers against criterias that the firm believes to be important for the implementation of strategy and to maintain competitive advantage. It is an important part of a firm's control system, which is directly related to the organizational architecture.
Most commonly, two groups evaluate expatriate managers; host-country managers and home-country managers, who both are subject to bias. Host-country managers are often biased by their cultural frame of reference and expectations, while home-country managers rely much on hard data since they lack knowledge of what is going on in foreign operations.
Several things can reduce bias in the appraisal process, such as promoting that more weight should be given to an on-site manager's appraisal than an off-site one. The on-site is more likely to evaluate the "soft" variables (relationship with workers, culture,etc.) ["hard" = numbers, profits, computer based]. Cultural bias may be eliminated if manager and on-site manager has same nationality.
How and why can compensation systems vary across nations?
Compensation should be adjusted to reflect national differences in economic circumstances and compensation practices. So how should a firm pay its expatriate managers?
Should the pay be equalized on a global basis or paid according to prevailing standards in each country?
Many firms use a global standard today. The balance sheet approach equalizes purchasing power across countries so employees can enjoy same living standard in their foreign posting as they did at home. The components of the typical expatriate compensation package are a base salary, foreign service premium, allowances, taxation and benefits.