Performance Appraisal and Employee Motivation
Performance Appraisal and Employee Motivation
1 Sadia Malik Awan 2 Dr. Muhammad Naeem
1 University of Central Punjab
2 Laureate Folks International
ERC, Pakistan
https://laureatefolks.blogspot.com
laureatefolks@gmail.com, WhatsApp: +923334446261
Performance
appraisal is a vital part of human resource studies. It is the key factor that
measures segments for the motivation of an employee in any organization. The
success of any organization depends on the performance of the employee. To
align the performance of an employee with the organization’s goal, the process
of performance appraisal is crucial. Human
Resources can give a distinct benefit to any organization. (Becker and Huselid (1998)). According to Burden 2010, without employees’
effective performance the organization cannot achieve its objective. Human
resources are keys to the business and their best utilization can help them to
be successful. Performance Appraisal is the way to utilize or boost their
performance. Overall performance appraisal
is a systematic and periodic process that assesses the person’s activity,
performance, and productivity. Individual job performance determines overall the
organization’s performance. Performance
review, evaluation, personal rating, the merit rating are different methods to
assess employee performance, used as per requirement ( Ivancevich, 2007).
Employee
performance is evaluated as part of career development through performance
appraisal. In this dynamic business world, talented and high-performing,
motivated employees are required to be successful. Moreover, the performance appraisal
system plays a vital role in human resource management as its help in
managerial decision making like administrative decisions and employee
development.
The finding of Longenecker and Goff (1992), shows that
performance appraisal practice influences the performance in a better way
that’s why it is followed by many managers and human resource personals.
According to Byars and Rue, (2000)
it is the process of assessing employees as per the goals set by the
organization for giving them feedback on their performance.
Moreover, the results
of the performance appraisal help organizations to give employees incentives,
salary increments, promotions, transfer or train and to deal with employee’s strengths
and weaknesses It can help them to work
on the weak point of employees to increase their morale and motivate them to
achieve the organization goal. According to Maley (2013) giving fair treatment, effective communication and
coordination are the results of effective performance appraisal.
A major benefit of performance appraisal is that it will help
to motivate employees if used effectively and efficiently. Employee motivation
is a significant factor that leads them to achieve the bigger objectives of the
organization. According to (Prof.
S. K. Singh & Vivek Tiwari, 2011),
due to lack of motivation and commitment turnover rate in any organization can
increase, due to this reason the study of motivation is emphasized. HRM policies
and practices should be aligned in such a way that it’s not only focused on
employee retention but should also cover the loopholes that lead employees
towards demonization.
Hislop,
(2003) defines motivation as the force which helps employees to accomplish the
task if the needs of employees are being satisfied they will complete it in a better
way. Moreover, according to Steers and
Porter (1987) through employee motivation, their way of completing tasks
and behavior can be changed.
There are different types of motivation: intrinsic, extrinsic,
positive, and negative motivation. Moreover, different theories like Maslow's
Hierarchy of Needs, Herzberg’s Two-factor theory, expectancy theory, McGregor’s
X and Y theory support the motivation factor.
Akafo and Boateng
(2015) said that employees are motivated by rewards and reorganization
that lead them to improve their performance. Performance appraisal makes the
employees learn how to perform functions effectively, due to these findings the
feedback process is introduced. It also played an important role in employee motivations
that increase the overall performance of the employee.
According to Chen & Eldridge, 2010; Appelbaum et al.,
2011,) past studies suggests that a performance appraisal is a motivational
tool used to enhance employees’ motivation. Employee motivation plays a significant
role in the accomplishment of any organization goal so the performance of any
employee should be appraised adequately.
1.1 Problem Statement
·
Does performance Appraisal impact
employee motivation?
·
There is no significant impact of performance
appraisal on employees’ motivation.
·
There is a significant impact of
performance appraisal on employees’ motivation.
1.2 The objectives of the Study
The study is developed
to find out the relationship among performance appraisal and employee
motivation. Some objectives are illustrated below:
·
To analyze the form of performance
appraisal and employee motivation
·
How overall performance appraisal does
influences employee motivation?
·
Investigate employee motivation theories
and approaches
1.3 Significance of the Study
The study defines
the effect of the performance appraisal system on employee motivation. The
benefits of this study are numerous. It is the source of inspiration and
motivation for employees which tends to increase their productivity. Human
resource management tends to deal with the physical and mental capabilities of
employees and this study help to increase employee motivation. Performance appraisal
identifies the satisfaction need of employees; as a result, human resource
practice directs employees to accomplish the goals. This study will also open
paths for scholars and researchers who are interested to pursue their studies
in this area.
