PERFORMANCE APPRAISAL AND ORGANIZATIONAL PERFORMANCE(A SURVEY OF SELECTED BANKS IN PH)

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

In today’s competitive business world, it is understood that organizations can only compete with their rivals by innovating. Organizations can only innovate by managing their human resources well (Kuvaas, 2006).

Enhanced Performance has to do with accomplishment standard of accuracy, completeness, cost and speed. Performance is seemed to be the fulfillment of an obligation in a manner that released the performer from all liabilities under the contract. This means that an employee must be properly appraised in terms of their productivity, skills, taken decision and total commitment to their jobs so as to enable the organization to achieved expected goals (Kuvaas, 2006).

The human resource system can become more effective by having a valid and accurate appraisal policy used for rating performances of the employees. Unfortunately, the number of organizations using an effective performance appraisal policy is limited.

Performance appraisal is a key in human resource management function which is viewed as a subset of performance management. Rao (2005) argues that performance appraisal is a method of evaluating the behavior of employees in the work place, this normally including both the quantitative and qualitative aspects of job performance. It helps to identify and overcome the problems faced by the employees in their work (Mackey & Johnson, 2000). Although it has many benefits for the organization, Nurse, (2005); states that performance appraisal have the equal probability of having a bad influence on the organization as well as on employee performance.

According to Kuvaas, (2006); performance appraisal or employee appraisal is a method by which the job performance of an employee is evaluated generally in terms of quality, quantity, cost and time typically by the immediate line manager or supervisor. A performance appraisal is a part of the process of guiding and managing career development in both private and public sectors. It involves the task of obtaining, analyzing and recording information about the relative worth of an employee to the organization (Kuvaas, 2006).

Accurate appraisals are crucial for the evaluation of recruitment, selection, and training procedures that lead to improved performance. Appraisals can determine training needs and occasionally, counseling needs (Kuvaas, 2006). They can also increase employee motivation through the feedback process and may provide an evaluation of working conditions, thus, improving employee productivity, by encouraging the strong areas and modifying the weak ones (Kuvaas, 2006). When effective, the appraisal process reinforces the individuals’ sense of personal worth and assists in developing his/her aspirations. According to Maud, (2001); Performance helps firms, industries and nations to achieve sustainable competitive advantage. Industry is a thrust area for countries in their quest for competitiveness (Maud, 2001). It must be noted that banks which have maintained the momentum of continuous growth, and profitability showed better ratio of manpower effectiveness. Each element has crucial sub-components which serve as building blocks for productivity, (Rao, 2005).

To thrive or survive, organizations need to continuously improve quality, attract more customers, and become more cost conscious (Rao, 2005).   In other words, firms need to better manage their performance appraisal and increase Employee performance.  Over the years, there are many practices, tools, techniques, systems, and philosophies that aim to help organizations to gain the competitive advantage of higher performance (Rao, 2005).

There has been a widespread use of performance appraisal in work organizations all over the world.   This widespread use of Performance Appraisal Systems (PAS) can be attributed to human resource specialists, academics and consultants who proclaim that performance appraisal is a critically needed tool for effective human resource management (Locker and Teel,1997).

Formal performance appraisal has become a widespread instrument of human resource management. Surveys reported in the 1970s and 1980s already indicated that between 74 percent and 96 percent of U.S. organizations, and a comparable proportion of British firms had a formal performance appraisal in place. Large, complex organizations are especially likely to conduct formal appraisals (Berry, 2003). Not surprisingly, many   firms   in   Thailand   are   vigorously   implementing   Performance Management System (PMS) to help them better manage their employee’s performance and in turn, it affects organizational performance.  Since it is the key process through which work is accomplished, it is considered the “Achilles heel” of managing human capital (Pulakos, 2009). Therefore, it is very important to manage performance appraisal effectively.

Torrington and Hall,(1998) indicated that appraisal in the banks of Malawi is related to employee productivity because of the following reasons; they can be used to improve current performance, provide   feedback, increase   motivation, identify   training   needs, identify potentials, let individuals know what is expected of them, focus on career development, award salary increases, and solve job problems. Further he stated that performance appraisals help in a very practical way to manage an organization’s staff effectively, allow one to know what employees have achieved and can achieve, know what employees’ weaknesses are, understand how each employee’s role fits into the overall business, compare the efficiency of different staff members, set realistic goals and identify ways business can be expanded or enhanced (Kuvaas, 2006). It also allows staff to; feel valued, understand what is expected of them, understand the business they are involved in, understand their weaknesses, identify their strengths, identify areas they need further training in as well as offer opinions and insights that may improve the business as a whole (Kuvaas, 2006).

