Performance Appraisal at FHCN
A research study investigating the attitudes of raters and ratees
University of Groningen
Msc , Faculty of Management and Organization,
Human Resource Management
November 3, 2010
Hendrikus ter Horst
Student number: 1752510
Rabenhauptstraat 19b
9725 CB Groningen
Tel.:+31624128909
Supervisor/ University
Drs. J. van Polen
Supervisor/ field of study
B. Groeneveld
Abstract
INTRODUCTION
Judgement is encountered in everyday life: whether it is in sports, school or in business, people make appraisals on a daily basis. Also in organizations appraisal plays an important role (Selden, Ingraham and Jacobson, 2001). When employee performance is assessed as part of a formal program, it is typically referred to as performance appraisal (Heneman, 2002).
Formal performance appraisal occurs during time periods and in meetings that are scheduled to produce a reasoned consideration of contributions. Evaluation can also occur informally as day to day feedback (Dickinson, 1993); however, in this thesis, when the term performance appraisal is used it refers to the formal form of performance appraisal. There are several ways to describe performance appraisal and within the literature multiple definitions have been used. All definitions acknowledge that performance appraisal is used to gain information on employee performance. However, some authors have a more minimalistic approach and focus purely on the evaluation function of performance appraisal: one of these is Noe (2006), who defines appraisal as “a process through which an organization gets information on how well an employee is doing his or her job”. Other authors have focused their definitions on the ability of appraisal to assign ratings. An example is DeNisi (2000), who defines performance appraisal as “the system whereby an organization assigns some ‘score’ to indicate the level of performance of a target person or group”. Furthermore, appraisal has been defined as a system for developing organizational performance, as done by Den Hartog, Boselie and Paauwe, (2004) who define performance appraisal as “a process which involves the measurement and review of employee performance, with the ultimate aim to positively affect organizational success”. In this research a more broad definition of appraisal is used, as it provides the insight that performance appraisal is more than a verdict on individual performance and forms a basis for decisions on personnel. The definition used in this thesis is that of Cardy and Dobbins (1994): they describe performance appraisal as “a process to identify, observe, measure and develop human resources in organizations over certain periods of times” This broad perspective allows inclusion of the identification of resources and organizational purposes of the appraisal. This is of interest as the performance appraisal can only be evaluated if its purpose is clear.
and Ferris, 1993; Murphy and Cleveland, 1995), due to the key influence it has on a variety of subsequent Human Resource actions and outcomes (Judge and Ferris, 1993). Performance appraisal purposes can be split into three clusters (Noe, 2006). These clusters are strategic, developmental and administrative purposes. Performance appraisal can be used as a basis for administrative decisions such as the awarding of pay increases, promotion and downsizing decisions. Also performance appraisal can be used for developmental purposes, which can be accomplished through coaching, mentoring and motivating employees. Finally appraisal can be used for strategic purposes, accomplishing performance improvement through setting and measuring of goals.
The important role of performance appraisals in organizations has led to a great amount of research, trying to understand and improve performance appraisals (Cardy and Dobbins, 1994). The output of the research has been implemented by practitioners, who have made changes to evaluation criteria, rating instruments and appraisal procedures in efforts to improve performance appraisal (Banks and Murphy, 1985, Walsch, 2003). Still, performance appraisal systems are often seen by employees as inaccurate and unfair (Walsch, 2003). It is suggested that performance appraisal typically engenders the same degree of enthusiasm as paying taxes (Folger and Lewis, 1993). When the performance appraisal system is not functioning correctly, it will lead to dissatisfaction with the job, reduced commitment to the organization and a greater likelihood that employees will contemplate leaving the organization (Brown, Hyatt and Benson, 2010). This demonstrates the importance of good performance appraisal, and also the importance of evaluation of the functioning of performance appraisal by organizations (Murphy and Cleveland, 1991, Walsch 2003). Comprehensive research regarding the evaluation of performance appraisal is, however, scarce (Walsch, 2003), extensive systematic research regarding the success or efficacy of new or existing performance appraisal systems has not been conducted (Walsch, 2003), and problems with current evaluation methods for performance appraisal are one of the most pressing issues facing practitioners (Murphy and Cleveland, 1991). This may be due in part to the complex nature of the systems and difficulty in selecting proper evaluation criteria.
the performance appraisal functions are used as input for multiple HR tools such as salary, promotion and development decisions. The appraisal system at FHCN can best be described as an annual evaluation, executed by supervisors. The supervisors are aided in this evaluation by an appraisal form, which should be a guide through the appraisal interview. The appraisal method used in the form can be defined as a graphic rating scale in which the rater scores the employees on different traits on a scale from one to five. The performance method at FHCN differs in a good way from a standard graphic rating scale, as descriptions have been added to the scales for poor, average and good performance. FHCN uses nine traits to appraise employees, and the average of these nine traits forms the evaluative norm of performance appraisal. The nine traits are equal for all personnel but should be interpreted based on the different function profiles. Also the appraisal form gives supervisors the opportunity to discuss specific goals with their employees and to record them on the appraisal form. The purpose for supervisors is to discuss the main focus for the employee over the next appraisal period.
