The effects of performance evaluation on punishment in organisations

Abstract

This article expands understanding of the relationship between punishment and performance in organisations. We analyse Korean data on performance and punishment as follows. While prior literature has focused on the effect of punishment on performance, this article examines the effect of performance gaps on punishment. Based on behavioural theory, strategic reference point theory and principal–agent theory, it sheds light on the negative relationship between performance gaps (cause) and punishment (effect). The article demonstrates that low performers are more often punished and high performers less so (i.e. a negativity bias). Our results also show that organisations prioritise light punishment over heavy punishment when disciplining employees in response to performance. Points for practitioners Low-performing organisations are more often punished and high-performing organisations less often so. The degree to which negative performance increases punishment is greater than that to which positive performance decreases punishment. Organisations prioritise light punishment over heavy punishment when disciplining employees in response to performance.