Author Abstract
We analyze the effects of increasing the salience of corporate values in an organization rewarding its employees based on financial performance. We use data from a field experiment conducted at an Indian mobile phone retail chain that implemented a 360° performance assessment system focused on organizational values. We find a counterintuitive result: the intervention drove even higher effort on dimensions of short-term financial performance associated with preexisting monetary incentives but did not substantially affect nonfinancial performance dimensions linked to long-term organizational goals. Our setting allows us to explore the effects of underlying counterbalancing mechanisms. While the 360° system drives higher effort to benefit the organization, consistent with the system improving goal clarity, activating organizational identification, or increasing implicit incentives, it may not improve all of the dimensions of performance intended to promote organizational alignment. Increasing employees' multitasking requirements, without adequate support and training, can generate confusion, which, in turn, can drive effort away from the sources of confusion and toward known elements of performance. Our findings provide insights about benefits and pitfalls that managers may need to consider when implementing 360° performance assessment programs as a complement to incentives based on financial performance.
Paper Information
- Full Working Paper Text
- Working Paper Publication Date: January 2018
- HBS Working Paper Number: HBS Working Paper #18-069
- Faculty Unit(s): Accounting and Management
