Empowerment in the Management of Business Units

Abstract

This study examines the mediating role of performance appraisal quality on the association between lower level manager's employee empowerment and their performance, which is assessed in respect to the performance of the business unit that they are held responsible for. Specifically, we address the conjecture concerning whether real autonomy is provided by focusing on the extent to which empowerment extends to another aspect of employees' organisational experience, i.e. their performance appraisal system, and also examine the subsequent impact that the level of employee empowerment has on lower level managers' performance. Covariance Based Structural Equation Modelling (SEM) was used to examine the relationship between employee empowerment, the quality of the performance appraisal systems, and business unit performance. The results reveal that employee empowerment exhibits a direct influence on non-financial performance and an indirect influence on financial performance through trust. In addition, trust is found to be significantly positively associated with both financial and non-financial performance. The findings provide managers with an insight into the important role of employee empowered in enhancing business unit performances, and the effectiveness of the performance appraisal system.