Latham And Wexley Performance Appraisal Commerce Essay

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This chapter essentially presents a more detailed variation of all variables involved in the study. First of all, it outlines the performance appraisal and the effectiveness. Besides, it also explains about justice and fairness, job satisfaction, employee's commitment and motivation and their turnover intention.

Latham and Wexley (1994) refer to the performance appraisal as any personnel decision that affect the status of employees regarding their retention, termination, promotion, transfer, salary increase or decrease, or admission into training programs. This definition shows that performance appraisal is the key in controlling people within the organization. The definition by Latham and Wexley is in line with Fletcher and Williams (1986) as both of them claimed that performance appraisal is determined by the management and it is the central part of personnel management activity, linking it with almost every other aspect of human resource activity.

In addition, Leap and Crino (1993) defined performance appraisal "as a process of assessing the quantitative and qualitative aspects of an employee's job performance". However, according to Sisson (1991), performance appraisal is "the process whereby current performance in a job is observed and discussed for the purpose of adding to the level of performance". On the other hand, Harvey and Bowin (1996) defined performance appraisal as the accomplishment of employees' assigned duties and the outcome produced in a specified job function or activity during a specified time period while performing their jobs. Milkovich & Boudreau (1997) referred to performance assessment or performance appraisal as the process that measures employee performance and employee performance is the degree to which employees accomplish work requirements.

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Armstrong (1993) defined performance appraisal "as a means of getting better result from the organization, teams and individual by understanding and managing performance within an agreed framework of planned goals, objectives and standards". However, according to Fletcher (2001) performance appraisal is a "general heading for a variety of activities through which organizations seek to assess employees and develop their competence, enhance performance and distribute reward".

2.2 Effectiveness of performance appraisal

Performance appraisal effectiveness refers to the accuracy of performance observations and ratings as well as the ability of the performance appraisal process to improve the rate's future performance(Cynthia, 1985). Hammond 1980, 1981(as cited in Cynthia 1985) has suggested that different types of tasks require different cognitive processes for effective performance. According to Feldman (in press) (as cited in Cynthia 1985), the cognitive processes engendered by different tasks affect raters' perception and categorization of persons during performance appraisal, which influences recall and judgment. The rater must be trained to observe, gather, process, and integrate behavior-relevant information in order to improve performance appraisal effectiveness (Cynthia 1985).

Lawler (1994) define that, reactions to appraisal and the appraisal process are believed to significantly influence the effectiveness and the overall viability of appraisal system. Scullen (as cited in Robert E, 2008) is reported that among the many outcomes of the appraisal process, accuracy of ratings and perceived effectiveness of the interview is critical. However, according to Ilgen (1992) the use of appraisal ratings as inputs to a range of administrative decisions, such as training and development, compensation and promotion contributed to the focus on appraisal accuracy as the primary criterion of appraisal effectiveness. Consistent with this emphasis, performance appraisal researchers Forgas and George (2001) in the past paid more attention to errors in information processing and judgments than to understanding what appraisers do well.

Lawler, Mohrman, and Resnick 1984 (as cited in Clinton, Patrick, Kathlyn 1988) argued the need to better understand differences in managers and subordinates' perceptions of the appraisal process. They postulated that performance appraisal systems will be effective (i.e accomplish the intended purpose) to extent that managers and subordinates have a shared perception of the purpose and function served by appraisal and the extent to which the process satisfies the needs of both parties.

The functions effectively served by the appraisal process are a source of continuing debate, as academics seek to better understand the appraisal process and organizations seek way to increase its effectiveness. Further research suggests that having a technically sound appraisal system and procedure is not guarantee that an organization's appraisal process will be effective. Manager and subordinates must have a shared perception of the purposes and functions of the process and the belief that the appraisal process is useful to them on an individual basic. Thus, an effective appraisal is one that satisfies the needs of the parties involved in the process. To be effective managers must have not only the skills necessary to conduct effective appraisals but also the willingness to do so (Clinton and Stephen 1992).

2.3 Justice and fairness

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I.M Jawahar (2007) suggest that perception of fairness are important to all human resource processes, e.g. selection, performance appraisal, and compensation, and particularly so, to the performance appraisal process. Cardy and Dobbins, 1994 (as cited in I.M Jawahar, 2007) asserted that "with dissatisfaction and feeling of unfairness in process and inequity in evaluations, any appraisal system will be doomed to failure". In practice perceived fairness of evaluation, the procedures used to evaluate performance, and the manner in which performance-related information is communicated likely play an integral role in shaping ratees' reactions to critical elements of the appraisal process. (I.M Jawahar 2007). Besides that, Taylor (1995) has also acknowledged the importance of fairness to the success or failure of appraisal system.

