European Journal of Social Sciences Volume 10, Number 3 (2009)

Effectiveness of Performance Appraisal: Its Outcomes and Detriments in Pakistani Organizations

Hafiz Muhammad Ishaq Federal Urdu University of Arts, Science and Technology, Islamabad, Pakistan E-mail: ishaq74nk@yahoo.com Tel: +92-3219506525 Muhammad Zahid Iqbal COMSATS Institute of Information Technology, Islamabad, Pakistan E-mail: mzahid75@yaho.com Tel: +92-3335112159 Arshad Zaheer Foundation University, Islamabad, Pakistan E-mail: arshad_zz@yahoo.com Tel: +92-3335135751 Abstract This paper aims at studying outcomes of performance appraisal and exploring factors that can make harm to the PA effectiveness in the perspective of Pakistani public and private sector organizations. Data were collected through survey of 127 managers and employees. Overall results reveal that in Pakistani public and private sector organizations, awareness level about outcomes of effective performance appraisal is more than factors that can make harm to the effectiveness of performance appraisal. Managers have different views from employees regarding detriments to PA effectiveness whereas, regarding outcomes of PA effectiveness, male and female managers/operatives have different views. Keywords: Performance Appraisal, Effectiveness, Outcomes, Detriments, Pakistan

1. Introduction
Effectiveness of performance appraisal has so far been studied in different contexts. However, exploring important areas like outcomes of effectiveness of performance appraisal and identification of factors that can make harm to the effectiveness of performance appraisal in perspective of Pakistani organizations was needed. Therefore, the researchers set objectives of this paper to study the outcomes of effectiveness of performance appraisal and to find key detriments to effectiveness of performance appraisal in Pakistani organizations. This paper aims at answering the following research questions: i. What are outcomes of effective performance appraisal in Pakistani organizations? ii. What are the factors that can harm effectiveness of performance appraisal in Pakistani organizations?

2. Literature Review
Published literature concerning outcomes and detriments of effectiveness of performance appraisal are discussed separately as under: 479

European Journal of Social Sciences Volume 10, Number 3 (2009) 2.1. Outcomes of Effective Performance Appraisal Common outcomes of an effective performance appraisal process are employees learning about themselves, employees knowledge about how they are doing, employees learning about what management values (Beer, 1981). According to Stephan and Dorfman (1989) outcomes of effective performance appraisal are improvement in the accuracy of employee performance and establishing relationship between performance on tasks and a clear potential for reward. Dobbins, Cardy and PlatzVieno (1990) told five outcomes i.e. use of evaluations as feedback to improve performance, reduced employee turnover, increased motivation, existence of feelings of equity among employees, linkage between performance and rewards. Nurse (2005) viewed provision of information for the development of managerial strategies for training and development as an outcome. Teratanavat, Raitano and Kleiner (2006) found outcomes like reduced employee stress, review of overall progress, linkage between current performance and employees goals, and development of specific action plans for future. 2.2. Detriments to Effectiveness of Performance Appraisal Literature uncovered following aspects that can make harm to the effectiveness of performance appraisal: exemptions to the highly visible employees, conduct of performance appraisal to punish the low performers, rewards on nonperformance, doubts in the mind of performers about appraisals after effects, organizations politics that leads to disturb performance of targeted employee (Deluca, 1993); use of fundamentally flawed appraisals, focus on encouraging individual, which automatically discourages teamwork/collaboration, inconsistencies in setting and applying appraisal criteria, focus on extremes (exceptionally good or poor performance), appraisals focus on achievement of short-term goals, support to autocrat supervisors, subjectivity of appraisal results and creation of emotional anguish in employees (Segal, 2000); use of vague qualities and irrelevant measurement criteria, use of useless checklists for evaluation, monologues instead of dialogues in feedback sessions, reluctance of appraisers to offer feedback, supervisors misguidance to appraiser (Nurse, 2005); inaccuracies at supervisor/organizations end (Horvath & Andrews, 2007).

