Managers' satisfaction with performance appraisal system: an empirical study

Abstract

Research about performance appraisal systems can be divided into four categories: those which focus on (a) rather cognitive processes and related issues; (b) rating scales, formats and methods; (c) the efficiency of the appraisal processes such as goal-setting, interview, etc. ; and (d) appraiser and appraise reactions to various issues involved. The present research belongs to the last category. In this context, two issues have been largely unexplored: (i) compatibility of evaluative and developmental roles of performance appraisals, which is a classic dilemma in design and implementation of appraisal systems. (ii) Impact of organizational variables on a system. In the light of the domain for research identified, the following objectives were set for the present study: (i) To identify the perceived characteristics of a performance appraisal system in terms of its’ content, process and outcome variables (called as “appraisal system variables’’) which would influence satisfaction with the appraisal system; (ii) To identify a set of organizational variables which would influence satisfaction with the appraisal system vis-a –vis the appraisal system variables; (iii) To compare a development-oriented performance appraisal system with a multi-objective system for their impact on user reactions to the appraisal system. It was hypothesized that satisfaction with performance appraisal system would be influenced by perception about both the appraisal system variables and organizational variables and would not be dependent on whether a system had an explicit developmental focus (implying that the system is declared to be a developmental one, though users may perceive it differently) or not. The study identified the critical appraisal system variables which act as predictors of satisfaction with appraisal system. It was found that a bisectional relationship between the appraisal system variables and satisfaction with performance appraisal system existed, with satisfaction about last performance evaluation acting as an intervening variable. While the content and outcome variables directly influenced satisfaction with appraisal system, the process variables had an indirect effect through the intervening variable. Among the organizational variables, the variable “structure” signifying clarity about the policies and systems had significant effect while other variables such as quality of superior-subordinate relations and character of communication processes had inconsistent effect. Results also indicate that providing an explicit developmental focus to an appraisal system through delinking of the evaluative component, though makes managers to perceive the out comes from the process as being more development-oriented, failure to do so need not act as a deterrent for perceiving the system to have a developmental orientation. The role of organizational variables is seen as important in this respect. It was also found that linking rewards to performance appraisal was not seen unfavorably by the respondents. The results of the study would contribute towards designing an effective performance appraisal system and help in identifying areas for action with respect to an existing system. The findings also provide directions for future research in the subject.