The Organizations Performance Appraisal

Published Date: 02 Nov 2017

Chapter 1

Malik, Saleem and Ahmed (2007) explained employee satisfaction with work as to the extent to which an employee likes his or her job. For employee performance appraisal we can use different words like performance review, employee appraisal, career development discussion etc. Coen and Jenkins (2000) explains that performance appraisal is a mandatory process performed in specific days or time and employees are judged in this specific time and marked for their various traits by the rater and the organization keeps this performance with them. This study investigates of the fairness of the appraisal system and its effect on employee satisfaction.

1.2. Objectives:

The main objectives of the project are as follow:

Find out the hurdles and provide solutions to that hurdles while conducting successful appraisal l program.

Comparative analysis of appraisal system of two companies, and the impact of the performance appraisal on the level of job satisfaction of the employees.

Analyses of the company appraisal system and its methods.

Find out the drawbacks of the appraisal system of the organization.

Find out the gaps while conducting performance appraisal in the organizations.

To ensuring that are the appraisal system deliver the required result

To make and carry out a successful performance appraisal in the said organizations.

Find out the appraisal system serves and aligns with the company mission and vision.

To know the performance appraisal can be used to determine whether HR programs i.e. a selection, training, and transfers have been effective or not.

Chapter 2

LITREATURE REVIEW:

Performance appraisal:

The objective of the performance appraisal is to get information about the personnel working around you. It provides an opportunity to the know the qualities and drawbacks of the people in your working environment. This is a process of evaluating how good employees perform their jobs when compared to a set of standards, and then sharing that information to those employees (Jackson & Mathis, 2003). A performance evaluation is widely used for checking wages and salaries, giving performance feedback, and identifying individual employee’s strengths and weaknesses. Most U.S employers use performance management systems for office, professional, technical, supervisory, middle management, and nonunion production workers (Jackson & Mathis, 2003).

According to Eberhardt and Pooyan (1988) Performance appraisal is recognized as an integral part of human resource management process. Like different authors or practitioners (Berendin and Beaty 1984; Devires; Morisson; Carol and Schneier 1982; Shullman and Gerlatch 1981) have defined performance appraisal differently according to their point of views. On one hand practitioners have given stress on the need of, to increase supervisor and subordinate agreement on the tasks to be performed, clarify performance objectives, increase top management support and to improve the feedback skills of the people who are doing appraisals. Academic researchers on the other hand have focused on different set of issues for example topics like rating formats, rater training programs, how to utilize information more effectively and the need to improve observational skills.

Eberhardt and pooyan (1988) conducted a case study and found that the experienced employees and those who were use to with appraisal system were more satisfied as compare to those who were less experienced and have no idea about appraisal system. If an employee is not clear about the system and the appraisal process, he will have no idea how things are taking place, which leads him/her to disturb the flow of the work and the employee is not able to provide his 100%. It is also discussed that a proper orientation to new employees will enable him/her to get aware of the system and it will be a source of job satisfaction for them.

Grints (1930) suggests that top-down system of appraisal should be removed and should be replaced by multiple rater evaluation using 360 degree appraisal. This tries to reduce bias and objectivity as in top down system. The solution of multiple raters uses internal colleagues, customers and recipients of services will reduce the subjectivity and inequity of performance ratings. Managers in 360 degree appraisal collect feedback and summarize evaluations.

A survey of 50000 respondents showed that only 13 percent of employees and supervisors and only 6 percent of the executives consider that their firm’s appraisal process is useful (People IQ, 2005). Another survey shows that 50 percent of executives considers their performance appraisal to be more or less effective while 15 percent considers it less on not effective at all (Mercer, 2002). A recent survey shows that 60 percent of employees rate their organizations as C category or worst in handling their performance management (World at work and Sibson consulting, 2007). Newman (2004) concluded that after 30 years of research no evidence substantiates the underlying hypotheses or belief that a specific method of appraisal rating has reliability. In fact the method of appraisal rating has very little effect on the accuracy of appraisal (Borman, 1991).

Despite the world wide use of performance appraisals, not everyone enthusiastically endorses performance appraisals. Criticisms are always there about how you conduct performance appraisal and it results (Jackson & Mathis, 2003).

Criticisms include:

• With today's emphasis on teamwork, appraisals concentrate a lot on individual and do too little to develop employees to do their work better.

• Most employees who receive reviews and supervisors who give them generally rate the process a resounding failure.

• Most appraisals are not consistent, short-ten oriented, subjective, and valuable only for pointing out employees performing extremely well or poorly (Jackson & Mathis, 2003).

