Nature of Performance Appraisal – Analysis

Keywords: pa system benefit

While performance appraisal systems (PAs) are great motivators of employees, they can also assist organisations in the achievement of their objectives. According to Wayne F. Cascio people are “the most vital of all resources, in work settings” (Cascio 2010). In order to optimise organisational outputs it, therefore, goes without saying that organisations should aim to maximise employee efficiency. In managing employees, it’s important for organisations to keep their employees happy to increase each employee’s outputs. Various studies have shown correlations between employee productivity and job satisfaction, work engagement and intent to quit (Find a source). As a result, organisations should be concerned with the management of these 3 factors, which are all determined by employee attitudes towards their work and will affect employee inputs, which will directly impact organisational effectiveness.

In the article Performance Appraisals Impact on Attitudinal Outcomes and Organisational Performance, Ahmed et al asserts that annual performance evaluations are traditionally one of the most accepted processes for employee management (Ahmed et al 2010). Therefore, through the management of employees, performance appraisal systems would play a key role in managing job satisfaction, work engagement and intent to quit. Given the causal relationships between employee attitudes, their professional performance and the quality of their outputs, this assignment strives to analyse the relationships between the performance appraisal and work engagement, job satisfaction and the intent to quit.

Using the Effective Performance Appraisals Systems Questionnaire, a 15 person study is conducted, which ultimately indicates positive relationships between the favourable perceptions of the performance appraisal system, job satisfaction and work engagement. A negative relationship is, however, found between employee impressions of the performance appraisal system and intent to quit.

Definitions

Performance Appraisal

According to its most accepted definition, performance appraisal “is the process of identifying, observing, measuring, and developing human performance in organizations” (Carroll and Schneir, 1982). This system is crucial to human resource management (HRM) in that it provides a platform for performance evaluation against the organisation’s strategy, and when properly implemented, encourages career development and self-assessment (Erdogaan 2002). While PA systems expose employee outputs to the subjective assessments of their superiors, peers and subordinates (Jackson and Schuler 2003), it often forms the basis of organisational reward and punitive systems (Cardy and Dobbins 2011).

Though performance appraisal systems serve as a practical evaluation tool, they are also critical in affecting work environment end drivers such as work engagement, job satisfaction and intention to quit.

Work Engagement

Work engagement relates directly to the degree to which an individual personally identifies with their work responsibilities (Khan 1990), investing emotion and personal resources in the execution of work tasks (Rich et al. 2010). Therefore, work engagement refers to the professional application of various levels of self-investment ranging from the physical to the emotional and cognitive (Rich et al 2010). Macey and Schneider explain work engagement in basic terms, as the extent to which employees are “involved with, committed to, enthusiastic, and passionate about their work” (Macey and Schneider 2008).

Job Satisfaction

Most simply defined, job satisfaction pertains to the amount of pleasure an individual derives from their work (Spector, 1997). Taken a step further, it directly compares an individual’s perception of ideal working conditions with their actual work environment and job characteristics (Karani et al). Ultimately in determining their level of job satisfaction, employees evaluate their position, within an organisation in light of their personal values and ideals. (Michael G. Morris et al) –

Intent to Quit

While intent to quit refers to an employee’s desire to actively seek alternative employment (Tett and Mayer, 1993), it also relates to the individual’s likelihood to leave the organisation (Cotton and Tuttle, 1986). According to Herrbach et al, intent to quit is primarily affected by employees’ level of job satisfaction, their sense of organisational loyalty and the employer’s reputation (Herrbach 2004)

Elements or Characteristics of an Effective Performance Appraisal System

While performance appraisal systems serve numerous purposes, its key function is to improve organisational effectiveness, by encouraging greater employee efficiency. Therefore, it is critical that performance appraisals display the following characteristics:

Alignment with Organisational Strategy and Goals

In Managing Human Resources, Cascio states that Performance Appraisal criteria must be relevant, regarding their relation to both organisational objectives and employee goals (Cascio 2010). Guided by the Performance Appraisal, employees should strive to meet targets that align with the organisation’s strategy, so that both parties benefit from its execution. Therefore, in addition to output targets, Performance Appraisals should also focus on developing employees through training initiatives, which should be aligned with long term organisational objectives. Additionally, performance criteria should evaluate outputs based on appropriate/inappropriate employee behaviour, but should also include a rating, which will indicate the quality of the work performed.