Recently, the importance of appraisal has again been emphasized, as employees will receive variable bonuses based on their performance appraisal for 2010. At the same time, the development role of appraisal is emphasized, as the headquarters of FHCN has demanded the organization to act more as a competence centre. With this knowledge, the functioning of the appraisal system has been closely monitored, and doubt has arisen regarding the functioning of the current performance appraisal process. This doubt is based on the high percentage of employees receiving the exact same appraisal, which might indicate decreased accuracy (Guralnik et al, 2004, Jawahar and Williams 1997). Also HR and the works-council have received complaints about the execution of performance appraisal and notice a reduced attention from team leaders and employees.
factors involved in a good performance appraisal system are discussed. First the definition and purpose of performance appraisal are discussed. Subsequently, the four criteria for good performance appraisal are presented to the reader. These criteria are: strategic congruence, accuracy, employee acceptance and rater acceptance. After this introduction, the choice of and importance of these criteria are discussed extensively, the factors influencing the criteria will be explained, and suggestions for improvement of the criteria will be considered. These criteria for good performance appraisal will provide the theoretical fundamentals for this research. The theory chapter is followed by the method section: in this chapter there is discussion of how the different criteria are measured within FHCN. The procedures used, research population, respondents and scales used will be described here. After the method section, the results will be presented in the results section. Concluding this thesis, the main research question will be answered in the discussion chapter.
THEORY
been complemented by employee and rater acceptance. (Murphy and Cleveland, 1991; Tziner, Murphy and Cleveland, 2001). Despite the great amount of specific research on performance appraisal, extensive literature on how to evaluate performance appraisal is scarce (Walsch 2003). Murphy and Cleveland (1991) already noticed that use of the older evaluation methods has caused problems in organizations, as these methods ignored the complex personal, interpersonal and organizational factors. With acceptance as a criterion for evaluating performance appraisal, these factors can be included. It is however not recommended to use solely acceptance as a criterion for evaluating appraisal. Acceptance of the performance appraisal is seen as a good but insufficient criterion for evaluation of performance appraisal, and should best be combined with other criteria (Hedge, 2000, Murphy and Cleveland 1991). However, there are few studies that combine the more general criteria for good performance appraisal (Walsch, 2003), and studies that do combine them are not unequivocal in which criteria to use (Noe, 2006 p337). In this study acceptance of appraisal will be combined with strategic congruence and accuracy. These criteria are added to the research to represent organizational interest in the appraisal process. This is based on the principle that performance appraisal should please all parties involved in the process; organization, employees and raters (Longnecker and Nykodym, 1996). Also these criteria have been previously combined by Noe (2006) and Kluijtmans (2001), and are confirmed to be important criteria for performance appraisal effectiveness by other authors. Therefore the following four criteria will be used in this research:
- Strategic congruence - Accuracy
- Employee acceptance - Rater acceptance
These criteria for evaluating performance appraisal systems will be elaborated in the upcoming paragraphs.
Strategic Congruence
and strategy has been studied by scholars (Wright and McMahan, 1992; Wright and Snell, 1998) and researchers advocate that aligning HR systems with the firm’s strategy is helpful for creating a competitive advantage (Wei, 2006). According to Grote (2002) and Noe (2003) this is why strategic congruence of performance appraisal should be seen as a criterion for a good performance appraisal system. Through strategic congruence the performance appraisal system will contribute to organizational effectiveness (Haines et all. 2004). Grote (2002) emphasizes that performance appraisal can link organizational strategy to daily performance. This can be done by stating individual goals for performance appraisal that result from organizational goals. By giving employees insight into their contribution to organizational strategy, a cynical stand towards the strategy can be prevented. (Tosi et all., 2001; Levinson, 1970). As an example of strategic congruence Noe (2006) describes an organization that focuses on customer services. An appraisal system in such an organization should focus on the degree on which the employees of the organization aid the customers. A commonly recognized pitfall is that organizations do not change the appraisal system despite strategic transformations in organizational strategy which require changes in employee behaviour. Henceforth, changes in the organizational strategy should also be carried through in the performance appraisal (Schuler and Jackson, 1987; Noe, 2006).
Accuracy
validity of the appraisal is reduced because the appraisal is made based on the wrong facts (Noe, 2006). In a performance appraisal, deficiency and contamination should be reduced to a minimum. However it is seldom possible to completely eliminate the contamination of an appraisal (Drenth, 1998; Noe, 2006). Besides validity, reliability is also often seen as a criterion for good performance appraisal. The reliability of the performance appraisal refers to the consistency of the performance appraisal. The appraisal has to be consistent between the raters (inter-rater reliability), but also across time (test-retest reliability) (Casio, 2005). In the rating process, the rating can be influenced through cognitive flaws unconsciously made by the rater. When this occurs we speak of rater errors, an example a rater error is the halo effect in which the perception on one trait is influenced by the perception of another trait. Raters can also purposefully distort the appraisals of employees to achieve personal or company goals: this is called rater politics (Noe, 2006). As major conceptions about rater errors are either wrong or problematic (Murphy et al, 1993) this research will focus on rater politics as cause for reduced accuracy. There are different situations in which a rater can be seduced to rater politics: for example, if a rater is accountable to the employee being rated, when a rater has to appraise conflicting goals, when a direct link exists between performance appraisal and highly desirable rewards or if distortion strategies are part of the culture of the company and are passed down from senior employees to new employees (Noe, 2006). Also appraisal politics can appear if managers are afraid that the performance appraisal outcome could disturb the relationship with the employee (e.g., Lawler, 1990; Murphy and Cleveland, 1991). Rater politics can be reduced by organizations through training the rater in the appropriate use of the appraisal system, by building top management support for the appraisal system and actively discouraging distortion. Also raters should be given some latitude to customize performance objectives and criteria for their ratees, and organizations should make sure constraints such as budget do not influence the process and make sure appraisal processes are consistent across the company (Noe 2006).
