EFFECTIVENESS OF PERFORMANCE APPRAISAL: ITS MEASUREMENT IN PAKISTANI ORGANIZATIONS

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1 685 EFFECTIVENESS OF PERFORMANCE APPRAISAL: ITS MEASUREMENT IN PAKISTANI ORGANIZATIONS Muhammad Zahid Iqbal * Hafiz Muhammad Ishaq ** Arshad Zaheer *** INTRODUCTION Effectiveness of performance appraisal is one of the major human resource issues, which is significantly taken up by public sector organizations in general and business organizations in particular. Therefore, the researchers set objective of this paper to study the factors that help measure the effectiveness of performance appraisal in Pakistani organizations. This paper aims at answering the research question that which criteria for measurement of effectiveness of performance appraisal are appreciated by managers/employees in Pakistani organizations? LITERATURE REVIEW According to Jacobs and colleagues (1980), cited in (Murphy & Cleveland, 1995, p ), effectiveness of performance appraisal is measured by categorizing its evaluation into three criteria. First is Utilization Criteria, which addresses the administrative and developmental purposes of performance appraisal. Second is Qualitative Criteria, it relates to job performance, data availability, equivalence, interpretability and practicality. Final is Quantitative Criteria, it focuses on elimination of rating errors. Organ (1988) maintained that employee s appraisal satisfaction was logically related to the perceived fairness/effectiveness of performance appraisal. Likewise, Blau (1999) viewed that employee s appraisal satisfaction focused on perceived fairness therefore, he suggested measurement of four major characteristics of performance appraisal process i.e. timeliness, procedures, setting goals, and feedback to assess level of employee s appraisal satisfaction. In addition, he further proposed establishing a positive link between employee satisfaction and subsequent manifestations of satisfaction experienced as outcomes of performance appraisal such as pay, promotion, supervision, job security, work, supervision, and co-workers. Cook and Crossman (2004) found appraisal dissatisfaction as a major cause of discrepancy between expectations and outcomes. According to them fairness can only be based on an individual s expectations and outcomes in comparison with other reference employee (employee having same job family and/or treated in the same way in appraisal process) * The author is an educationist and currently working at Allama Iqbal Open University as Assistant Regional Director. He received his Ph.D in Human Resource Development from National University of Modern Languages Islamabad. Contact: mzahid75@yahoo.com ** The author is pursuing his Ph.D in Human Resource Management. He is an Assistant Professor at Federal Urdu University of Arts, Science and Technology, Islamabad, Pakistan ishaq74nk@yahoo.com *** The author is pursuing his Ph.D in Management Science from Foundation University, Rawalpindi, Pakistan arshad_zz@yahoo.com

2 686 in the organization. Such employees perceive appraisal as ineffective due to equitable outcomes of the performance appraisal system (Cook & Crossman, 2004). While measuring effectiveness of performance appraisal, Dorfman, Stephan and Loveland (1986) undertook four variables vis-à-vis job performance (current and subsequent), feedback (with three facets i.e. support, pay and advancements, and performance improvement), satisfaction, and motivation. Variables of satisfaction and motivation were found significantly correlated with current and subsequent job performance whereas administrative factor of feedback (pay and advancements) and organizational outcome i.e. satisfaction were found positively inter-correlated. Therefore, such administrative elements were suggested to be made part of appraisal system to promote positive feelings of ratee towards appraisal process. They also found direct relationship between supervisors performance ratings of their subordinates and the level of feedback (support) provided by them (high performance ratings high support and vice versa), which was hypothesized. However, they maintained that it were more effective if the indirect relationship had existed (low performance ratings high support and vice versa). Procedure and Measures The researchers designed a survey questionnaire for managers and operatives working with public and private sector organizations of Pakistan. As suggested by Fink (1995b), only purposeful statements based upon research objective and hypotheses were included. All questions were closed to elicit standardized response. Medium of communication was English with focus on use of conventional language. Wording of survey questions/statements was kept simple and unbiased (McClelland, 1993) and questions of trivial nature were avoided (McClelland, 1994). Instructions/legends were also given at the start of every set of questions having same format (Cooper & Emory, 1995). For expeditious response, survey questionnaires were administered through referrals. The researchers maximized accuracy in the test scores by applying measurement scaling carefully. The research design of the study used five-point Likert scale for all survey questions (Fink, 1995a). Nominal scales were also used for few personal information questions. The researchers focused mainly on inferential statistics with the purpose to test the hypotheses, but for description of facts found in data, tools of descriptive statistics were also used. Data were prepared for application of statistical treatments for further descriptive and confirmatory analyses. Three hypotheses were developed and tested to find as to whether they had answered the research question. Two independent samples t-tests were performed to analyze difference between mean values of two groups in the respective data set. Hypotheses were: H 1 : There is a significant difference of opinion between managers/employees working with public and private sector organizations regarding measurement of effectiveness of performance appraisal based on utilization, qualitative and quantitative criteria. H 2 : There is a significant difference of opinion between managers and employees working with public/private sector organizations regarding measurement of effectiveness of performance appraisal based on utilization, qualitative and quantitative criteria. H 3 : There is a significant difference of opinion between male and female managers/employees working with public/private sector organizations regarding measurement of effectiveness of performance appraisal based on utilization, qualitative and quantitative criteria.