Organizations use performance appraisals in two different roles. One role is to measure performance for the purpose of making pay, promotions, dismissal, downsizing or layoffs. This role is to be used for administrative uses. This is often the connection between rewards employee hope to receive and their productivity (Jackson & Mathis, 2003).

Performance-based compensation confirms the idea that pay raises should be given for performance achievements rather than for seniority. Typically in this instance the manager is the rater of the employees' performance and also the person who makes the compensation recommendations for the employee (Jackson & Mathis, 2003).

The other role is the use of appraisals for developmental uses. The developmental type of performance appraisal stresses on identifying potential and planning employees' growth opportunities and direction (Jackson & Mathis, 2003). The manager's role in this situation is like of a coach. The manager rewards good performance with recognition, explains what type of improvement is necessary, and shows employees how to improve his performance. People do not know where and how to improve, and managers should not expect progress if they are not in the position to explain where and how improvement can occur (Jackson & Mathis, 2003).

The aim of developmental feedback is to change individual behavior, rather than to compare individuals such as the administrative uses of performance appraisals.

This type of feedback can also identify areas in which the employee might wish to grow (Jackson & Mathis, 2003). In a performance appraisal interview targeted on development, an employee may only be lacking in one area of his work, and that may be keeping him from a promotion.

The supervisor may advice that they consider taking an evening course at the local college.

This will help the employee advance in his career. There are two different approaches about performance appraisal: traditional and modern.

Traditional Approach:

Performance appraisals began as a simple method of income justification. It was used to decide that if an employee's salary or wage was justified or not.

The process was finally linked to the material outcome an employee would receive for good performance. If the employee's performance was less than expected, then a cut in the pay would occur. If the employee's performance was better than expected, a rise in pay would be practiced (Target Woman, 2009).

A weakness of this process was that it did not give any consideration to the developmental possibilities of the employee. A pay cut was the only incentive for an employee to either improve or continue to perform well. In many instances, this basic system of performance evaluation failed to achieve the desired results (Target Woman, 2009).

The traditional approach is also known as overall approach. This is primarily concerned with the overall organization and with the past performance of the employees only. Traditionally emphasis was only on the reward outcomes with time to time it was rejected. It was only in the 1950’s that the performance appraisal came to be recognized as a useful tool to motivate and develop the employee potential (Target Woman, 2009).

Modern Approach:

In most of the organizations performance appraisal is used directly or indirectly to determine reward outcomes. The results of the performance appraisal help in identifying the employees who performed better should be paid more and should be rewarded with promotion and bonus (Target Woman, 2009). Performance appraisal systems are more structured and formal between the employee and the supervisor. Performance appraisals are normally conducted annually or, twice a year.

The weaknesses, strengths and opportunities for improvement and skill development of the employees are discussed. During the time of performance appraisal, poor performers are counseled to perform better. In extreme cases, demotion, dismissal or decrease of pay is resorted to. The modem approach to performance appraisal is a developmental approach. This recognizes employees as individuals and gathers around the goal setting process (Target Woman, 2009).

The performance appraisal process can be an extreme source of dissatisfaction and frustration if an employee know that the process was not fair, political or irrelevant (Skarlicki and Folger, 1997). Leaders who do not know the faults of current appraisal process often assume that the entire system is bad. They may have a choice of scrapping this system and replacing it with a new one with this hope that employee reaction will change and become positive. The new system replaces the old ones without knowing the root causes of the dissatisfaction and without any bases for the new system. Employees do not enjoy poor performance appraisals but if they perceive that the procedure, rules and regulations were fair will less influence their attitude towards their supervisor and organization.

Leventhal (1980) identified seven procedural categories that an individual can use to identify the fairness of organizational processes. These includes procedures for selecting agents, setting ground rules, making decision, collecting information, appealing decisions, safeguarding employee rights, and changing procedures. The awareness of employee about fairness in any of the procedure can lead to perception of injustice.

Performance appraisal is one such method that allows for the optimization of labor. In a broad sense , it is a rigid structure that allows for the continued measurement and evaluation of individual behavior and performance, while influencing an employee’s job related attributes through such factors as increased job satisfaction and recognition (with the use of promotional aids such as better equipment, duties, and wages). The purpose of any such system, is not only to measure just the performance of human resources but also to find areas where there is skill deficit for further development , identify excess potential that could be utilized better, and communicate objectives more precisely to workers . By doing so, businesses move one step closer to the achievement of their desired goals and objectives. here another factor is also included which is not a direct objective of appraisal, but can become a valuable asset within itself