Employee acceptance
Schneier, 1982; Cawley, Keeping and Levy,1998; Lawler, 1967; Murphy and Cleveland, 1995; Hedge and Borman, 1995). Reduced acceptance can cause employees to turn their back on the appraisal, the appraisal system and employee decisions which are based on the appraisal, because they do not perceive it as valid (Bernadin en Beatty, 1984). On the other hand, improved employee acceptance will have a positive influence. High acceptance will improve motivation and productivity, and it improves the organization's ability to retain the best employees (Roberts, 1992). While authors agree about the importance of employee acceptance of the performance appraisal system, the literature is not consistent in describing the concept of acceptance (Roberts, 1992, Roberts, 1994). One concept however, perceived fairness, is seen as a good predictor of acceptance and has received a considerable amount of academic attention (Dobbins, Cardy and Platz-Vieno, 1990; Gabris en Irke, 2000; Greenberg, 1986; Landy, Barnes-Farrell and Cleveland 1980; Noe, 2006; Taylor et al. 1995). Perceived fairness can be split up into four types of perceptions using the theory of Greenberg (1986). The four types of fairness perception are: procedural justice, distributive justice, interpersonal justice and informational justice. These four types of justice perceptions will now be elaborated.
- Procedural justice perceptions. This type of fairness perception focuses on the structural
components of the performance appraisal procedures. Three of these procedures have shown an important influence on perceived fairness in performance appraisal research; assigning raters, setting criteria and seeking appeals. The assignment of raters with a sufficient level of knowledge, for example of the ratee`s job, its level of performance and the appraisal system, was found to influence perceptions of fairness. (Landy, Barnes and Murphy; 1978; Tang and Sarsfield-Baldwin, 1996). Folger et al. (1992) and the subsequent empirical work by Taylor et al. (1995) emphasized the importance of setting criteria and seeking appeals. Silverman and Wexley (1984) found that participation in construction of behaviourally anchored rating scales led to favourable perceptions regarding the performance appraisal interview process and outcomes. Stratton (1988), and Alexander and Ruderman (1987) found that perceptions of appeal procedures were positively related to evaluations of supervisors, trust in management, and job satisfaction.
- Distributive justice perceptions. This type of fairness perception focuses on the attitudes
appraisal system. Prior research has identified two factors contributing to the perception of distributive justice: the equity decision norm and absence of politics. Employees may consider a performance rating unfair if the rater is considered to be attempting to avoid conflict by inflating ratings, playing favourites or yielding to political pressures to distort ratings (Longnecker, C.O., Gioria, D.A. and Sims, H.P, 1987).
- Interpersonal justice perceptions. Interpersonal justice concerns fairness perceptions that
relate to the way the rater treats the person being evaluated. Greenberg (1986) provided evidence that individuals are highly influenced by the degree of sensitivity they are shown by their supervisors and other representatives within the organization.
- Informational justice perceptions. Informational justice concerns fairness perceptions
based on the clarification of performance expectations and standards, feedback received, and explanation and justification of decisions. Like procedural justice, the focus is on the events which precede the determination of the outcome, but for informational justice, the perceptions are socially rather than structurally determined. Information about procedures can take the form of honest, sincere and logical explanations and justifications of any component of the allocation process. In the context of performance appraisals the most common interactions will involve the setting of performance goals and standards, routine feedback, and explanations during the performance appraisal interview.
Rater Acceptance
The rater plays an important and central role in the performance appraisal system (Ilgen et al. 1979; Jawahar, 2007; Klein et al., 1987). After all, the rater has the challenging task of consistently observing the performance of employees and transforming this information into an honest and accurate appraisal. (Roberts 1992). The attitude of the rater towards the performance appraisal system has great influence on the appraisal, and so rater acceptance of the system is essential for a well functioning appraisal system (Bettenhausen and Fedor, 1997; Carroll and Schneier, 1982). Raters with low acceptance of the system tend to give appraisals based on maximizing their own profit (Fedor et al, 1999). Reduced motivation/acceptance will also lead to appraisal errors, to general or ambiguous feedback, inadequate documentation and a lack of confidence in the usefulness of the appraisal information (Carrol and Schneire, 1982, Robert 1994). This can lead to a system with reduced effectiveness or even total ineffectiveness (Bernadin and Beatty, 1984; Roberts 1994). Despite the recognition of rater acceptance as an important factor for good functioning of performance appraisal systems, little research has been devoted to this theme (Ford, 2002; Hedge, 1995; Roberts, 1992). The researchers that have conducted research into the theme have used varying criteria. This research will make use of three criteria previously used by Roberts (1992), who based them on Carroll and Schneier (1982): understanding of the purpose of appraisal, confidence is the usability of the appraisal, and perceived employee acceptance. These criteria will now be elaborated.
- Purpose of appraisal. If a rater recognizes which goals the organization is pursuing with
- Usability. For raters to accept the performance appraisal system, the benefits need to
exceed the costs. One of the costs of the appraisal system is the effort a rater has to put into the appraisal system. Raters value the practical usability of the appraisal system (Murphy and Cleveland’s 1991, Roberts, 1992). This usability is among other things influenced by the time a rater has to invest in the appraisal system, the ease of execution of the appraisal and the complexity of the appraisal form (DeCotiis and Petit, 1978; Harris, 1994; Longenecker and Fink, 1999; Roberts, 1992). Appraisals systems that are too complex or cost too much time to execute can be seen as an excessive load which will deduct the rater from other responsibilities (Harris, 1994; Heneman et al., 1989).
- Employee acceptance. Continuing with the knowledge that raters have to perceive that the
benefits of the appraisal system are exceeding the costs, another important cost factor is employee reaction towards the appraisal. Raters will be less motivated if they perceive employees to be resistant to the appraisal system (Carrol and Schneier, 1982). If the rater perceives the appraisal to disturb the relationship with the employee, the acceptance of the appraisal system can be badly affected. If employees react with hostility towards the appraisal system because they do not accept its results, raters might not be able or willing to perform correct appraisal.
METHODS
In the foregoing chapter a theoretical outline has been given of the criteria of a good performance appraisal system. These criteria are used to map the current condition of the performance appraisal system at FHCN. In this chapter an overview is given of the research methods used for this purpose.