2. LITERATURE REVIEW
This paper will
discuss components and theories of effective performance appraisal and employee
motivation. Moreover, we will discuss what are the findings of other
researchers and scholars on appraisal performance and employee motivation?
Performance Appraisal
is a useful tool of human resource management and is also used to reward
employees and for promotion etc. According to
(Talya and Berim, 2010)
different theories like reinforcement theory are used to reward employees as a
performance appraisal tool. Performance Appraisal
is a method used to evaluate employee performance and assess its outcome on job
performance which can determine their development (Lin, Horng, Chen, & Tsai, 2011).
Lotham
and Locke’s (1979) studies suggest that the goal-setting theory of performance
appraisal set the goals for the employee to motivate them and increase
their performance. Locke & Latham (2006), identify that five basic
components like transparency, challenge, task complexity, commitment and,
feedback allow setting goals.
According to Mitchell (1997) setting challenging and
difficult goals motivate employees in a better way than assigning easy goals
and goals should be specific.
Hom,
Mitchel, Lee & Griffeth, 2012, studies show that
motivation is defined as an emotional state of employees through which goals
are achieved.
Vroom
(1964) introduced the
expectancy theory of motivation which explains that employees’ expectation
in work affect their behavior and the reward they seek. The relationship
between setting goals and assessing employees’ behavior is not as simple as it
assumed. The model is defined in pictures:
According to (Rao, 1985),
performance appraisal has components like identification of key performance
areas, self-appraisal thru the subject, performance analysis, identification of
training needs, identification of qualities required to accomplish goals.
Giving feedback through a performance appraisal system; motivate employees to perform their task effectively as motivated employees are more committed to their work. Cook and Crossman’s (2004) studies show that performance appraisal can satisfy employees if the feedback system is fair.
Udeze (2000) states that employee productivity to achieve
the objective of an organization; is evaluated through a performance appraisal system. Employee
productivity depends on how much an employee is motivated and feedback
regarding employee performance plays a vital role. By supervising the employee’s
daily work an effective feedback system can be created.
According to Hekelová (pg. 34-36) performance appraisal and
motivation, influence workers to perform high-quality work which means improving
employees’ work and their overall performance. Motivated employees will spend
more time improving themselves and be happy with their achievements and if the
employees are happy the turnover rate will decrease (Krietner, 1995). Managers
believe that performance appraisal has a positive relationship with the motivation
of the employee. According to Karahan
& Kurtulums, n.d. performance evaluation motivates employees towards
achieving goals and helps to set new goals and improve the performance in a challenging
world.
According to (Pattern, 1977; DeVries,et. al, 1981; Murphy
& Cleveland, 1995) employees’ increment decisions, incentives,
promotion, retention, termination decision, and training and development
program are evaluated from the results of performance management.
As we have
observed from previous studies that employee motivation plays an important role
in organizational development. Performance Appraisal is a system that motivates
employees through rewards, incentives, and training. According to Emmerik, Schreurs, Cuyper, and Peters,
(2012) rewarding is a powerful tool used in performance appraisals such as
salary increments and incentives. Promotion indicts that the past performance
of employees is appreciated, it motivates current and new employees to work
hard towards achieving goals Maana (2013).
Recognition is a
tool that is used to motivate employees if the work of an employee is
recognized he/she will feel appreciated. (Hsiu-Fen,
2007) states that organizations should develop a proper reorganization
system as it is essential for both employees and organization. The employees
who are appreciated and recognized are more positive towards work.
Malhotra
et al (2007:2098) studies observe that intrinsic reward
is an important factor used to motivate employees but employee behavior such as
skill variety, autonomy are also important variables. Appreciation and praising
employees is the most important factor in employee motivation. An appraisal is a
powerful system to motivate employees and it has multiple benefits like demonstrating
the need for improvement; building a sense of personal value, developing and increasing
employee satisfaction and performance. In line with Cory, Ward, and Schultz (2007) employees who obtthe ain substance from
a supervisor after fair feedback contributes efficiently towards creative
goals.
According to Robert & Kim, 2007, if there are
some deficiencies in the performance appraisal system, it will also affect the
motivational level of employees which has an impact on the implementation of
new ideas and goals. Furthermore, employees can also lose interest in
organizational goals.
