Perceived fairness of and satisfaction with employee performance appraisal

Abstract

Employee performance appraisal is one of the most commonly used management tools in the United States. Over 90 percent of large organizations including 75 percent of state employment systems require some type of annual performance appraisal (Seldon, Ingraham & Jacobson, 2001). Performance appraisal is one of the most widely researched areas in industrial/organizational psychology (Murphy & Cleveland, 1993). However, the traditional research agenda has done little to improve the usefulness of performance appraisal as a managerial tool. Recent research has moved away from studies of rater accuracy and psychometric measures to themes of employee reactions towards performance appraisal as indicators of system satisfaction and efficacy. Employee perception of fairness of performance appraisal has been studied as a significant factor in employee acceptance and satisfaction of performance appraisal. This study investigated employee reactions to fairness of and satisfaction with an existing performance appraisal system utilizing a hypothesized four-factor model (Greenberg, 1993) of organizational justice as the theoretical basis. The underlying hypothesis was that the conceptualized four-factor model, which differentiated between the constructs of interactional and procedural justice, would best represent the underlying factor structure of the data. Data were obtained via a survey questionnaire from 440 participants from two organizations that were part of a large public employment system. Ten multi-item scales representing four factors of organizational justice and performance appraisal fairness and three scales indicating satisfaction were included. The findings of the study indicated that respondents perceived the performance appraisal system was to be fair as indicated by their agreement with 9 of the 10 scales used to measure reactions to fairness. The respondents also indicated their relative satisfaction with their most recent performance appraisal rating and with their supervisor. Less satisfaction (although not dissatisfaction) was indicated with the performance appraisal system overall. The conceptualized four-factor model was not found to represent the underlying factor structure substantially better than alternative plausible three-factor models. The best fit three–factor model, however, provided some support for the differentiation between procedural and interactional organizational justice factors, which is a distinction that has been debated in the organizational justice literature.