Introduction
Roberts (2003, p.89) argued that performance appraisal is a controversial management tool that provides answers to problems within the system design and administration of organizations. Majority of the organisations have adopted appraisal systems to enable it gauge employee performance in trying to boost morale, and reward them accordingly. However, despite the importance and popularity of the performance appraisal in organisations, its implementation and effectiveness have been controversial (Liu and Dong, 2012, pp. 150). In fact, some studies revealed that there are many performance appraisal systems that have completely failed to motivate employees to do a better job (Oh and Lewis, 2009, pp. 159 -160). However, participatory performance appraisal is an essential and proven attribute of an effective performance appraisal system (Roberts, 2003, p. 89). The true performance appraisal participation is a process that can lessen the instance of dysfunctions of traditional performance appraisal systems, in order to promote a more “humane and ethical human resource management decision-making process” (Roberts, 2003, p. 89). It is best to focus on the employees’ morale, rather than in the behaviour or on objective features of organizations (Weakliem & Frenkel (2006, p. 336). The researcher believes that there is strong justification to study this area as it is important for organisations to understand the impact of appraisal systems on employee morale and consider options to ensure morale is sustained.
Aim and Objectives
The aim of this research is to investigate the impact appraisal systems have on employee morale. The study will achieve this by:
- Investigating the roles played by managers and subordinates within the appraisal process
- Investigating the different factors that affect employee morale during the appraisal process
- Establishing the use(s) of the appraisal system by the organisation to be studied and employees perception of these use(s)
Research questions
In order to achieve the research aim and objectives, the study will seek to answer the following questions:
- What factors affect employee morale within the appraisal system?
- What impact do these factors have on employee morale?
- What are the roles senior managers and line managers play in managing appraisal systems?
- What is the effect of participation of the employees in the appraisal process in terms of productivity and growth?
Learning Objectives and Style
At the end of this research, the researcher will be able to
- Identify those factors that affect employee morale within the appraisal system.
- Understand impact of these factors on employee morale
- Analyse data from different sources that will adequately answer the research questions and probe alternative explanations.
The researcher will make use of questionnaires and one to one interviews to accommodate the researcher’s combination of visual and auditory learning style.
Literature Review
Appraisal is an effective instrument in the human resources management, which, if performed correctly and logically, helps organisations achieve their target (Oshode, et al., 2014). It is an important factor in identifying people’s talents and capacities with results that can make them aware of advancements, plans and goals (Okanye, 2006). Thus, organisations should shift their primary focus on their employees (Palaiologos et al., 2011, pp. 826). The reward system that is based on the behaviors of leaders are “significant determinants of subordinate perceptions, attitudes, and task performance” (Jackson et al., 2012, pp. 646. At the same time, the appraisal process clarifies employees’ expectation and recognises achievement and progress toward goals (Jackson et al. 2012 pp. 647).
Some critics of performance appraisal argued that individual performance appraisal assumes a false degree of measurement accuracy and engenders dysfunctional employee conflict and competition. When the appraisal system is not properly managed, it can lead to dissatisfaction with the entire system and this may, in turn, influence employees’ intention to quit through reduced job satisfaction (Poon, 2004). However, the proponents of performance appraisal claim that these negative effects are remediable through the application of genuine employee participation (Roberts, 2003, p.89). The participation of the employees is the key to enhance job-related autonomy which promotes the growth of the employee. Intrinsic motivational approaches signify that the management has trust and confidence in the abilities of its employees. Through participatory appraisal, the employees are given the ample opportunity to be heard by management and voice-out their opinions with regard to the performance ratings. The employees are empowered to rebut ratings, documentation or verbal feedback that they disagree with (Roberts, 2003, p.90). This fosters a fair-decision making process that can lead to a more accurate and valid rating (Roberts, 2003, p.90).
The performance appraisal process should include employee participation in development of performance standards, rating form, employee self-appraisal, and rate participation in the interview (Roberts, 2003, p.90). The two key process to ensure the success of employee participation hinges on the following: 1.) the amount and quality of informal performance feedback; and 2.) goal setting that will be will have positive result in the future (Roberts, 2003, p.91).
