Relationship between perceived performance management system (PMS) effectiveness, work engagement and turnover intention: mediation by psychological contract fulfillment

Abstract

PurposePerformance management systems (PMSs) are critical for organizational success, but research is undecided on their constructive influence and the means through which they impact work engagement and turnover intention. This study aims to fill this gap by surmising psychological contract fulfillment as a mediator in the relationship between PMS effectiveness (PMSE) and employee outcomes.Design/methodology/approachThe study uses a survey research design. Data were collected from 327 working professionals in India. The Statistical Package for Social Science Version 10.0 (SPSS 10.0) and the Analysis of Moments Structure (AMOS) 4.0 were used for data analyses.FindingsThe two-factor construct perceived PMSE was found to explain a larger variance in work engagement and turnover intention than the separate measures for its constituents PMS accuracy (PMSA) and PMS fairness (PMSF). Psychological contract fulfillment and work engagement were found to mediate the relationship between PMSE and turnover intention.Research limitations/implicationsThe study broadens the field of research on PMS in important ways. It demonstrates that the two-factor construct PMSE has a larger influence on employee outcomes in comparison to its constituent individual measures PMSA and PMSF. This is also the first study to suggest that in contrast to PMSF, PMSA explains a higher variance in employee outcomes.Practical implicationsThis study validates the strong relationship between PMSE and key employee outcomes. Besides PMSF, managers can use the findings of this study to focus on the “right things” or accuracy in the PMS context to enhance work engagement and reduce turnover.Social implicationsThe study findings will have value everywhere owing to the diffusion and convergence in the human resource management practices of multinational firms irrespective of their contexts (Ananthram and Nankervis, 2013).Originality/valueEarlier PMS studies have mostly been limited to either its fairness or accuracy and attended unduly to its appraisal element. This study adopts a systems vision of PMS and overcomes earlier drawbacks by investigating the role of both PMSA and PMSF in shaping employee outcomes. This is the first study to empirically confirm that in contrast to PMSF, the PMSA constituent of PMSE explains a higher variance in employee outcomes. The study provides greatly essential pragmatic support to the conjecture that PMSs advance work engagement (Mone and London, 2014; Gruman and Saks, 2011) and lower turnover intention (Kwak and Choi, 2015).

Hotel employees’ intention to stay through psychological contract fulfillment and positive emotions in post-lockdown era

“…Although a few research have recently revealed the mediating role of PCF (Sharma et al, 2021), it has not been extensively investigated in previous studies. We argued that, during such pandemic times, the psychological well-being of hotel employees is crucial.…”

“…Study highlights that PCF mediates the relationship between antecedents such as trust in supervisor and POS and psychological empowerment. Although a few research have recently revealed the mediating role of PCF (Sharma et al , 2021), it has not been extensively investigated in previous studies. We argued that, during such pandemic times, the psychological well-being of hotel employees is crucial.…”

How to Evaluate the Effectiveness of Performance Management Systems? An Overview of the Literature and a Proposed Integrative Model

“…The relationships established between the criteria of the transfer dimension were based on the Social Exchange Theory, which suggests that positive work outcomes are a form of reciprocation for the investment made by the organization, such as PMS, in their personal and professional well-being, promoting greater engagement and reducing intentions to leave the organization (Kakkar et al 2020;Sharma et al 2021). Equity Theory also provides important insights by arguing that perceived equity regarding PMS can increase employee engagement with the organization and work and reduce their intention to leave the organization (Sharma et al 2021).…”

“…Merely making technical or methodological adjustments to PMS is not enough to change people's perceptions of them (Levy et al 2017), so it remains a practice that has fallen short of organizational expectations (Cappelli and Conyon 2017). As a result, scholars and practitioners have questioned whether the investments made to implement and promote performance management truly yield substantial benefits for organizations (Awan et al 2020;Cappelli and Conyon 2017;Garengo et al 2022;Ikramullah et al 2016;Iqbal et al 2019;Kakkar et al 2020;Keeping and Levy 2000;Lawler 2003;Modipane et al 2019;Schleicher et al 2019;Sharma et al 2021).…”

Cognitive Motivational Perspectives of Performance Measurement System and Organisational Commitment: Role Ambiguity as a Mediator

“…While SPMS and its behavioral implications remain the major focus in management accounting literature (Sharma, Sharma, & Agarwal, 2021;Appuhami, 2019;Moulang, 2015;Burney & Widener, 2007;Webb, 2004), studies have also evidenced the mediating effects of some factors on the link between PMS and individual outcomes, for instance, psychological empowerment and role clarity (Hall, 2008), role ambiguity and job-relevant information (Burney & Widener, 2007), trust and fairness (Lau & Sholihin, 2005), procedural fairness and organization commitment (Lau & Moser, 2008), as well as justice perception (Burney et al, 2009). Prior evidence shows the crucial influence of the PM system on managerial behavior, which coincides with the organizational theory that the long-term success of an organization is greatly influenced by individual actions (Sharma et al, 2021;de Haas & Kleingeld, 1999). Hence, this calls for further investigation into other possible influential factors in the relationship between PMS and managerial behavior.…”