DISCUSSION

The aim of the present study was to assess the strength and direction of the relationship between
performance appraisal satisfaction and job satisfaction of employees working in private sector
organizations in Delhi, NCR, using simple regression analysis. Quantitative data, using survey
method, was collected from 108 employees working in 26 organisations in various sectors such
as banking and financial services, hospitality, real estate, consulting and retail services etc. Each
researcher administered the survey to 2 employees working in a particular organisation at the
managerial position (Junior, Middle or Senior Management). The tools used were Minnesota
Satisfaction Questionnaire by Weiss, Dawis and England (1967) and Performance Appraisal
Satisfaction Scale by Katavich (2013) which is an adaptation of the scale developed by Cook
and Crossman (2004). Qualitative data, in the form of interview, was also collected from one
employee of each organisation, where a few questions pertaining to the performance appraisal
system of the organisation were asked from the employees. The hypotheses of the study were:
H1A: There will be a significant and positive relationship between performance appraisal
satisfaction and general satisfaction of employees.
H1B: There will be a significant and positive relationship between performance appraisal
satisfaction and intrinsic satisfaction of employees.
H1C: There will be a significant and positive relationship between performance appraisal
satisfaction and extrinsic satisfaction of employees.
H2A: General satisfaction of employees will be significantly influenced by their satisfaction
with performance appraisal system.
H2B: Intrinsic satisfaction of employees will be significantly influenced by their satisfaction
with performance appraisal system.
H2C: Extrinsic satisfaction of employees will be significantly influenced by their satisfaction
with performance appraisal system.
The findings of the correlational analysis revealed that performance appraisal satisfaction was
significantly correlated with all the three measures of job satisfaction, i.e. intrinsic satisfaction,
extrinsic satisfaction, and general satisfaction. Further regression analysis revealed that
performance appraisal satisfaction contributes to significant amount of variance in all the three
parameters of job satisfaction. Thus, all the hypotheses were accepted. The findings of the study
are discussed below:

Performance Appraisal Satisfaction and Intrinsic Satisfaction

Table 2 in the results section indicated a high positive correlation between Performance
Appraisal Satisfaction and Intrinsic Satisfaction i.e. 0.511. Regression analysis, in Table 3,
showed that the R2 value was calculated to be 0.262 which demonstrates that 26.2% of the
variance in intrinsic satisfaction can be explained through performance appraisal satisfaction of
the employees. These results showed that intrinsic satisfaction of employees is influenced by
their satisfaction with performance appraisal system. These findings are in line with previous
research. In one research, for example, regression analysis deduced that performance appraisal
satisfaction significantly and positively predicted intrinsic satisfaction of the employees working
in a soft drink industry in Ethiopia (R=0.450, R2 = 0.202 i.e. 20.2% variance in intrinsic
satisfaction was explained by performance appraisal satisfaction) (Bulto & Markos, 2017).
Another study by Fakhimi and Raisi (2013) found that the correlation between performance
appraisal satisfaction and intrinsic motivation in bank employees was 0.729 which was a high
correlation.

It can also be seen that 73.8% variance in intrinsic job satisfaction is caused by factors not
studied in the present study. These factors can include personal factors such as personal traits,
interests, skills, capabilities, knowledge level, experiences and determination of the employees
(Gahan & Abeysekera, 2009).

Researchers have noticed that performance appraisal satisfaction and intrinsic satisfaction have
great interaction to each other. Intrinsic job satisfaction refers to internal factors that are related
to satisfaction with the job, i.e. factors related to the self-actualization of the worker, that is, the
need for a sense of self-accomplishment on the job (Herzberg and colleagues, the Two-factor
theory of job satisfaction, 1959). Thus, if the employees experience a sense of responsibility,
self-directiveness, skill development and a sense of accomplishment at their job, they are
intrinsically satisfied. Various aspects of the performance appraisal system enhance employee
motivation.

Many studies explained the importance of performance appraisal satisfaction in various ways to
improve organizational performance mainly through enhancing employee motivation, and
commitment and job satisfaction. (Saeed and Shah, 2016; Singh and Rana, 2015). Performance
appraisal is essential as it gives the necessary feedback on performance of employees on the
basis of which managers can identify training needs and plan for employee development (Levy
and Williams, 2004). Provision of feedback helps in clarifying what the employee must do
(McCalley, 2006; Pat-El et al., 2012). Several studies indicate the presence of a positive
correlation between feedback and work motivation (Chiang & Jan, 2008; McCalley, 2006). In
the present study, interviews with the participants revealed that 19 out of 26 organisations have
some sort of a feedback mechanism – formal or informal, which may contribute to employees’
intrinsic satisfaction.