3 687 Respondents Characteristics Managers who appraised performance and employees whose performance was appraised in Pakistani public and private sector organizations were considered as elements of population for the study. The researchers contacted some 300 managers/employees working with public and private sector organizations of Pakistan through survey questionnaires. Overall response of survey questionnaires, ready for further analysis, was 42%. The researchers gave due importance to the issue of blank responses and straightaway excluded the questionnaires having less than 75% responses as suggested by Sekaran (2003). Before application of statistical treatments on data, it was analyzed that average response of survey questions was 99%. Minimum response to survey questions in a questionnaire was 95% whereas maximum response was 100%. In addition, table 1 displays aggregate profile of the respondents. Table 6 Respondents Characteristics Selected Dimensions % n Age Gender 20 to 29 years to 39 years to 52 years Male Female Education Masters or above Graduation Experience Less than 1 year to 3 years to 7 years years or above Job Position Managerial/Officer Employee/Operative Type of Organization

4 688 Pubic Sector Organization Business/Private Sector Organization Own Business Instrument s Reliability Inter-item reliability coefficient i.e. Cronbach s alpha for overall measurement of effectiveness of performance appraisal (14 items) was To delete an item from questionnaire, Cronbach s alphas ranged between and 0.833, which were good enough for further statistical analyses (Sekaran, 2003). Therefore no item was eliminated. Data Reduction Factor Analysis Factor analysis was applied to reduce data. Table 2 shows that overall, no construct was eliminated. Thus, for 14 items of three latent variables of measurement of effectiveness of performance appraisal, a total of 3 iterations were performed for communalities and rotated components matrices. The number of eliminated items came to 4. Therefore, 10 items with higher factor loadings carried forward for further statistical analysis. The coefficients of Kaiser- Meyer-Olkin (KMO) against all latent variables were more than 0.50 (i.e. Minimum = and Maximum = 0.770). Bartlett s Coefficient against all latent variables was found significant at p = 0.01.

5 689 Table 7 Summary of Factor Analysis and Tests of Assumptions for Factor Analysis Kaiser-Meyer-Olkin (KMO) and Bartlett s Coefficients Variables Total Items Eliminated Items Iterations KMO c Bartlett d Items Total (C a, RM b ) Remaining Total (C a, RM b ) χ 2 df Sig. Measurement of PA Effectiveness Utilization Criteria * Qualitative Criteria * Quantitative Criteria Total a C = Communalities b RM = Rotation Matrix c KMO = Kaiser-Meyer-Olkin Measure of Sampling Adequacy d Bartlett s Test of Sphericity * p < 0.01