Procedure
To improve the response rate a letter has been attached to the questionnaire explaining the purpose and ensuring anonymity, also attention has been drawn to the questionnaire in the staff magazine, in the management team, and through an e-mail to department managers. FHCN supported the research financially by supplementing production employees who participated in the research on their own time with a ten euro voucher.
Two questionnaires have been developed; one from the perspective of the ratee and one from the perspective of the rater. The questionnaire handed out to the employees contained ninety questions and was built up from the criteria for a good performance appraisal. The first part of the questionnaire contained general questions whereas the other parts contained questions on the strategic congruence, accuracy and acceptance of the appraisal system. An open question was added in order to gain additional comments and recommendations for the performance appraisal process.
Respondents
Employees throughout the organization who were involved with the performance appraisal system were approached to participate in the research. In total 12 raters and 114 employees participated in the research, of a total of 511 employees working at FHCN. This is a response rate of 25%. Because a control question had been included in the questionnaire in which employees were asked to give a specific response to make sure the questions were read thoroughly, 11 questionnaires had to be declared invalid. Also one rater questionnaire had to be declared invalid as he or she had admitted to not yet having made use of the appraisal system. This reduced the response rate to 22%.
direct production functions in the organization, such as the HR department, QA/RA, Logistics and facilities, PU ABD, and indirect functions in the BPS department. This group represent twenty one percent of the participants (n=22), there was a missing value of seven. The length of job tenure of participating employees was relatively long compared to the national average in 2009 where only 21.4 percent had a job tenure longer than ten years (OECD, 2010). The largest group of employees at FHCN stated that they had been working for FHCN for a period longer than twenty-one years (n=41, 40%). The other employees were distributed among the different groups as followed: less than six years (n=4, 3.9%), six years to ten years (n=15, 14.6), eleven to fifteen (n=23, 22.3%).
Six of the raters who responded to the questionnaire were male, and five female. Four raters were in the age category of thirty one to forty four and the others were in the category forty five and above. Seven of the raters were working in one of the production departments, and four in one of the other departments. Because of the anonymity of the raters job tenure can not be defined, however it is noticeable that fifty five percent of the raters participating in the research have a job tenure lower than ten years.
Measures
The items in the questionnaires have been formulated as propositions, and have been set in the Dutch language. Answers to the questions were recorded on a five point Likert scale, ranging from strongly agree to strongly disagree. The questionnaire for raters is different than the questionnaire for ratees, as each has specific questions regarding acceptance of the appraisal system. In the following paragraphs the items used in the questionnaire will be accounted for.
Strategic congruence. The degree in which there is a perceived congruence between the strategy
of FHCN and the performance appraisal system has been measured with a scale of five items based on a method previous used by Biemond (2005). This method involves a measurement of the strategic congruence as well as a measurement of the knowledge of organizational strategy to put the strategic congruence scale in perspective. The strategic congruence has been measured with two items based on Hertenstein and Platt (2000) measuring the link between performance expectations and organizational strategy. An example of one of the questions asked is: “The
internal consistency coefficient was used to estimate the reliability of the scale and was determined to be: .75 for employees and: .93 for raters, which assumes the scale to be reliable. To put the strategic congruence scale in perspective three items based on a scale of Patterson (2005) measured the degree in which organizational goals are known by employees. An example of one of the items is:”Goals of FHCN have been clearly communicated to me”. The Cronbach`s alpha used to measure the internal reliability of the scale is: .88 for both employees and raters.
Accuracy. The perceived accuracy has been measured with two variables: the equity decision
norm and the concern over rating.
Equity decision norm: The degree of perceived equity has been measured with five items
designed by Walsch, 2003. An example of one of the items used is: “My performance rating
reflects how much work I do”. The Cronbach`s alpha of the scale is: .86 for employees. As the
internal consistency for raters was initially low, one of the questions was removed from the scale, hereafter the reliability of the scale was determined to be: .81. These five items are also used as one of the scales measuring employee acceptance.
Concern over ratings, the extent to which employees and raters perceive the appraisal not
to be influenced by political considerations, has been measured with seven items. One of the items used is: “The rating I get is a result of my rater applying performance-rating standards
consistently across employees”. After the Cronbach`s alpha of the scale was initially low for
employees two items where removed from further consideration in the study. The five remaining items in the “concern over ratings” scale were determined to be reliable: .72. The internal consistency for raters determined to be sufficient: .78.
Employee acceptance. The employee acceptance of the performance appraisal system has been
measured with ten variables, divided into the four justice perceptions as described in the theory section. To measure employee acceptance, items developed by Thurston (2010) have been used.
Procedural justice. The procedural justice perception has been measured with three
The Cronbach’s alpha internal consistency coefficient determined to be: .85. Rater confidence has been measured with a five item scale. One of the items used was: “FHCN makes sure that I
am assigned a rater who is qualified to evaluate my work”. The Cronbach`s alpha of the scale
was determined to be: .96. The perceived possibility for employees to lodge an appeal to their appraisal against the outcome of the appraisal has been measured with a five item scale. One of the items used to measure this has been: “I have ways to appeal a performance rating that I think
is biased or inaccurate”. The Cronbach`s alpha as measured for this scale was: .89.
Distributive justice. The distributive justice has been measured with two variables:
accuracy of rating and the concern over rating. Accuracy of rating, the degree of accuracy perceived by the employees, has been measured with six items (Walsch, 2003). An example of one of the items used is: “My performance rating reflects how much work I do”. The Cronbach`s alpha of the scale is: .86. The extent to which employees perceive the appraisal to be influenced by political considerations has been measured with seven items, one of the items used is: The
rating I get is a result of my rater applying performance-rating standards consistently across employees”. The Cronbach`s alpha of the scale is: .72. This was achieved after removing two
items from further consideration in the study.