Oshode, et al. (2014) argued that in order for appraisal system to be successful, the implementation should be adjudged fair by all stakeholders. Hence, the performance appraisal process must be imbued with fairness, appraisal satisfaction, supervisory support, appraisal system acceptance and greater employee acceptance of negative feedback (Roberts, 2003, p.92). An important set of the appraisal moderators is goal setting and feedback.
The positive effect of goal setting is that it allows the employees to focus and give attention on critical tasks at hand, enhancing employee persistence and reducing the chances of employee distraction. At the same time, formal and informal feedback will allow the employees to make adjustments in job performance and to receive positive reinforcement to cultivate effective job behavior. Roberts (2003, p.92) explained that performance feedback is instrumental in changing employee work behavior, enhance their job satisfaction and performance, and boost employee morale (Roberts, 2003, p.92).
Peterson et al. (2008, p 21) define morale as a cognitive, emotional, and motivational stance toward the goals and tasks of a group. They conclude that morale subsumes confidence, optimism, enthusiasm, and loyalty as well as a sense of common purpose. This means higher customer satisfaction is achieved when employees are satisfied and motivated. The factors that help to define morale are intrinsic motivation, job satisfaction, work meaningfulness, organizational commitment and work pride (McKnight, Ahmad & Schroeder, 2001). Further, higher morale comes from a “belief that rewards are equitably distributed”, while poor morale relates to lower work effort and productivity (Forret & Love, 2008, p. 251). Low morale in achieving business objectives results to high absenteeism, labour turnover, unresolved grievances or strikes, impedes the achievement of the organization’s desired outcomes (Linz et al., 2006, p. 417).
Methodology
This study employs the use of survey research design. William (2006) confirms that “survey research is one of the most important areas of measurement in applied social research because it encompasses any measurement procedures that involve asking questions from respondents. A survey can be anything from a short paper-and-pencil feedback form to an intensive one-on-one in-depth interview (William, 2006). The interview questions will be semi-structured, highly interactive and in-depth to be able to determine the opinions of the participants in this study.
Instrumentation and Data Collection
The main tool that will be utilized for this research study in data gathering is through a questionnaire. The questionnaire was constructed as closed or fixed type in accordance to the goals and objectives of the research and issues that may arise during the course of the study. The researcher distributed the questionnaire among the respondents chosen for the study. The nature and purpose of the study were carefully explained to the subjects. The questionnaires were gathered and retrieved based on the schedule that was appointed and agreed by the researcher and the subjects. After the questionnaires were gathered and collected, the data contained therein were sorted and tabulated for analysis and interpretation.
Quantitative Research Design
This research study shall use quantitative methodology on the topic which relates to challenges of that the managers have to face when conducting employee appraisal and how such performance appraisal system affects the employee morale within an organization. For the quantitative research part of the study, the researcher shall make use of a statistic and standardized set of questions where all the participants or subjects were asked similar set of questions (Wimmer & Dominick, 2010).
For the quantitative research, it will involve several deductive, theory-testing, objective and positivists processes. The epistemology for this study using such kind of approach will need the researcher to assume an independent theory from the variables of the study (McNabb, 2010). The epistemology of quantitative research must present that there is an association between variables (DeLyser, 2010), and that questions on the attitudes in social surveys should be included in order that the quantitative research must also take interest in matters of meaning.
The findings from this initial desktop research will form the basis for designing a questionnaire which had been conducted to measure variables and measured using Likert Scale. The used a quantitative research to elicit views and opinions from line managers and subordinates in Fieldco Limited. The findings of the quantitative research will be tested by carrying out semi-structured in-depth interviews with senior managers at Fieldco.
The interview will focus on a mix of management, composed of senior, middle and lower cadre, as well as subordinates. The researcher believes this approach is necessary to enable the findings of the quantitative method to be checked qualitatively. The researcher has decided on triangulation on the premise that quantitative research will help establish relationships among variables with qualitative research hopefully explaining the factors responsible for the relationships. The researcher believes that using both research methods will aid any generalisations made in this study. In addition, while the basis of designing the questionnaire will be based on the researcher’s preconceptions, interviews will be expected to balance this subjectivism.The primary data will be collected using open-ended interviews and through the distribution of questionnaires to the subjects/participants of the study. The element of validity and reliability is guaranteed through effective and careful selection of the subjects/participants. There will be other resource persons such as the managers, who possess insightful data through relevant experience and observations.
