The Effect of Performance Appraisal on the Employee Motivation

The literature on motivation suggests that there are two categories: extrinsic and intrinsic. Extrinsic motivation results from satisfying, indirectly, the lower-level human needs associated with basic survival (Bennett et al., 2002) and includes financial rewards, working conditions and job security. Intrinsic motivation results from satisfying the higher-level human needs (Bennett et al., 2002). This includes job satisfaction, compliance with standards for their own sake (such as ethical standards, fairness and team spirit) and the achievement of personal goals (Frey and Osterloh, 2002). The Content theories of motivation are based on identifying specific human needs and describing the circumstances under which these needs activate behavior. Amongst these, Maslow and Herzberg are the most famous and still cited in most of the motivation literature (Cuong et al., 2003). Process theories of motivation focus on the ways that people think through motivation issues and how they determine whether their actions were successful. These include expectancy theory, equity theory, goal theory and the psychological contract. Each has merits, but none is sufficient in itself (Handy 1993).

Herzberg's Motivation Theory is thought to be most relevant for this study. Herzberg suggested that there are two different types of needs: (1) hygiene factors (if inadequate these determine levels of worker dissatisfaction): supervision, interpersonal relations, work conditions, salary and job security (2) motivator factors (these determine the level of worker motivation and satisfaction): achievement, the work itself, recognition, responsibility, advancement and growth. Herzberg's model proposes that if salaries are not paid in a timely manner, health workers are likely to become more concerned with getting paid and less willing to exert effort at their job as they seek alternative means of gaining income and support for their families. Motivator factors have been examined at length but researchers have neglected hygiene factors. However, Herzberg also suggests that even when hygiene factors are met, they simply produce neutral feelings if motivator factors are absent. If the problem is staff retention, hygiene factors such as improved salary levels and working conditions will be effective. If the problem is staff performance, attention should be given to motivator factors. For the primary purpose of addressing staff retention, it is relevant for this study to identify the hygiene factors within Herzberg's framework as motivator factors.

Performance appraisal system is usually identified as a critical element for boosting employee motivation (Selvarajan and Cloninger, 2011). Performance appraisal system is an important drive that looks for better, more accurate, more cost-effective ways for of evaluating job performance and employee motivation. Performance appraisal system is a significant technique aimed at enhancing the performance of the employee in the organization (Vasset, Marnburg and Furunes, 2011). Hodgetts (2002) categorizes a four- step process of the performance appraisal system. Performance appraisal systems comprises of established performance standards, a method of determining individual performance, comparison against standards and an evaluation of performance based on the comparison. The first step of establishing performance standards outlines the employees’ job responsibilities. The job standards are set against the worker performance. The second step involves pegging the worker performance (such as traits approach, behavioral approach, ranking methods, alternation ranking, and results methods, productivity measures, 360 degrees evaluation and Management by Objectives (MBO). Thirdly, there is comparison against standards. At some point, the individual work record it compared with the standards set for the job. Fourth, an evaluation of performance is made pegged on the comparison.

Cawley and Keeping (1998) suggested different criteria’s to evaluate employee’s reaction. A few of them are session satisfaction, justice (procedural and distributive), perceived (utility and accuracy), and system satisfaction. Keeping and Levy (2000) have found result that based on the appraisal reaction model adjusting nicely in appraisal effectiveness model in order to measure the success of appraisal systems. Levy and Williams (2004) proposed performance appraisal framework after integrating the prior research and included system satisfaction, session satisfaction, perceived utility. Ilgen and Fisher et al. (1979) stated that productivity, work motivation and organizational commitment can be affected due to satisfaction level of employees related to performance appraisal system. In spite of having developed, technically sophisticated and accurate appraisal system, its effectiveness will be limited if employees do not support and accept the performance appraisal (Cardy and Dobbins 1994).

Selvarajan and Cloninger (2008) suggest that some organizations are dissatisfied with their performance appraisal process. This implies that the performance appraisal process is not an appropriate mechanism for addressing employee motivation. But performance appraisal is considered to be essential to create a positive effect work environment and improve the quality of service. Selvarajan and Cloninger (2011) argue that there are a number of issues associated with the performance appraisal process and these include poor design, lack of attention to the organizational culture, and unwillingness to confront issues of poor performance, as well as time pressure. There are different performance review process and their effect on employee motivation while looking at the past oriented and future oriented methods.