The criteria must be SMART (Specific, Measurable, Attainable, Relevant, Time-bound)

An effective Performance Appraisal system should focus on job requirements, must be based on measurable criteria, and must refrain from opinion based assessments (Noe et al 1994). The system should distinguish between excellence and poor delivery, and should award employees appropriately (Cascio 2010). Furthermore, unattainable performance criteria will serve only to discourage employees. As a result, ratings for measuring performance must fall realistically within an employee’s reach, should be driven by timelines, and must be assessed regularly. Clearly defined timelines not only provide structure to the performance appraisal process, but also establish deadlines for the achievement of set goals. Should employees fall short of set targets, corrective action must be taken in the new assessment cycle. Organisations must, therefore, invest in designing performance criteria that can be practically and consistently measured and applied equally to all employees throughout the organisation.

Credibility/Acceptability

The success of all performance appraisal systems hinges directly on employee endorsement and support. According to Cascio, “HR programs must have the support of those who will use them, or human ingenuity will be used to thwart them” (Cascio 2010). In order to attain employee buy-in, it is, therefore, critical that organisations incorporate employee and management participation, and inputs into the design of any performance appraisal system,. The credibility of a Performance Appraisal also relies heavily on the quality and integrity of the information used to reach the Performance Appraisal rating. Employees should feel that supervisors accurately assessed their performance (Cascio 2010). It is, therefore, critical that employees view the system to be fair and representative of their work requirements. It’s also crucial that employees value the assessments of their evaluators. Employees must feel that assessor evaluations are objective and standard in application.

Practical Usability

While Performance Appraisal Systems must focus on specific job requirements, designers of these systems must place emphases on their usability. To encourage employees to actively use the system, it must be easy to understand and apply (Cascio 2010). In addition, employees must have a clear understanding of the evaluation criteria.

A time-consuming system can deter employees from using it maximally, thereby compromising the effectiveness of the performance appraisal process. As a result, it’s imperative that employees not only understand the objectives of the performance appraisal system, but also have a firm grasp of the criteria and the consequences of non-performance.

Two-Way Feedback

Once supervisors have completed employee evaluations, they must provide employees with clear, meaningful feedback that focuses on both strengths and weaknesses. Supervisors must then allow employees the opportunity to respond to evaluation ratings and comment on their development goals within the organisation. It’s essential that an honest, two-way discourse is encouraged to prevent the emergence of disgruntled employees.

Implementation

The first step in implementing an effective performance appraisal system is to define the performance evaluation criteria that will align to both the employee’s job and the organisation’s short and long term goals. The defined criteria must then be transformed into rating system that will link specific scores to levels of performance (Cascio 2010, p.338). In order for both employees and assessors to understand the assessment process, the organisation should conduct training sessions, which should cover both the characteristics of the performance appraisal system as well as the assessment process (Cascio 2010, 338). In addition, the process must be communicated to the employees and the assessors in writing. Tracking mechanisms must be put in place to alert assessors to inconsistencies in the process and also to assist managers with corrective measures should employees fall short of set targets (Cascio 2010, 338). The system should also allow for an appeals process. This will create a platform for disgruntled employees to address their grievances. To reduce the inevitable subjectivity associated with performance appraisals, recent scholars have also suggested the use of the 360 degree feedback system (Ahmed et al 2010). This form of appraisal assesses the employee from various angles (Top Down, Peer to Peer, Bottom Up and Client) and allows for a more balanced assessment of the employee’s performance.

In implementing a successful performance appraisal system, it is important to focus on attaining employee and management endorsement and also to promote a fair and transparent process.

