MONASH UNIVERSITY

GROUP ESSAY
TOPIC

PERFORMANCE MANAGEMENT
Fairness and performance appraisal

Name: Truyen Thi Thu Duong

ID: 22207406
Class: Wednesday/ 1pm – 4pm
Lecturer: Dr Dianne Taylor
Due date: April 12, 2010

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Performance appraisal (PA) which involves “measuring job performance” (Murphy and

Cleveland 1995, p.1) has become a fact of organizational life. A research conducted in 1992

by Longenecker and Goff had estimated that over 90 percent of all large organizations in the

U.S. employ some form of systematic employee appraisal and review. According to

Nykodym (1996), the appraisal process can provide managers with a useful communication

tool for employee goal setting and performance planning, increase employee’s motivation and

productivity to facilitate discussions concerning employee growth and development, provide a

solid basis for wage and salary administration and provide data for a host of human resource

decisions. However, it is suggested that there is no “ideal” performance appraisal system due

to the differences in sizes, demographics or industry the company is in (Grote, 2007). In

addition, other researchers have also acknowledged the importance of fairness to the success

or failure of appraisal systems (Smither, 1988; Taylor, Tracy, Renard, Harrison and Carroll,

1995, as cited in Jawahar, 2007). In order to give some implications of how to effectively

assess “a man’s contribution and ability” (Thompson and Dalton, 1970, p. 150, cited in

Narcisse and Harcourt, 2008), the essay will examine the factors that impact fairness

perceptions and the consequent correlations of appraisal fairness perceptions and PA systems.

Next, PA instruments are discussed in order to reduce factors causing unfairness in

performance measurement. Finally, two case studies will be analyzed, aiming to

demonstrating practical application of PA in organizational context and implying a gap in

research field of PA implementation.

As noticed by Jawahar (2007), even though it is mostly acknowledged that fairness is

important to appraisals and the appraisal process, studying the influence of fairness

perceptions on appraisal reactions is virtually non-existent. Reactions to PA process are

believed to make a significant impact on the effectiveness and the general viability of

appraisal systems (Jawahar, 2007). Kavanagh, Benson and Brown (2007) point out that there

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is a positive and significant association between the PA process and employee perceptions of

performance appraisal fairness and that among PA process variables, participation in PA,

attitudes towards supervisors and knowledge of the performance appraisal process

significantly influence employee’s fairness. In addition, fairness perceptions can be increased

by giving employees an opportunity to be involved in PA or giving them a chance to make

self-appraisals in the align with their managers’ assessment (Franke, Murphy and Nadler,

2003). Particularly, employees’ fairness perceptions of performance appraisals also influenced

by other factors called justice factors. According to Narcisse and Harcourt (2008), there are

mainly three factors recognized by previous studies and used in reality, namely distributive

justice, procedural justice and interactional justice. People care about the fairness of their

outcomes (distributive justice), the procedures to which they undergo (procedural justice), and

fairness of the interpersonal treatment and conversation that they receive (interactional

justice) (Ambrose 2002; Bies 2001). However, with the qualitative sampling strategy of

interviews with 20 knowledgeable employees, Narcisse and Harcourt also add four additional

justice factors affecting fairness perceptions, one distributive – the consistency in reward

distribution – and three procedural – appraisal frequency, job relevant criteria, and rater and

ratee training. In general, the bottom-line of all those findings is that justice factors can make

a great influence on fairness perceptions (Kavanagh, Benson and Brown, 2007).

Regarding the impacts of fairness on PA system, it is widely accepted that employee beliefs

about the fairness of a PA system play a crucial role in any PA system because perceived

fairness is linked to trust in and hence, acceptance of the PA system (Kavanagh, Benson &

Brown, 2007; Jawahar, 2006; 2007). Certain fairness perception leads to various performance

appraisal reactions. In a research article by Jawahar (2006), it is noticeable that distributive

and procedural justice perceptions play important role in satisfaction with feedback - an

important reaction positively related to job satisfaction and organizational commitment. More

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specifically, the author emphasizes the roles of procedural justice in the influence on

satisfaction with appraisal feedback comparing with that of distributive and interactional

justice perceptions. This viewpoint is shared by many other studies. Perceived procedural

fairness causes one’s satisfaction, commitment and high performance motivation (Steensma

and Visser, 2007; Tyler and Blader, 2000; Masterson, Lewis, Goldman, and Taylor, 2000).

Overall, a fairness PA system leads to positive outcomes, including better employee reactions

to the appraisal process, the improvement of motivation and performance, as well as attitudes

toward the organization (Franke, Murphy and Nadler, 2003; Pettijohn, Pettijohn and d’Amico,

2001; Leung, Su, and Morris, 2001; Colquitt and Chertkoff, 2002).

