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PERFORMANCE MANAGEMENT CHALLENGES IN MULTINATIONAL
ORGANIZATIONS: GLOBAL AND LOCAL POLICY PERSPECTIVES
Prihatina Jati
1*
, Indri Astuti
2
, Budi Safari
3
, Nurwulan Kusuma Devi
4
STIMA IMMI Jakarta, Indonesia
1,2,3,4
jatitina15@gmail.com
1
, indriast01[email protected]m
2
, budisafari[email protected]m
3
,
nurwulankusumadevi026@gmail.com
4
ABSTRACT
Globalization of management is a fact of life. Global management is the performance of management
activities that cross national boundaries. Global management helps to solve problems that cannot be
solved alone in international cooperation. The growth and development of multinational companies
requires quality management. The complexity in handling companies across countries spurs the
resources in it to continue to be creative and innovative. The method used in this study is descriptive
analytics, by conducting a literature search related to performance management challenges in the
context of multinational companies, with a conceptual approach and a historical approach. The results
of this study show that management challenges always exist in building a multinational organization,
performance management is needed in building a change mentality. To face performance challenges in
miltnational organizations there are several steps or strategies that can anticipate them, including:
Creating the availability of skilled personnel, Improving the company's ability to adopt and use
progress, Building a more effective, efficient, and highly motivated team, which is able to improve the
company's competitive position, Ensuring adequate human resources for expansion into new
programs. Training, Increased productivity. Reduce employee turnover. Increased efficiency.
Keywords: Management; Performance; Multinational; Global; Local
INTRODUCTION
Performance management can be defined as an effort to improve the ability and
encourage employees through various ways to work vigorously, effectively, efficiently and
productively, in accordance with the right work process in order to achieve optimal work results
(Govender & Bussin, 2020). Performance management should be viewed as a system that operates
broadly in order for the results of performance management to be maximized (Ferreira & Otley,
2009).
The implementation of performance management includes the objectives to be achieved,
the allocation of decision rights, and the measurement and evaluation of organizational
performance (Walker et al., 2011). This performance management practice can improve the
performance of public sector organizations (Taufiqurokhman, 2016). Performance management as
a system and factors affecting the performance management system. Performance management
as a system includes: (1) the definition of performance management as a system, (2) the
limitations (challenges) of the performance management system, and (3) the reason for the need
for a new system for managing the performance of the new organization. Factors affecting a
performance management system include (1) the influence of the environment on performance
management, and (2) issues related to the performance management system (Dharma, 2020).
However, in practice performance management challenges many especially in
multinational organizations. Therefore, the application of global/international performance
management is absolutely necessary in providing the best service in which the company will
operate. Global human resource management requires more complex handling when compared
to domestic human resource management.
The emergence of globalization in many fields, changes that occur simultaneously outside
the company, rapid changes in new technologies, new innovations in terms of how to produce,
changes brought from the internet and so on, all of these things have contributed to determining
the conditions of company management (Safri, 2019).
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Companies are also required to provide the best quality, both in the products and services
produced but do not forget the environmental impact that occurs from all company activities.
Operations managers today must have a global outlook and operations strategy, the rapid
development in world trade that seems like a world without borders, resulting in many
organizations expanding their organizations not only domestically but also abroad (Ambarwati &
Supardi, 2020). This helps companies gain and maintain a competitive advantage in the global
marketplace (Hetharie & Rieuwpassa, 2022). A multinational corporation as a private business
organization consists of several legal entities connected by the parent company and
distinguished by their size and multinational spread (Syukri & Kusniati, 2021). Multinational
companies are most talked about because they are business associations in the framework of
world globalization and economy (Chandrawulan, 2014).
In this context, it has two objectives; (1) to analyze the performance management
challenges of an organization both globally and locally in relation to multinational companies
(2) to verify mechanisms and strategies in dealing with challenges that are considered more
important and used more widely by multinational companies both globally and locally.
RESEARCH METHOD
The method used in this study is descriptive analytics, by conducting a literature search
related to performance management challenges in the context of multinational companies, with
a conceptual approach and a historical approach. This research is literature study research which
is any effort to collect relevant information with the topic or problem that will be or is being
researched. Data collection is obtained and processed by accessing information, data and
literature studies using document reviews, books, the internet, scientific articles, and other data
relevant to this research.
