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Methods and Practices of Performance Appraisal This chapter provides the basis for the development of this study. It will give a general overview of the relevant literature and research on performance appraisal and organizational commitment in general but with a lot of emphasis on appraisal session, supervisory behaviours during appraisal and employees satisfaction with performance appraisal and affective commitment. A brief outline of performance management, performance appraisal and organizational commitment will first be discussed as a sort of general foundation followed by some relevant aspects of performance appraisal, affective commitment and ending with a summary of the chapter. The justification is that it will facilitate the conceptualization of the variables that will be examined in this study, indicate their envisaged relationships and further provide the basis for their empirical evaluation. Although the performance appraisal session is a component of the whole performance appraisal system (Giles Mossholder, 1990) however, it is still a major part of the appraisal system since it is the only avenue for gathering employees opinions and other information (Roberts, 2002). Similarly, supervisory behaviours during an appraisal session has been indicated to be a major aspect which contributes to the effectiveness of performance appraisal session (Martin Bartol, 1986) hence some key concepts of performance appraisal session and supervisory behaviours will be applied and used to formulate the argument that there should be a positive relationship between performance appraisal satisfaction and certain supervisory behaviours during a performance appraisal session. Similarly, extant literature and research (Dessler, 1999; Paul Anantharaman, 2004) has indicated that using performance appraisals to develop employees may increase their affinity to the organization hence this review will elucidate the logic for attempting to establish a positive link between performance appraisal satisfaction and affective organizational commitment and the significance of such a relationship to organizations. 2.2 A BRIEF OVERVIEW OF PERFORMANCE MANAGEMENT In the late 1980s and 1990s, organizations started implementing combined practices aimed at building a culture of performance which involved using strategies that were believed to enhance employees input towards the overall success of the organization referred to as performance management (IPM, 1992). However the majority of these practices (e.g. goal setting, assessment and review) were already being used by organization but as individual practices (Armstrong Baron, 2005). Armstrong (1998) sees performance management as a combined and well planned method used to further improve the success of an organization by increasing employees performance and developing the abilities of teams and individual employees however Fletcher (1993a cited in Armstrong Baron, 1998) sees it as a method used by organizations to invent and share their vision with the employees by enabling them appreciate their own part towards achieving the organizations vision and in so doing help to manage and improve the performance of both the employees and organization whereas Hendry, Bradley Perkins (1997) believe it is an efficient method used to enhance the performance of individuals and teams to realize the goals of the organization. The definitions above indicate that performance management is a tool used by organizations to achieve organizational aims by effectively managing the performance of employees and the organization as a whole. Some features of performance management include: different forms of appraisals (e.g. 360- degree appraisal, peer appraisal, self appraisal); reward strategies (e.g. performance related pay, competence related, contribution related pay); coaching and mentoring; career management/ succession planning and personal development plans. 2.3 OBJECTIVES OF PERFORMANCE MANAGEMENT According to Armstrong Baron (2005), the aim of performance management is to enhance the performance of employees and the organization by further improving good performance, having an idea of the visions of the organization, supporting individuals to achieve these aims and generally ensuring a conducive atmosphere for individual growth which will ultimately impact on the organization. Armstrong Baron, (1998) believe that the objectives of performance management could further be broken down to the following: A process which helps organizations to accomplish prolonged enhanced performance. It can act as a pillar of change towards building a more performance centred tradition. Improving employees motivation and commitment. Facilitating employee development, improving their work satisfaction and attaining their desired goals in a way that profits both employees and the organization. Strengthening team work and performance. Facilitating improved communication in the workplace amongst superiors and subordinates all year round due to continuous discussions. Affording the opportunity for employees to communicate their job desires and needs. Organizations assess the outcome of performance management by using opinions or attitude surveys of their employees, some factors used are: changes in employee attitude, motivation, productivity, achievement of financial target, changes in employees attitude, achievement of objectives, improved customer service, development of new skills and improved quality (Armstrong Baron, 2005). 