Evaluating the “Effective Performance Appraisal Systems Questionnaire”

A close comparison can be drawn between the criteria analysed in part I of the Effective Performance Appraisal Systems Questionnaire and the key characteristics of an effective performance appraisal system as outlined by Cascio (Cascio.2010). Like Cascio, the questionnaire assesses employee satisfaction with the implementation of the performance appraisal system according to the following criteria:

whether consequences/rewards are reflective of scores rating;

whether targets add value to the success of the business;

whether the evaluation criteria is relevant to the success of the job;

the fairness of allocated ratings;

the consistency of ratings;

whether ratings differentiate between effective and less effective performance;

the ease with which the performance appraisal system is administered and applied;

the level of endorsement received from all parties (assessors and employees);

the degree to which decisions are based on ratings and are sound and relevant;

the performance appraisal’s level of congruence with organisational strategy, goals and culture;

the degree to which performance appraisal criteria are specific, measuring, stretching targets;

whether the performance appraisal takes both unit and individual performance into account and takes corrective action;

whether employees are evaluated annually and corrective measures are taken.

The only criterion not mentioned by Cascio is whether the performance appraisal system is the organisation’s primary evaluation tool. This question offers great insight into the degree to which an organisation uses the performance appraisal system as a management tool. A lower organisational dependence on the performance appraisal system (as a management tool) will weaken the causal relationship between the performance appraisal system and the 3 factors (job satisfaction, work engagement, intent to quit). Out of the 15 participants in the study, 8 strongly agreed that their organisation’s performance appraisal system is the primary assessment mechanism, 4 felt it was somewhat true, 1 thought it was neither true nor false and 2 somewhat disagreed. According to the respondents, 80% (12/15) of the organisations represented in the study, therefore, use the performance appraisal tool as a primary management mechanism. As a result, the performance appraisal perceptions of the majority of the study’s participants will affect their levels of job satisfaction, work engagement and their intentions to quit.

The questionnaire evaluates the remaining 13 criteria on a scale from 1-5, with scores of 5 reflecting positively on the effectiveness of the system and 1 reflecting poorly. Through the calculation of an individual’s mean score across the 13 criteria, the questionnaire, therefore, gives a relatively clear indication of an employee’s level of satisfaction with the performance appraisal system.

The questionnaire then continues to assign scores for job satisfaction, work engagement and intent to quit. Mean calculations for these criteria are compared with mean scores for employee happiness with the performance appraisal system. Through these comparisons, the relationships between the system and the 3 factors can be evaluated. [Write a concluding sentence that will summarise all your observations above. Did you evaluate the questionnaire or did yo relate it to the AP system? I’m not clear.]

Link between the Effectiveness of a Performance Appraisal System and Work Engagement, Job Satisfaction and Intention to Quit – A Literature Review

Basis for Employee Perceptions of Performance Appraisal Systems

Employee perceptions of performance appraisals are largely based on the following factors:

Fairness

According to Adnan Ahmed, “the success of any PA system depends on its degree of fairness” (Ahmed 2010). As suggested above, performance appraisal systems are highly reliant on employee and manager endorsement, and its success can be severely compromised if employees suspect bias within the system (Ahmed 2010).

Effective rewards/consequence system

The success of a performance appraisal system is also linked to its ability to drive results within both an employee’s job scope and the organisation. Employees must believe that the ratings of a performance appraisal system will lead to meaningful decisions and will clearly differentiate between effectiveness and ineffectiveness. It is, therefore, critical that employees believe in the functionality of the performance appraisal system.

Focus on development

Employees will respond more positively to performance appraisal systems that cater to employee development goals; which should be aligned with organisational objectives. According to Bard Kuvaas, organisational willingness to invest in employee development can have positive effects on employee perceptions regarding the performance appraisal system. This will in turn positively affect employee performance and directly affect the achievement of organisational objectives. Employer investment in employee development may lead to a sense of indebtedness, which will result in improved performance (Kuvaas 2006). Organisational investment in employee career development could, ultimately, lead to strong employee commitment to the organisation, which will positively affect work engagement.