In establishing such a system, it is important to firstly determine goals that are realistic and will be expected from the workers, and then make these goals known to the workers so workers have direction. Once developed, evaluations can be undertaken, in three steps. The first thing is that involves the observation and identification of an employee’s work behavior, and the outcomes and achievements that are a direct result of them. These goals will then must be compared against the original goal standards that were set for them. The second step revolves around the appraisal and action to be taken to counter the first step. If an employee’s performance is lacking, analyze the reasons that why must be undertaken, and corrected through such means as increasing motivation, training or even termination. If the overall performance of the employee is good or better than expected then the employee should be rewarded. Such rewards can be increased wages, movement to jobs requiring more expertise. The third step is to have a review of the initial goals and the development of new ones. The person who is setting the goal should examine them properly and should think that if the goals were realistic and achievable in contact of resources and other things available in work environment. To execute performance appraisals, it is necessary to have a performance appraisal system. such a system refers to the form or method that will be used to collect and appraise data, the job analysis that will be conducted to identify criteria that will be measured universally, establishing not only the validity but also reliability of data collection methods , selecting who would best suit the position of appraiser and their influence on the overall appraisal, the interviewing processes, the ways in which results will be utilized, and how the appraisals system itself will be appraised for quality and usefulness . In total, appraisal systems fall into four types depending on the particular approach taken. These are the comparative standards, absolute standards, objective based approaches, and direct indexes. Within each of these methods, appraisals take on a number of different forms.

History:

Performance appraisal relates back to the Second World War. Cole (1925) formal observation of individual work tool place in Robert Owens factory in New Lanark in early 1800s, hanging a colored piece of wood on the machine to show the conduct of the employee by the superdient for previous day ( white for excellent, yellow, blue, black for poor performance). The twentieth century led to F.W. Taylor, and his measured performance, and the scientific management process (Taylor, 1964). The psychological tradition developed in 1930`s used approaches that showed performance and personality used feedback from graphical ratings. Later developments removed the middle scale from five points lickert scale to forced choice distribution method to avoid central rating. The evaluation also included the narrative writing and comments to support the ratings (Mair, 1958).

Different methods of performance appraisal:

Bondy (1998) says that the comparative standards category of appraisal is considered one of the easiest forms, due to the ease with which it is administered. This system have a lot of standards for comparing and contrasting one worker from another, in order to better distinguish their capabilities and efforts. Within this system several comparative methods exist, the first of which is known as ‘Simple’ or ‘Straight’ ranking. It works by rating individuals on their performance from best to worst. This particular method assumes that the rater or appraise is able to make judgments or comments on overall performance without any criteria or benchmarks to guide them. This generally causes ratings to be biased more so on opinions, as opposed to actual figures of output, sales or labor turn over. The second comparative method is known as the ‘Alternate’, and is similar to the first one in its drawbacks and design. Appraisal is done by listing the best performer first, then the worst last, once this has been done, the second best and worst performers are selected, and placed accordingly. This process continues until the entire groups of subordinates are ranked. The third method known as the ‘Paired Comparison’ have the same defects as the other two, but allows for slightly more objectivity to be included in comparisons by contrasting two subordinates at a time against all others on a single standard criterion, such as overall performance. Unfortunately, the amount of "time taken increases geometrically as the size of the group increases". The fourth form of comparison is that of ‘Forced Distribution’. This method divides assessment into categories, allowing for more criteria to be used in judging individuals. The subordinates are then selected and placed into these individual groups for comparison. The problem with this approach is that employees may not naturally fit into the categories they are placed in, possibly causing the creation of artificial results. Throughout all four comparative standards systems, there exists one undermining factor that is ignored. This is the belief that workers are not capable of identical work standards, and that there is always one person who is better than the rest. This factor is unrealistic.

