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The Journal

Contemporary Management Research


2014, Vol.8, Issue No. 1, 72 - 82.

Effect of Performance Appraisal System in


Organizational Commitment, Job
Satisfaction and Productivity
Mrs.E.Deepa
Vivekanandha College of Engineering
for Women
Tiruchengode

Dr.S.Kuppusamy
M.Kumarasamy College of
Engineering, Karur

Dr.R.Palaniswamy
Jansons School of Business,
Coimbatore

ABSTRACT
Performance appraisal is a formal, structured system of measuring and evaluating an
employees job related behaviours and outcomes as well as to discover how and why
the employee is presently performing on the job and how the employee can perform
more effectively in the future. Performance appraisal system is important to any
organizational work performance; it determines the organizations success or failure.
This paper summarizes the conceptual framework of performance appraisal system
and its relationship between Job Satisfaction, Organization Commitment, Organization
Citizenship Behavior, Employee Engagement and thus with Productivity.
KEYWORDS: Job Satisfaction, Organization Culture, Organization Citizenship
Behavior, Employee Engagement, Productivity.

INTRODUCTION

employee and the management to know the


level of employees performance compared to

In many organizations performance appraisal

the standard/predetermined level. Also it helps

systems are used to identify the better perform-

to identify the poorer performers who may

ing employees who should get the majority of

require some form of counseling, or in the

available merit pay increases, bonuses, and

extreme

promotions. We can describe Performance

decreases in pay.

cases,

demotion

dismissal

or

appraisal as a structured formal interaction


between a subordinate and supervisor, that

Performance Appraisal is essential to under-

usually takes the form of a periodic interview

stand the employees performance through

(annual or semiannual), in which the work

HRD. In fact, performance appraisal is the

performance of the subordinate is examined and

basis for HRD. It was viewed that performance

discussed, with a view to identifying weakness

appraisal was useful to decade upon

and strengths as well as opportunities for

employee promotion/transfer, salary determi-

improvement and skills development. The

nation and the like. But in the recent develop-

process of performance appraisal helps the

ment, Performance appraisal indicates that


the level of desired performance, level of

Deepa, Palaniswamy and Kuppusamy

2014

73

actual performance and the gap between these

tional commitment since it will make them

two. This gap should be bridge through human

to become loyal to the company and will

resources development techniques like training,

commit themselves

and executive development, etc.

automatically in all aspects which results

to

the

organization

in greater improvement in their career as


Techniques

or

Methods

of

Performance

Appraisal System

well as the productivity. Thus Organizational


Commitment leads to greater productivity.
Deborah F. Boice and Brian H. Kleiner

To collect PA data, there are three main meth-

(1997) reported that effective performance

ods:

appraisal

systems

help

to

create

Objective Production

motivated and committed workforce, USA.

Personnel

In their analysis, they pointed out that with

Judgmental Evaluation

large spans of control, several supervisors


may work with an individual employee. They

Benefits of Performance Appraisal

concluded

that

developing

appraisal

an

effective

system

requires

Facilitation of communication

performance

Enhancement of employee focus through

strong commitment from top management:


if the system does not provide the linkage

promoting trust
Goal setting and desired performance rein-

between

employee

performance

and

organizational goals, it is bound to be less

forcement

than completely effective.

Performance improvement
Determination of training needs

Aharon Tziner, Kevin R. Murphy (1999)


CONCEPTUAL FRAMEWORK

observed the attitudinal influences in performance appraisal. From their analysis they

Effect of PAS in Organizational Commitment:

found

Organizational Commitment refers to the

instrumental commitment were more likely

amount of involvement an employee has in

to give high ratings than raters lower on

his/her work. This helps both the employee

instrumental commitment. They also sug-

and the organization to improve their skills

gested that perceptions of performance

which in turn improves the productivity of

appraisal systems can affect the quality and

the

employee. An

usefulness of the ratings obtained. One way

employee who is involved completely in

of improving ratings may be to increase

his/her work is said to have great organiza-

perceptions that ratings are done honestly,

organization

and

the

that

raters

who

were

high

on

The Journal Contemporary Management Research

74

March

that ratings are used fairly by organizations,

manship, and civic virtue. It is found that

and that raters are rewarded for providing

the OCB dimensions of altruism and civic

useful performance feedback to their subor-

virtue can have just as much of an impact

dinates.