Thus, performance appraisal system is usually viewed as a critical element for boosting intrinsic
satisfaction of the employees and thus, employee motivation (Selvarajan and Cloninger, 2012).
There are various accounts of empirical studies that demonstrate the positive relationship
between performance appraisal satisfaction and motivation. For example, a study conducted on
Nigerian public sector concluded that as employees were properly motivated with the necessary
and adequate training needs based on regular feedbacks about their performance, innovation
tended to increase rapidly on the job thereby leading to organizational competitive positioning
(Salau et al., 2014). Kisang and Kira (2016) in their study conducted on Kenyan Commercial
banks have found that objectivity of performance appraisal and feedback positively influences
employees’ intrinsic motivation.

It has been argued that performance appraisal provides an important avenue to recognise
employees’ work efforts. Recognition in this case has for long been considered as a key
employee incentive. Its importance is underscored by Samarakone (2010) who indicates that
human beings in a number of instances prefer negative recognition as opposed to no recognition
at all. Thus, employees whose work efforts are recognised through the performance appraisal
ratings tend to be satisfied with their job.

Performance management research shows that a significant number of employees tend to have
the desire to perform their jobs well as part of their individual goals as well as a demonstration
of loyalty towards the organisation (Wright & Cheung, 2007). Extant literature on performance
management indicates that performance appraisal when undertaken in the right manner can
contribute significantly to employee satisfaction and motivation (Tuytens & Devos, 2012).
When undertaken in the absence of clear goals, performance appraisal can however have serious
ramifications in terms of employee dissatisfaction and consequently a reduction in productivity
and organisational commitment (Maley, 2013). This is line with Ryan and Deci’s Self-
Determination theory (2000) that intrinsic satisfaction of people will be enhanced if the
communicated goal provides them ground for work behavior. Employees record higher levels of
motivation and satisfaction when they are presented with explicit goals that they are supposed to
meet (Gómez-Miñambres, 2012; Catania, 2012). Performance appraisal, as a means to
communicate and translate strategic visions and goals to employees, may enhance intrinsic
motivation through experienced meaningfulness of work, because superordinate goals have the
capacity to convey to employees something in which they can believe (Latham, 2003). Bipp and
Dam (2014) noted that employees perform at a higher level in the presence of specific and
challenging goals.

In the present study, qualitative data gathered through interviews revealed that 12 out of 26
organisations use a performance appraisal technique that is related to setting goals such as
Management by Objectives or setting up of Key Responsibility Areas (KRAs). Thus,
employees’ intrinsic satisfaction may be related to implementation of such techniques. This
satisfaction was evident in the responses given by the participants of the present study. For
example, one participant stated that ‘The thing is you define and set your own KRAs and work
accordingly, that is the best part.’ Another employee stated that “Goals are set keeping in mind
needs of the organisation that results in organisational growth; employees are satisfied because
they are involved in setting of goals.”

Performance Appraisal Satisfaction and Extrinsic Satisfaction

Employees’ extrinsic satisfaction depends upon a number of factors such as promotions, salary
increases and bonus payments etc. Emmerik, Schreurs, Cuyper, and Peters (2012) argued that
performance appraisals can be used to motivate employees through rewards such as promotions
and salary increases. Such rewards are in the form of extrinsic rewards which can be used to
boost performance (Bassett-Jones & Lloyd, 2005).

Table 2 in the results section indicated a high positive correlation between Performance
Appraisal Satisfaction and Extrinsic Satisfaction i.e. 0.637. Regression analysis, in Table 3,
showed that the R2 value was calculated to be 0.406 which demonstrates that 40.6% of the
variance in extrinsic satisfaction can be explained through performance appraisal satisfaction of
the employees. These results showed that extrinsic satisfaction of employees is influenced by
their satisfaction with performance appraisal system. Previous literature has also supported this
finding. For instance, Kampkotter (2016) concluded that receiving formal performance
appraisals has a positive and highly significant effect on job satisfaction. For performance
appraisal related to monetary consequences, this effect even gets stronger. Thus, the results
implied that performance appraisal related to monetary outcomes is a powerful HR management
tool which seems to be honoured by employees.