According to Clarke (1995) absolute standards is the second category of the appraisal systems, and it is directly against the comparative standards. It evaluates employees independently, while at the same time establishing several standards for evaluation. In total, there exist six methods of appraisal under this system, the first of which is known as the ‘Essay Narrative’. As its name suggests, it involves documenting in written format, each person’s strengths, weaknesses, and development needs .the task of setting promotion is made more difficult because each document if rarely written in a standard format it varies from person to person through the use of language and vocabulary. Further limiting this system is its dependence on supervisory event recall. In most cases, events that are near to the appraisal date are best remembered and evaluation on these event is not right because workers tend to do good in these days., hoping that any prior failings might be overlooked .the other benefit of this system is that here is a chance that you can write openly of about the unique characteristics because the appraiser is not bound by set questions. . The second method, ‘Critical Incident’ does not move around average performance, but instead extreme levels of performance. In this method the appraiser will just have to record the two extremes the effective or ineffective accomplishments so it’s an easy and time saving way for the appraiser when any good or bad event occurs he have to just record it. . This system does not allow for comparison between subordinates because it does not differentiate the importance of jobs. ‘Weighted Checklists’ are the third type of absolute standard, and are prepared by the information collected from critical incidents reports, and the collection of frequency of events. By viewing this list, it is then possible to find out the total failings or outstanding performances of subordinates, and then at the end decide the importance of these happenings on successful job fulfillment. The benefit of such a system lies in time reduction and "it’s characteristics of objectivity". The fourth method is ‘Forced Choice’, is as like to the weighted checklist, but with the ability to cover the common errors of leniency, strictness and central tendencies that sometimes are present in some appraisals. This is done by requiring the appraiser to select "which of two descriptions in a pair better describe the subordinate". The choice of answers are written in such a manner that both seems equally favorable or possibly unfavorable, thus to overcome up to a large extent the possibility of bias. However, this is based mainly on behaviors rather than personal attributes, it does not allow for employee interaction (such as feedback), that can lead to the possible distancing of workers, and completely forgoes any area in which a worker may excel, that is not included in the questionnaire. The fourth, and most commonly used absolute standard appraisal, is the ‘Graphic Rating Scale’ (also known as ‘Conventional Rating"). This is used to measure a person’s "quality and quantity of work, as well as a number of personality traits, such as reliability and cooperation". Popularity for this system flourishes from the ease with which it can be developed, administered, and understood by the raters. "It can also be altered to a large number of jobs, provided they have a number of common elements", and be as reliable and valid as more complicated forms such as ‘Forced Choice’ .the drawback included here are same as with all other absolute standards, as well as a lack of potential for development, leaving subordinates none the wiser to continue with their mistakes. Because this system’s nature attempts to cover a wide variety of areas, it can sometimes overlook fine detail that needs to be considered. In some cases, companies have developed this system with parts from the essay/narrative method to create a more accurate approach. This action would allow for more details to be noted that would normally not be addressed correctly or substantially (it should be noted that when adding the elements of essay you are also adding the failures associated with that system). The last method in absolute standards is the ‘Behaviorally Anchored Rating Scales’ that consists of "five to ten vertical scales - one for each important dimension of a job performance anchored by the incidents judged to be critical. Critical incidents occur when employee behaviors result in unusual success or failure on some part of the job" (effective and ineffective behavior). Values are assigned to these incidences by the managers or job experts according to their performance. The main disadvantage of this method is that "the amount of time and professional expertise that is required to develop appropriate anchors". Another problem arises from the fact that observations are of conduct as opposed the actual results. On the other hand, the advantage of this technique is that the superiors allows their subordinates to give feedback for improving their performance. .

Griffen (1989) The Objective Based category of appraisals is specifically designed to appraise management on all levels. The popularity of this system originates from trait of rewarding those people who deserve due to their accomplishments. This system works in four steps. The first step is to develop goals with the collaboration of subordinates so they will achieve those targets and at the end will benefiting the organization. The second step is to monitor the subordinate goals over a specified period of time and keep changing them to suit better to the changes caused in the external work environment. The third step is at the end of the specified period that was allowed for the completion of a task .at this level comparison of actual and expected performance occurs. Investigations takes place as to why certain outcomes were ascertained. If the performance was below then expected so the work should be assigned to different people or a system should be developed for their education if the employee was the cause. . If the performance is better than expected then goal setting process should be reviewed to find that if there was enough demand, if it is found that this result is caused by the workers having more skills and capabilities then at first noticed, appropriate steps should be taken to place the employee at a place where his/her skills can be better utilized. The final step is to overview the results consider all the new factors and then develop goals for future and current business needs. The last method of appraisal systems is known as direct indexes, and differs from the first three methods primarily in how performance is measured. The first three (except for the objective based approach) "depend on a superior evaluating a subordinate’s performance. There is a certain amount of subjective evaluation in these cases. However, the direct index approaches measures subordinate performance by objective criteria (such as productivity, absenteeism, and turnover). In the case of managers, performance is calculated through the effectiveness of their subordinates, through such means as "scrap rates, the number of defects produced, customer complaints, output per hour, new customers, orders, and sales" and other such measures that are directly related to the organization’s efficiency. Subjectivity within this system is rather removed, and for such reasons it is rarely ever used solely by itself.

It is important to have a performance appraisal system that is correct one. Incorrect system can cause never solving issues and less productivity problems to business. Methodology for best systems needs to be identified but at the same time the question arises "best for what?" arises. Currently trends show an amalgamation of several methods being used, such as the ‘essay/narrative’ system and ‘graphic’ method in an attempt to better cope with the limitations of single methods, and thus better reach goals.