on managers subjective evaluations of


employees performances as employees

Aizzat Mohd. Nasurdin, Mohamad Abdullah

objective productivity levels. The degree to

Hemdi and Lye Phei Guat (2008) examined a

which OCB can influence judgments of job

model involving Human Resource Management

performance is relatively high. We can say

(HRM) practices, perceived organizational sup-

that if employees have the feeling of having

port, and organizational commitment. They have

citizenship in the organization their perfor-

concluded that HRM practices will be positively

mance in the work will be more.

related to organizational commitment, and


that perceived organizational support would

Wei Zheng, Mian Zhang, Hai Li (1986), exam-

serve as

relationship

ined how performance appraisal process is

and commitment.

associated with organizational citizenship

They found that the Malaysian manufacturing

behaviour, under the light of social exchange

sector demonstrated that career development

theory and impression management theory,

and

direct,

using affective commitment as a mediator and

with

rating-reward linkage as a moderator. They

mediator

in

between HRM practices

performance

positive

the

appraisal

and significant

have

relationships

organizational commitment.

found that the relationship between performance appraisal process and organizational

Effect of PAS in Organizational Citizenship

citizenship behaviour was partially mediated

Behavior

by affective commitment, and perceived ratingreward linkage strengthened the direct asso-

Also referred to as contextual behavior,

ciation between appraisal process and orga-

prosaically behavior, and extra-role behavior,

nizational citizenship behaviour whereas it

organizational

weakened the relationship between appraisal

citizenship

behavior (OCB)

consists of employee behavior that contributes

process and affective commitment.

to the welfare of the organization but is


beyond the scope of the employees job

Scott B Mackenzie , Philip M Podsakoff,

duties. These extra-role behaviors may help

Richard Fetter (1991) investigates the effects

or hinder the attainment of organizational

of organizational citizenship behaviours and

goals. There are five dimensions of OCB:

objective sales productivity on managers'

altruism, conscientiousness, courtesy, sports-

evaluations of salespersons' performance.

Deepa, Palaniswamy and Kuppusamy

2014

Three objective measures of weekly productivity

75

Effect of PAS in Job satisfaction

(number of policies, total commissions, and the


percentage of quota reached) were obtained for

Job satisfaction refers to the contentment

a primary sample of 259 multiline insurance

an individual has with his or her job. Job

agents, as well as a cross-validation sample of

satisfaction

113 agents. Also obtained for these agents was

individual is with his or her job. It is a

an evaluation of four dimensions of organiza-

relatively recent term since in previous

tional citizenship behaviours (altruism, civic

centuries the jobs available to a particular

virtue, courtesy, and sportsmanship), and a

person were often predetermined by the

managerial assessment of their performance.

occupation of that persons parent. Perfor-

Covariance structure analysis indicated that

mance appraisal is among the most critical

managers' subjective evaluations of salesper-

Human

sons' performance are determined as much by

global success for one organization. It is

the salespersons' altruism and civic virtue as by

also important to mention that extensive

objective productivity levels in the primary

frustration and satisfaction with performance

sample. Similar results were also obtained in the

appraisal have challenged practitioners and

validation sample. Moreover, these findings

researchers to appraise the efficiency of

were robust to the effects of common method

performance appraisal quality. Once the

biases.

employees are satisfied with their job their

describes

Resource

how

functions

content

that

an

brings

performance will be effective and they will


Abduls Sattar Abbasi, Aiza Hussain Rana

achieve the goals efficiently.

(2012) analyzed the impact of Islamic work


ethics, reward system and organizational

June M.L. Poon (2004) observed the effects

environment

on

of

of employees' perceptions of political motives

employees.