According to James Brown, 2007 (as cited in Abuduaini, 2009), he defines, fairness as equal treatment, receiving the same services and benefits as other people. Fairness means different thing to different people, and our view of whether or not something is fair often depends on the circumstances (Klesh, J.1979 as cited in Abuduaini, 2009). Konovsky, 2000 (as cited in Sharon and Mark 2008) argues that the importance of fairness lies in its role as a primary organizational value and in understanding the consequences of employee fairness perception. Research has demonstrated that perceptions of fairness result in increased favorable employee attitudes and behavior, such as organizational citizenship behaviors (Skarlicki and Latham 1996,1997 as cited in Sharon and Mark 2008) and organizational commitment (Folger and Konoveky 1989 as cited in Sharon and Mark 2008).

Fairness and equity in performance appraisal can best be defined as the quality of being fair in a formal situation where no one person has an unfair advantage in indentifying, measuring, and managing human performance in an organization. This mean we must appraisal someone equally and in a formal situation (to put aside any relationship or misunderstandings with the person being appraised). If the performance rating mechanism is used accurately but is perceived by subordinates as unfair, it will have negative outcome. However, if it happened that performance appraisal mechanism is used inaccurately but perceived by subordinates as fair, a possibility of negative outcome can be hindered (Ab. Aziz Yusof, 2009, p.170).

There are three components of justice that need to be upheld during the implementation of performance appraisal. These are distributive justice, procedural justice and interaction justice.

Distributive justice

The study of distributive justice deals with the perceived fairness of the outcomes or allocations that individuals in organizations receive (Folger and Cropanzano, 1998 as cited in Lawrence 2005). Distributive justice is based on the equity theory of motivation introduced by Adam Smith in 1965. According to him, individuals in the organization tend to compare their contribution and rewards with that of other individuals in the organization. Employees hope to get what they deserve, not less and not more. By comparing himself with others, the individual will tend to make more effort and be more committed if he/she finds that the rewards gained is just compared with others' contribution and reward. On the other hand, if he/she perceives that his/her rewards are unfair compared with other people's input and outcome, there is tendency that they will withdraw or make less effort or change their perception of inputs and outcomes. In other words, the employee is prepared to change his/her behavior, attitudes or both as result of his/her perception of distributive justice in the organization (Ab. Aziz Yusof,2009, p171).

Procedural justice

The study of procedural justice focuses in the fairness of methods that are used in organizations to arrive at distributive justice. It addresses 'fairness issues concerning the methods, mechanisms, and processes use to determine outcomes' (Folger and Cropanzano, 1998 as cited in Lawrence 2005). Perception of procedural justice reflect an appraisal of the process by which an allocation decision is (or was) made (Folger and Cropanzano, 1998 as cited in Lawrence 2005). Procedural justice in performance appraisal emphasizes the process of evaluation during which decisions made are not in conflict with various parties involved in the process. Levental 1976, (as cited in Ab. Aziz Yusof 2009) also maintained that there are three principles affecting perceptions of procedural justice. There are:

Correct ability rules- procedures should increase employee input into the decision process.

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Accuracy rules- procedures should enhance the accuracy of information used in the decision process.

Bias suppression rules- procedures should discourage managers from using bias in their decision.

Interaction justice

Interaction justice refers to 'justice appraisals based on the quality of the interpersonal treatment (people) receive' (Bies and Moag, 1986, as quoted in Cropanzano and Randall 1993 as cited in Lawrence 2005). Bies and Moag argued for the inclusion of an intervening factor that influences perceptions of organizational justice. They held that organizational justice is a function of the procedures in place, the interaction among members, and resulting outcomes. A concern with interactional justice therefore involves raising questions about the type of 'interpersonal sensitivity' and other aspects of social conduct that characterize social exchange between parties, including the explanation offered for certain decisions made about the individual (Folger and Cropanzano,1998 as cited in Lawrence 2005).

