Chapter 1 Introduction 11 Background Business Essay

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Human Resource Management has been increasingly recognised by various companies and organisations as a significant element of strategic management. When managed properly, human resource can enhance organisational effectiveness and can also be a source of competitive advantage.

In the last decade, performance appraisals have undergone so many changes (Redman & Wilkinson, 2001). During recent years performance appraisal systems have tended to move away from being primarily control and maintenance based and have moved towards an approach more concerned with motivational and developmental issues. As human resources management evaluative tools, performance appraisal measures are widely used by managers. They need to know and analyze their employees' abilities and accomplishments during a given period. If adequately informed on their employees' capacities and performances-whether the results are positive or negative- managers can implement actions which will help motivate the employees to improve their performance. The empirical-and variable-based nature of these measures provides a more balanced view of how well employees fare in accomplishing their specific tasks allotted for their positions. While all industries generally use performance appraisals in one way or the other, these measures are specifically important for service-oriented firms whose very survival rely on customer satisfaction on their employees' service to them. Hence, performance appraisals for the service sector count on a.) The managerial view of their employees' performance and b.) The extent of customer satisfaction with their handling of issues and wants.

A performance appraisal is the process of assessing workers performance in comparison to certain predetermined organizational standards. Appraisals not only help employees understand how they are doing but they also help the worker's supervisor along with the organization as a whole.

Performance appraisal is an important part of performance management. In itself it is not performance management, but it is one of the range of tools that can be used to manage performance. Because it is most usually carried out by line managers rather than HR professionals, it is important that they understand their role in performance management and how performance appraisal contributes to the overall aims of performance management.( CIPD,2010)

Performance appraisal is one way of giving employees feedback about their performance at work. According to ACAS (1997) appraisals regularly record an assessment of an employee's performance, potential and development needs. Performance appraisal is a formal system of measuring, evaluating, and influencing an employee's job-related attributes, behaviours and outcomes.

In some organisation's appraisal results may be used to determine relative rewards in the firm who should get merit pay increases, bonuses, or promotions. Similarly, appraisal results can be used to identify the poorer performers who may require some form of counselling, demotion, dismissal or decreases in pay. Interestingly, performance appraisal is a very controversial managerial issue. Some researchers have expressed doubts about the validity and reliability of the process. On the other hand, there are advocates of performance appraisal who claim that it may well be the most critical of all perfomance management practices.

Performance appraisals provide employees with recognition for their work efforts. The appraisal system provides the supervisor with an opportunity to indicate to employees that the organization is interested in their performance and development. This recognition can have a positive motivational influence on the individual's sense of worth, commitment and belonging.

1.2 Statement of problem

In this 21st century, the business environment is becoming increasingly uncertain and dynamic. This trend, which began in the sixties, has accelerated due to environmental forces such as globalization, advances and innovation in technology and changes in the market conditions. In order to survive and sustain in such a competitive environment, a large number of firms has adopted competence-based management as an approach to human resource management (HRM). It provides interaction between human resource systems and a company‟s strategy (Meshoulam & Baird, 1987;Santos, 2000; Schuler & Jackson, 1995). The changes in the business environment require firms to show greater concern in developing human competence. It plays an important role to achieve success and have a competitive advantage over their competitors (Drejer & Riis, 1999). Thus, the performance management and appraisal system refers to a function within the HRM which allows firms to develop a competent workforce. The important role that Performance Appraisal plays in organizations, especially in HRM practices has long been recognized (Borman, 1979; Judge & Ferris, 1993; Landy & Farr, 1980). PA serves a variety of purposes such as providing the basis for making selection decisions, determining salary increases, and providing a vehicle for feedback between supervisors and employees. However, most research in this field was directed toward establishing methods for improving the properties of performance ratings (e.g.Kumar, 2005; Tziner, Joanis & Murphy, 2000 the foundation of these researches is that employees' opinions regarding the Performance Appraisal process are highly critical to the long-term effectiveness and the success of the system as well.

1.3 Purpose of Study

Organisational Performance is mostly determined by performance appraisal. The Implementation of performance appraisal on employee performance and subsequently the derived feedback from the process have derived attention in recent times from both researchers and the management of most organization.

The purpose of this study is to examine the statement "IF and To what extent performance appraisals motivate individuals in the workplace. This research would like to focus on investigating role that performance appraisals play in motivating employees.

1.4 Research Objectives

1) To know how employees in an organization react to performance appraisals in relation to how they are motivated.

2) To know if performance appraisals plays a role in motivating employees to be more productive.

3) To find out the benefits of performance appraisals to employees.

4) To explore the Top management expectations on the goals and usefulness of performance appraisal

1.5 Research Questions

a) Is there a significant relationship between Performance appraisal and employee motivation to work?

b) How do employees perceive performance appraisal in relation to work in an organization?

c) Does performance appraisal has more negative effects on employees than positive effects?

d) Does Performance appraisal change Employee attitude to work?

e) Is performance appraisal an effective performance management tool?

1.6 Limitation of Study

The sample of this study consists of the managers and employees of the Human resource department of a University within the Education Industry. Due to the nature of the study and the policies of these Universities, employees may not give the necessary response and managers may not be willing to participate in the study.

Also, in the collection of secondary data, there was limited literature on the role of performance appraisal in motivating employess. This was a big limitation to this piece of research work since not much published work has been done in this area .

1.7 Definition of Terms


Motivation can be defined as that which makes people act or behave in the way they do. In a work environment, it is sometimes viewed as the difference between what people can do and what they will do. Motivation begins with the needs that exist within us. If these are unsatisfied we establish a goal, consciously or unconsciously, and take action to achieve that goal. People sometimes make the mistake of trying to motivate others on the basis of faulty assumptions about their future behaviour.


Performance Appraisals as "a process designed to improve organisational, team and individual performance (Armstrongs, 1994). Performance appraisal also known as performance review, formally documents the achievements of an individual with regards to set targets.


Performance management can be seen as a systematic approach to management which uses goals, measurement, feedback and recognition as a means of motivating people to achieve their goals