3. 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 questions. Two independent samples t-tests were performed to analyze difference between mean values of two groups in the respective data set. Hypotheses were: There is a significant difference of opinion between managers/employees working with H1: public and private sector organizations regarding (a) outcomes of effective performance appraisal and (b) detriments to effectiveness of performance appraisal. 480

European Journal of Social Sciences Volume 10, Number 3 (2009) H2: H3: There is a significant difference of opinion between managers and employees working with public/private sector organizations regarding (a) outcomes of effective performance appraisal and (b) detriments to effectiveness of performance appraisal. There is a significant difference of opinion between male and female managers/employees working with public/private sector organizations regarding (a) outcomes of effective performance appraisal and (b) detriments to effectiveness of performance appraisal.

3.1. 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 1: Respondents Characteristics
% 77.08 15.04 07.08 78.2 21.8 31.6 68.4 34.0 38.0 17.0 11.0 66.7 33.3 50.0 45.6 4.4 n 88 17 08 97 27 36 78 34 38 17 11 76 38 57 52 5

Selected Dimensions Age 20 to 29 years 30 to 39 years 40 to 52 years Gender Male Female Education Masters or above Graduation Experience Less than 1 year 1 to 3 years 4 to 7 years 8 years or above Job Position Managerial/Officer Employee/Operative Type of Organization Pubic Sector Organization Business/Private Sector Organization Own Business

3.2. Instruments Reliability Inter-item reliability coefficient i.e. Cronbachs alpha for overall questionnaire (33 items) was 0.869. Thus, Cronbachs alphas for outcomes (14 items) and detriments (19 items) of effectiveness of performance appraisal were 0.813 and 0.904 respectively. To delete an item from questionnaire, Cronbachs alphas ranged between 0.790 0.826 for outcomes and 0.896 0.904 for detriments, which were good enough for further statistical analyses (Sekaran, 2003). Therefore no item was eliminated. 481

European Journal of Social Sciences Volume 10, Number 3 (2009) 3.3. Data Reduction Factor Analysis Factor analysis was applied to reduce data. Table 2 shows that overall no variable was eliminated. Thus, for 33 items of two variables of outcomes and detriments of effectiveness of performance appraisal, a total of 9 iterations were performed for communalities and rotated components matrices. The number of eliminated items came to 19. Therefore, 14 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 = 0.715 and Maximum = 0.759). Bartletts Coefficient against all latent variables was found significant at p = 0.01.
Table2: Summary of Factor Analysis and Tests of Assumptions for Factor Analysis Kaiser-Meyer-Olkin (KMO) and Bartletts Coefficients
Total Items Items Eliminate d Total (Ca, RMb) Items Remainin g Iterations Total (Ca, RMb) Bartlettd KMOc 2 164.096 225.833 df 15 28 Sig. 0.000* 0.000*

Variables

Outcomes of 14 8 6 4 Effective PA Detriments to 19 11 8 5 Effectiveness of PA Total 33 19 14 9 Note: a C = Communalities b RM = Rotation Matrix c KMO = Kaiser-Meyer-Olkin Measure of Sampling Adequacy d Bartletts Test of Sphericity * p < 0.01

0.715 0.759

The factors having higher loads existed in the variables of outcomes and detriments of effectiveness of performance appraisal. Table 3 shows that these variables have 14 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. According to rotation sums of squared loadings, component/s collectively explained more than 60% of the variance. Regarding variable of outcomes of effectiveness of performance appraisal, items eliminated were Employees learning about themselves, Establishment of relationship between performance and reward, Use of evaluations as feedback to improve performance, Existence of feelings of equity among employees, Development of managerial strategies for training, Reduced employee stress, Review of overall progress and Development of specific action plans for future. For variable of detriments to effectiveness of performance appraisal, items eliminated were Exemptions to the highly visible employees, Conduct of performance appraisal to punish the low performers, Use of fundamentally flawed appraisals, Focus on encouragement of individual instead of teamwork, Focus on extremes (exceptionally good or poor performance), Support to autocrat (dictator type) supervisors, Use of vague qualities and irrelevant measurement criteria, Use of useless checklists for evaluation, Monologues instead of dialogues in feedback sessions, Supervisors misguidance to rater and Inaccuracies at supervisor/organizations end.