Informational Justice. The informational justice scale has been measured with three
variables: clarifying expectations, providing feedback and explaining rating decisions. Clarifying expectations, the extent to which employees know what is expected of them, has been measured with six items. An example of one of these items is: “My rater clearly explains to me what he or
she expects for my performance”. The Cronbach`s alpha of this scale is: .88. Providing feedback,
the perception of the employee of the feedback he or she has received from the rater, has been measured with six items. An example of one of the questions used is: “My rater routinely gives
me information or help that I can use to improve my performance”. The Cronbach`s alpha of this
scale is: .93. Explaining rating decisions, the degree in which employees receive a good explanation of the outcome of their performance appraisal, has been measured with 4 items. An example of an item is: “My rater takes the time to explain decisions that concern me”. The Cronbach`s alpha of this scale is: .92.
Interpersonal justice. The interpersonal justice has been measured with two variables:
the items used is: “My rater treats me with respect”. The Cronbach`s alpha of the scale is: .86. The extent to which a rater treats the employee with a sense of sensitivity has been measured with five items. One of the items used in the scale is: “My rater does not make hurtful statements to
me”. The Cronbach`s alpha of the is scale was determined to be: .83.
Rater Acceptance. The acceptance of the performance appraisal system by raters has been
measured with three variables, purpose of the appraisal, usability, tendency to distort and acceptance by employees.
Purpose of appraisal, the degree in which raters recognize the purpose of appraisal, and
the extent to which they perceive this purpose is promoted by management, has been measured with eight items from Taylor, Masterson, Renard, and Tracy (1998). An example of one of the items is: “Management of the organization actively supports the importance of appraisal”. The Cronbach’s alpha internal consistency coefficient was used to estimate the reliability of the scale and was determined to be: .92.
Usability, the perceived usability of the performance appraisal system, has been measured
with a four item scale from Reike (2003). An example of one of the items used is: “The
performance appraisal form is too complex”. Cronbach’s alpha internal consistency coefficient
was used to estimate the reliability of the scale and was determined to be: .71.
Acceptance by the employee, the degree in which raters perceive the employees to accept
the performance appraisal, has been measured with a 3 item scale. An example of one of the items used is: “My employees accept the outcome of the appraisal as determined by me”. The Cronbach’s alpha internal consistency coefficient was used to estimate the reliability of the scale and was determined to be: .78.
RESULTS
Strategic Congruence
Knowledge of organizational strategy. Employees neither agreed nor disagreed with the
statements measuring their knowledge of the organizational strategy: the overall score was 2.89 (SD=1.05), see table 1. Supervisors were more positive about their knowledge of organizational strategy and “agreed” to the statements. Supervisors had an overall score of 2.30 (SD=0.72). Results of the specific items of this scale can be found in appendix A.
Strategic congruence. Employees “neither agreed nor disagreed” with both items in the strategic
congruence scale. An overall score was developed for this scale which was calculated as the mean of the ratings assigned to the individual items. The overall score was 3.02 (SD = 1.05) which was classified in the “Neither agree nor disagree” response category (see table 1). Raters “agreed” (item scored between 1.51 and 2.50) with one of the items and “neither agreed nor disagreed” with the other item measuring strategic congruence. The overall score calculated for this scale was 2.32 (SD = 1.01) which was classified in the “agree” response category (see table 1). Results of the specific items can be found in appendix A.
TABLE 1 Strategic Congruence
Item Mean Standard
Deviation
Response category(a)
Employee knowledge of organizational strategy 2.89 1.05 NA
Rater knowledge of organizational strategy 2.30 0.72 A
Strategic congruence as perceived by employees 3.02 1.05 NA
Strategic congruence as perceived by raters 2.32 1.01 A
a, Response Category: SA = Strongly Agree (1.50 or less); A = Agree (1.51 – 2.50); NA = Neither Agree nor Disagree (2.51 – 3.49); D = Disagree (3.50 – 4.49); and, SD = Strongly Disagree (4.5 or greater).
Accuracy
Equity decision norm. Employees indicated that they “agreed” with four of the five items in this
scale and they “neither agreed nor disagreed” with the remaining item. They most strongly agreed with the item “The most recent performance rating I received is based on the many things I am responsible for at work” (mean = 2.16). Respondents indicated the least amount of agreement with the item “My performance rating reflects how much work I do” (mean = 2.63). A complete overview of item scores can be found in appendix A. An overall score for the items in this scale was calculated as the mean of the ratings assigned to the individual items. The overall score was 2.33 (SD = .84) which was classified in the “agree” response category (see table 2).
Raters agreed with all of the items. They agreed most with the statements “My performance rating is based on the many things I do that help at work.” and “The most recent performance rating I received is based on the many things I am responsible for at work”. Both had a mean of 1.82. Other item scores can be found in appendix A. The overall score calculated for the scale was 1.91 (SD = .49).
Concern over ratings. Employees “agreed” with all of the items included in the “concern over
rating” scale. The items with which they most strongly agreed was “The rating I receive is not influenced by personal like or dislike of my supervisor” (mean = 2.12). The items with which respondents least agreed were “My rating is not the result of my rater trying to avoid bad feelings among his or her employees” (mean = 2.48). An overall score for the items was calculated as the mean of the ratings assigned to the individual items. The overall score was 2.30 (SD = .69) which was classified in the “agree” response category (see table 2).
TABLE 2
Summary of Perceptions of Setting Performance Expectations of Employees of FHCN.
Item Mean Standard
Deviation
Response category(a) Equity decision norm as perceived by employees 2,34 0,84 A
Equity decision norm as perceived by raters 1.91 0,49 A
Concern over ratings as perceived by employees 2,30 0,69 A
Concern over ratings as perceived by raters 1,70 0,44 A
a, Response Category: SA = Strongly Agree (1.50 or less); A = Agree (1.51 – 2.50); NA = Neither Agree nor Disagree (2.51 – 3.49); D = Disagree (3.50 – 4.49); and, SD = Strongly Disagree (4.5 or greater).