Qualitative Research Design
Andrew, Pedersen, and McEvoy (2011) argued that a case study has been one of the most commonly used qualitative methodological approaches to conduct a research study on the effect of performance appraisal system and its effects on employee morale. The qualitative aspect will be determined through the use of series of activities including tabular evidence, census data and conducting surveys. The gathering of qualitative data will use the methods such as interviews, focus groups and observations. Andrew et al. (2011) explained that the disadvantage of using interviews is that such activity can be time-consuming. The difference between data collection and interview in the project plan is that interviews can be time consuming while conducting surveys and distribution of questionnaires will require tabulation and analysis of data gathered.
This research will also be looking to see evidence of Longenecker (1997, pp. 213) top ten causes of ineffective managerial appraisals within Fieldco and how these mentioned causes affect employee morale including unclear performance criteria/ineffective rating instrument, poor working relationship with the boss, superior lacks information on actual performance, lack of on-going performance feedback, overly negative/second guessing review, perceived political reviews, and lack of focus on management development/improvement, an ineffective link to reward systems, superior lacks rating skills/motivation, and review process lacks structure/consistency. Fieldco’s appraisal systems and these will be investigated further especially the impact on employee morale. The interview questions and questionnaire will be semi-structured, highly interactive and in-depth to be able to determine the opinions of the participants in this study.
Source: Author’s Work, 2014.
Following data collection, the approach proposed for data analysis for this study will be first, to provide a description of the sample from which data will be collected, descriptive information on age, gender, department, years at company, role etc., as well as the means, modes, range, and standard deviations for the derived scores. Second, the researcher will determine if any relationships/correlations or differences exist in the use of appraisal system on employee morale along the lines of age, gender, role, years at company etc.
The researcher expects to use SPSS software to analyse information gathered from the use of questionnaires. The interview questions will be semi-structured, highly interactive and in-depth. The interviews will be coded to label transcribed data. The focus will be on open coding so that concepts will be yielded, which will later be grouped into categories. It is these categories that will provide the basis for the final analysis. The research orientation is ethno methodological as it attempts to evaluate impact of appraisal systems from the perspective of subordinates and managers. This ethno methodological stance to research is to study how people make sense of their social world, so the way subordinates and managers make sense of appraisal systems in Fieldco and the impact on morale will be investigated.
Source of Data:
The research work makes use of a real estate company, Fieldco Limited, located in Lagos, Nigeria. Fieldco is a company involved in sales, leasing, facilities management and development of properties. It has five sites and staff strength of about 70 employees. The company has an annual turnover of over US$ 4 million and currently has over 130 residential apartments under management in various sites in Lagos State, located in Rebecca Court, Livingold Terraces, Lifestyle Terraces all within Banana Island in Lagos, and will also include Cameron Court, Tarino Tower, which are all within Ikoyi in Lagos.
Participants/Subjects of the Study
The sampling approach used can be described as “non- probability” as the purpose was not to use a random selection method but to identify and select those that are more likely to have information about the process (Bryman and Bell, 2003). The sampling approach used is to identify employees who are appraised, and managers who are involved in the appraisal process. In selecting sample from the population of about 80 employees, twenty employees will be selected non-randomly for this study, while the other 4 respondents from each of the five sites of the company. General statements based on action, activities or events in one location to describe the company will be avoided.
Limitation
The main concern of the researcher is that the sample size may not be sufficient to make generalisations. The researcher understands that focusing on just a city and one company in Nigeria may affect the conclusions of the research but the timescale for the research is such that it will be practically impossible to extend this research to more than one city. In addition, some of the participants of this research including both managers and subordinates may decline in filling the questionnaires.
Research Findings and Analysis
In this part of the dissertation, researcher of the study analyzed and examined the aims and objectives with the help of different statistical tests and interview analysis. Quantitative research method was used by the researcher in order to collect the data for analysis. Statistical analysis with the help of ANOVA and interview analysis with the help of qualitative method was done. Detailed analysis of the research is given below:
Statistical Analysis
In this part of the research, researcher tested the difference between the variables of the research with the help of different statistical tests. Following is the analysis of research hypothesis.