6 690 The factors having higher loads existed in the variables of measurement of effectiveness of performance appraisal. Measurement comprised three criteria vis-à-vis utilization, qualitative and quantitative. Table 3 reveals that these latent variables have 10 items with higher loads based on communalities and rotated component matrices. The estimates of the variance in each item accounted for by the components in the factor solution were above 0.50 except achievement of administrative purposes i.e Its deficiency of 0.45 was ignored due to its significant role (see Iqbal, 2008). According to rotation sums of squared loadings, component/s collectively explained more than 60% of the variance except utilization criteria for measurement of effectiveness of performance appraisal, which was ignorable. However, in case of latent variable of quantitative criteria for measurement of PA effectiveness, cumulative percentage of rotation sums of squared loadings was not calculated reason being there was only one item i.e. elimination of rating errors (see Murphy & Cleveland, 1995). As regards variable of measurement of effectiveness of performance appraisal, items eliminated were Improvement in ratee s job performance, Availability of relevant data, Feedback to communicate pay and advancements and Feedback regarding performance improvement Table 8 Factor Loadings Measurement of Performance Appraisal Dominating Items a Extraction b Component c Rotation Sums of 1 2 Squared Loadings Cumulative % Utilization Criteria Achievement of strategic purposes Achievement of developmental purposes Achievement of administrative purposes Qualitative Criteria Practicality of evaluation Feedback to support ratee True interpretation of results Satisfaction of ratee Equivalence/equity among all ratees Motivation of ratee Quantitative Criteria

7 691 a Initial Value of all items is b Extraction Method: Principal Component Analysis c Rotation Method: Varimax with Kaiser Normalization RESULTS AND DISCUSSION Table 4 shows that minimum M was 3.73 against latent variable of quantitative criteria for measurement of effectiveness of performance appraisal. Maximum M was 4.17 against achievement of developmental purposes (an item studied under latent variable of utilization criteria for measurement of effectiveness of performance appraisal). Thus, overall mean scores and relative standard deviations revealed respondents agreement to the all criteria for measurement of effectiveness of performance appraisal. Table 9 Means and Standard Deviations Constructs M SD Measurement of Effectiveness of PA Utilization Criteria Achievement of strategic purposes Achievement of developmental purposes Achievement of administrative purposes Qualitative Criteria Practicality of evaluation Feedback to support ratee True interpretation of results Satisfaction of ratee Equivalence/equity among all ratees Motivation of ratee Quantitative Criteria Table 5 displays the results of two independent samples t statistic, applied to test the hypotheses 1, 2 and 3. The average perceptions of managers/employees of public and private sector organizations of Pakistan were same in respect of variables of measurement of effectiveness of performance appraisal. Results related to hypothesis 2, revealed that average

8 692 perceptions of managers/officers and employees/operatives of public/private sector organizations of Pakistan were same in respect of measurement of effectiveness of performance appraisal. Likewise, results of third hypothesis revealed that average perceptions of male and female managers/employees of public/private sector organizations of Pakistan were same in respect of measurement of effectiveness of performance appraisal. Table 10 Two Independent Samples t Table on Comparison between Mean Perceptions of Male and Female, Managers and Operatives of Public and Private Sector Pakistani Organizations Regarding Measurement of Effectiveness of Performance Appraisal Variables Two independent samples t Sector-wise (Public-Private) Position-wise (Manager-Operative) Gender-wise (Male-Female) t df Sig. t df Sig. t df Sig. Measurement of PA Effectiveness Utilization Criteria Qualitative Criteria Quantitative Criteria *p < 0.05 (two tailed) These results overall support previous studies for adopting utilization criteria (e.g. Jacobs & colleagues, 1980 cited in Murphy & Cleveland, 1995), qualitative and quantitative criteria (see Jacobs & colleagues, 1980 cited in Murphy & Cleveland, 1995; Dorfman, Stephan & Loveland 1986) for measurement of effectiveness of performance appraisal. CONCLUSİONS Conclusions substantiated the research objective while answering the research question that Pakistani public and private sector organizations do believe in measurement of effectiveness of performance appraisal. However, they generally agree to all criteria for measurement of effectiveness of performance appraisal but utilization and qualitative criteria are slightly preferred over quantitative criteria.

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