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Table 3: Factor Loadings Outcomes and Detriments of Effectiveness of Performance Appraisal
Extraction
b

Dominating Administrative Purposes and Usesa

Componentc 1 2 3

Rotation Sums of Squared Loadings Cumulative %

Outcomes of Effective PA Employees knowledge about how they are 0.706 doing Improvement in the accuracy of employee 0.669 performance Linkage between current performance and 0.505 employee's goals Employees learning about what 0.559 management values Reduced employee turnover 0.757 Increased motivation 0.587 Detriments to Effectiveness of PA Organizational politics that disturb 0.753 performance of targeted employees Doubts in the mind of performers about 0.632 appraisal's after effects Rewards on nonperformance 0.557 Creation of emotional anguish in employees 0.757 Reluctance of raters to offer feedback 0.699 Appraisal's focus on achievement of short 0.746 term goals Subjectivity of appraisal results 0.616 Inconsistencies in setting and applying 0.608 appraisal criteria Note: a Initial Value of all items is 1.000 b Extraction Method: Principal Component Analysis c Rotation Method: Varimax with Kaiser Normalization

0.831 0.809 0.702 0.642 0.861 0.704 0.851 0.746 0.685 0.855 0.773 0.827 0.619 0.615 67.096 63.050

4. Result and Discussion

Table 4 shows that minimum M was 3.29 against rewards on nonperformance (item studied under variable of detriments to effectiveness of performance appraisal). Maximum M was 4.27 against increased motivation (item studied under variable of outcomes of effectiveness performance appraisal). Thus, overall mean scores and relative standard deviations revealed respondents strong and general agreement to the outcomes and detriments of PA effectiveness respectively.

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Table 4: Means and Standard Deviations
M 4.04 4.26 4.06 4.00 4.00 3.60 4.27 3.60 3.70 3.69 3.29 3.49 3.45 3.74 3.65 3.60 SD 0.553 0.799 0.868 0.909 0.882 1.037 0.784 0.649 1.150 0.983 1.238 1.029 0.966 1.044 0.929 1.063

Variables Outcomes of Effective PA Employees knowledge about how they are doing Improvement in the accuracy of employee performance Linkage between current performance and employee's goals Employees learning about what management values Reduced employee turnover Increased motivation Detriments to Effectiveness of PA Organizational politics that disturb performance of targeted employees Doubts in the mind of performers about appraisal's after effects Rewards on nonperformance Creation of emotional anguish in employees Reluctance of raters to offer feedback Appraisal's focus on achievement of short term goals Subjectivity of appraisal results Inconsistencies in setting and applying appraisal 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 outcomes and detriments of effectiveness of performance appraisal. Results related to hypothesis 2, revealed that average perceptions of managers/officers and employees/operatives of public/private sector organizations of Pakistan were same in respect of outcomes but different in case of detriments of effectiveness of performance appraisal. Results of third hypothesis revealed that average perceptions of male and female managers/employees of public/private sector organizations of Pakistan were different in respect of outcomes but same regarding detriments of effectives of performance appraisal.
Table 5: Independent Samples t-test With Respect To Sector, Position and Regarding Outcomes and Detriments of Effectiveness of Performance Appraisal
Two independent samples t Position-wise (ManagerOperative) t df Sig. -0.020 66.66 0.984 2.062 79.25 0.043*

Variables Outcomes of Effective PA Detriments to Effectiveness of PA Note: *p < 0.05 (two tailed)

Sector-wise (PublicPrivate) t df Sig. 0.574 95.41 0.567 0.191 98 0.849

Gender-wise (MaleFemale) t df Sig. -2.826 65.28 0.006* 1.222 37.59 0.229

These results overall support literature for outcomes of effectiveness of performance appraisal while corresponding with the previous studies (e.g. Beer, 1981; Stephan & Dorfman, 1989; Dobbins, Cardy & Platz-Vieno, 1990; Nurse, 2005; Teratanavat, Raitano & Kleiner, 2006) and also support literature (see Deluca, 1993; Segal, 2000; Nurse, 2005; Horvath & Andrews, 2007) while studying factors that can make harm to the effectiveness of performance appraisal.

5. Conclusion
Conclusions substantiated the research objectives while answering the research questions that Pakistani public and private sector organizations do believe in the role of outcomes and detriments for effectiveness of performance appraisal. The respondents are more aware about outcomes of effective performance appraisal than factors that can make harm to the effectiveness of performance appraisal. 484

European Journal of Social Sciences Volume 10, Number 3 (2009) As regards detriments to PA effectiveness, Managers have different view from employees. Likewise, regarding outcomes of PA effectiveness, male and female managers/operatives have different views.

References
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