In order to test the statement that is “There are significant age, gender, role, and job tenure differences between a performance appraisal and morale of the employees in organization”, researcher used the AOVA statistical analysis technique. With the help of ANOVA, researcher analyse the influence of age, gender, and job tenure differences between a performance appraisal and morale of the employees in organization. The table given below is mentioned the ANOVA test.
Interview analysis
According to the upper management of the Fieldco Limited, certain systems to appraise the performance of an individual employee, even though the systems they incorporate are not exempted of criticism. The participants also mentioned that the prime influential critique is the framework used by the human resource management, whereby appraisal is considered as a conventional practice and technique that searches for the solutions of the issues confronted, the drawbacks and frailty and the proposition for the development of a performance appraisal system. On the other hand, it is also noticed that the inconsistency in the evaluation made for the previous performances and the allocation of rewards and remuneration on account of the previous performances performed, the performance of the appraiser is evaluated, the appraiser then provokes to perform a conflicting role alike the judges and monitors the performance as a counsellor of insight.
The human resource managers are hereby hesitant to come up with a pessimistic decision or judgment on the individualized performance of an employee as it can certainly lead to de-motivation and therefore, directs towards appraise allegation incorporating lack of support by the management for the employees and the involvement of a poor performance by the employees on individual basis. In order to avoid this inconsistency the appraiser measure the degree of the employee’s performance with the technique called ‘Central Tendency’, in this technique the managers rate all the measure in the middle rating point. The organizational politics often prefer this method of rating an employee’s performance.
Participants during interview revealed that another approach utilized by the human resource management is the exploitation of TQM (Total Quality Management). Along with the arrival of the Total Quality Management (TQM) and the broad implementation of teams, two or more individuals work in the same group sustaining same objectives, conventional systems for the appraisal of performance encompasses certain criticism eventually. For instance, instead of encouraging and motivating the employees, an attribute of divergence and inconsistency might create when the evaluations are attached to be paid on merit and is certainly assisted by an imposed evaluation.
The approach, Total Quality Management (TQM) was founded by W. Edwards Deming; he certainly stated that and explained his association with the perception regarding the appraisal of performance and that this process should be eradicated, as most of the advocates associated to the Total Quality Management (TQM) declared that appraising performance is relatively harmful. Even though, it is certain, that without considering safety measures that includes an opposite design, support by the administrative adequate, comprehensive analysis of the job and its description and the appraisers for the purpose of training, and the risk to appraise performance processes conventionally has now become an addition among the numerous supervisors of bureaucratic rituals and the assistants and the subsidiaries ought to persist accordingly.
Participants also revealed that performance of a business and its ensuing effectiveness and efficiency can only be obtained when the employees of the organization are consistently analyzed, evaluated and apprised for their performances. The incapability of organizations to put into practice a valuable mechanism performance appraisal has restricted them from getting competitive benefits which they need more at the present as compared to the previous times.
Discussion
The results of this study indicate that satisfaction with a performance appraisal system was significantly related to employee morale and turnover intent. Workers who were less satisfied with their existing evaluation systems were more likely to report intent to quit their jobs in the near future (Stewart, Volpone, Avery, & McKay, 2011, p. 581). Based on the study of Stewart et al. (2011), it was revealed that dissatisfaction with a particular evaluation procedure has indirectly affected the employee turnover intent. In the present study, the relationship between performance appraisal satisfaction and morale showed that turnover intent was significant. It is even despite the fact that the effects of overall job satisfaction were removed. Such finding showed that there is a component of performance appraisal satisfaction which was not taken into account by the measure of job satisfaction that was used for the study. Thus, even if the employee’s job satisfaction is high, but the existing appraisal system is lacking, employee turnover can still take place. Hence, this affirms the fact that attitudes toward an appraisal system can influence organizational outcomes such as employee turnover (Stewart, et al., 2011, p. 581) Further, it can be inferred that effective appraisal system causes a substantial influence on the morale of the employees.
It should be noted that the measure of job satisfaction used in this study provided a combination of questions on the various aspects of satisfaction, such as type of work, pay, or working conditions. While this technique of combining various aspects of job satisfaction into a single measure of general job satisfaction is common in the literature, (Burns & Machin, 2012, p. 118) it is possible that if the questions had been of a more global nature. Hence, performance appraisal system satisfaction may not have made an independent contribution to predicting turnover intentions.