2.4 DEFINITION OF PERFORMANCE APPRAISAL Performance appraisal is the process used to assess employees performance often times against some agreed work goals to enable organizations take some decisions. Performance appraisal is a formal process of supplying employees with an unambiguous feedback based on their work performance (Carroll Schneier, 1982 cited in Dobbins, Cardy Platz Vieno, 1992) but can also occur in an informal and sometimes highly biased form in any organization (Fletcher, 1997). Performance appraisal is believed to have originated from American but has been modified to suit the UK market (see Beer et al, 1978). An effective performance appraisal should seek to understand why goals have been / not been achieved to throw more light on the employees capabilities and by so doing understand what training/ development the employee requires (Anderson, 1991). Several definitions of performance appraisal have been put forward and some of them are: An opportunity for the individual and those concerned with their performance most usually their line manager to get together to engage in a dialogue about the individuals performance, development and the support required from the manager (CIPD ,2009). Performance appraisal is, the formal assessment and rating of individuals by their managers at, usually, an annual review meeting (Armstrong, 2006, p.9). A performance appraisal is a way to regularly record an assessment of an employees performance, potential and development needs. The appraisal is an opportunity to take an overall view of work content, loads and volume, to look back on what has been achieved during the reporting period and agree objectives for the next (ACAS, p.3). Performance appraisal is the process of defining expectations for employee performance: measuring, evaluating and recording employee performance in relation to those expectations; and providing feedback to the employee. While a major purpose of performance appraisal is to influence, in a positive way, employee performance and development, the process also is used for a variety of other organisational purposes, such as determining merit pay increases planning future performance goals, determining training and development needs and assessing promotional potential of employees. (Bartol Martin, 1991 p.421 cited in Coates, 1994). Performance appraisal is also defined as, a term once associated with a rather basic process involving a line manager completing an annual report on a subordinates performance and (usually but not always) discussing it with him or her in an appraisal interview (Fletcher, 2001, p.473) he further stated that though this description still holds true in some organizations that performance appraisal is now a general term used to describe so many practices used by organizations to evaluate employees and develop their capabilities, enhance performance and distribute rewards which implies that the use to which performance appraisal is put could impact on both supervisory behaviours and employees satisfaction. 2.5 PERFORMANCE MANAGEMENT AND PERFORMANCE APPRAISAL Although some organizations sometimes use the expressions performance management and performance appraisal to mean one and the same, there are differences between them. Performance management is, a comprehensive, continuous and flexible approach to the management of organizations, teams and individuals which involves the maximum amount of dialogue between those concerned (Armstrong Baron, 2005, p.14) while performance appraisal which is narrower entails supervisors assessing and scoring their subordinates in an appraisal review. Performance appraisal plays an important role in the performance management system because it is the medium used to explain the goals and objectives of an organization, it is also the main tool used for employees performance assessment and development. It is believed that with the emergence of performance management with its broader outlook, that performance appraisal now has a fundamental task in a more incorporated and vibrant set of human resources systems which implies that performance appraisal can accomplish more than it could on its own (Fletcher, 1997). Armstrong Baron (2005) highlighted some idealised features that differentiate performance management from performance appraisal since it has been noted that the two terms are often confused with each other (Bevan Thompson, 1991). Performance management Performance appraisal Joint process through dialogue Top down assessment continuous review with one or more formal reviews Annual appraisal meeting Ratings less common Use of ratings Flexible process Monolithic system Focus on values and behaviours as well as objectives Focused on quantified objectives Less likely to be directly linked to pay Often linked to pay Documentation kept to a minimum Bureaucratic- complex paperwork Owned by line managers Owned by the HR department Fig. 1- source