It can also be seen that 59.4% variance in extrinsic job satisfaction is caused by factors not
studied in the present study. These can include factors such as a physically appropriate working
environment, to be a part of a coherent team, to be appreciated by colleagues and superiors and
being under a project-oriented control rather than an oppressive control (Bektas, 2017).
Monetary reward system, job security, relations with superiors and relations with the colleagues
constitute external reward system (Panagiotis & Petridou, 2008) which can contribute to
external job satisfaction of an employee.

Within the performance management literature one of the most dominant views is that money or
pay-for-performance is one of the most effective ways of rewarding employees and hence
increased motivation (Van Herpen et al., 2005; Kominis & Emmanuel, 2007). Money in this
case acts as an extrinsic motivator by satisfying the employee‘s needs indirectly through means
of bonuses and pay (Anthony & Govindarajan, 2007). Performance appraisals perform a crucial
role in determining the amount of bonus payment of salary increase. Thus, people who are
satisfied with their performance appraisals also tend to be satisfied with their salaries or
monetary benefits (Kampkotter, 2016).

Whenever there are new job openings in an organisation, the performance appraisal rating of an
employee becomes a useful reference point for the managers to use for internal promotions
(Kumar, 2012). According to Maana (2008), such promotions not only serve as a reward for the
employee‘s past performance but also perform a crucial role in increasing the extrinsic
satisfaction of an employee.

The expectancy theory given by Vroom (1964) which deals with motivation and management
based on three beliefs namely Valence, Expectancy and Instrumentality postulates that
associating incentives to an employee’s performance motivates the employee to increase effort
as well as performance (Cullen, 2005). This enhances extrinsic satisfaction of an individual.

In the present study, it was found that performance appraisal satisfaction contributed more to
extrinsic satisfaction than intrinsic satisfaction. There can be several reasons for this. One of the
tools used for the study was Minnesota Satisfaction Questionnaire which measures Intrinsic,
Extrinsic and General Job Satisfaction. The items measuring intrinsic satisfaction included
statements such as ‘Being able to keep busy all the time’, ‘The chance to do different things
from time to time’, ‘The chance to be “somebody” in the community’, ‘The chance to do things
for other people’, ‘The chance to do different things from time to time’ etc. These statements are
not directly connected to the performance appraisal satisfaction or what performance appraisal
means. On the other hand, the items measuring extrinsic satisfaction included statements such as
‘The competence of my supervisor in making decisions’, ‘The way company policies are put
into practice’, ‘The way company policies are put into practice’, ‘The praise I get for doing a
good job’ etc. These factors are directly and indirectly related to performance appraisal
satisfaction. Thus, it can be explained that the correlation between performance appraisal
satisfaction and extrinsic satisfaction will be higher than the correlation between performance
appraisal satisfaction and intrinsic satisfaction.

Gagne and Deci (2005) argue that when a given task is intrinsically appealing to the employee,
it is possible that the positive effects can be undermined in a case where the extrinsic rewards
are also linked to the given task. As an example, Gagne and Deci (2005) note that pay as one of
the motivating factors has the potential to erode intrinsic motivation (e.g. achievement).
Appraisals without monetary consequences seem to have neither an economically nor
statistically significant effect on job satisfaction. Performance appraisal without any monetary
consequences may be seen as useless or dispensable, because, in this case, performance
assessment and feedback are not linked to any further, explicit actions which, in turn, might
induce a significant decrease in job satisfaction (Kampkotter, 2017). In the present study, it
appears that performance appraisal is, indeed, connected to monetary consequences because
there were three items in the PAS questionnaire that measure Distributive Justice. This factor
was also apparent through the qualitative interview wherein one participant recognised that a
strength of their organisation is that “increments are based on appraisal.”

Long and Shields (2010) considered rewards and recognition based on achieved performance
appraisal rating as one of the ways that help trigger innovative behaviour as an outcome of
motivation. According to Amabile et al. (1994), people who perceive themselves as extrinsically
motivated are driven to work because they have a strong desire to be recognised and rewarded
for their efforts. Praise and tangible rewards are more important to some people as they can be a
mechanism with which they maintain or increase the image a person has of themselves (Jawahar
2006). This also enhances their satisfaction with job.