The results also showed that the employees of organization did not report on the different levels of overall satisfaction as affected by appraisal systems of employees in smaller companies. However, those employees work for larger companies showed to be more satisfied with the process or mechanics of performance evaluation, as opposed to the employees of other smaller companies. These findings suggest that companies should devote more human and financial resources to developing and improving the process of performance appraisal to promote equity and fair play. Burns, & Machin, (2012, p. 118) explained that the effects of company size on various organizational characteristics, inadequacies and errors in communication among organizational members, as well as weaknesses in the utilization of skills, knowledge, and experience of organizational members, can become especially problematic when a company’s size is large. In addition, “the organizational attempts to handle these difficulties through formalization will only create additional problems” (Yang & Kassekert, 2010, p. 413). Thus, it may be that the evaluation systems used in larger companies do not succeed in establishing a “personal link” with the needs of their employees.
Thus, although company size was not significantly related to turnover intent, the relationship between appraisal system satisfaction and turnover intent was significantly stronger for employees of smaller companies than for those of larger companies. In fact, overall performance appraisal system satisfaction accounted for approximately 19.2% of the variance in turnover intent for employees of smaller companies, but only about 7.2% of the variance for employees of larger companies. This may be because workers in larger organizations have become used to the somewhat impersonal nature of the appraisal process; they may see the evaluation procedure as a given-as something of a “necessary evil”-and may view other factors as more crucial in their turnover deliberations. Researches identified that employees of smaller companies, on the other hand, apparently consider their feelings about the entire appraisal system (e.g., overall satisfaction, process satisfaction, and needs identification satisfaction) more closely when deciding whether or not to quit.
On the other hand, female workers tended to report greater levels of satisfaction with their performance appraisal systems than male workers. This was held true for both of the appraisal satisfaction subscales (i.e., process and needs identification) as well as for overall appraisal system satisfaction. As I postulated earlier, this may be because women, who have experienced discrimination in the workplace for years (Holtz & Harold, 2013, p. 339), have a tendency to expect less from appraisal systems than men, and thus report higher levels of satisfaction with existing systems than men do. Thus, evaluation systems may have to be especially poor before female employees will complain about them. As women also reported higher levels of overall job satisfaction than men, it may be that women tend to expect less from their jobs in general than men do. Although expectations of appraisal systems and jobs were not specifically measured in this study, this is certainly a plausible explanation in light of the results obtained. Another possibility is that supervisors, in an effort to avoid any appearance of sexual bias, may tend to sway ratings in favour of their female subordinates. In a recent interview study of upper-level executives with extensive performance evaluation experience (Patel, & Conklin, 2012, p. 205), deliberate distortions of formal appraisals appeared to be commonplace.
The women in the current study did not exhibit significantly higher or lower turnover intentions than men in general-a finding which concurs with the literature (Swailes, 2013, p. 32). Further, the relationship between appraisal system satisfaction and turnover was not significantly different for men than for women. The two sexes appear to link their attitudes about existing appraisal systems to their turnover decisions with approximately equal strength.
An examination of employee tenure indicated that employees with lower levels of tenure (i.e., less than one year) were significantly more satisfied with their appraisal systems than those with higher levels of tenure. Perhaps new employees have not been with their company long enough to be especially critical of the evaluation systems in use. Having had less experience with evaluations, they may also know less about the systems’ drawbacks than their more senior counterparts. Employees who have worked for an organization longer may be in a better position to critically evaluate their appraisal systems and, as they may be anticipating promotions or raises based upon these evaluations, they may have a tendency to become more dissatisfied with inadequate appraisal systems. It is also possible that companies make a greater effort to ensure that regular and systematic evaluations are conducted for all new employees, while evaluations conducted later in an employee’s tenure may become somewhat more sloppy or careless.
The relationship between appraisal system satisfaction and turnover, however, was no different for employees with higher levels of tenure than for those with lower levels of tenure. Apparently, although newer employees tend to be more satisfied with their appraisal systems, they are no more or less likely than more senior workers to consider their attitudes about such systems in making a determination of whether or not to quit.