According to Tyler and Bies 1989(as cited in Ab. Aziz Yusof 2009), procedural fairness is found to be a function of the perceived sincerity and adequacy of the explanation. This finding is particularly relevant to termination decision. An adequate explanation for a termination reduces the time taken by the subordinate, as well as colleagues, to come to terms with the situation. It help to focus the thinking and actions of the terminated subordinate toward looking for a new job. Greenberg & McCarty 1990(as cited in Ab. Aziz Yusof, 2009) claimed that the most important factor affecting perceptions of procedural justice is how subordinates feel about the quality of their interaction with the management. This emphasis on interaction justice may be especially important in minimizing wrongful dismissal suits, which often reflect a desire to "get even" with the person who made the decision to terminate the subordinate.

2.4 Job Satisfaction

Keeping and Levy, 2000 (as cited in I.M Jawahar 2007) defined an important reaction of all the appraisal reactions; satisfaction has been the most frequently studies. According to Giles and Mossholder, 1990 (as cited in I.M Jawahar 2007) satisfaction with aspects of the appraisal process is regarded as one of the most consequential of the reactions to performance appraisal. For instance, Giles and Mossholder, 1990 (as cited in I.M Jawahar) have asserted that using satisfaction as a measure of employees' reactions affords a broader indicator of reactions than more specific, cognitively oriented criteria. In fact, cognitively oriented measures, such as perceived utility and perceived accuracy are positively related to measures of satisfaction (Keeping and Levy 2000 as cited in I.M Jawahar 2007).

In addition, because appraisals from the basis of several important decisions, satisfaction with key aspects of the appraisal process signifies recognition, status, and future prospects within the organization. Thus, favorable attitudes about reward contingencies develop when satisfaction is high rather than when it is low ( I.M.Jawahar, 2007). Taylor (1984) defined these psychological implications of satisfaction make it a significant determinant of behavior and job and organizational attitudes. Indeed, in Jawahar, 2006 (as cited in I.M Jawahar 2007) study reported that satisfaction with appraisal feedback was positively related to job satisfaction and organizational commitment and negatively related to turnover intention. In summary, theoretical arguments and empirical evidence suggests satisfaction to be among the most important of reactions to the appraisal process.

Brezt 1992 (as cited in Sylvie and Denis,2009) defined dissatisfaction with performance management has been around for many years. According to Skarlicki and Folger,1997 (as cited in Paul & Laurel 2009) the appraisal process can also become a source of frustration and extreme dissatisfaction when employees perceive that the appraisal system is biased, political or irrelevant.

Job satisfaction is the most studied variable in organizations. Locke, 1976(as cited in Tobias and Neal, 2010) defined job satisfaction as a pleasurable emotional state the results from the appraisal of one's job. In other words, job satisfaction describes an affective reaction to one's job as well as attitudes toward the job. This in turn suggests that job satisfaction is formed from affect, cognition, and ultimately will result in satisfaction contingent job-related behaviors. Some of the most commonly studies outcomes of job satisfaction are organizational citizenship behaviors, absenteeism and turnover (Organ & Ryan,1995; Wegge, Schmidt, Parkes, &Van Dick,2007; Saari & Judge,2004 as cited in Tobias and Neal,2010).

According to Spector, 1997 (as cited in Abuduaini, 2009) refer to job satisfaction in terms of how people feel about their jobs and different aspects of their jobs. Ellickson and Logsdon, 2002 (as cited in Abuduaini, 2009) support this view by defining job satisfaction as the extent to which employees like their work. Schermerhorn, 1993 (as cited in Abuduaini, 2009 ) defines job satisfaction as an affective or emotional response toward various aspects of an employee's work. ). Many researchers claim that job satisfaction can be formally defined "as the degree to which individuals feel positively and/ or negatively about their jobs" (Steyn & Van Wyk 1999 as cited in Abuduaini, 2009). This is so true, that if employees' desired expectations are met, then he or she will experience a feeling of accomplishment that will therefore determine the degree of satisfaction (Abuduaini 2009).

Job satisfaction explains what makes people want to come to work. What makes them happy about the job or decide to quit. Job satisfaction does not necessarily mean job productivity, although it affects the latter (Nor Azizah,1998 as cited in Noor Asyikin 2004). This subject is important to employers because an organization does not like to lose staff, and emphasis on job satisfaction may help to make more productive worker (Noor Asyikin 2004). Blake and Mouton,1964 (as cited in Noor Asyikin 2004) suggest that it is necessary to indentify just the needs of an employee. The organization for which he/she works must then ensure that these needs are met if it wishes to secure the advantages of the workers performing with a high level of job satisfaction and for that matter, commitment.