Employee Acceptance.
Employee acceptance has been measured with four forms of justice: procedural, distributive, informational and interpersonal justice.
Procedural Justice. Scales representing the procedural justice factor included “Setting
Performance Expectations”, “Rater Confidence” and “Seeking Appeals”.
Setting Performance Expectations. Respondents “neither agreed nor disagreed” with all
six of the items included in the setting performance expectations scale. They most strongly agreed with the item “The appraisal process requires that performance expectations be set for me at the start of a rating period” (mean = 3.26). Remaining items scores can be found in appendix A. A overall score was developed for this scale which was calculated as the mean of the ratings assigned to the individual items. The overall score was 2.98 (SD = 0.86) which was classified in the “neither agree nor disagree” response category (see table 3).
Rater Confidence. Respondents “agreed” with the all five of the items included in this
determined to measure a single construct, the researcher computed an overall score for the items in this scale which was calculated as the mean of the ratings assigned to the individual items. The overall score was 2.34 (SD = 1.07) which was classified in the “Agree” response category (see table 3).
Seeking Appeals. Respondents “agreed” with five of the six items included in this scale
and “neither agreed nor disagreed” with one item. Item means ranged from 2.02 to 2.60. Respondents most strongly agreed with the item “I have ways to appeal a performance rating that I think is biased or inaccurate” (mean = 2.02). Since the five items in the “Seeking Appeals” scale were determined to measure a single construct, the researcher computed an overall score for the items in this scale which was calculated as the mean of the ratings assigned to the individual items. The overall score was 2.27 (SD = .81) which was classified in the “agree” response category (see table 3).
Distributive Justice. Two scales were included to measure perceptions of the distributive justice
factor: “accuracy of rating” and “concern over ratings”.
Accuracy of Rating. Respondents indicated that they “agreed” with four of the five items
in this scale and that they “neither agreed nor disagreed” with the remaining two items. They most strongly agreed with the item “The most recent performance rating I received is based on the many things I am responsible for at work” (mean = 2.16). Since the five items in the “accuracy of rating” scale were determined to measure a single construct, the researcher computed an overall score for the items in this scale which was calculated as the mean of the ratings assigned to the individual items. The overall score was 2.34 (SD = .84) which was classified in the “agree” response category (see table 3).
Concern over Ratings. Respondents “agreed” with six of the items included in the
Informational Justice.
Three scales have been proposed to represent the factor described as informational justice: “clarifying performance expectations”, “providing feedback” and “explaining rating decisions”.
Clarifying Performance Expectations. Respondents “agreed” with four of the five items
included in the scale designed to measure “clarifying performance expectations”. Employees “neither agreed nor disagreed” with the item “My rater regularly explains to me what he or she expects of my performance”. Respondents most strongly agreed with the items “My Rater clearly explains to me what he or she expects for my performance” (mean =1.93) and “My rater clearly explains to me the standards that will be used to evaluate my work.” (mean = 2.08). Since the items in the “clarifying expectations” scale were determined to measure a single construct, the researcher computed an overall score for the items in this scale which was calculated as the mean of the ratings assigned to the individual items. The overall score was 2.25 (SD = .88) which was classified in the “agree” response category (see table 3).
Providing Feedback. Respondents indicated that they “neither agreed nor disagreed” with
the items included in the scale “providing feedback”. They indicated their most positive perceptions of the item “My rater lets me know how I can improve my performance” (mean = 2.86). They responded least positively to the item “My rater reviews with me my progress toward my goal” (mean = 3.20). The mean for this item is categorized in the “Neither agree nor disagree” range. Since the seven items in the “providing feedback” scale were determined to measure a single construct, the researcher computed an overall score for the items in this scale which was calculated as the mean of the ratings assigned to the individual items. The overall score was 3.10 (SD = 1.10) which was classified in the “neither agree nor disagree” response category (see table 3).
Explaining Rating Decisions. Respondents agreed with three of the five items included in
ratings assigned to the individual items. The overall score was 2.35 (SD = .92) which was classified in the “agree” response category (see table 3).
Interpersonal Justice. The two scales representing interpersonal justice as suggested by Bies and
Moag (1987) and Thurston (2001) are “respect in supervision” and “sensitivity in supervision”.
Respect in supervision. Respondents “agreed” with all of the items included in “respect in
supervision” scale. The items with which they most agreed were “My rater is rarely rude to me.” (mean = 1.59) and “My rater is almost always polite.” (mean = 1.65). Since the five items in the “respect in supervision” scale were determined to measure a single construct, the researcher computed an overall score for the items in this scale which was calculated as the mean of the ratings assigned to the individual items. The overall score was 1.72 (SD = .74) which was classified in the “agree” response category (see table 3).
Sensitivity in Supervision. Respondents “agreed” with the items in the “Sensitivity in
Supervision” scale. The items they most agreed with were “My rater treats me with kindness” (mean = 1.62) and “My supervisor does not make hurtful statements to me” (mean = 1.68). Since the five items in the “Sensitivity in Supervision” scale were determined to measure a single construct, the researcher computed an overall score for the items in this scale which was calculated as the mean of the ratings assigned to the individual items. The overall score was 1.82 (SD = .74) which was classified in the “agree” response category (see table 3).
TABLE 3
Summary of Perceptions of Fairness Scales as Applied to the Performance Appraisal System at FHCN
Scale Mean Standard
deviation Response category(a ) Respect in Supervision 1,77 ,70 A Sensitivity in Supervision 1,83 ,74 A Clarifying Expectations 2,25 ,88 A Seeking Appeal 2,28 ,81 A
Concern over Rating 2,30 ,69 A
Accuracy of Rating 2,34 ,84 A
Rater Confidence 2,34 1,07 A
Explaining Rating Decisions 2,35 ,92 A
Setting Performance Expectations 2,98 ,86 NA
Providing Feedback 3,11 1,10 NA
a, Response Category: SA = Strongly Agree (1.50 or less); A = Agree (1.51 – 2.50); NA = Neither Agree nor Disagree (2.51 – 3.49); D = Disagree (3.50 – 4.49); and, SD = Strongly Disagree (4.5 or greater).