They

is

in performance appraisal on their job satisfac-

significant and positive correlation between

tion. They found that when employees per-

work environment and citizenship behavior

ceived performance ratings to be manipulated

of employees. They have concluded that

because of raters' personal bias and intent to

organizations should develop proper, trans-

punish subordinates they expressed reduced

parent and well communicated reward system

job satisfaction that, in turn, led to greater

to ensure

to

intentions to quit their jobs. They concluded

achieve both tangible and intangible organi-

that manipulations of ratings for motivational

zational objectives.

purposes, however, had no effect on job

citizenship

pleasant

found

work

behaviour
that

there

environment

satisfaction and turnover intention.

The Journal Contemporary Management Research

76

March

Ayaz Khan (2009) examined the effectiveness

Employee engagement is the act of an

and impact on performance and job satisfac-

employee being involved in, enthusiastic

tion of technical education faculty (N.W.F.P).

about, and satisfied with his or her work.

He

It

concluded

that

existing

system

of

includes

the

characteristics

of

performance appraisal lack proper effective-

workplace environment

ness to positively affect performance and

retain the most productive employees.

satisfaction

of

Employee engagement is typically described

Technical Education Department (N.W.F.P)

as a high level of employee involvement,

due to inherent pitfalls.

commitment to

level of faculty

members

that attract and

the organization and job

satisfaction. Engaged employees value, enjoy


Adnan

Ahmed,

Iftikhar

Hussain

(2010)

and have pride in their work. They are more

analyzed the Performance Appraisals Impact

willing

on Attitudinal Outcomes and Organizational

organization

Performance, Pakistan. They recommended

responsibility; invest more effort in their

that a better PA system integrated with better

jobs; share information with other employ-

HR

ees; and remain with the organization than

practices

will

appraisal satisfaction

enhance
and

performance

also

increase

to

employees

help

each

succeed;

who

are

other

and

take

additional

less

the

engaged.

employee job satisfaction and reduce turnover

Employee engagement and related vari-

intentions

ables, such as commitment and cooperation

to

bring

effectiveness

in

the

organizations.

are associated with their performance as


because once the employees are given a

Mahdieh Darehzereshki (2013) analyzed the

good performance appraisal they will be

role of the performance appraisal quality on job

motivated and automatically they will start

satisfaction, Malaysia. He had analyzed and

engage themselves towards the objectives

concluded that employees with high quality

of the organization.

performance appraisal experiences were more


likely to be satisfied with their job and human

Graham Lowe (2012) examined how job, work

resource (HR) practitioners has to decide

environment, management and organizational

whether the allocation of additional resources to

factors influence levels of engagement among

ensure that all employees have a uniformly high

healthcare employees. He found that a high

quality performance appraisal experience is a

level of employee engagement is related to

worthwhile investment.

retention, patient centered care, patient safety


culture and employees positive assessments

Effect of PAS in Employee engagement:

of the quality of care or services provided by

Deepa, Palaniswamy and Kuppusamy

2014

77

their team. He concluded that hospital employ-

Effect of PAS in Productivity:

ees provide a unique opportunity to explore the

Productivity refers to the objectivity or

dynamics of employee engagement in health-

target of an organization to be achieved

care.

by their employees. Employees can work


effectively and efficiently only when they

Vishal Gupta, Sushil Kumar (2013) explored the

are satisfied with their work and when they

relationship between perceptions of perfor-

feel responsible for the work they do. This

mance appraisal fairness and employee

can be done by motivating the employees

engagement in the Indian business context. The

in terms of both financially as well as

relationships between justice perceptions and

non-financially. Performance appraisal helps

engagement were analyzed and they found that

the organization to understand the employ-

there is a significant positive association

ees interest about their job and also helps

between distributive and informational justice

in

dimensions and employee engagement. They

facilities

concluded that the distributive and informational

effective way. It motivates them and makes

justice perceptions during a performance

them

appraisal session lead to enhanced engagement

attaining the goal of the organization. It

among employees.

also helps in creating a new culture in the

providing
for

to

them

the

performing

engage

necessities

or

the job

an

themselves

in

towards

organization so that the employees feel


Caroline Ann Rowland, Roger David Hall

comfortable in their work and which in turn

(2013) explored the contribution of appraisal

all

systems to sustainable organizational effec-

productivity.