RESULT AND DISCUSSION
Concepts and Challenges in Management Implementation in Multinational Companies
Facing global business competition, what distinguishes one company from another
company is the application of corporate values or culture in running its business (Ali et al., 2019).
Good management will be able to face changes and bring optimal results. The current concept
of globalization brings various consequences in the business field. When a company
(organization) plans to enter the global market, country boundaries are unable to limit the
company from the pressure of foreign competition, so the success of the company is largely
determined by the ability of the leader to adapt to his environment including opportunities and
challenges.
The international business management and human resource development community
will benefit by continuing to explore empirically as well as investigate leadership skills essential
to global leaders (Nazwirman, 2020). Hamel and Prahalad said that competition in the future can
not only be done by redefining strategy but also need to redefine the role of upper management
in creating strategies therefore the role of business people in identifying future business,
analyzing, planning, determining / formulating and implementing the right strategy is essential
and decisive for example through organizational transformation (Safri, 2019).
The function of global performance management is to assess, monitor, and manage
employee performance in the global business environment, development and implementation of
an effective and measurable performance management system to ensure that international
employees work productively in order to achieve expected business goals (Seto et al., 2023).
World economic growth leading to the current era of globalization has an impact on the
increasing level of business competition between organizations operating at the domestic,
regional, and international levels. International markets become without borders (Mahanani,
2020).
Globalization has led to the development of international business activities. The most
traditional forms of international business are investment and international trade. International
trade refers to the exchange of products and services that cross national borders. This trade
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involves products and services. Exchange in international trade in the form of exports and
imports.
Combining the global scale efficiency benefits of global companies, with local
advantages and advantages in response to multidomestic companies (Mahanani, 2020). Without
unique competencies, a foreign company will have difficulty competing with local companies
that are considered to know the local market better. Thus, as many employees as possible should
have contact with regulators, suppliers, local communities, watchdog groups and, most
importantly, customers. Companies built to change worry about being caught off guard, so they
put everyone close to customers and the environment. That way, when the time comes to change
the direction of the organization, everyone moves together based on a common understanding
and feels the need for change (Tampubolon, 2020).
In general, multinational companies are categorized as legal persons who have the same
position as citizens (natural person) where the multinational company is established or
domiciled in business. Thus, it can be said that currently the state is the only entity that has the
authority to regulate and control the activities of multinational companies.
Today, managing human capital efficiently and effectively leads to the progress and
development of an organization, but without proper human resource planning, the progress of an
organization is indeed difficult to achieve (Putranto et al., 2022). Quality management in the
public sector has garnered great attention in many countries around the world (Harsch & Festing,
2020). Human resource development activities designed to strengthen strengths, overcome
limitations, provide relevant, new competencies, and broaden views. Such development
activities are usually related to formal programs, action execution, job rotation, and delegation.
The challenges of globalization require leaders in multinational companies to have a
global mindset and be able to act with local wisdom. The success of Japanese multinationals in
the host country can be seen from how much they accept and adapt Japanese management
methods into an organizational culture (Ashta et al., 2018). The role of multinational companies
is a major player in the global economy, in the perspective of knowledge and networking it can
be seen that the ability to transfer knowledge is a competitive advantage. Excellence in relations
between countries in the long run can create new knowledge and experience that is tacit that will
be difficult to replicate.
The challenge of being able to adapt to change is a problem that must be accepted by
leaders of multinational companies. Literature studies explain the role of leaders for successful
change is very important because organizational change is not always successful, according to
research results 70% of organizational changes are unsuccessful (Hughes, 2011). This poor
success rate indicates that the underlying framework for implementing and managing change in
an organization is not yet valid.
Change as an important element that measures capabilities and culture aimed at
organizational alignment. Because the pace of organizational change is not greater than the
changes in the business environment that occur, the basic mentality, organizational behavior,
business ethics, work ethics, knowledge and skills including leadership are formed in
accordance with the demands of the organization.
Changes in multinational companies can be in the management process through global
integration and local differentiation (Pešalj, 2011). The type of company forms a network in
facilitating knowledge between the units combined. The characteristics of the company as an
active entity in increasing the capacity and ability of new knowledge can be called a
characteristic of competitive advantage. Obstacles to organizational transformation are due to
low quality work. Influential factors in organizational change are education, low foreign
language skills, less communication intensity, limited time for information dissemination
(Bojesson & Fundin, 2020).