Rater Acceptance
Rater acceptance has been measured with four scales: importance of appraisal, usability of the appraisal system, tendency to distort appraisal and employee acceptance.
Importance of appraisal. Respondents agreed with five of the eight items included in the
Usability of the appraisal system. Respondents “neither agreed nor disagreed” with four of the
five items included in the usability of appraisal scale and “disagreed” with one item. They most strongly disagreed with the reversed item “The appraisal gives me insights into employee performance I would not have without the system” (mean = 3.64). An overall score was developed for this scale which was calculated as the mean of the ratings assigned to the individual items. The overall score was 2.98 (SD = .98) which was classified in the “Neither agree nor disagree” response category (see table 4).
Employee acceptance. Raters agreed with two items and neither agreed nor disagreed with one
item. Respondents most strongly agreed with the item “Employees accept the rating of the appraisal as determined by me” (mean=1.82). An overall score was developed for this scale which was calculated as the mean of the rating assigned to the individual items. The overall scale was 2.15 (SD = .52) which was classified in the agree response category (see table 4)
TABLE 4.
Summary for Perceptions of Rater Acceptance Scales as Applied to the Performance Appraisal System at FHCN Scale Mean Std. Deviation Response category(a ) Importance 2.31 0.69 A Usability 2.98 0.98 NA Employee acceptance 2.15 0,52 A
a, Response Category: SA = Strongly Agree (1.50 or less); A = Agree (1.51 – 2.50); NA = Neither Agree nor Disagree (2.51 – 3.49); D = Disagree (3.50 – 4.49); and, SD = Strongly Disagree (4.5 or greater).
Tips and Remarks about the Appraisal System.
functionality (7 employees). Other employees remarked that they are missing the performance interviews (4 employees) or that there should be more attention given to the performance interviews (2 employees). Employees also made critical remarks regarding the knowledge of the rater, arguing that most have very little knowledge of the real performance and activities in the department (5 employees). The comment was made that employees are too much appraised as a group (1 employee), and that employees are sometimes appraised by someone who is not related to your function (1 employee). The most negative reaction compared the appraisal form with a lotto-form, which is only based on the last impressions. A complete overview of the remarks can be found in the appendix.
DISCUSSION
The purpose of this research was to provide FHCN with insights into the functioning of the performance appraisal system. The results of the study should give FHCN better knowledge of what factors contribute to a well functioning performance appraisal system and how employees and supervisors perceive the current functioning of the performance appraisal system. Additional to this, suggestions for improvement of the current appraisal system at FHCN will be given. Based on previous research, four criteria have been used to evaluate the performance appraisal system: strategic congruence, accuracy, employee acceptance and rater acceptance. Through the use of a questionnaire the perceptions of employees and raters regarding the four criteria have been measured.
The results of the research demonstrate that employees and supervisors have a fairly positive attitude towards the appraisal system at FHCN; both groups agreed with most, although not all, statements representing the criteria for a well functioning performance appraisal system. A brief overview of the findings regarding each of the four main criteria used to measure performance appraisal will be presented first, and subsequently consequences of the findings and areas in need of improvement will be discussed.
employees and raters agreed with the variables measuring this criterion. Employees also responded positively towards items measuring the third criterion; employee acceptance of the current performance appraisal system. Employees agreed with eight of the ten scales, neither agreeing nor disagreeing with the other two scales. The two scales suggesting room for improvement were the provision of feedback and the setting of expectations. The fourth criterion, rater acceptance, also scored well: raters agreed with the statements of two of the three scales. Raters neither agreed nor disagreed with the usability scale, suggesting room for improvement here. These findings identified four areas where FHCN's appraisal system is in need of improvement. These four areas are: the strategic congruence, the setting of expectations at the start of the appraisal program and the provision of feedback (which were both part of the employee acceptance scales), and the usability of the appraisal system (which was part of the rater acceptance scale). In the following, suggestions for improvement of the performance appraisal system will be given.
