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

479

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:
European Journal of Social Sciences Volume 10, Number 3 (2009)
480
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 Platz-
Vieno (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:
H
1
: There is a significant difference of opinion between managers/employees working with
public and private sector organizations regarding (a) outcomes of effective performance
appraisal and (b) detriments to effectiveness of performance appraisal.
European Journal of Social Sciences Volume 10, Number 3 (2009)
481
H
2
: 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.
H
3
: 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

Selected Dimensions % n
Age
20 to 29 years 77.08 88
30 to 39 years 15.04 17
40 to 52 years 07.08 08
Gender
Male 78.2 97
Female 21.8 27
Education
Masters or above 31.6 36
Graduation 68.4 78
Experience
Less than 1 year 34.0 34
1 to 3 years 38.0 38
4 to 7 years 17.0 17
8 years or above 11.0 11
Job Position
Managerial/Officer 66.7 76
Employee/Operative 33.3 38
Type of Organization
Pubic Sector Organization 50.0 57
Business/Private Sector Organization 45.6 52
Own Business 4.4 5

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.

European Journal of Social Sciences Volume 10, Number 3 (2009)
482
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

Bartlett
d

Variables
Total
Items
Items
Eliminate
d Total
(C
a
,

RM
b
)
Items
Remainin
g
Iterations
Total (C
a
,

RM
b
)
KMO
c

2
df Sig.
Outcomes of
Effective PA
14 8 6 4 0.715 164.096 15 0.000*
Detriments to
Effectiveness of PA
19 11 8 5 0.759 225.833 28 0.000*
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

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.
European Journal of Social Sciences Volume 10, Number 3 (2009)
483
Table 3: Factor Loadings Outcomes and Detriments of Effectiveness of Performance Appraisal

Component
c

Dominating Administrative Purposes and
Uses
a

Extraction
b

1 2 3
Rotation Sums of
Squared Loadings
Cumulative %
Outcomes of Effective PA
Employees knowledge about how they are
doing
0.706 0.831
Improvement in the accuracy of employee
performance
0.669 0.809
Linkage between current performance and
employee's goals
0.505 0.702
Employees learning about what
management values
0.559 0.642
Reduced employee turnover 0.757 0.861
Increased motivation 0.587 0.704
63.050
Detriments to Effectiveness of PA
Organizational politics that disturb
performance of targeted employees
0.753 0.851
Doubts in the mind of performers about
appraisal's after effects
0.632 0.746
Rewards on nonperformance 0.557 0.685
Creation of emotional anguish in employees 0.757 0.855
Reluctance of raters to offer feedback 0.699 0.773
Appraisal's focus on achievement of short
term goals
0.746 0.827
Subjectivity of appraisal results 0.616 0.619
Inconsistencies in setting and applying
appraisal criteria
0.608 0.615
67.096
Note: a Initial Value of all items is 1.000
b Extraction Method: Principal Component Analysis
c Rotation Method: Varimax with Kaiser Normalization


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.
European Journal of Social Sciences Volume 10, Number 3 (2009)
484
Table 4: Means and Standard Deviations

Variables M SD
Outcomes of Effective PA 4.04 0.553
Employees knowledge about how they are doing 4.26 0.799
Improvement in the accuracy of employee performance 4.06 0.868
Linkage between current performance and employee's goals 4.00 0.909
Employees learning about what management values 4.00 0.882
Reduced employee turnover 3.60 1.037
Increased motivation 4.27 0.784
Detriments to Effectiveness of PA 3.60 0.649
Organizational politics that disturb performance of targeted employees 3.70 1.150
Doubts in the mind of performers about appraisal's after effects 3.69 0.983
Rewards on nonperformance 3.29 1.238
Creation of emotional anguish in employees 3.49 1.029
Reluctance of raters to offer feedback 3.45 0.966
Appraisal's focus on achievement of short term goals 3.74 1.044
Subjectivity of appraisal results 3.65 0.929
Inconsistencies in setting and applying appraisal criteria 3.60 1.063

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
Sector-wise (Public-
Private)
Position-wise (Manager-
Operative)
Gender-wise (Male-
Female)
Variables
t df Sig. t df Sig. t df Sig.
Outcomes of Effective PA 0.574 95.41 0.567 -0.020 66.66 0.984 -2.826 65.28 0.006*
Detriments to Effectiveness
of PA
0.191 98 0.849 2.062 79.25 0.043* 1.222 37.59 0.229
Note: *p <0.05 (two tailed)

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.
European Journal of Social Sciences Volume 10, Number 3 (2009)
485
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.


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