Armstrong Baron, 2005 p. 15 2.6 DEFINITION AND COMPONENTS OF ORGANIZATIONAL COMMITMENT The phrase, organizational commitment is gradually becoming a vital organizational terminology because there is an indication that it has a positive relationship with employee behaviours that encourage organizational retention and performance (Chalofsky Krishna, 2009). OReilly Chatman (1986) defines organizational commitment as the foundation of an employees psychological attachment to the organization whereas Porter et al (1974) states that organizational commitment is comprised of three major elements: (a) strong conviction in and acceptance of the organizations aims, (b) readiness to go the extra mile for the organization, and (c) a strong desire to retain organizational membership. Meyer Allen (1991) noted that notwithstanding numerous researches, that there has been a lack of agreement with definition of concepts used in measuring organizational commitment. Moreover, the various definitions of commitment seem to point to three general components hence to minimise the issue of construct definition, they put forward three components of organizational commitment: 1. Affective commitment- the employee wants to stay because of an attachment and desire to identify and be involved with the organization. 2. Continuance commitment- the employee stays with the organization because of the need to after considering the costs related to leaving the organization. 3. Normative Commitment- the employee feels obligated to continue with the organization. These three components reflect the fact that commitment is a psychological condition that typifies the nature of the relationship an employee will have with the organization hence will affect the employees decision to exit or continue with the organization. (Meyer Allen, 1991), however they have dissimilar impact on employees behaviour (Lee Bruvold, 2003). The present study will focus on affective commitment because a Meta analysis of various researches that have tried to establish a link between work outcome and organizational commitment established that affective or attitudinal commitment showed the strongest relationship (Randall, 1990). Moreover, from the description of the three components of organizational commitment, it can be deduced that an employee that has an affective commitment for the organization will most likely exhibit more positive attitude, be willing to go the extra mile, be less likely to leave because of his/her attachment to the organization. 2.6.1 THE IMPORTANCE OF ORGANIZATIONAL COMMITMENT The importance attached to organizational commitment could be attributed to the fact that present day organizations lay much emphasis on teamwork, empowerment, and flatter organizational structures thereby making it a pre requisite that certain acceptable behaviours are required from employees which are often referred to as organizational citizenship behaviour. These behaviours are discretionary contributions that are organizationally related, but are neither explicitly required nor contractually rewarded by the organization, yet contribute to its effective functioning, (Meyer Allen, 1997 p.34). Although organizational commitment may be associated with certain aspects of a flatter organization (e.g. team working and empowerment) as mentioned above, however, it does not just happen because an organization operates a less bureaucratic structure. Organizations employ different outlook of organizational theory example, a unitarist view will elicit a different type of commitment from a pluralist view since these two outlook will employ different management control and forms of employees management (see Perkins, 1998 p. 14). Similarly, Caldwell et al (1990) noted that variations amongst organizations with respect to the human resources policies in place affect employees attitudes and reactions, a statement also echoed by Perkins (1998). Studies have indicated that commitment can promote the type of behaviours that yield desirable organizational outcomes (Dessler, 1999). Some of positive outcomes attributed to organizational commitment include: a positive relationship with motivation and involvement (Stumpf Hartman, 1984), affirmation of positive affect and loyalty (OReilly Caldwell, 1980), enhancement of some portions of job performance (Angle Perry, 1981) and a negative relationship with absenteeism (Angle Perry, 1981). 2.7 BASIC METHODS AND PRACTICES OF PERFORMANCE APPRAISAL Organizations differ in characteristics (e.g. management style, size, culture, technology and sector) which imply that they will most likely implement performance appraisal practice that they perceive will be suitable for them (Bretz et al, 1992). Similarly, Tolliday Zeitlin (1991) argues that the potential for performance appraisal with regards to its implications and definitions will be a consequence of the social and organizational stance of those who use them, however, an effective performance appraisal will be a gain for both the employees and the organization (Anderson, 1991). Some basic methods of performance appraisal according to ACAS (2008) include: Rating employees characteristics are rated on a scale ranging from outstanding to unacceptable. Comparisons