Past-Oriented Methods

Rating Scales

The rating scale method provides a well-structured performance appraisal. Each employee characteristic is rated against a scale with points that range from “poor” to “excellent” performance (Afriyie, 2009). The ratings are based on the ability of the employee to work as a team player, communication skills and technical competence (Khan, 2013). The scale is necessary for the appraisers’ job (Okeyo, Mathooko and Sitati, 2010). The biggest advantage for this technique is the comparison of the employee’s performance in the entire workforce (Ali, Mahdi and Malihe, 2012). The disadvantage of this technique is the lack of applicability on all sorts of jobs. It is also not applicable in measuring the workers traits (Ali, Mahdi and Malihe, 2012).

Check-list Method

Under this method, checklist of “Statements of Traits” of employee in the form of YES or No based questions is prepared. Here, the rater only does the reporting or checking and HR department does the actual evaluation (Okeyo et al., 2010). The rater concerned has to tick appropriate answers relevant to the appraisers. When the check-list is completed, it is sent to HR department for further processing The HR department then calculates the total scores which show the appraisal result of an employee. The advantage of the check list methods is its economic nature, ease of administration, there is limited training which is required and is standardized. However, the disadvantage is the rater’s biases, use of improper weights by HR department that do not allow rater to give relative ratings (Caruth and Humphreys, 2008).

Force Choice Method

The first choice method is a series of statements arranged in the blocks of two or more are given and rater indicates which statement is true or false. The rater is forced to make a choice. HR department does actual assessment. The advantage of this technique is that it has no personal biases because of forced choice but the disadvantage is incorrectly framed statements (Denby, 2010). It forces everyone to do a comparative rating of all the employees on a predetermined distribution pattern of good to bad (Ichniowski and Shaw, 2009).

Future-Oriented Methods

MBO (Appraisal by Results)

The use of management objectives was first widely advocated in the 1950s by the noted management theorist Peter Drucker. MBO (management by objectives) methods of performance appraisal are results- oriented. That is, seek to measure employee performance by examining the extent to which predetermined work objectives have been met (Newman, Thanacoody and Hui, 2012). Usually the objectives are established jointly by the supervisor and subordinate. Once an objective is agreed, the employee is usually expected to self-audit; that is, to identify the skills needed to achieve the objective. They are expected to monitor their own development and progress (Porter, 2008). Instead of assuming traits, the MBO method concentrates on actual outcomes. If the employee meets or exceeds the set objectives, then he or she has demonstrated an acceptable level of job performance (Qureshi at al., 2007). Employees are judged according to real outcomes, and not on their potential for success, or on someone’s subjective opinion of their abilities.

Assessment Center Methods

An assessment center refers a central location where the managers form a team to participate in job evaluation exercises invigilated by trained assessors. It is more focused on observation of behaviors across a series of select exercises or work samples (Porter, (2008). Assesses are requested to participate in in-basket exercises, work groups, computer simulations, role playing and other similar activities which require same attributes for successful performance in actual job (Qureshi et al., 2007). Well conducted assessment centre can achieve better forecasts of future performance and progress than other methods of appraisals. Also reliability, content validity and predictive ability are said to be high in Assessment Centers (Scott, Clotheir and Spriegel, 2007). The tests also make sure that the wrong people are not hired or promoted.

360 degree Appraisal

It is a technique in which performance data/feedback/rating is collected form all sections of people employee interacts in the course of his job like immediate supervisors, team members, customers, peers, subordinates and self with different weightage to each group of raters (Ohabunwa, 2009). This technique has been found to be extremely useful and effective. It is especially useful to measure inter-personal skills, customer satisfaction and team building skills (Qureshi et al., 2007). One of the biggest advantages of this system is that assesses cannot afford to neglect any constituency and has to show all- round performance. However, on the negative side, receiving feedback from multiple sources can be intimidating, threatening, and expensive and time consuming (Shaw et al., 2008).

Psychological Appraisals

These appraisals are more directed to assess employee’s potential for future performance rather than the past one. It is done in the form of in-depth interviews, psychological tests, and discussion with supervisors and review of other evaluations. It is more focused on employees emotional, intellectual, and motivational and other personal characteristics affecting his performance (Ohabunwa, 2009). This approach is slow and costly and may be useful for bright young members who may have considerable potential. However quality of these appraisals largely depends upon the skills of psychologists who perform the evaluation (Shaw et al., 2008).