CCH One of the world’s largest legal publishers (CCH) of personal management has set out general guidelines for the implementation of performance appraisal systems, stating that each system should be reviewed and weighed up in the light of several factors to best determine which would be the effective. some of the factors are: available resources to business, specifically time and money (there would be no point in taking on a system that generated less than it consumed); staff appraisal aims and objectives to overall business output using such a specific system ); Priorities the nature of the job for appraisal ( it will enable a business to use their resources in right direction, the focus will remain on the priority areas) the size of the organization (once again there would be no need for a in-depth appraisal system if the business had few employees - in such cases, the comparative standards method of appraisal is probably best); training and development; and the ability of present staff in carrying out individual performance appraisals (the more difficult the appraisal task, the more likely a business will need to resort to a professional for expert advice, which is not feasible for small business). If these factors are addressed correctly, will save thousands of dollars to the organization in many ways.

With out any doubt, much debate remains about the effectiveness of even the best thought out appraisal methods. In the view point of the staff members Appraisers are said to be ineffective due to their strictness, leniency, personal biases and prejudices, suffering from central tendencies, unknowingly distorting the truth (halo effect), stereotyping and other such errors. While others will argue that employees leave interviews believing that they had wasted their time, and in some cases leave feeling hostility that only proves detrimental to the business in the long run. Doubts are also expressed as to the lack of information contained by some appraisal records - allowing for misinterpretations of valuable information that may lead to acts of unfair dismissals, which in turn can cause lengthy and costly legal litigations for unfair dismissal.’ One final valid debate regarding reliance on performance appraisals lies with the question "what is the point of having bosses if they are not giving their employees proper and regular feedback". It is a fact that regular interaction, close coordination and direction maintenance by a superior would help the performance of individuals; this is a managerial job that should never be removed. The role of the appraisal should not be neglected as effective implementation can lead to some very good results.

With a correct and well implemented appraisal system, small businesses and companies alike may look forward to improved competencies, added value to the organization, and productivity growth through the development of partnerships between workers and their superiors. This may allow for issues previously ignored, such as the availability and benefits of new machinery, to be reviewed for future consideration. Of course there remain many more areas that must be understood fully before being able to effectively utilize performance appraisals (other such areas include interview techniques and implementation programs), but due to the sheer magnitude of this area, this document can only briefly overview the concept of appraisals and it’s key points.

Different techniques for performance appraisal:

In 1940`s, behavioral methods were developed using motivational approaches. Those approaches included behavioral anchored rating scales (BARS), Behavioral observational scales (BOS), Behavioral evaluation scales (BES), critical incident and job stimulation. All these judgments were used for performance criteria such as customer service and rated in factors such as excellent, need to improve, average or poor. These feedbacks were assigned numerical values which should be added in narrative statements and then decisions would be made to the need of trainings, to identify skills and to identify talent for careers in line management, supervision and future managerial potential. After 1945 result oriented approach was developed that led to development of management by objective (MBO). This provided aims to achieve specific targets in specific time, profitability and deadlines with a feedback on previous performance (Wherry, 1958). In 1960`s the concept of self appraisal was developed in which the appraise was had to prepare questions because a range of topics were have to discussed in the interview. Until this period the success of appraisal was dependent on the skills of interviewer. In the 1930`s 360 degree appraisal was developed where feedback was no more dependent on the boss and subordinate relationship but included the groups appraising the performance of line managers and peer feedback from peers groups on individual performance (Redman and Snape, 1992).

Job satisfaction:

Locke (1976) defined job satisfaction as "a pleasurable or positive emotional state resulting from the appraisal of one’s job or job experiences". In the above definition there is importance of feeling and thinking. It is a natural thing when we feel so we think about that thing, conversely when we think about something so we feel that thing. It means that thinking and feeling and in our mind or we can say that it is in our biology. So when we evaluate our jobs so we assess that thing which is very important to us, so here we can see that both thinking and feeling are involved. Nelson (2006) says that an employee satisfaction is priceless. The frustrated employees negatively affect the willingness to do the job. The unsatisfied employees are less committed to the organization which in turn affects their performance and ultimately the performance of the overall organization. Bagozzi (1980) suggests that there is no significant relationship between job satisfaction and job performance because it is not clear that either performance is dependent of satisfaction or satisfaction is dependent on performance. Yousaf (1998) concluded that there is a positive relationship between job satisfaction and performance but also with organization commitment and find out that more the members are satisfied so they will have greater organization commitment and will better do their job performance. Rotenbury; Moberg ( 2007) indicated that the employees who were involved more in work were having a positive job performance whereas employees who were not interested in their jobs and were not satisfied their performance was not good. Cross man; Zaki (2003) satisfaction is not independent and the satisfaction with one variable may cause improvement in another variable. They concluded that female employee were more satisfied with their pay as compared to the male employees. Also the findings found that those with low educational background were least satisfied. Graham; Messenar (1998) found that in U.S.A females were less satisfied with their pay as compared to male employees.