So far, it is obvious that fairness perception is central to PA systems. As a result, it is

necessary to design the “right” PA instruments ensuring both the accuracy of the instruments

and employee perceptions of fairness (Latham, Almost, Mann and Moore, 2005). Three

frequently used appraisal instruments are bottom-line measures (managing objectives based

on goal attainment), trait-based scales (assessing attitudinal and personality variables such as

employee’s loyalty, commitment, creativity and so on), and behavioral scales (measuring and

coaching a person on observable behaviors) (Latham et al., 2005). As assessed by the authors,

apart from behavioral scales, the two first measuring tools are accompanied with limitations

such as ambiguity, subjectiveness or undeserved promotion or penalty, which effects ratee’s

fairness perception. In particular, the balanced scorecard is being broadly encouraged

(Bourne, 2005). According to Kaplan and Norton (2005), the balanced scorecard (BSC)

creates a partial performance management framework to translate an organization's mission

and strategy into a set of performance measures. The BSC is proposed on four perspectives:

financial, customers, internal business process, and learning and growth. Among those

aspects, learning and growth are the most important and useful one for the organization as it

involves “the determination of employee capabilities and skills, technology, and ensuring a

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corporate climate that supports organizations” (Martello, Watson and Fischer, 2008, p. 70).

By focusing on such question as how to sustain the ability to change and improve, it is more

likely to create an positive working environment where the organization care for employee’s

development, leading to employee’s satisfaction and vice versa the employee’s loyalty as well

as positive contribution probably help to accelerate the organization’s productivity. Another

appraisal tool named as 360-degree feedback is also recognized to be used in numerous big

corporations, such as DuPont, General Electric Co. (GE), Motorola Inc., Procter & Gamble

Co, and et cetera (Latham et al., 2005). This measure is defined as the practice of gathering

and processing multi-rater assessments on individuals and feeding back the results to the

recipients (Jones & Bearley, 1996). As such, its main objective is usually to assess training

and development needs and to provide competence-related information for successful

planning, not for promotion or pay increase. In this tool, three sources of feedback can be

used to evaluate an individual's performance (Alma and Thomas, 2001), including (i) people

who can observe the recipient's behavior such as boss, peers, subordinates, and

internal/external customers; (ii) task-oriented assessment and (iii) feedback made by

individuals themselves (Alma and Thomas, 2001). With this multi-source assessment, 360-

degree feedback seems to reduce individual bias and error in judging performance, improve

accuracy and adequacy in performance appraisal, and create better communication at all

levels resulting from performance discussion (Bentley and Kohn-Bentley, 1998; 2001;

Kirksey, Milliman, Zawacki, Norman, and Powell, 2001). However, this method may take

much time to implement, causing the hesitation for managers and employees to keep it done

in periodical assessment (Bentley and Kohn-Bentley, 1998; 2001; Sellas, 2000).

Theoretically, PA is not easy to be proceeded in the way of ensuring fairness due to different

perceptions and no best-suit PA tool to all situations. As the same scenario, implementation of

PA in reality is even more complicated task. A case study from a Performance Management

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Program of East Carolins University (Mani, 2002) elaborated the importance of fairness in

performance appraisal. This survey found that, even though employees received outstanding

ratings, they still dissatisfied the measurement system because they perceived that some other

employees also received high ratings without hard working. Mani also noticed that

employees’ satisfaction is based on fairness of system and the trust and satisfaction level

toward their supervisors. Additionally, another case study in Saint Lucian public service

organization (Narcisse and Harcourt, 2010) illustrated that the employees cared deeply about

consistency in the reward distribution. The perception of distributive justice in fairness of

performance appraisals is affected by how consistently pay raises and promotions reflect

appraisal ratings across all employees. During the performance appraisal process, participants

at management level felt that procedural justice factors were more fairness than low- and

middle-level positions who claimed that their non-involvement in setting performance

standards makes them feel the unfairness in the appraisal procedures. More clearly,

employees were more likely to believe that their appraisal rating was based on inaccurate and

biased information and that the rating was determined by unfair means. In contrast, all

managing-level participants believed that their appraisal were accurate. These two case

studies is worthy for human resource staff to consider in order to more deeply examine

fairness in PA system design and implementation.

It can be concluded that fairness perceptions of employees and PA system are consequently

correlated with each other. Fairness perception might be affected by many factors, including

factors evolved in PA process, mainly one of three basic kinds: distributive, procedural or

interactional (Narcisse and Harcourt, 2008). On the other hand, the success of PA systems

may well depend on employees’ perceptions of fairness and reactions to important

perspectives of the appraisal process (Jawahar, 2007). As such, an effective performance

appraisal is one that satisfies both the aims of employees as well as employers. Consequently,

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in the design and implementation of PA instruments, there must be a shared perception on the

goals of employees and managers on the performance appraisal process (Longenecker and

Goff, 1992). It is the essence of performance appraisal fairness.

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