Multinational companies with expatriate leaders need to adapt their leadership style to
local managers and employees, because foreign leaders certainly have a different leadership
style from local and local employees, because foreign leaders certainly have a different
leadership style from local and local employees (Artina et al., 2020). Leadership is the ability
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possessed by individuals in motivating, leading and influencing others to play a role in
achieving organizational goals. The success of the organization is determined one of them from
the role of the leader (Javidan & Teagarden, 2011).
According to Javidan & Teagarden (2011), The definition of a global mindset is the
availability of knowledge, cognitive, and psychological attributes that enable global leaders to
influence individuals, groups, and organizations (there are no global organizational boundaries)
representing diverse cultures or political or institutional systems to contribute to the
achievement of global organizational goals
The success of global leaders is influenced by a global mindset that is theoretically built
from 3 components:
1. Intellectual Capital, shows the intellectual level of the leader and the cognitive capacity of
several indicators of global industry knowledge, understanding the value of networks and
organizations and having an absorption of culture.
2. Social Capital, showing good relationships inside and outside the company, seen from
international networks, interpersonal skills in building new relationships, and skills as
leaders who are able to move employees to the global level.
3. Psychological Capital, denotes a positive psychological profile, cosmopolitanism and a
desire for cross-cultural encounters of several attributes: respect for different cultures.
4. The dominance of top expatriate management plays a role in responding to changes
aimed at order for the organization to thrive and survive in business (Manning et al.,
2012). The importance of organizational change, the managerial skills of the leader are
needed. The ability of reliable leaders can be improved, one of which is by rotation in the
organizational structure, creating a culture of learning at the leader level.
The complexity of organizational structures and management processes of multinational
companies, efforts to increase competitive advantage can be done through global integration and
local differentiation (Pešalj, 2011). The innovation process does not focus on the parent
company but is disseminated to the host country through the system. Competitive advantage
leads to the characteristics of the company as an active entity in increasing the capacity and
capability of new knowledge.
Strategy to Face Multinational Organization Challenges Through Global and Local
Policies with Performance Management
For decades, research on multinational corporate strategy has been anchored in the theory
of internalization. It is based on the economics of transaction costs, not explaining how
multinational companies can build and maintain competitive advantage (Dabic et al., 2014). Thus,
it differs from the traditional annual performance appraisal in two important aspects. First, there
is a clear alignment with the strategic objectives of the organization. Second, performance
management is a continuous, continuous process, not a static snapshot that occurs only once a
year (Aguinis & Burgi-Tian, 2023). The global movement from performance appraisal to
performance management began in the early 2010s.
For example, in 2012, Donna Morris, Adobe's senior vice president of human resources,
was interviewed by the Economics Times of India during a business trip. He stated that he
would "abolish the performance review format." Morris' spontaneous announcement was met
with great enthusiasm in the industry (Aguinis & Burgi-Tian, 2023). In addition, soft law
provisions are contained in The United Nations Global Compact which is a strategic policy
initiative for companies that are committed to aligning their business policies and strategic
operations with 10 (ten) universal principles in the fields of human rights, labor, environment
and anti-corruption (Syukri & Kusniati, 2021).
Therefore, to face performance challenges in military organizations, there are several
steps or strategies that can anticipate it, including: (Alliger et al., 2015)
1. Creating the availability of adequate skilled personnel so that they can fill vacancies. Job
vacancies often occur in companies. This happens due to employees entering retirement,
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employees resigning, employee rotation, the formation of new divisions and other things.
Through training and development, human resources will be available that can fill the
vacancies.
2. Improve the company's ability to adopt and use technological advancements due to its
sufficiently skilled and knowledgeable staff. It is undeniable that today's technology is
developing rapidly. Companies that are unable to adopt the technology will have
difficulty meeting market demand. Every company must be able to adjust to technology
needs balanced with the availability of employees who are able to master technology. The
inability to adopt existing technology will result in serious setbacks for the company. The
absence of employees who are able to master the technology adopted will also result in
the company not running optimally.