We always relate job satisfaction with good pay. Research shows that when employees are asked to rate their different aspects of job such as supervisor, work environment, work, pay etc so the nature of the work emerges important (judge & church, 2000; jurgenson, 1978). Unfortunately managers think that for employee only money is important nothing else as work itself. Kovach (1995) conducted a study related to job attributes employees ranked interesting work at number 1 while pay at number 5. Whereas managers ranked interesting work at number 5 and pay at number 1.

We always hear debates on that weather satisfied employees are good or productive employees and HR practitioners try to reduce cost and are concerned about the effect of job satisfaction on productivity and the impact on performance and other outcomes. Most of the earlier reviews of the literature like in 1985 that the statistical correlation between job satisfaction and job performance is 0.17 ( Iffaldano & Muchinsky 1985). These researchers concluded that the relationship between the two variables was a management fad and illusionary. However Organ (1988) presented that the weak relationship was due to the narrow means often used to define the job performance. Thoreson; Bono; Patton (2001) found that when the correlations are appropriate so the average correlation between job performance and job satisfaction is higher that is 0.30.

(Hacket and Guion 1985; Hulin, Roznowski & Hachiya 1985; Kohler and Mathieu 1993) these all researchers says that a large number of dissatisfied employee will quit jobs or will like absenteeism more as compared to satisfied employees. Job satisfaction shows correlation with absenteeism and turnover in the range of 0.25.

So there are also a lot of factors except performance appraisal like culture, job environment, work itself etc which can affect performance, but performance appraisal is one of them which can affect the performance positively or negatively.

Smith; Kendal; Hulain (1969) says that the job descriptive index (JDI) measures job satisfaction with five different aspects coworkers, pay, promotion, appraisal and the work itself. When employees show more satisfaction with work facilitation and career development customers reported higher service quality (Schneider and Bowen, 1985).

Individual job performance may be facilitated or constrained by different situational factors such budgetary report, availability of time and job related knowledge (Peters & O, Coner, 1980). Locke (1984) says that lower performance is one possible aspect of job dissatisfaction, dissatisfied employee may also file a grievance, try to improve their performance, ask for a transfer or beat their dog.

There is a lack of consensus on that what indicates job satisfaction, there are number of variables which show increase or decrease in job satisfaction but many investigators rely on a single thing such as turnover rate or overall firm rating (Cameron, 1986). There seems to be a general agreement that multiple internal (preferred by internal employees) and external (preferred by clients) criteria are needed for more comprehensive evaluation (Cameron,1986; Goodman and Penning, 1980; Friedlander, 1980)

IIgnetal (1979); kluger and Derishi (1996) says that feedback means the positive outcome which based on the evaluation of the employees performance and feedback can really have an impact on future performance of the employees.

Lawler (1994) Vroom (1964) from the organizational point of view, Feedback motivates members of the organization towards the achievement of the goals and objectives, it is also enabling them to keep and maintain a high level of effort. If the situation remains stagnant and employees do not get any sort of appraisal or feedback from the high ups, their morale get down and that is called discrepancy model.

Organ (1985) suggests that a withdrawal behavior may not produce a good employee to the organization. The discrepancy model is also related with distributive justice theory and many model of job attitude formation (Adams 1963; Homans 1961).

According to Hulian that difference between expected and received outcome is the driving force for attitudes and behaviors.

Jawahar (2006) says that satisfaction with rater and employee previous performance grading affects employees’ satisfaction with appraisal feedback. Satisfaction with appraisal feedback was positively related with job satisfaction and organizational commitment and negatively related to job turnover intentions.

Wal-Mart performance evaluation system:

Retrieved from http://www.scribd.com/doc/32968961/WAL-MART Wal-Mart calls the process of performance appraisal evaluation. All managers and associates are evaluated annually. Associate are hired more than minimum wage and can expect to rise within one year .New associates receive two evaluation during the first fiscal year. The first at 90 day and the second on the anniversary date. The four performance appraisal levels are

Below standard

Above standard

Standard

Outstanding

Outstanding assuming performance is above standard the employee receives raise at the 90 day evaluation and at the annual evaluation. Employees who are performing outstanding can receive rise in pay any time during the year. All employees must be in their current position for at least 6 months before they are promoted to next level.

Compensation and Benefits:

Executive Compensation:

Wal-Mart uses the compensation and nominating Committee and the stock option committee to help determine executive compensation parameters The Wal-Mart compensation and nominating committee administer Wal-Mart stock option and restricted stock plans sets the interest applicable to the deferred compensation planned reviews the benefits and benefits structure for executive officers. This committee has make nomination for directors.