Therefore, we are persuaded to say that there as a relationship between Performance appraisal and organizational performance. In the next segment statement of the problem will be discussed.

1.2 STATEMENT OF PROBLEMS

This brings us to those problems that are associated with conducting performance appraisals. The process usually starts at the middle management level where it is the job of a middle manager to apprise his subordinates or employees who are under him (Rao, 2005).  In fact, every successive hierarchical level, the superiors are asked to evaluate the employees who are working under them (Rao, 2005) This can give rise to many issues that make performance appraisals an unpleasant task. As a result, many managers view the process of appraisal as time consuming and burdensome. To begin with performance appraisals can cause friction, resentment and the consequent low morale. Since appraisals are rather subjective in nature, they can also be disputed in case of negative ones (Rao, 2005).

The performance appraisal systems tend to have several problems. Raters‟ evaluations are often subjectively biased by their cognitive and motivational states (Pulakos, 2009), and supervisors   often   apply different   standards   with   different   employees   which   results   in inconsistent, unreliable, and invalid evaluations (Folger 1992). In order to create better systems, researchers have traditionally focused on validity and reliability (Bretz   1992) by designing newer “forms” of performance appraisals (e.g, behavioural-based systems that better define specific essential job functions of employees or 360-degree feedback mechanisms that allow for cross-validation via multiple raters).  However, despite these recent advances in evaluation design, critics continue to argue that performance appraisal systems are not consistently effective (Atkins & Wood, 2002; DeNisi & Kluger, 2000).This study sought to examine performance appraisals and employee job performance. In the next segment objective of the study will be discussed.

1.3 OBJECTIVE OF THE STUDY

The main objective of the study is to examine the relationship between performance appraisal and organizational performance. The following objectives are to be achieved accordingly:

1. To examine the relationship between rating method and organizational performance.
2. To examine the relationship between ranking method and organizational performance.

iii.    To examine the relationship between management by objective and organizational performance.

1. To ascertain the relationship between organizational culture and organizational performance.

1.4 RESEARCH QUESTIONS

The following research questions will be used to guide the study.

1. To what extent does rating method associated organizational performance?
2. To what extent does ranking method associated with organizational performance?

iii.    What is the extent to which management objective influence organizational performance?

1. What is the relationship between organizational culture and organizational performance?

1.5 SIGNIFICANCE OF THE STUDY

This study is significant in the following ways;

Firstly, it will assist the organization to continually plan for the good of their employee’s and also make use of skilled manpower for the good of the organization.

Others who will benefit from this study include managers, business organizations, higher institutions and the society in general. In the next segment scope and limitation of the study will be discussed.

1.6   SCOPE/LIMITATION OF THE STUDY

The study is delimited under the following heading: content scope, geographical scope and unit of analysis.

1. Content Scope: The content scope of this study involves on investigation to ascertain the relationship between performance appraisal and employee job performance. The dependent variable is employee performance, measures by Productivity, Effectiveness and Efficiency. While independent variable is Performance Appraisal measure by Rating method, Ranking Method and Management Objective.
2. Geographical Scope: This study is delimited to some selected Banks in Port Harcourt Metropolis which include Union Bank, First Bank and FCMB.
3. Unit of Analysis: The unit of analysis in this research involves the individuals at the time of carrying out the study. The scope of this study is to ascertain the relationship between performance appraisal and employee job performance.

1.7   Limitation of the Study

In carrying out an investigation of this native the researcher must of necessity be faced the following constraint.

Firstly, the time constraint’s the time frame provision for this study was short.

Secondly, financial constraints. Usually, a study of this nature involved some level of expenditure therefore, finance was also a limiting factor.

Thirdly, poor response from the respondent and inability to access the entire population of the study. In the next segment significance of the study will be discussed. Lastly,  poor measurement instrument. In the next segment, definition of terms will be discussed.

1.8 DEFINITION OF TERMS

Appraisals:      An act of assessing, evaluating something or someone.

Job: A paid position of regular employment.

Performance:  An act of presenting a play, concert, or other form of entertainment.

Performance appraisals: It is a method by which the job performance of an employee is documented and evaluated.