with objectives employees are assessed based on how far they have met already agreed goals with supervisors. Critical incidents requires the supervisor to record employees positive and negative behaviour for a period of time. Narrative report the supervisor assesses the employees job performance using own words. Behaviourally Anchored Rating Scales involves the use of a number of rating scales which are tailored to suit each job. Most UK organizations use appraisal of personality, appraising job related abilities and rating scales (e.g. forced distribution and behaviourally based rating scale) which are methods used for assessment and comparison appraisal while result oriented appraisal and competency based appraisal are methods use for motivation and development appraisals (Fletcher, 1997 2004). His classification was based on the two broad uses of performance appraisal which will be highlighted below. Although management by objective (MBO) is also used in UK (*ANDERSON) it is widely used in the US to appraise senior executives and professional employees while the trait based rating scale is used for more junior employees Bretz et al, (1992). 2.8 PERFORMANCE APPRAISAL USES It has been stated that knowledge of the use to which performance appraisals is to be put is important to human resource development (Youngcourt et al, 2007) and essential to its design since different types of information may be required for different purposes (Cleveland, J.N., Murphy, K.R. Williams, R.E. (1989) and research has also shown that the use to which performance appraisal is put affects the rating process and results (Jawahar Williams, 1997; Ostroff, 1993). Organizations use performance appraisal to achieve numerous contradicting objectives (McGregor, 1957; Meyer, Kay French, 1965). However, some of the uses of performance appraisal are: taking reward decisions, performance improvement, employee motivation, improving communication between supervisors and subordinates, succession planning and as a formal assessment of inadequate performance (Fletcher, 1997). According to Youngcourt et al (2007) past literature/research (Cleveland, Murphy Williams, 1989, 2003) seem to point to the fact that there is a tendency for organizations to use appraisal to differentiate either among employees (the administrative use) or within employees (the developmental purpose). Cederblom (1982) also gave two broad classifications of performance appraisal use: counselling and development; evaluation and discussion of administrative decisions. Though it has been noted that appraisals can be put to multiple uses, the present study will use the two broad classifications listed above for ease of comparison with extant work. 2.9 A GENERAL SUMMARY OF PAST PERFORMANCE APPRAISAL STUDY AND LITERATURE Performance appraisals has received lots of attention from industrial and organizational psychologists (Nathan, Morhman Millman, 1991; Landy Farr, 1980) and most of these works especially the ones dealing with cognitive aspect of performance appraisal have been methodologically and conceptually sound (DeNisi, 1997 cited in Fletcher, 2001). Researchers have conceptualized rating instrument and process; characteristics of raters and ratees as a way of understanding cognitive aspect of performance appraisal but so far, have only been able to expound our knowledge of the rating formats (Landy Farr, 1980) yet, there is still no major positive impact on performance appraisal practice (Banks Murphy, 1985; Fletcher, 2001). There has been quite a number of review of extant literature and research on performance appraisal practice with their implication for future research (e.g. Levy Williams, 2004; Fletcher, 2001; Keeping and Levy, 2000; Arvey Murphy, 1998; Bretz, Milkovich Read, 1992; Cederblom, 1982). A brief summary of these reviews seem to indicate that researchers are still looking for ways of improving the practicality of performance appraisal process in organizations as stated by (Thorndike, 1949 cited in Bretz et al, 1992; Meyer, Kay French, 1965 cited in Fletcher, 2001; Kluger DeNisi, 1996; Fletcher, 1997 2001) but the direction so far shows that between 1950 and 1980, most research was dealing with ways to improve rating instruments used for appraisals which led to a call by Landy Farr (1980) for more studies on cognitive aspects of performance appraisal thereby resulting in a shift of attention in the early 1980s to a better understanding of the various behaviours exhibited by a supervisor during performance appraisal. The mid 1980s till late 1990s saw an increase in research dealing with how information is handled during performance appraisal (Arvey Murphy, 1998) which was brought to light by some researchers (e.g. Ilgen Favero, 1985; Dipboye, 1985; Ferris Judge, 1991) when they noted that the social and situational factors affecting performance appraisal were being overlooked by researchers. In their review of extant performance appraisal research work of 1985 1990, (Bretz, Milkovich Read, 1992) writing from a US perspective noted that majority of these work were centred on supervisor/ subordinate personal qualities, psychometric issues, rating errors/accuracy, supervisor training, performance appraisal format, cognitive