Director compensation plan:

This program is designed to

1. Provide fair compensation to executives based upon their performance and contribution to Wal-Mart.

2. Provide incentives to attract and retain key executives.

3. Introduce a long term commitment to Wal-Mart and develop pride and sense of company ownership. This compensation package has three main parts.

1. Base salary, which is reviewed annually

2. Equity compensation consisting of stock option and for certain executive restricted stock 

3. Incentive payment under the company management incentive plan.

Wal-Mart has deferred compensation plan under which executives may defer compensation with its interest accruing on amount deferred. Executive also participates in the Profit sharing plan which is doffed contribution to retirement plan with its assets primarily invested in Wal-Mart stock.

Reward System:

Store manger receive additional compensation based upon their store profit .Assistant store manager receive compensation based upon company profitability. All other persons are compensated on hourly basis with the opportunity of receiving additional bonuses based upon the company productivity and profitability. Shrinkage bonuses are implemented in 1980 to control losses from theft and damage. If a store holds shrinkage below corporate goal every associate in that store receive bonus .wall-mart has paid several million dollars in bonuses for improving shrinkage problem. A very successful incentive program is its volume producing item contest where by departments within a store has special promotion and pricing on items they want to feature. The contest is initially among departments in the store .result are compared among departments and region to region. This is done to boost sales and sell slow moving items it also encourages employees to be innovative.

Benefits Packages:

Wal-Mart benefit program is extensive and very competitive in the industry .The benefits package include

Profit sharing

Comprehensive health care plan and dental insurance for employees and their dependants

Group life insurance and optional term life insurance plan

Business travel accident policy

Salary continuance

Long term disability insurance

Paid vacation

Purchase discount

Store managers’ bonus program

Generous stock purchase plan.

Our benefits are designed to help associates meet their unique personal, family, and financial needs, and the program is divided into four areas:

Career Benefits

 Career benefits are designed to give each Associate every opportunity to grow, prosper, and advance in his or her career. Regardless of gender, color, religion, age, national origin, or sexual orientation, an Associate with the desire and the ability to get the job done will find many career paths and opportunities to explore. We also provide classroom training, computer-based training, in-store and on-the-job training, mentoring, and a host of other opportunities to give associates the knowledge and skills for a successful career.

Financial Benefits

 Financial benefits offer associates several ways to save and invest for their financial security. Our Profit-Sharing and 401(k) Plan help associates save for long-term financial needs, such as retirement. Another financial benefit is the Associate Stock -Purchase Plan, which allows associates to buy stock through payroll deductions.

Health Care Benefits

 The foundation of our health benefits is to provide a choice of medical coverage options designed to protect associates from catastrophic medical costs. Health care benefits also include Life and Accidental Death and Dismemberment Insurance, Short-and Long-Term Disability Insurance, and a dental plan that covers a range of general and major care.

Personal Benefits

 Our personal benefits include such extras as discounts on child care, education, and travel. Personal benefits also include medical and personal leaves of absence, long-term service benefits, and even a professional and personal associate counseling service.

Profit sharing and Stock option plans:

Wal-Mart believes that each of its associates is a partner in the company and encourages stock ownership .To maintain feeling of ownership and to keep them informed the company stock price is announced storewide at the end of each business day .eight percent of the Wal-Mart full time associates own stock.

The literature review suggests that performance appraisal and job satisfaction are positively related with each other ,a positive feedback will make employee satisfied and he will take keen interest in his job in future while on the other hand if the feedback is not good ,it will have rather good or a bad impact on the performance of the employee.

Chapter 3

3. Methodology:

3.1. Sample:

To analyze the effect of performance appraisal on employee job satisfaction I collected data from 30 employees of the Imperial stores Pakistan.

Imperial was selected because of easy availability of data, ease of access due to head office located in Peshawar and affordable cost. The organization selected is having braches all over Pakistan so the results can be generalized in retail industry allover Pakistan.

3.2. Instrument and measures:

30 questions were asked from the employees through questionnaire among which two of the questions in which one was about supervisor fairness which is related to the independent variable performance appraisal and second question job satisfaction after performance appraisal is related to our dependent variable which is job satisfaction.

3.3. Procedure:

Data for the study is collected from 30 employees of the imperial stores with the help of questionnaire which was developed by the researcher under the supervision of HR manager Muhammad Irfan. The questionnaire was having 30 questions based on five points lickert scale. The respondents responses are obtained by answering the questions like 1 for agree, 2 for strongly agree, 3 for disagree, 4 for strongly disagree and 5 for no idea. Now in the answers of the question if strongly agree or agree is more so it means that the employee is satisfied and having no problem with the system. But if the responses for disagree or strongly disagree are higher so it means that there is some problem in the system and employees are not satisfied. Here PER is used for performance and APR is used for appraisal.

