THE IMPACT OF PERFORMANCE APPRAISAL ON EMPLOYEE PRODUCTIVITY
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CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The heart and soul of any organisation is its people. Over the years, this statement has held true. According to Sekiguchi (2013) the way organisations manage human capital rather than physical capital is the primary distinguishing and determining factor of the way an organisation performs. Many researchers agree that the Human resource of the organisation give the organisation its competitive advantage (Diefendorff & Chandler, 2011; Muo, 2007; Messah & Kamencu, 2011). Therefore, it is important to give credence to the factors that influences a company’s human resources’ ability to be effective. One of such factors is performance appraisal.
The performance appraisal is a component of performance management, and it is vital, in that it directly reflects the organization’s strategic plan. However, globally many Human Resource managers are beginning rethink the use and importance of Performance appraisal as a performance management method (Jocelyn, Kimanuchege & Musiega, 2013). This is due to the fact that over the years many employees have viewed it as unfair and not an accurate measurement of their performance (Furnham, 2017). Furthermore, employees have opined that managers are subjective in their appraisal reviews which have rendered it purpose ineffective (Andersen & Pedersen, 2012). Needless to say, performance appraisal is often a negative, disliked activity and one that seems to elude mastery (Russell & Russell, 2010). Managers do not like giving them and employees do not like receiving them (Houghton, 2010). Therefore it is one of the most dreaded phenomenon that occur in a company. Selvarasu & Sastry (2014) discovered in their study that majority of the performance appraisals in companies did not accurately measure employee performance. This has therefore led to suggestions by many scholars and Human resource experts alike that performance appraisals need to be replaced by a more effective measurement of employee performance (Shaout & Yousif, 2014; Zhang, 2004; Arabaiy & Suradi, 2007).
The debate surrounding performance appraisal is even more contested in Nigeria following the rising claims of employee maltreatment in Nigeria. The argument centres around the question of whether performance appraisal serves as a positive motivation or negative pressure used by managers to threaten the job security of employees (Adewunmi & Adenugba, 2010). According Emekenem (2016), many employees feel their managers set unrealistic targets for them to meet and unfairly judge them based on their ability or inability to meet these targets. Furthermore, many workers feel their performance appraisals are biased and do not put employees on a level playing field (Kolawole, Komolafe, Adebayo & Adegoroye, 2013).
Additionally, there is the case that performance appraisal discourages teamwork as the focus of Performance Appraisal in most firms remains on the individual employee. Regardless of the emphasis, an effective appraisal system evaluates accomplishments and initiates plans for development, goals, and objectives. However, many studies have shown that performance appraisal serves many purposes, especially in a world were improved results and efficiency are increasingly critical in today’s globally competitive marketplace. Therefore, the challenge remains determining how performance appraisal can be channelled to improve employee’s productivity and performance.
1.2 Statement of Problem
There are varying views to how people perceive the impact of performance appraisals on employee job performance. Some studies have suggested that it is beneficial to the organisation in terms of the performance of individuals (Boice & Kleiner, 1997). However, recent research suggests that some large organisations are completely changing the way their organisations approach critical elements of the performance appraisal because they have found it to have a negative effect on the moral of employees which ultimately affect their productivity (Rock & Jones, 2015). Studies have shown that a lot of employees have experienced both being unmotivated to the point of despair and being motivated to the point of pure joy by the outcome performance appraisal on the job (Delery & Doty 2006; Youndt, Snell, Dean & Lepak, 2006). This has led to questions about the methods of performance appraisal and the manner in which they are conducted. Therefore the major dilemma remains what method performance appraisal channels a positive energy to employees and does it improve their productivity. It is based on this dilemma and the back and forth between the existing literatures that spurs this research.
1.3 Research Aim and Question
The major aim of this research is to determine the impact of performance appraisal on employee productivity. The specific aims are:
- To determine the effect of Management by Objective on employee motivation.
- To determine the effect of Ratings Scale on employee engagement.
- To determine the effect of Behavioural anchored appraisal on employee service quality.
1.4 Research Questions
This research will aim to answer the following questions
- What is the effect of Management by Objective on employee motivation?
- What is the effect of Ratings Scale on employee engagement?
- What is the effect of Behavioural anchored appraisal of Post appraisal interview on employee service quality?
1.5 Research Hypothesis
There are basically two types of hypothesis used in this study:
Null (H0) and alternative (H1) they are used below
Hypothesis is made here, each opposing the other based on the above questions:
- H0: There is no significant effect of Management by Objective on employee motivation
H1: There is a significant effect of Management by Objective on employee motivation
- H0: There is no significant effect of Ratings Scale on employee engagement.
H1: There is a significant effect of Ratings Scale on employee engagement.
- H0: There is no significant effect of Behavioural anchored appraisal on employee satisfaction.
H1: There is a significant effect of Behavioural anchored appraisal on employee satisfaction.
1.6 Operationalization of the Study
Operationalization is a mathematical depiction of a research topic, it is breaking down of the research topic into two variables, and they are the dependent variable and independent variable. The dependent variable is that which needs the other to make meaning while the independent does not need the other to have meaning, it can stand on its own.
The dependent variable in this study is the employee productivity, while the independent variable is performance appraisal.