- Strategic congruence. As shown in the results section the strategic congruence of the
performance appraisal system is perceived to be low. This has a negative effect on organizational performance, as an alignment between organizational strategy and the performance appraisal helps employees contribute to organizational goals, and create a competitive advantage (Grote, 2002; Noe, 2003). To improve the strategic congruence of the performance appraisal, the organization should recognize what the firm's distinctive competencies are, and how employees should contribute to these. The performance appraisal system can and should be used to communicate these goals. This will provide guidance so that employees can contribute to the firm’s success (Miliman, 2002). Employees should be evaluated with respect to the required knowledge and behaviour for contributing to organizational goals using the performance appraisal system. This reinsures that specific training needs of employees are recognized and on the condition that these training needs are answered, makes sure all employees can contribute optimally towards the organizational goals. This gives FHCN the opportunity to continuously evaluate and improve individual performance against clearly defined, preset objectives that are directly linked to company strategy (Dowling, Welch & Schuler 1999)
- Setting performance expectations. The setting of performance expectations at the start of
expectations (Noe, 2006). If the setting of expectations is not perceived as fair, employees can reject the appraisal, reducing the chance that goals of the appraisal will be realized (Thurston, 2010). As shown in the results chapter, employees perceived the setting of performance expectations process to be up for improvement as they “neither agreed nor disagreed” to statements measuring this variable. This was emphasised by the comments that were provided by employees, such as “goals are unknown to my department and underlying function”, “clear measurable criteria should be made” and “appraisal should be matched to company and function competences”. As the performance expectation setting process is considered important, FHCN should improve the process. Currently all five hundred thirty seven employees are appraised with the same general appraisal form describing general criteria. These general criteria have to be personalized through the use of the function description of the employee. This procedure is mentioned in the memo sent with the appraisal form to the supervisors. Despite this option to personalize the appraisal form, the specific criteria are not mentioned on the form, causing reduced clarity and transparency. This is the standard procedure; in addition to this the employee and the supervisor can agree to put extra criteria on the appraisal form. However, the use of this general form disregards the principle that not one measure is suitable for all departments (Maskell, 1989). FHCN should improve the setting of performance criteria by personalizing the performance criteria as proposed by Wisner and Fawcett (1991) in their nine step plan for developing a performance appraisal system, FHCN should develop an understanding of each functional area’s role in achieving the various strategic objectives. As mentioned before this is now done, through the use of the function description. However this should be better integrated in the appraisal process. Appraisal forms should contain this description of the required behaviour or results instead of vague general criteria. This also improves the inter-rater reliability as raters can compare required behaviour and performed behaviour to specific examples (Noe, 2006). At FHCN, preparations are being made to introduce competency management. Competency management is a sound basis for performance appraisal, as it can be used as a tool for describing performance expectations, and is able to give good examples of poor, average and good performance (Picket, 1998). When these specific function criteria are known at FHCN, the organization it is advised to use them as performance criteria in their performance appraisal. - Providing feedback. Effective feedback from supervisors regarding subordinate work
that respondents “neither agreed nor disagreed” with items regarding the quality and quantity of feedback included in the “Providing Feedback” scale. As discussed in the theory section, feedback is an essential part of the performance appraisal system, influencing acceptance and helping employees to improve their performance, which is important for the organization (Murphy & Cleveland, 1995). FHCN has split the performance appraisal into a section discussing past performance and rating the employee, and a performance interview discussing the future performance. For both interviews two separate forms are provided and the interviews are expected to be executed straight after each other at the end of December. An employee who wishes to discuss his or her performance later on in the year has to request an extra performance interview. FHCN has made plans to make the performance interview in December also voluntary; however these plans have been blocked by the works council. The low rate of performance interviews combined with the overall low rate of formal conversations in which the performance of employees is discussed can be seen as negative, performance appraisal should be seen as a continuous process (Noe, 2006). A single formal performance discussion does not give employees an opportunity to improve. This can lead to reduced acceptance and reduced development. FHCN is advised to combine the discussion on future performance and the evaluation of past performance, as this enhances employee interest in improving future performance (Boswel en Boudrau, 2002). Also FHCN should focus more on performance interviews throughout the year. This advice has also been made by employees and supervisors in the open question in the questionnaire, who have stated that “performance interviews should be reintroduced” and “there should be more focus on the performance interview”. Smither (1998) suggests that feedback, whether formal or informal, should be delivered on a continual basis and certainly should not be limited to an annual event. Therefore it is recommended that the organization adopt a greater emphasis on the need for performance feedback and recognize its role in the ongoing performance management process.
- Usability of the appraisal system. As described in the results section, raters neither agreed
raters see the appraisal form more as a registration form than a tool that assist them in the difficult task to make just appraisals. The results also suggest that there is room for improvement in reducing the length and complexity of the appraisal form. FHCN is advices to take this critique on the appraisal system into account and discuss options for improvement with the raters. A suggestion for improving the usability is developing a more specific appraisal form with examples of good, average and bad performance related to the function of the employee. As this aids the rating in the decision making process and improves rater acceptance (Longenecker and Fink, 1999). In the development of such an appraisal form FHCN is advised to involve raters as this improves the acceptance of this form by the raters (Friedman & Cornelius, 1976).
Strengths and Limitations
The strength of this research is the use of multiple criteria measured through the perception of employees and raters. Analyzing performance appraisal through employee perception has become an important method (Walsch, 2003). This thesis builds on the suggestions of Murphy and Cleveland (1991), that employee acceptance is a good but insufficient criterion for evaluating performance appraisal systems as it provides only one view while there are three parties involved: the organization, the ratee and the rater. This research has tried to include the views of all parties involved by measuring perceived strategic congruence and accuracy, as well as ratee and rater acceptance.
methodology and performance criteria are generalizable towards other firms. Also a theoretical implication has to be taken into account, as the four criteria used in this thesis have not previously been used together. Despite the combination is based on the suggestions of Hedge (2000) and Murphy and Cleveland (1991), to combine employee acceptance with other criteria, and although the other three criteria used are generally seen as good criteria for performance appraisal the combination needs further research. Finally only one type of validity has been taken into account to measure the accuracy of the appraisal process. Although more forms of validity could have contributed to a better understanding of the accuracy of appraisal, this study focused sole on content validity as accuracy was one of four criteria and part of a broader research.
Suggestions for future research
To improve the response rate, future research should be scheduled close after the appraisal period. Furthermore it is recommended that different questionnaires within the company should not be distributed shortly after one another, as this might reduce the interest to participate. Further research into the appraisal system at FHCN should be more specific and focus on the four areas receiving a low score (strategic congruence, setting performance expectations, feedback and usability). This can provide the company with knowledge of the causes for these reduced scores. To provide the company with detailed information, it is suggested to execute qualitative research; interviewing both raters and ratees will help researchers to discover the causes for the reduced scores. Furthermore the methods used in the performance appraisal form should receive attention. This topic has been ignored in the current research as it focused on employee perception. However FHCN is advised to perform research to determine whether the current appraisal method is the best choice considering their performance criteria. Future research should contribute to evaluation and improvement of the performance appraisal system at FHCN. Supporting FHCN to take full advantage of the benefits a successful appraisal system can offer.
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