3.4. Data analysis tools:

The software used to analyze the data is not rather other than statistical package for social sciences. Latest version of SPSS i.e. "SPSS 16 for windows" is used to test our data. Linear regression and correlation is applied on data to test the results.

Chapter 4

4.1. Analysis:

Here some tables are given and discussion is made in the end of the tables on the results obtained from the following tables.

Correlations

APR

SAT

APR

Pearson Correlation

1

.497**

Sig. (2-tailed)

.005

N

30

30

SAT

Pearson Correlation

.497**

1

Sig. (2-tailed)

.005

N

30

30

**. Correlation is significant at the 0.01 level (2-tailed).

Regression

Model Summary

Model

R

R Square

Adjusted R Square

Std. Error of the Estimate

1

.497a

.247

.221

1.12353

a. Predictors: (Constant), APR

ANOVAb

Model

Sum of Squares

df

Mean Square

F

Sig.

1

Regression

11.622

1

11.622

9.207

.005a

Residual

35.345

28

1.262

Total

46.967

29

a. Predictors: (Constant), APR

b. Dependent Variable: SAT

Now we can see the value of Pearson correlation in correlation table so it is a positive value which means that there is a positive correlation between the two variables for example the fairness in the appraisal system when increases so the job satisfaction also increases. The result of sig (2-tail) is 0.05; it means that the correlation is significant so there is a relationship between two variables if one variable increase the other will increase as well and if one decrease the other will also decrease.

Now if we have a look of regression table so the R square value is 24.7 which indicates that dependent variable satisfaction can be explained by independent variable appraisal.

In the table of ANOVA the regression value is significant which 0.005 is.

Chapter 5

5.1. Discussion:

Here we are comparing Pakistani store with international Wal-Mart stores. Walt mart is a multinational store it also conducts its performance appraisal annually and have different plans for their different levels of employees like director compensation plane, store manager compensation plane etc. They also conduct their performance appraisal in the specific days of a year and they do their evaluation with the 360 degree mean everyone is evaluating his or her fellow boss or subordinate. This system is very good but the adoption of any method depends upon situation. Wal-Mart is also not free from discrimination they had a very large case on women discrimination at their stores. So internationally normally 360 degree method of appraisal is going on like Microsoft, IBM, Mercek etc. Whereas if we have a look of imperial so they are still practicing top to bottom approach that every time the superior will supervise his subordinate and there is no chance for subordinate to supervise his superior or give his views about him.

Now come to the research side which is based on the responses reveled from the organization i.e. imperial stores in the retail sector there is a proper system of performance appraisal. There is a positive and significant relationship between both the variables that are performance appraisal and job satisfaction. Many other authors and practitioners confirms that satisfied employees are the assets for the organization and play an important role in the progress/development of the organization(scheinder, Hanges, Smith, and Salvagio 2003; Osstroff 1992; Schinder 2003).

5.2. Conclusion:

For effective performance appraisal and job satisfaction organizations needs to be fair enough to address effectively appraisal of workforce. The issue facing by organizations in effective appraisal is favoritism/nepotism. To get better result and achieve set targets it is strongly suggested that to avoid favoritism/nepotism from the organizations. It is also suggested that the policies and practices should be fair and without any grudges and they have the capacity to satisfy their employees. Achieving high job satisfaction organization needs to focus on the outcome of the appraisal and set new objectives according to the results if needed.

While achieving competitive advantage through appraisal, organization need to fill the gaps and shortfalls in the system by carrying out the survey about the appraisal system and face and address the criticism on the system so they can improve the system and get favorable results.

The management needs to clearly communicate expectations before and after appraisal and the deadlines to employees so they can be mentally prepare what management wants from them.

While achieving organizations goals managements needs to fill the gaps between actual and expected employee performance through the results from appraisal. The outcome of the appraisal should be shared with the employees pointing out their weaknesses and strengths, they should also brainwashed on their weaknesses and how they can overcome on those weaknesses to perform in a better way in the future..

It is also suggested that more study required to find the new ways and means about the performance and its effect on job satisfaction, that organization have to put and get more fruitful result in the form of performance and job satisfaction, because of the time limitation researcher is not in position to carry out more elaboration of the work and find out new way and means. A detail research on the subject may lead to different results and outcome. It is stressed that effective appraisal will lead to better results and organizations should make effective appraisal part of their annual review.