Literature Review

In summary, the 3 factors mentioned above strongly affect employee perceptions about performance appraisals. In order for appraisals to positively affect performance and motivate the work force, employees must relate positively to the system (Kuvaas 2006). Positive employee reactions to the performance appraisal system will therefore contribute positively to employee job satisfaction and work engagement, which will lessen intent to quit (Ahmed et al 2010).

A survey study conducted in Islamabad, Pakistan, evaluated surveys completed by 123 employees from marketing, sales, production and administration backgrounds. Both management and non-management positions were represented in the sample group and the results “indicate [a] significant positive correlation between PA satisfaction and job satisfaction…and [suggests] that the employee turnover intentions are significantly and negatively correlated to perception of PA satisfaction” (Ahmed et al 2010). An additional study of 112 surveys cited by IM Jawahar supports the positive correlation between PA satisfaction and job satisfaction and the negative relationship between PA satisfaction and intent to quit. Jawahar does clarify, however, that while individuals desire performance feedback, they are more likely to respond positively to favourable feedback. Positive performance evaluations are, therefore, more likely to create a positive employee attitude towards performance appraisals than the negative (Jawahar 2006).

Christian, Garza and Slaughter (2011) cite Khan (1990), Macey and Schneider (2008), to offer insight into the relationship between appraisals and work engagement. While the authors don’t make a direct assessment of this relationship, they infer that a healthy level of work engagement is encouraged by employee beliefs that leadership expectations and evaluations are clear and fair in assessing their performance. Although a direct correlation is not discussed, the criteria of an effective performance appraisal system include fairness and the clear communication of SMART targets. Therefore, it can be concluded that a performance appraisal system that effectively applies the above mentioned criteria, would have a positive effect on work engagement. As a result, a positive relationship exists between the effective implementation of performance appraisal systems and levels of work engagement prevalent within an organisation.

Additionally, based on assertions made by Gersick, Bartunek & Dutton, 2000; Kahn1990, Christian, Garza and Slaughter(2011) make an argument for the positive effect of organisational support on employee commitment to their work. According to Christian et al, “Social support (the extent to which a job provides opportunities for assistance and advice from supervisors or co-workers), motivate[s] by creating meaningfulness (Gersick, Bartunek, & Dutton, 2000; Kahn, 1990), resilience, and security (Ryan & Deci, 2001). Thus, [it’s] expected that engagement would be positively related to social support.” (Christian et al 2011)

In addition to job satisfaction, work engagement and intent to quit, the implementation of performance appraisal systems also affect other outcomes. Two others that this article hopes to address are organisational commitment and role ambiguity. Work commitment is extensively addressed, which is defined as the commitment to job tasks, rather than the commitment to an employer. The management of performance appraisal can, however, affect the level of commitment an employee feels to an employer. This can further be affected by an organisation’s perceived external prestige, which could cancel out the impact of an employee’s perception of the performance appraisal system and decrease their desire to quit (Herrbach, Mignonac and Gatignon 2004). Role ambiguity is also an important outcome of a performance appraisal system that is poorly structured and not representative of employee job responsibilities. When an employee is unclear about their role, performance will be compromised as well as organisational outputs. As a result, effective structuring, implementation and monitoring of the performance appraisal system is critical to employee performance and organisational success.

Link between the Effectiveness of a Performance Appraisal System and Work Engagement, Job Satisfaction and Intention to Quit – Empirical Glance – The Effective Performance Appraisal Systems Questionnaire

To further evaluate the link between performance appraisal systems and job satisfaction, work engagement and intention to quit, this study uses the Effective Performance Appraisal Systems Questionnaire. Part I of the questionnaire evaluates employee perceptions of the level effectiveness and fairness displayed by their organisation’s performance appraisal system. Part II assesses employee levels of job satisfaction, part III their intention to quit and part IV their level of work engagement. Using the questionnaire noted above, this study evaluated 15 individuals between the ages of 30 and 59. Out of the sample, 7 employees were male and 8 female, with the group evenly split between black and white, with only one representative from the Indian racial group. Employees within this sample of 15 have worked for their organisations for time periods ranging from 2-30 years.