aspects of appraisal and feedback. They further stated majority of these work had taken place in the laboratory and had used students as respondents also, cognition has received the highest attention and even though it is quite understandable that researchers should focus a lot of attention on studying the rating aspects of performance appraisal since it entails difficult cognitive procedures, however, the performance appraisal process takes place in an applied social and political environment, hence it would be beneficial to assess the degree to which research is contributing to the performance appraisal process. This seems to be an echo of the call by Banks Murphy (1985) that the huge focus on cognitive aspect of performance appraisal will most likely contribute to the widening gap between research and actual practice. Napier Latham (1986) noted that the lack of improvement in performance appraisal practice stems from the fact that researchers seem to focus on improving appraisal measurement rather than on the appraisal practicalities (Thorndike, 1949 cited in Bretz et al, 1992). Another review of existing study of performance appraisal from 1993 1998 carried out by Arvey Murphy (1998) further buttressed the issues raised in the Bretz et al (1992) review but Arvey Murphy also noted that research is now widening towards the notion of contextual aspect of job performance. Similarly, Fletcher (2001) writing from a UK perspective, while concurring with the views raised in the Bretz et al (1992) review also noted that there seems to be no considerable improvement in performance appraisal practice as most UK organizations indicate disappointment with their performance appraisal scheme which implies that performance appraisal not only yields unconvincing ratings but most likely is unsuccessful as an employee development and motivational tool as indicated by (Meyer, Kay French, 1965 cited in Fletcher, 2001). Keeping Levy, (2000), writing on performance appraisal reaction which is pertinent to the present work agrees with the views already noted by the studies above on performance appraisal practice in general but they further narrowed down their views to studies pertaining to appraisal reactions. They observed that performance appraisal effectiveness has been heavily researched with some of the work focusing on aspects like: appraisal frequency, faith in supervisor, participation, validity of ratings and employee reactions to performance appraisals. On the issue of appraisal reactions, they differentiated the various reaction measures that have received great deal of attention and they include: satisfaction, fairness, perceived utility, perceived accuracy but they pointed out that there seems to be some contradictions with measurements of reaction, concepts and the way some measures have been operationalized. They also noted that dependent variables should be of interest and use to human resource practice as indicated by Balzer Sulsky, (1990, cited in Keeping Levy, 2000) that most of the dependent variables so far used in extant studies are of little use to human resources practitioners while the important ones have so far been ignored by researchers. Cederblom (1982) had reviewed the appraisal session, another important area to the present study and stated that though some writers had indicated that there are some difficulties associated with an appraisal section that involves a joint discussion of development and salary, however most of these research had come up with inconclusive reports (e.g. Meyer et al, 1965; Cummings,1973 cited in Cederblom, 1982) thereby making it difficult to conclude on the noted difficulties, however some studies (e.g. Burke, Wetzel Weir, 1978 cited in Cederblom, 1982) indicated that certain discussion on reward during an appraisal session seems to increase employees satisfaction. Cederblom (1982) stated that there are some factors that have been shown to improve the effectiveness of a performance appraisal session which are: supervisors level of competence of employees job and performance; goal setting; supervisors support; encouragement of employees participation. 2.10 PERFORMANCE APPRAISAL SESSIONS The appraisal session involves the actual meeting of the supervisor and subordinate to discuss the subordinates past performance and possibly future goals, development and salary. It has been identified to be a key part of a performance appraisal system by contributing to its effectiveness since the appraisal session is the avenue for gathering employees opinion and other needed information Roberts (2002). There have been a number of researches on this area of performance appraisal (e.g. Burke Wilcox,1969; Greller, 1975; Burke at al, 1978; Fletcher, 2001; Asmub, 2008) however most of the studies have been centred on the appraisees experiences of the appraisal session though attention is now being directed towards the supervisors experience (Burke et al, 1978) Nathan, Morhman Millman (1991) noted that there are some shortcomings with most of the past researches as most of the them seem to have overlooked the interpersonal perspective in which appraisal occurs (Wexley Klimoski, 1984 cited in Nathan et al, 1991) and instead focused on pointing