According to Rue and Byers (1994), job satisfaction is made up of five (5) components:

Attitude toward colleagues

General working conditions

Financial benefits

Attitude towards supervision

Job satisfaction occurs when a job meets the expectations, values and standards of an individual and will influence their commitment and performance (Gordon 1999 as cited in Abuduaini 2009). The greater the degree of the expectations being met the higher will the level of job satisfaction be. According to Bateman and Snell, 1999 (as cited in Abuduaini 2009), staff will be satisfied if they are justifiably treated by the outcomes they receive or the processes that are implemented. However, they also warn that a satisfied worker may not necessarily be a productive worker. Job satisfaction can also be portrayed as a feeling of pleasure that stems from an employee's impression of his or her job.

2,5 Commitment toward organization

Employee commitment to an organization, according to theory, is a fairly reliable predictor of certain behavior, with particular reference to turnover. Persons who are committed to an organization should be more likely to remain with an organization and to work toward its goals. Organizational commitment has been identified as a critical factor in understanding and explaining the work related behavior of employees in organizations. There are two underlying themes if organizational commitment to the literature: 1) attitudinal and behavioral. 2) single dimension or multiple commitments. Attitudinal perspective defines organizational commitment in terms of cognitive and effective responses and attachment to an organization. On the other hand, a behavioral perspective focuses on the behaviors that bind an individual to an organization. While for another theme explained that whether the construct consists of a single dimension as in a commitment to an organization, or if there exist multiple commitments for an individual; such as commitment to one's job or career as well as commitment to the organization (Bashaw & Grant,1994 as cited in Noor Asyikin, 2004)

The research of Mowday, Porter and Steers and their collegues (cf.Mowday, Steers, and Porter, 1979; et al,1982 as cited in Lim Soo Giap,1996) define organizational commitment as the "relative strength of an individual's identification with and involvement in a particular organization," and argue that it is "characterized by at least three factors: 1)a strong desire to maintain membership in the organization" (1979).

Most definitions of organizational commitment describe the construct in term of the extent to which an employee indentifies with and is involved with an organization. For instance, the OCQ, develop by porter and smith (1970) defines organizational commitment as the relative strength of an individual's identification with the involvement in a particular organization (Porter, Steers, Mowday & Boulian,1974 as cited in Noor Asyikin 2004). This identification with;1) the organization's goals and value,2) a willingness to exert effort for the organization and3) desire to maintain membership in the organization. Attitudes assessed in this conceptualization were motivation, intent to remain with the organization and the identification with the values of the organization.

Organization commitment differs from the concept of job satisfaction. Organization commitment focuses on attachment to the employing organization, including its goals and values, whereas job satisfaction emphasizes the specific task environment where an employee performs his or her duties. Moreover, organizational commitment appears to develop slowly but consistently over time as employees think about their relationship with the organization. This type of commitment is less affected by day to day events in the workplace (Mowday et al,1997 as cited in Noor Asyikin, 2004). Satisfaction on the other hand, has been found to be a less stable measure over time, reflecting more immediate reaction to specific and tangible aspects of work environment (Porter, Steers, Mowday & Boulian,1994 as cited in Noor Asyikin, 2004). There are also situations where organizational commitment is so powerful that it outweighs job satisfaction.

Performance appraisal decision are critical to employees because it affects their monthly salary and are closely related to their commitment at the workplace (Abdul Hamid , as cited in Rusli and Nur Azman Ali 2004)

2.6 Motivation

Merriam- Webster, 2007 (as cited in Georgina and Tugrul 2010) defined motivate is 'something (as a need or desire) that causes a person to act'. Motivation is one of the main factors that determine the work performance of employees. A person, man or woman, is motivated when he or she wants to do something (Lefter, Manolescu, Marinas and puia, n.d). The motivation of a person covers all the reasons for which he choses to act in a certain manner (Adair, 2006 as cited in Lefter, Manolescu, Marinas and puia, n.d).