When analysing trends within this groups responses, the following observations were made:

Performance appraisal and job satisfaction

The general trend displays that positive perceptions about the performance appraisal system are coupled with greater job satisfaction. The questionnaire rates contentedness with the PA system on a scale from 1-5, with 1 reflecting unhappiness and 5 indicating happiness. Though not all positive sentiments about the performance appraisal system are linked with high levels of job satisfaction, the graph below demonstrates an upward sloping curve, which indicates that the more positive an employee’s perception of the PA system, the higher the degree of job satisfaction. Exceptions are however seen at point A and B, where one of the employees with the highest level of job satisfaction displays the second lowest degree of happiness with the PA system and the employee with the lowest level of job satisfaction displays a degree of happiness with the PA system that’s only slightly below average.

A

In addition to measuring personal employee satisfaction with the appraisal system, the questionnaire also interrogates the employee about their colleagues’ perception (organisational satisfaction) of the system. Though organisational satisfaction is generally lower than personal satisfaction, the same upward sloping trend prevails as can be seen in graph 2 below:

Performance appraisal and work engagement

According to Macey and Schneider, work engagement refers to the extent to which individuals are passionate about their work (Macey and Schneider 2008). It, therefore, seems logical that high levels of job satisfaction would be paired with a strong sense of work engagement. Given the above indicated relationship between performance appraisals and job satisfaction, it could be deduced that positive sentiments about an organisation’s performance appraisals, could contribute to a strong degree of work engagement among its employees. The results of the Effective Performance Appraisal Systems Questionnaire demonstrate a positive relationship between employee feelings about the PA system and work engagement. Graph 3 shows a positive slope, indicating that generally employees who are content with their performance appraisal have a greater commitment to their jobs. Despite this trend, there are exceptions, as indicated by point A, where the employee with the highest level of work engagement is the least satisfied with the PA system and point B, where the employee with the lowest level work engagement shows slightly below average contentedness with the system. Irrespective of this exception, a clear positive relationship exists between happiness with the performance appraisal system and work engagement, as demonstrated by graph 3 below:

A

Performance Appraisal and Intent to Quit

The connection between job satisfaction and intention to quit seems obvious, since someone who’s satisfied with their work is less likely to actively seek alternative employment. Based on the positive relationship that exists between perceptions regarding the performance appraisal and job satisfaction, it could, therefore, be concluded that a negative relationship exists between performance appraisal perceptions and intent to quit. The graphical depiction of the fifteen person study demonstrates the negative relationship between performance appraisal perceptions and intent to quit. With the exception of two respondents, employees who were satisfied with the performance appraisal system allocated a low rating to their intention to quit.

Conclusion

This assignment deliberately neglects the discussion of the effect of positive versus negative feedback on work attitudes. This omission is based on the assumption that most employees can differentiate between negative feedback/constructive criticism and an ineffective unfair appraisal system. Instead this assignment argues that employee perceptions of performance appraisal systems will be based on the criteria listed in section 3, rather than on subjective assessments of whether their personal evaluations contained positive or negative feedback.

Therefore, the system’s merits will affect job satisfaction, work engagement and intention to quit. In addition to the results from the Effective Performance Appraisal Systems Questionnaire, the arguments made in this article also rely on various literature sources and findings from studies cited by Ahmed et al and IM Jawahar. All sources point unanimously to a positive relationship between performance appraisal perceptions, job satisfaction and work engagement and to a negative relationship between performance appraisal perceptions and intent to quit. This finding suggests that favourable employee perceptions of performance appraisal systems lead to high levels of job satisfaction and work engagement, and to low levels of intent to quit. Therefore, employees who believe the appraisal system to be fair and effective, will be happier at work, will invest more of themselves into their work and will be less likely to resign their jobs to seek alternative employment.