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Assistant Professor
Department of Management Studies
Faculty of Business Studies
Bangladesh University of Professionals
fsumayya@yahoo.com
Mafruha Hossain
Lecturer
Department of Management
Bangladesh University of Business and Technology
mafruha_h@yahoo.com
Abstract
The study investigates the factors that ensure the effectiveness of performance
appraisal system (PAS) in the pharmaceutical industry of Bangladesh. In order to
conduct the study, Secondary data were collected from different articles, books
and online sources and Primary data were collected through questionnaire from
200 employees of different pharmaceutical companies. Through factor analysis
six factors (Rater accuracy, Training, Performance Appraisal Process, Employee
Attitude, Communication, and Inter personal factor) were obtained. The results
of regression analysis showed that all the factors except interpersonal factor are
significant in ensuring the effectiveness of performance appraisal system. So,
pharmaceutical companies in Bangladesh should take these factors into strong
consideration in order to ensure the effectiveness of performance appraisal
system and to achieve the appraisal goal.
Keywords: Effectiveness of performance appraisal system, Factor analysis,
Regression analysis.
1. Introduction
Performance appraisal system (PAS) is a procedure
ofassessing employee performance based on preset standards. It is one of the most important
human resource management functions and also an
integral part of human resource management Judge
and Ferris 1993, Selvarajan and Cloninger 2008.
According to Hartle (1995), performance appraisal
system (PAS) should be incorporated into the way
that the business is managed and it should also be
associated with other key practices such as
business strategy, total quality management and
mostly on employee development. It has two
purposes, one is administrative purpose
(information for making salary, promotion, and
layoff etc.) and another one is developmental
purpose (diagnosing training needs, career planning
etc). Performance appraisal (PA) is the basic need
for developing employees for the development of
the organization. In advocating this view, Valance
(1999) suggested PA system as a tool for reviewing
and signifying the improvements of employee
productivity. Whereas, Cokin (2004) put his opinion
that effective system is imperative for
organizations, because it focuses on enhancing
employee's capabilities. The effectiveness of
performance appraisal system often influenced by a
number of factors like proper communication,
training, performance
appraisal
process,
interpersonal factors, employee attitudes and rater
accuracy. This paper aims at studying the factors
that have an immense impact on the effectiveness
of PA system in the perspective of pharmaceuticals
industry in Bangladesh. The results of this study, will
have significant implications for pharmaceutical
companies. If the relationships between the factors
related toperformance appraisal and the
effectiveness of PAS are significant, the
pharmaceutical companies could take those
significant factors into consideration in order to
ensure the effectiveness of performance appraisal
system.
2. Literature Review
3. Research Objectives
The objectives of this study are to find out the
factors that can ensure the effectiveness of
employee performance appraisal system in
pharmaceuticals industryin Bangladesh and to find
out the extent of relationship of those factors
with the performance appraisal system.
4. Methodology
This study has been doneby a series of steps. First,
review of literature was undertaken to identify the
factors that can influence the effectiveness of
performance appraisal system. Then data were
collected through a questionnaire survey from
employees of different pharmaceutical companies
in Bangladesh. Finally, factor analysis was used to
identify the factors that mostly affect performance
appraisal's effectiveness. The factors taken were
then used as inputs in regression analysis for
examining the relationship between thosefactors
and effectiveness of performance appraisal system.
The KMO and Bartlett's Test (table 2) shows that Kaiser-Meyer-Olkin Measure of
Sampling Adequacy (KMO) is 0.854 which is above .6 and The Barlett's Test of
Sphericity is significant.
Table 2: KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
Bartlett's Test of Sphericity Approx. Chi-Square
df
Sig.
.854
6.878E3
171
.000
So the results of correlation matrix, KMO and Bartlett's Test specify the
appropriateness of factor analysis.
5.1.2 Factor extraction:
Eigenvalue criterion: As per the
rules of Eigenvalue, factor with an
eigenvalue of 1.0 or more is retained.
Extraction Method:
Principal Component Analysis.
6.186
4.450
2.749
2.237
1.600
1.219
.081
.059
1.5911
1.4760
1.3850
1.3103
1.2485
1.1868
1.1303
Accept
Accept
Accept
Accept
Accept
Accept
Reject
1.0750
Reject
* Only comparisons of 8 factors are reported in the table. Other factors are rejected.
Eigenvalue
0
1
10
11
12
13
14
15
16
17
18
19
Component Number
.959
.954
.951
.949
.952
.952
.948
.941
.937
.931
.968
.964
.963
.972
.970
.959
.304
.923
.922
.918
PA
Process
Rater
Accuracy
Employee
Attitude
Factor rotation,
naming of factor
and obtaining
factor score
Interpersonal
Factors
Communication
Training
6.0 Conclusion
References
Anderson, J. r. 2002. "Measuring Human Capital:
Performance Appraisal Effectiveness", Paper presented
in Midwest Academy of Management Conference,
University of Kentucky.
Appelbaum, S. H. (2011). Globalization of Performance
Appraisals: Theory and Applications. Management
Decision,Vol. 49 (4), pp 570 - 585.
Armstrong, M. (2001). Human resource management
practice, (8th ed.) London: Kogan Page Publishers.
Attwood, M. (1985). Introduction
management. London: Pan Books.
to
personnel
"An investment in
knowledge pays the
best interest."
- Benjamin Franklin