When it is not OK: Performance management impacting employee acceptability and psychological contract in MNCs

Performance management (PM) is one of the most important and complex HR practices. Companies operating internationally are challenged in their PM practices as cultural peculiarities add complexity. In this conceptual study, we examine how unacceptable PM processes in multinational companies affect employees and their psychological contract (PC) with the company. The findings in our study reveal, when a PM is unacceptable to an employee, it is understood as a failure in four critical areas of organisational justice: distributive, procedural, interpersonal and informative. There are cultural differences in how these failures are assessed, and thus, how the PC is either breached or violated. At the individual employee level, symptoms of such breaches and violations include stress, reduced well-being, and poor performance among employees. At the organisational level, such breaches and violations can lead to poor overall performance. To improve the employee acceptance of PM in multi-national corporations and to reduce violations of the PC, we propose a unique theoretical model for acceptable PM that encompasses the four types of organisational justice.