Boswell & Boudreau (2002) stated that formal performance appraisal system in an organisation
consists of both an Evaluative and a Developmental function. As a tool for evaluation,
performance appraisals helps detect strengths and weaknesses, i.e. room for improvement of
employees, and help to set objectives and to improve employee performance. The
developmental use of performance appraisal systems focuses on experiences and skills that
employees should acquire and which are identified by the use of performance appraisals (e.g.,
training and development needs). This process of evaluation and development offers the
advantage of identifying the employees’ skill level and serving the employees’ development
needs and career ambitions. Thus, performance appraisals provide a way to the employees to
work towards self-growth and attain self-actualization at work, which is an important
component of intrinsic satisfaction (Herzberg et al., 1959). In the present study, since formal
appraisal review was done only annually in most organisations, performance appraisal may not
have fulfilled its developmental goal. This can be one of the reasons why the relation between
performance appraisal satisfaction and intrinsic satisfaction is lower than that between
performance appraisal satisfaction and extrinsic satisfaction.

Kuvaas (2006) found that lack of feedback review and feedback review once a year leads to low
intrinsic motivation. In the present study, it was found that 6 organisations did not have a
feedback review system i.e. they did not receive any feedback related to their performance and
as mentioned before most of the remaining 20 organisations got a feedback review annually.
The supervisor appraising the performance of an employee has a great role in affecting overall
job satisfaction of the employee. That is, trust in the supervisor, in the form of perceived
fairness, has been found to play a significant role in increased performance appraisal satisfaction
and job satisfaction. For example, Naji et al. (2015) conducted a study among bank employees
to examine the relationship between perception of performance appraisal and employee’s job
satisfaction and the impact of trust on supervisors on the relationship between performance
appraisal satisfaction and job satisfaction. The results indicated the existence of a positive and
significant relationship between Performance Appraisal and Job satisfaction. In the present
study, employees’ performance, in 24 out of 26 organisations, was appraised by their managers.
The moderately high correlation between performance appraisal satisfaction and extrinsic
satisfaction suggests that the respondents are reasonably satisfied with their boss/manager.
Employees’ trust in their supervisor could have been high, which may have contributed to their
extrinsic satisfaction.

Performance Appraisal Satisfaction and General Satisfaction

Table 2 in the results section indicated a high positive correlation between Performance
Appraisal Satisfaction and General Satisfaction i.e. 0.606. Regression analysis, in Table 3,
showed that the R2 value was calculated to be 0.368 which demonstrates that 36.8% of the
variance in general satisfaction can be explained through performance appraisal satisfaction of
the employees. These results showed that general satisfaction of employees is influenced by
their satisfaction with performance appraisal system. This result has also been found in previous
researches. For example, Darehzereshki (2013) found that there was a significant positive
relationship between the performance appraisal satisfaction and job satisfaction of employees of
MNCs in Malaysia. Another study by Saxena and Rai (2015) was conducted to find out the
effect of performance appraisal system on job satisfaction in service sector in India. The results
indicated that the dependent variable job satisfaction was found to be positively and
significantly related to the independent variable performance appraisal (R=.508).

It can also be seen that 63.2% variance in general job satisfaction is caused by factors not
studied in the present study. These factors can include the working environment, fair policies
and practice, safety and security, relationship with co-workers, challenges, responsibilities and
nature of the work itself etc (Anastasiou, 2014; Rukh et al., 2015; Rahman et al., 2017).

Previous studies have found a significant relationship between performance appraisal

satisfaction and overall job satisfaction. Employee satisfaction with the performance appraisal
process is logically related to the perceived fairness of the process (Organ, 1988). The positive
appraisal satisfaction-overall job satisfaction relationship can be conceptualized as representing
a focused application of the positive procedural/interaction justice to job satisfaction relationship
(Moorman, 1991). Procedural/interaction justice measures the general degree to which fair
(satisfactory) formal procedures are used by the organisation (e.g. collecting accurate
information that is necessary for making decisions) as well as how procedures are carried out
(e.g. supervisor considering an employee’s viewpoint) (Moorman, 1991). Employee satisfaction
with performance appraisal depends upon the fairness associated with the appraisal (i.e.
timeliness, feedback, goal-setting etc). While an employee may be unhappy with the outcomes
received based on an appraisal, the key to an adverse employee reaction to such outcome
negativity is its process (Folger, 1993), (i.e. procedural fairness/satisfaction). This aspect was
also seen in qualitative interview wherein one participant mentioned that he was not satisfied
with the current performance appraisal system because the outcomes were personally driven. He
said, “Actually the outcomes are very personally driven. It depends upon your personal relation
with your manager and your image in manager’s mind, your manager's perception of you.” If
the appraisal process implemented by one’s supervisor is perceived as fair, this positively affects
overall job satisfaction. In the present study, employees from at least 13 organizations have
stated that their performance appraisal system is “fair, transparent and objective”. Thus,
perceptions of fairness in the procedure of performance appraisal may have led to increased job
satisfaction of the employees. Also, the employees felt that there is fairness in the performance
appraisal system of their organisations where there is a “scope of communication with the boss”
and that the system is “transparent, approachable, impartial and unbiased”.