Examining the impact of performance appraisal on employee productivity as the topic has the following constructs: dependent constructs as employee productivity and independent as performance appraisal:
Y =F(X)
Where Y is a dependent variable, F is a function and X is an independent variable
The above is mathematically expressed as Y=f(x)
Where Y= dependent variable
X=independent variable
Y= Employee Productivity
X= Performance Appraisal
Therefore from these equation sales of consumer goods depends on marketing mix strategies.
This is expressed as;
Employee Productivity= f (Performance Appraisal)
This is EP = f (PA)
Where EP = Y and PA = X
The X and Y are broken down as follows;
Y= (Y1, Y2, Y3)
Y1= Employee Motivation
Y2= Employee Engagement
Y3= Employee Service Quality
Similarly, X = (x1, x2, x3)
Where
X1=Management by Objective
X2= Ratings Scale
X3= Behavioural anchored Appraisal
1.7 Scope and Limitations of Research
This research would be conducted on a Multinational Corporation based in Nigeria, here after called (MNCN). The organization is Nigerian Breweries. This organisation is known all over the world for her household products are used by millions of people every day. Within Nigeria itself, this organisation is one of the oldest manufacturing organisations and is very committed to bettering the Nigerian community, by offering products that have considerably reduced environmental impact, improving livelihoods of the communities they serve in, and ensuring that as a manufacturing organisation it does not in itself constitute an environmental hazard by keeping a close watch on its environmental footprint. This research would be limited to this organisation as it is going to be an in-depth study of the performance appraisal practices of the organisation.
1.8 Significance of the Study
The study will be important in providing a leeway for the management in Nigerian Breweries to assess performance appraisal methods and make adjustments where necessary, if employee productivity is to be achieved.
The study will be of benefits to employees and management in the Manufacturing sector as it would show them areas where their performance appraisal methods are faulty and how they can improve it in order to inspire increased productivity for their employees.
The study will be significant to the government as the findings and recommendations of the study can be applied to the public sector. It will show the government the importance of performance appraisal and how it can be applied in the public sector.
Furthermore, it will add to the body of knowledge on performance appraisal and employee productivity.
1.9. Organization of the study
Chapter one of this study covers areas of these research work, such as introduction, which comprise of the background of the study, statement of the problem, objectives of the study, research questions, formulation of hypotheses (null and alternative), scope of the study, significance of the study, operational definition terms and operationalization of the variables.
Chapter two reviews all relevant literature to the study as well as the researcher’s view concerning previous studies on human resource management practices on organizational performance and other related matters, Conceptual, theoretical, empirical and gap.
Chapter three includes the methodology to be applied in collecting and analysing data, population definition, study sites and limitation.
Chapter four will present the study as well as the data analysed and the interpretation of the analysed data.
Chapter five includes a summary of the study, conclusion and recommendation based on findings.
1.10 Definition of Terms
Work Level: Within this organisation, employees are placed based on seniority in work-levels. Within the global frame, MNCN is regarded as a Work Level 5 organisation where the most senior person in the position of Managing Director and Senior Vice President, is on Work Level 5. All other employees are on lower work levels. The organisation structure can be further understood with the figure below.
Job Grades: The work levels are further split into job grades. On each work level, the grades typically connote the seniority of the role or sometimes the individual. The distinctions from one work level to another, or job grade to another, lies in the scope of the work expected for that role and the level of decision making to be done also within the role. Work level one has 7 grades, Work Level 2 has 3 grades, and all the others have 2 grades per work level i.e. from 3 upwards. In terms of hierarchy, it’s arranged in ascending order from 1A to 1E, 2A to 2C etc. See an illustration
Management Employee: This refers to the employees from grade 1D, who are regarded within the organisation as Management Staff. They are non-unionized and their work is usually not directly related to output like those of the factory staff. Their work is also highly unquantifiable unlike factory staff, with the exception of field sales employees who are judged against their targets and accompanying behaviours. Operators and Supervisors would usually report into them.
Mid-Year Conversation: This is the first formal performance appraisal of the year. The dates are usually announced and it is driven globally throughout the MNC in other countries apart from Nigeria.
End-of-Year Conversation: This is the final Performance Appraisal for the year, where employees work and outcomes are reviewed against outcomes agreed previously at the beginning of the year. A rating for the year is usually proposed during this conversation.
Talent Performance Calibration (TPC): This is the session held by the midlevel managers within the organisation to discuss talent. The agenda usually involves going through the outcome of the end of year conversation for each individual within the function, here the performance rating of the individual is usually agreed for the year and this feeds into pay roll for the next year i.e. it determines to a large extent the amount of increment the individual receives during the annual pay review and also affects how much of the company bonus is allocated to the individual.
Human Resource Business Partner (HRBP): This is the process owner and go to person for all HR matters within a function. This person also acts as the facilitator of the TPC session that is held within the function for all work level 1 and 2 employees.
Goal Setting: This is the period at the beginning of the year were goals for each individual are agreed and are also aligned either to business goals or functional goals. The priority for these goals are also set at the same time.
Listing: This is another outcome of the TPC session held with midlevel managers. This is where an individual is identified and agreed upon as key talent and listed or watch listed for a High Performer title. The benefits that accrue to such listing range from leadership development opportunities for the next role, to an upgrade to the premium zone of the pay scale.
Standards of Leadership (SOLs): The behavioural scale by which employees are judged.
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