In the phase of determining the criteria and standard for performance appraisal ideas needs to be taken from the employees. This can be done by conducting online surveys from the company employees. This will help to set criteria that is not biased and that are valued by the employees. Moreover, all the employees should not be judged on the same criteria. Performance criteria need to be tailored according to the level as well as the capability of an individual. Experienced and new employees should not be evaluated on the same criteria because of the difference in the level of expertise.
The performance appraisal measure that will be employed will be multi rater or 360 degree. This will includes reporting from all the levels for every individual. Moreover, employees’ performance will be rated on multiple criteria. This will not include only the current work performance, but previous performances as well as behavioural conduct and contribution to organizational activities.
The communication of the performance standards will be done on regular basis by the team leader or the department supervisor throughout the organization. This will avoid the problem that often arises by the employees complains of not being aware or communicated about the performance standards. Then collection and gathering of data and information for performance appraisal will be done. This will also be a continuous process. The rationale behind this is that if the performance is evaluated at the end of the month, then there is a possibility that some employees might pretend to work better. By evaluating the performance and actions of the employees on a regular basis, will enable to more accurately analyze and appraise the performance.
After the data is gathered, performance appraisal and recognition will be done in a visible manner. This means that the recognition of the performers and contributors will be done by arranging a small scale organizational event in the start of every month. This will make the employees who got appraisal feel motivated. It will also act as an inspiration for other employees to perform better next time.
As part of the analysis, the employees’ feedback will be taken again to come across any prejudices that might possibly have occurred on the departmental level. Becoming familiar with the grievances of the employees will help to address those problems and eliminate employee dissatisfaction. Corrective actions will be taken to remove the errors and faults that has occurred in the previous appraisal system and identified by the employees or the management.
The inconsistency in the evaluation made for the previous performances and the allocation of rewards and remuneration on account of the previous performances performed, the performance of the appraiser is evaluated, the appraiser then provokes to perform a conflicting role alike the judges and monitors the performance as a counsellor of insight (Richter & Nayab, 2011). The human resource managers are hereby hesitant to come up with a pessimistic decision or judgment on the individualized performance of an employee as it can certainly lead to de-motivation and therefore, directs towards appraise allegation incorporating lack of support by the management for the employees and the involvement of a poor performance by the employees on individual basis. In order to avoid this inconsistency the appraiser measure the degree of the employee’s performance with the technique called ‘Central Tendency’, in this technique the managers rate all the measure in the middle rating point. The organizational politics often prefer this method of rating an employee’s performance (Kamphorst, & Swank, 2012, p. 27).
The politics of an organization involve reflective and planned endeavours, where the employees enhance their self-interests when a dispute or conflict takes place during the courses of actions being performed. The evaluation and choices of the tasks to be performed by the employees were eventually affected by the impending sources biased and inaccurate decisions regarding the evaluation of performance appraisal. The political judgment was further influenced by highly assessing a number of obvious proficient capabilities to perform the tasks, prior to be critical across the range of procedures, termed as the ‘Halo Effect’ (Shen & Jiuhua Zhu, 2011, p. 3020). A number of proficient capabilities are indeed lower; for this reason the management may put forward an unbiased decision crosswise the optimistic review which is known as the ‘Horn’s Effect’. Certain evaluations may include events that occur newest and they are acknowledged as the ‘Recency Effects’. In this instance, just the events that occur recently are recorded in contrast to the managers who gather and use the substantiation all the way through the period of appraisal.
An additional, general critic is the evaluation of the performance, whilst, suffering from a lot of unfairness and favouritism, that includes prejudice with respect to age, gender, ethnicity, attitudes, physical appearance, values and principles within the group and out of the group, also the likes and dislikes of distinctive individuals and onwards (Datta, Guthrie, Basuil, & Pandey, 2010, p. 281).
The overall findings of the research mentioned that morale of employees and turnover in an organization often results in the diminished motivation and morale of the remaining employees (Datta, et al.,2010, p. 281). Besides presenting a morale problem, turnover can interfere with team functioning. It can involve a disruption in the efficient operations of an organization “when knowledgeable and experienced personnel leave and replacements must be found and prepared to assume positions of responsibility. If the leaver had unique skills and/or occupied a critical position within the company, the loss may affect performance throughout the organization, and may continue to do so until a replacement becomes fully functional. Thus, turnover can have a devastating impact on overall organizational productivity.