Implications

The results imply that employees who are satisfied with the performance appraisal system in
their organisations also tend to be high on job satisfaction. Thus, in order to increase job
satisfaction of employees, HR managers should work on the performance appraisal system and
try to make it fair, transparent and easily understood by the employees. There should be
increased awareness among employees towards the performance appraisal system. The criteria
of the performance appraisal system should be made in such a manner that the employees can
easily relate to it. The results also imply that procedural justice, i.e. the fairness of the system of
appraising performance in the organisations, tends to be highly correlated to job satisfaction.
Thus, factors such as the criteria or the guidelines for evaluating performance, raters’ efficiency
in doing a performance appraisal and the understanding of the performance appraisal system by
the employees must be worked upon by the HR managers to increase job satisfaction of the
employees in organisations. HR managers should conduct training programs in organisations in
order to increase the awareness of the organisation’s performance appraisal system among the
employees. This can lead to an increase in performance appraisal satisfaction of employees and
subsequently an increase in their job satisfaction. Organisations should also focus on
performance appraisal review such as an formal feedback regarding performance appraisal
ratings which can enhance job satisfaction.

Limitations

The following are the limitations of the present study:

1. The Performance Appraisal Questionnaire did not address the component of Distributive
Justice very well as it contained only 3 items measuring Distributive Justice. There
should have been more items on it and it should have been measured as much as
Procedural Justice.
2. The tools used for assessing the variables were self-report measures which can lead to
providing socially desirable answers and hiding certain aspects of the organisations that
the employees are working in.
3. The study only included employees working at the managerial level and thus the results
cannot be generalised to other employees.
 4. The present study was carried out only in the public sector organisations and hence the
results cannot be generalised to public sector organisations.
5. The word ‘Job Satisfaction’ was not used throughout conduction. Hence, in the
qualitative interview, no questions were asked on job satisfaction. There should have
been some questions gauging job satisfaction of the employees.

Suggestions for future research

Future research can include more variables such as organisational commitment, intention to quit,
employee performance and other such employee outcomes. Other factors that contribute to job
satisfaction can be studied too. These factors can include pay, job security, relationship with the
supervisor and co-workers, task responsibilities and the nature of the work itself. Public sector
organisations can also be included in future studies and a comparison between public and
private sector organisations can be made. Different organisations can also be compared on the
basis of their performance appraisal systems and their impact on job satisfaction. Impact of
different performance appraisal techniques on job satisfaction can also be studied.

Conclusion

The aim of the present study was to assess the strength and direction of the relationship between
performance appraisal satisfaction and job satisfaction of employees working in private sector
organizations in Delhi, NCR. It was found that the results of the current study are in line with
the hypotheses stated. The hypothesis which stated, ‘There will be a significant and positive
relationship between performance appraisal satisfaction and general satisfaction of employees’
was accepted. The correlation value of performance appraisal satisfaction and general
satisfaction was significant at .01 level (r=.606). The hypothesis stating, ‘There will be a
significant and positive relationship between performance appraisal satisfaction and intrinsic
satisfaction of employees’, was accepted. The correlation value of performance appraisal
satisfaction and intrinsic satisfaction was significant at .01 level (r=0. 511). Similarly, the
hypothesis stating that, ‘There will be a significant and positive relationship between
performance appraisal satisfaction and extrinsic satisfaction of employees’ was accepted since
the obtained value of correlation between the two variables (r=0.637) was significant at .01
level.
Also, the findings indicated that General satisfaction of employees was significantly influenced
by their satisfaction with performance appraisal system (Hypothesis H2A). Performance
appraisal satisfaction contributed to 36.8% variance in the general job satisfaction of the
employees (R2 =0.368, p=0.000). Similarly, Hypothesis H2B stating, ‘Intrinsic satisfaction of
employees will be significantly influenced by their satisfaction with performance appraisal
system’, was also accepted (R2 =0.262, p=0.000). Finally, hypothesis H2C which stated that,
‘Extrinsic satisfaction of employees will be significantly influenced by their satisfaction with
performance appraisal system’, (R2 =0.406, p=0.000), was also accepted.

Therefore, it was seen that all the six hypotheses were accepted, supporting the fact that
performance appraisal satisfaction and job satisfaction are both intrinsically and extrinsically
related.