these factors lead to increase in

tiveness. It argues that competitive advantage


is increasingly reliant on discretionary effort. As

Gerald T. Gabris, Kenneth Mitchell (2009)

the emphasis of appraisal has shifted from a

examined whether employee incentive plans

developmental

focus,

lead to increased productivity. The authors

perceived unfairness in both procedures and

also implemented a structured open-ended

outcomes threatens to undermine commitment

questionnaire to over 100 employees of Biloxi

and, therefore, sustainable performance. They

and used five-point Likert Type scale for

found that appraisal frequently creates actual

analyzing the data. They found that statistically

and perceived injustice in terms of both

significant variation in attitudes does exist

procedures and rewards. It also generates

toward the Biloxi merit bonus system as a

tensions between managing performance and

stimulus of employee performance. They

encouraging engagement.

suggested that potential conflict between

to

performance

The Journal Contemporary Management Research

78

March

managers and subordinates over the purpose

justice - considered

and function of the performance appraisal

satisfaction and work performance. They

process may not be all that serious. Also they

concluded that employee perception of

suggested that employees themselves appear

organizational justice (distributive, proce-

to support the notion that rises and promotions

dural and interactional justice ) in the

should be based on merit.

performance

appraisal

practices

system

to

did

job

not

significantly contribute or have no impact


Evrim Ustunluo (2009) analyzed whether
appraisal

system

leads

to

improve

to productivity.

in

productivity. They pointed out that most of

Relationship derived or understood from the

the teachers always or often fulfill their

above discussion:

responsibilities in terms of teaching and


professionalism although few teachers had

PAS models:

received low means .They suggested that

Now, the impact of performance appraisal

Administration, Heads of Program and Coordi-

through Organizational Commitment, Job

nators always and often take their responsibili-

Satisfaction and Employee Engagement

ties

towards productivity can be given as a con-

in

terms

of

planning,

organization,

communication, collaboration, professional com-

ceptual framework as follows:

petence, leadership and duties, whereas TDU


and TMDU sometimes and rarely fulfill respon-

Performance Appraisal System can be

sibilities. They concluded that in terms of the

used to encourage the employees to have

administration, the appraisal system helped

a great Organizational Commitment. It

define roles and responsibilities more clearly,

makes them to work efficiently for the

review and determine job descriptions, organi-

organization by thinking that the organiza-

zational goals and objectives, and led to contin-

tion as their own and by having a great

uous learning, team building and improved

commitment.

productivity.
Performance Appraisal System also helps
Ari

Warokka,

and

the employees to motivate themselves in

the

two ways; either financially or non-finan-

performance

cially. Financially, by providing extra

appraisal on productivity and employees by

incentives, it helps the employees to

connecting the employees perception on fair

motivate themselves and makes them to

Thamendren
literature

of

performance

Cristina

Moorthy
the

G. Gallato

(2012) studied

effect

appraisal

of

and

organizational

2014

Deepa, Palaniswamy and Kuppusamy

have a more commitment in the organization.

79

accordingly and all these factors will help


them to increase in their productivity.

Non-Financially, by providing extra roles


CONCLUSION

and responsibilities, it helps the employees


to have a great citizenship behaviour which
helps them to work more and to increase in

Thus the employees who are apprised prop-

their productivity.

erly according to their performance using the


performance appraisal system get motivated

Performance Appraisal System also moti-

automatically. Performance appraisal system

vates the employees to engage themselves

helps both the employees and the organiza-

towards the work and makes them to have

tion in increasing their productivity. The

a very good Job Satisfaction.

employees will have Organizational Commitment and Organizational Citizenship Behav-

Job Satisfaction, once the employees are

iour automatically. Once the employees found

satisfied with their job they will commit

that they are satisfied with their job, then they

themselves automatically to their job, thus

engage themselves towards the work until

makes the employee to feel that they are

they find that there is an increase in their

the citizens of the organization.

productivity.

Once the employees feel that they are the


citizens of the organization they will behave

80

Figure 1:
Model 1:

Figure 2:
Model 2:

The Journal Contemporary Management Research

March

Deepa, Palaniswamy and Kuppusamy

2014

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