Practical Implications and Suggestions for Future Research
These results have several implications. First, since employee attitudes towards performance appraisal systems significantly predict turnover intent even after the effects of overall job satisfaction have been removed, employers concerned about turnover problems would be wise to concentrate some effort on developing and improving existing evaluation systems. In addition to possibly preventing unwanted turnover, (Datta, et al., 2010, p. 281) point out several reasons for optimizing performance appraisal systems: a) documenting, rewarding, and punishing past performance; b) improving future goal-setting and performance; c) facilitating human resource planning; d) improving employee motivation; e) providing employees with feedback concerning their job performance; and f) improving superior-subordinate relationships. A well-developed appraisal system can also help an organization to legally justify its personnel decisions. In fact, if an organization does not adhere to the appropriate laws concerning performance evaluation systems when making such decisions, it may face costly litigation and 70 reinstatements of employees with awards of up to two years back pay (Datta, Guthrie, Basuil, & Pandey, 2010, p. 281). However, employees must be kept well informed of any changes in their performance appraisal systems. This is essential. To institute a new appraisal system without such communication could actually increase turnover.
For example, an increase in turnover in one organization was directly associated with the installation of a new performance appraisal program based on management by objectives. Neither the employees nor the managers understood the MBO system well. As a result, everyone was uncertain about performance criteria. It took about a year for the employees and managers to feel comfortable with the system, and for turnover to subside (Datta, et al., 2010, p. 281). In the current study, however, the variance in turnover intent explained by appraisal system satisfaction, after overall job satisfaction was accounted for, amounted to approximately 1.5 percent. Thus, it is important not to overemphasize the practical implications of these research findings. Nonetheless, pragmatic interests still dictate that time spent in cultivating and enhancing appraisal systems would certainly not be time wasted. The finding that the relationship between appraisal system satisfaction and intent to turnover was significantly stronger for smaller companies than for larger firms indicates that small employers need to be especially concerned with their evaluation systems, at least to the extent that they wish to reduce 71 turnover.
This is not to say that larger employers may safely ignore the implications of their evaluation system choices. In fact, the higher levels of satisfaction with appraisal process found among employees of larger organizations indicate that large employers may in fact be more concerned with the mechanics (i.e., fairness, regularity, etc.) of performance evaluation than small employers. This study has some internal validity limitations. Because all subjects did not answer all the survey items studied, a 100 percent “return rate” was not achieved. In addition, some appraisal items were not included in the surveys administered by specific companies. Although highly unlikely, the results obtained could have resulted from a systematic selection factor regarding those companies that included particular items in their surveys. While this could not be helped after the fact, future research on this topic should take care to try to include all subjects and items in the survey process, so that such a selection bias does not occur.
In addition, the use of a “don’t know” response as the middle possibility essentially reduced several of the response scales from 5-point Likert scales to 4-point scales. Although it is necessary to allow such a response for employees for whom certain items are not applicable, such a “mid-point” response also includes workers who neither agree nor disagree with the statement in question, but rather feel somewhat neutral about it. Thus, future researchers might wish to incorporate both a “don’t know” response as well as a true mid-point/neutral anchor. External validity limitations are not of as much concern as internal validity problems in this particular study. The fact that the surveys were all conducted within a ten-year time frame does present one problem for generalizability, however. It is unclear how the state of the art in performance appraisal systems will change in the immediate future, and along with it, the relationship between attitudes toward such systems and turnover.
Conclusion
The importance of research in this area should not be underestimated. Employers must frequently make decisions concerning the structure and content of performance evaluation systems for their employees. Knowing how their employees may react to such systems, including any effect such reactions may have on voluntary turnover, can help organizations to plan more effectively. Armed with such knowledge, an employer may be better able to determine the most effective way to improve upon existing appraisal systems. Such improvements may well have a dramatic effect on the motivation and morale of employees, and may help serve to reduce the costs associated with voluntary turnover. Thus, future research is needed to more thoroughly understand the relationship between performance appraisal system satisfaction and employee turnover.
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