Consistency

Survey outcomes show that a principal objective of performance evaluation is to make sure profitability. There is a prospective conflict, however, when the performance evaluation method does not suit the distinct nature of a foreign operation that might have purposes aside from short-run profit. MNCs establish foreign operations for a lot of causes. Businesses that depend on a steady provide of raw supplies generally expand overseas to secure their supplies. Other people invest abroad to lower production costs by utilizing less costly labor and power, typically establishing a local operation there. Other reasons for expanding abroad contain the should (1) avoid losing a foreign market place to significant competitors, (2) produce markets for components and associated products, (3) diversify business enterprise dangers, (4) search for new markets, (5) satisfy government regulations, and (6) spread overhead costs amongst a lot more making units. Quite a few of these objectives are strategic rather than tactical in nature. Emphasis on short-term profitability and efficiency can divert attention from crucial manufacturing and corporate technique and alienate corporate personnel.

Given the uniqueness of each foreign subsidiary’s mission, performance evaluation systems need to enable for how the subsidiary’s objectives fit in with overall corporate objectives. For instance, if a foreign subsidiary’s objective would be to generate components for other units within the system, it should be evaluated when it comes to how its costs, production, high quality, and delivery timetables compare to other sources of supply. This use of nonfinancial performance measures to complement standard economic meaures of performance is constant with the contemporary notion of employing a balanced scorecard. Subsidiary managers ought to participate fully in establishing their objectives. Their participation helps to ensure that they're going to be evaluated inside a framework that's sensitive to local operating circumstances and consistent with overall corporate goals. Firms must be positive not to sacrifice long-term objectives because subsidiary managers are preoccupied with short-term outcomes. This adh rence to long-term goals might be accomplished by making confident that short-term efficiency targets and management incentives are met within the company’s strategic plans.