Performance management can be defined in various ways, and there are multiple definitions in the literature. Harris (2018) offers a broad definition of the concept, stating that it refers to “the design and implementation of management control systems in organisations to ensure that the strategic objectives are met” (p. 1).
In a similar fashion, Barth and de Beer (2018) define performance management as “a comprehensive, cyclical, year-around process where every individual team member of an organisation is aligned and focused in their actions and results to achieve common goals and improve performance through goal setting and clarifying expectations, receiving and providing coaching and feedback, reviewing results on goals and expectations, and recognising and rewarding members for their performance contributions” (p. 5).
The practices listed in this definition are typically part of performance management systems in organisations (Aguinis, Joo and Gottfredson, 2011; Biron, Farndale and Paauwe, 2011; Buckingham and Goodall, 2015; Cappelli and Tavis, 2016; Kuvaas, Buch and Dysvik, 2016).
Performance appraisal is part of the performance management system that commonly deals with collecting information about employees’ performance and assessing it (Barth and de Beer, 2018; Harris, 2018). Performance appraisals are crucial to organisational performance management since they provide information necessary to support managerial decision-making in designing, implementing and improving performance management (Barth and de Beer, 2018; Harris, 2018).
Fairness of performance appraisal is another important concept that will be addressed in the research. However, few scholars offer specific definitions of performance appraisal fairness. Rubel and Kee (2015) define it as “the extent to which employees perceive their organisation conducts appraisal in a fair manner that emphasises the delivery of their skills and work behaviours” (p. 185). Hence, the fairness of performance appraisal is somewhat subjective and depends on the perspectives of a particular employee.
Job satisfaction is a crucial notion in human resource management. Although there are various definitions available, the most basic one that is applicable to most organisational context is that job satisfaction refers to the employee’s level of content with their job (Brown, Hyatt and Benson, 2010; Deepa, Palaniswamy and Kuppusamy, 2014; Shipton et al., 2016).
Job satisfaction is affected by employees’ perceptions of and attitudes toward a wide array of work-related factors, including job characteristics, work environment, leadership, relationships with colleagues, promotional opportunities, recognition and more (Deepa, Palaniswamy and Kuppusamy, 2014; Shipton et al., 2016). Hence, it is a complex notion that has various antecedents on the organisational level and can influence other essential measures, including turnover intentions, performance and motivation (Shipton et al., 2016).
Performance Appraisal Practices
Because performance appraisals are meant to be aligned with the organisation’s strategy and goals, there is significant variation in performance appraisal practices that are applied and studied. For example, rating scales used in various organisations to evaluate employee performance can differ in their components and criteria based on organisation type or industry (DeNisi and Murphy, 2017). For instance, service organisations typically include metrics for customer service, whereas IT and tech companies could consist of measures of innovation, problem-solving and related constructs (Shipton et al., 2016).
Besides rating scales, performance appraisal practices tend to also include feedback provision and discussion of progress and goals with employees (DeNisi and Murphy, 2017; Harris, 2018; Shipton et al., 2016). These components are part of the organisational support that employees require to improve their performance.
Although significant differences in performance appraisal practices exist, the literature emphasises the need for these to be systematic, meaning that they should be applied throughout the organisation and used for long periods of time to enhance performance and other organisational outcomes (Hassan, 2016). The design and implementation of performance appraisals thus have a significant influence on their success in specific organisations, and it is crucial for managers to select and apply performance appraisal practices appropriately.
Reliability of Performance Appraisals
While various scholars explain the benefits of performance appraisals, there is also a large number of publications concerning their limitations. The main concern that is often cited in the research is the reliability of performance appraisals. Reliability is a broad term that refers to accuracy, purposefulness, and fairness of performance evaluations as they are applied in a given organisation (Iqbal and Akbar, 2015). Based on research, there are two main factors that can impair the reliability of performance appraisals.
On the one hand, managers’ knowledge can facilitate or impair the application of performance appraisals and their outcomes. According to Hermel (2015), performance appraisals can be complicated, and thus managers need specific training and knowledge in order to be able to rate their employees well. Therefore, managers’ understanding of the process, its constraints, and its influence on employees is crucial to their rating decisions and the reliability of performance appraisals as a whole.
On the other hand, managers administering performance appraisals are also subject to bias and errors, which can impair the ratings they give employees, making them less accurate and fair. For example, managers who have excellent interpersonal connections with some employees could give them higher scores than they would if they were utterly objective (Javidmehr and Ebrahimpour, 2015). They can also evaluate performance based on incomplete, outdated, or wrong information, causing errors in judgment (Javidmehr and Ebrahimpour, 2015).