Mikkelsen (2005) suggested that employees have higher job motivation when they perceived their performance appraisal as fair and trustworthy. An organization's performance appraisal system can be a practical tool for employee motivation and development when employees perceive their performance appraisal as accurate and fair ( Ilgen 1979, as cited in Paul & Laurel 2009). Lawler (1994) have asserted that appraisal reactions likely play a key role in the development of favorable job and organizational attitudes and enhance motivation to increase performance. Rusli and Nur Azman Ali 2004 defined performance appraisal is also being seen as having direct influence on job satisfaction and motivation of workers.

In 1943, A.H. Maslow came out with "A theory of Human Motivation," in which he discussed how humans have basic needs that need to be met, and once these basic needs have been met a higher level of need arises. According to Maslow, individuals have a hierarchy by which their needs are ordered, and since everyone is different their needs order will vary. The five basic needs that are indentified in Maslow's theory are: physiological, belonging, self-actualization, safety, and esteem (Maslow, 1943; Hughes, 1999 as cited in Georgina and Tugrul 2010). Employee's needs are continuously changing and, therefore, what satisfies and motivates an employee today may not be' what motivates them a year or six months from now (Georgina and Tugrul 2010).

Douglas McGregor developed one of the best known motivational theories, Theory X and Theory Y. In the process of work, McGregor separate employees in two categories. Employees that align to the X theory are predisposed to negligence, by avoiding work as much as possible, by lacking ambition and avoiding responsibilities. Considered a medium level person, the X employee is indifferent to the needs of the company that he belongs to, and has certain inertia toward change, by resisting it. In consequence, at the workplace, the X employee must be forced, threatened with punishments, permanently controlled and penalized in order to be determined to make the efforts necessary to attain the company objectives. According to the Y theory, the employees consider it normal to make physical and intellectual efforts at work, by voluntarily taking upon themselves different assignments and responsibilities and by being motivated by the associated rewards. The Y employee must not be forced by different means to obtain performance, because he is motivated by the content of his work. McGregor's view can, of course, be considered simplistic, because external and internal factors can often decisively influence his work performance (Lefter, Manolescu, Marinas and puia, n.d).

Herzberg developed the Motivation-Hygiene Theory which discusses management's inability to motivate workers and how motivation does not come from just raising salaries, fringe benefits, or duties of the worker (Herzberg, 1987 as cited in Georgina and Tugrul 2010).

2.7 Turnover intention

Tett & Meyer, 1993 (as cited in Christina, Mei Huei and Lilian 2010) defined turnover intention as a conscious psychological willingness to leave an organization. It also represents thoughts of quitting a job or searching for new employment opportunities. Price and Mueller 1981 (as cited in Christina, Mei Huei and Lilian 2010) described how there are diverse factors that affect turnover, which can make it difficult to predict turnover behavior accurately. However, turnover intention (or the intention to leave) has been identified as the best predictor of turnover because researchers have demonstrated that intention to leave has been consistently correlated with turnover (Bedeian, Kemery, & Pizzolatto, 1991; Mobley, Homer & Hollingsworth, 1978; Newman, 1974 as cited in Christina, Mei Huei and Lilian 2010).

Turnover has been used as an organizational performance indicator since the early work of March and Simon 1958 (as cited in Ikhlas Altarawneh and Mohammad H.Al-Kilani 2010). These social scientists defined employee turnover intention as a reflection of an employee's decision to participate and work in the organization. Denvir and McMahon 1992 (as cited in Ikhlas Altarawneh and Mohammad H.Al-Kilani 2010) define labour turnover as "the movement of people into and out of employment within an organization". These definitions suggest the turnover intention can be voluntary or involuntary. Involuntary turnover is when a person is removed from his or her job by the employer (Eric & Nancy, 2008, p98). Voluntary turnover refers to an employee voluntarily leaving and organization. Early approaches such as March and Simon's 1958 (as cited in Tobias and Neal, 2010) contributions and inducements model have identified that job satisfaction determines the perceived desirability of movement, which ultimately determines whether an individual quits the job or not. In March and Simon's model job satisfaction is driven by match between the job and the self image, the match between the job and other roles, as well as the predictability of future relationship inside the organization.

Three categories of factors affect turnover intention: 1) environment or economy; 2) employees; and 3) organization level (Moynihan & Pandey, 2007 as cited in bang cheng, jian xin and jin hu, 2010). Another important aspect of the operation of a business is job satisfaction. In the past several decades, both researchers and managers have become aware that job satisfaction is positively related to job performance (Bono & Judge, 2003; Saari & Judge, 2004 as cited in Bang cheng, jian xin and jin hu, 2010 ).