out the problems with supervisors even though they are the motivational impartial factors of the performance appraisal procedure and thus directing attention on how to reduce these errors with enhanced rating scale and training (Hogan, 1987, p.364). Their study substantiated the importance of the need for good interpersonal relationship as employees participation, the standard used to assess the employee and review of issues that are vital to the employees development are all affected by the type of supervisor/subordinate relationship. Similarly, Finn Fontaine (1984) put forward that supervisors and employees should relate together to categorize the major work attitudes that are very crucial to the appraisal which may likely involve the use of a well structured job analysis that will not only form the basis for measuring past performance but also form the foundation for building future performance. The organizational culture which affects means and manner of its communication will affect performance appraisal discussion (Maroney Buckely, 1992) since employees attitude is a function of their convictions which is guided by the organizations communication means and hierarchy (Nystrom Starbuck, 1984 cited in Maroney Buckely, 1992). Some guidelines given by Armstrong Baron (2005) for the appraisal session are: 1. Supervisors should come prepared by going through a list of the pre set goals and probably their record of employees performance for the year. They need to give consideration to the likely reasons that could have resulted in the employees high/low performance, changes that may have occurred between the last appraisal and the intended one. It is also advisable for employees to come prepared with their own records so they can contribute effectively. 2. The environment should be informal to allow for an open and honest discussion with less conflict. 3. The session should be carried out according to plans made earlier but should also allocate enough time for employees contribution. 4. Supervisors should ensure they give a positive, frank, and merited feedback which will motivate the employee especially when they are commended for high achievement. 5. The employees should have ample time to contribute so they can reveal the issues they are encountering and this also will make them feel the appraisal session was fair. 6. Allowing the employee to self appraise will afford the opportunity of seeing things from an employees perspective and will also form part of the appraisal discussion. 7. Employees performance that has been stated accurately should be the focus of the appraisal session rather than the supervisors personal view of the employee. 8. It is also advisable that both appraisee and appraiser jointly review probable causes of good/poor performance rather than it being just the supervisors views. 9. The supervisor as much as possible should stick to facts rather than discuss issues that will come as a surprise to the employee. 10. The agreed goals should be measurable and there should be a plan or discussion on how to achieve them and supervisors should ensure the session ends positively. The overview of performance appraisal uses; methods and practices; past performance appraisal research and appraisal session above is indicative of the fact that performance appraisal use, the discussion during an appraisal session (e.g. goal setting, feedback, participation, relationship between the supervisor and employee, rating score, salary and development discussion) will likely have an effect on employees satisfaction with the appraisal. Hypothesis 1: employees will be satisfied with their performance appraisal session when they have good interpersonal relationship with the supervisor, actively participate, adequate and constructive feedback, favourable rating and the appraisal discussion includes salary and development. 2.11 ISSUES AND CRITICISMS OF PERFORMANCE APPRAISALS Fletcher Williams (1992) noted that there have been issues regarding the use of performance appraisal which have lingered for years and a survey of some UK organizations (IRS, 2005, no 828, p.9) seem to buttress this point as most of the employees stated that there are issues in the way and manner performance appraisals are being delivered in organizations which they attributed to lack of training for line managers on how to develop effective performance appraisals, too much use of paperwork (IRS, 2005, no 828, p. 9). Similarly, Stroul (1987) stated that both management and employees are resentful of the mandatory yearly performance appraisal process (Stroul, 1987). Other issues noted with performance appraisal include Anderson (1993) also identified a number of problems related with performance appraisal: Classifying the standards that will be used for assessing performance. Gathering correct and sufficient data employee performance data. Managing conflicts between supervisors and subordinates. Defensive behaviour of most employees. The various issues noted above coupled with dissatisfaction with performance appraisal as indicated by organizations (Mount 1983; Stroul, 1987; Fletcher, 2001) has led to criticisms from several authors. Deeming (19
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