3. Building a more effective, efficient, and highly motivated team, which is able to improve
the company's competitive position and increase employee morale An effective, efficient
and highly motivated team will be formed from employees who fully understand the
company's vision and mission and prioritize teamwork when compared to individual
work. Forming a solid team is very difficult and takes a long time because it is related to
company culture and other components in the company.
4. Ensure adequate human resources for expansion into new programs. One of the benefits
of training and development is that the company will better ensure the availability of
adequate human resources for the benefit of expanding into new programs. New
programs are generally carried out due to company expansion or business unit
development. Training and development will make it easier for companies to map human
resource needs in company expansion.
5. Studies have shown that those who receive training have specific benefits from training,
including employment development.
6. Increased productivity. Empirically, training and development has been shown to increase
employee productivity. Through training and development, employee productivity can be
clearly measured because the company will know the changes before the training is
carried out with after the training.
7. Reduce employee turnover. Training and development can reduce employee turnover
because training and development specifically aims to increase employee knowledge in
one particular field according to the needs of their field of expertise.
8. Increased efficiency leads to financial gains. Financially training and development can
reduce recruitment costs, onboarding costs, education and training costs for new
employees.
9. Decreased need for supervision. Training and development have also been empirically
shown to reduce the level of supervision. This happens because employees work more
confidently with their abilities after receiving training, work quickly without hesitation,
and are able to correct all existing mistakes.
Training and development have provided benefits such as: (Bashir & Jehanzeb, 2013)
1) Increased job satisfaction and morale among employees. Job satisfaction and employee
morale are unique dimensions and change rapidly. Through training and development, it
is hoped that there will always be an increase in job satisfaction and employee morale,
because job satisfaction and employee morale are more easily formed with this
dimension.
2) There is an increase in employee motivation. Empirical training and development have
also been shown to increase employee motivation. The motivation in question is positive
motivation, namely the motivation to promote and increase company profits.
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3) Increased efficiency in work processes, thereby providing financial benefits.
4) Training and development are also useful for improving the efficiency of work processes.
Trained employees will provide the best quality production results and efficient
production time so as to increase financial profits for the Company.
5) Increased capacity to adopt new methods and technologies. Through training and
development will allow companies to increase production capacity and employee ability
to adopt new technologies so that companies will produce more goods or services they
produce.
6) Increased innovation in strategy and products. Training and development will specifically
provide encouragement for employees to innovate in strategy and products. Some
employees in many cases after being given training are able to create the latest superior
strategies and products as a result of product differentiation.
7) Able to reduce employee turnover. High turnover often occurs due to the inability of
employees to work. Training and development can lower the frequency of employee
replacements.
8) Improve the company's image. Training and development can indirectly improve the
company's image. The company's image can be formed through qualified employees.
Meanwhile, qualified employees can be printed through training and development
programs.
9) Able to increase the ability of training diversity in risk management. Risks in the business
world cannot be avoided but risks can be minimized by improving the ability of each
employee. The diversity of training provided provides diverse employee knowledge so
that they can anticipate and reduce risks that will occur through their expertise
These are steps or strategies to anticipate performance management challenges in
multinational organizations, both global and local, and the benefits they get. So that this makes
the company organization competitive because it has good resources.
CONCLUSION
Based on the problems and discussions above, regarding the challenges of performance
management in multinational organizations with global or local policies, it can be concluded as
follows:
Management challenges always exist in building a multinational organization,
performance management is needed in building a change mentality, clear delivery of vision and
mission, efforts to open communication with performance management can support the success
of change. The factors that contribute to the success of change are communication within the
organizational unit, involvement of all components including top management roles that
perform repetitive messages to communicate change. The function of global performance
management is to assess, monitor, and manage employee performance in the global business
environment, development and implementation of an effective and measurable performance
management system to ensure that international employees work productively in order to
achieve expected business goals.
To face performance challenges in miltnational organizations there are several steps or
strategies that can anticipate them, including: Creating the availability of skilled personnel,
Improving the company's ability to adopt and use progress, building a more effective, efficient,
and highly motivated team, which is able to improve the company's competitive position,
Ensuring adequate human resources for expansion into new programs. Training, Increased
productivity. Reduce employee turnover. Increased efficiency, Decreased need for supervision.
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