According, to Daley (1987) training and development
programs derive from performance appraisal to motivate employees. Khan’s
(2012) studies show that as a result of training employee’s job performance
increases. Previous studies show that performance appraisal affects employee
motivation and that increases job performance. In HRM, it is important to set overall
performance criteria that help to achieve organizational goals. KPI is a measuring
tool that measures performance for a specific objective.
According to Selvarajan and Cloninger (2008), few
organizations are not satisfied with the performance appraisal procedure
followed to evaluate employee performance. Performance appraisal is considered an
essential element that creates a good working environment. There are different
performance appraisal rating method and their impact on employee motivation.
2.1
Past oriented Rating Method
The rating scale method is an organized
method of performance appraisal. According to Afriyie, (2009) employee
characteristics are rated against the point that ranges from poor to excellent
performance. This rating scale is an easy and commonly used method (Barringer, Jones, and Neubaum, 2005
The check-list method is used to evaluate employees
thru simply asking yes or no questions. According to Okeyo et al., 2010 human resources do an actual evaluation, and raters
do a report.
Ali,
Mahdi, and Malihe, 2012 have found out some deficiencies in
past-oriented methods like the rating scale technique being less applicable in
all sorts of jobs. In the checklist method, raters are biased and improper weight
is used by the human resource department. Therefore, researchers introduced
modern methods.
2.2
Modern oriented Method
Peter Drucker
1950s introduced Management by the objective
method in this method; performance
appraisal is result-oriented. MBO is a method wherein specific period managers
and employees together identify, plan, organize, and communicate objectives that
are focused on.
The
assessment center method is used in the selection procedure
to test the suitability of the candidate. According to (Scott, Clotheir, and Spriegel, 2007) this method can forecast future
performance than any other method.
2.3
360 Degree Feedback is a method where feedback is composed of
different sources of people like supervisors, peers, and subordinates with
different groups of raters relative to different weightage. Ohabunwa, 2009 said that it is a system
in which employees receive confidential feedback from different people around
them. According to Qureshi et al., (2007) this technique is very useful to assess
team-building skills, interpersonal skills, and customer satisfaction.
It is also an
important decision that who will evaluate the performance of the employee.
Raters should be fair while making a decision.
According to Vasset, Marnburg and
Furunes, (2011) collecting information from different sources and used
accurately by evaluators can reduce biases. Performance appraisal is the only
tool that helps the supervisor to set a clear goal for employees after
assessing their past performance and monitoring them in a specific period. Ali, Mahdi, and Malihe, (2012) studies show
that peers can also monitor the performance of employees if supervisors are
absent or not available for evaluation.
Furthermore,
employee reaction towards performance appraisal system also affect employee’s
motivation level. Studies of Keeping and
Levy (2000); Levy and Williams show that researchers emphasis that how
employees react to performance appraisal. Different criteria are also identified by the
researcher to evaluate the reaction of employees like session satisfaction,
justice, perceived, and system satisfaction.
3. DISCUSSION
The paper aims
to evaluate an effective performance appraisal system and how it affects employee
motivation. The literature reviewed that there is a significant relationship between
performance appraisal system and employee motivation. In this paper, we have
discussed different methods, techniques, and theories referred to by
researchers. Fair feedback, setting appropriate goals, an accurate performance
appraisal system, and employee reaction are important variables. Moreover, it
is noted that motivated employees perform jobs more efficiently and they are
more focused to accomplish organizational objectives and goals. It is important
to select the effective performance appraisal method; the studies show that 360
feedback is more effective; as it assesses employee performance from different angles
(Sahoo & Mishra, 2012). Concerning
motivation, it is observed that factors like rewards, recognition, and
increment have an impact on motivation and employee performance. Long and Shields’s (2010) studies suggest
that employees who achieve goals are rewarded and recognized feel more motivated.
From studies and
previous research, it has been concluded that Performance appraisal and
employee motivation have positive relation which untimely increases their
performance and is useful to achieve organizational goals. It is also discussed
that result/feedback achieved from performance appraisal is used to motivate the
employee. Administrative and other decisions like promotion, training &
development, and termination decisions are taken from the appropriate
performance appraisal system.
4.1 Future Recommendations and Implications
Performance
should be aligned to a better reward and compensation system to motivate employees.
Goals and objectives should be clear to employees. Performance appraisal should
be done monthly quarterly and annually.
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