Unintended consequences of promotions: Importance of annual incentives for performance management systems

Abstract

With increased globalization, multinational enterprises (MNEs) have become pervasive in emerging economies such as India. Given that employee performance is multidimensional and culture-bound, the management of performance in MNEs is very critical for the successful implementation of their business strategy. We focus on promotions and incentives as they are considered the two crucial aspects of any performance management system. Based on a multisource, temporal study spanning over 19?months, we tested the interaction effect of promotion and annual incentive on employee outcomes. We conducted interviews of 15 senior officers in phase 2 to understand the inconsistencies in our findings. The contribution of the study to industry and academia are discussed.