Bias and errors impacting managers’ judgment can have a negative impact on employees’ perceptions of the process of performance appraisal and even affect their opinions about the organisation (Ideogu and Ozturen, 2015; Nair and Salleh, 2015; Selvarajan, Singh and Solansky, 2018; Tahjono, 2014; Taneja, Srivastava and Ravichandran, 2015). Hence, it is crucial to assess the risk of bias and errors in managers’ decision-making to understand whether the organisation’s performance appraisal practices are reliable.
Job satisfaction is a significant organisational outcome that has been widely studied in business management research. It is linked to a variety of other organisational characteristics through cause-and-effect relationships. For instance, job satisfaction can affect the employees’ level of work engagement and organisational commitment (Judge et al., 2017; Karanika-Murray et al., 2015; Lu et al., 2016; Shmailan, 2016).
Through these influences, job satisfaction can also impact other vital variables, such as employee performance, organisational productivity, turnover intentions, motivation, and more (Judge et al., 2017; Lu et al., 2016). Higher levels of job satisfaction are crucial for organisational success since they help to retain workers while also enhancing their contribution to the achievement of organisational goals.
In terms of influencing factors, job satisfaction is affected by a broad range of organisational variables. One of the most prominent theories of job satisfaction, Herzberg’s Two-Factor Theory, links job satisfaction with organisational practices, rewards, and recognition schemes, as well as with the nature of work and opportunities for growth and development (Judge et al., 2017).
The theory rests on the notion that organisational environment factors can be divided into two groups: motivators contribute to job satisfaction, whereas hygiene factors prevent job dissatisfaction (Miner, 2005). The latter group of factors includes policies, work conditions, relationships with co-workers and leaders, supervision, salary, remuneration and job security. Motivators, in turn, are considered to be achievement, promotional opportunities, rewarding or exciting nature of the work, recognition, growth and responsibility (Miner, 2005).
Research data confirm the effect that the working environment has on job satisfaction of employees, thus offering more support to this theory (Judge et al., 2017; Raziq and Maulabakhsh, 2015). However, there are also recent studies that have identified new variables impacting job satisfaction.
For example, Alegre, Mas-Machuca and Berbegal-Mirabent (2016) found job satisfaction to be influenced by teamwork, strategic identification, work-family balance, autonomy, and supervisor support. Understanding the influence of these factors and applying this knowledge to organisational HR practices can help in leveraging job satisfaction, resulting in positive corporate outcomes.
Performance Appraisal Reliability and Job Satisfaction
When implemented consistently throughout the organisation, performance appraisals become an integral part of its internal environment. Therefore, the relationship between performance appraisals and job satisfaction has also been studied in the literature. Kampkötter (2015) found that performance appraisals tied to higher job satisfaction only if they provided benefits for good performance results.
Other scholars attempted to evaluate if employees’ perceptions of the fairness of performance appraisals moderated their influence on job satisfaction. For example, researchers suggested that employees’ perceptions of the performance appraisal process could impact job satisfaction by affecting organisational trust and justice (Kim and Holzer, 2016; Tjahjono, 2014).
Generally, the findings indicated that poor reliability of performance appraisals applied in organisations had an adverse impact on employees’ job satisfaction, leading to other negative consequences, including higher turnover and low organisational commitment (Brown, Hyatt and Benson, 2010; Ismail, Mohamed and Rayee, 2016; Kim and Holzer, 2016; Nawaz and Pangil, 2016; Poon, 2004; Rubel and Kee, 2015).
These findings highlight the necessity of developing and implementing high-quality performance appraisal practices in order to evaluate and improve performance, as well as to encourage a healthy workplace environment. Nevertheless, the research did not identify any recent studies on the topic conducted in Saudi Arabia.
Since national context has a significant impact on management practices and the perceptions of employees in relation to them, this gap in research could affect performance appraisal and management practice in the country. Thus, investigating the relationship between these variables in this national context is crucial to support managerial decision-making in Saudi companies. Company X was chosen as the site of this research project because the managers reported low employee satisfaction and the resulting problems with morale, motivation and employee performance.
These issues began with the introduction of performance appraisals, allowing the supposition that they have influenced employees and their attitudes negatively. Conducting a study in this setting will contribute to managerial practice in company X and in similar contexts. Moreover, the research will generate knowledge on the topic of performance appraisals and job satisfaction that reflects the interplay of these variables in the Saudi context, thus contributing to the body of scholarly research in the area. The next section will discuss research aims and questions, as well as the methods to be utilised in data collection and analysis and ethical considerations connected with this project.
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