Professional Documents
Culture Documents
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Abstract
Purpose The purpose of this paper is to try to understand better whether performance appraisal
(PA) helps performance evaluators (PEs) to manage more effectively and meet employees
expectations in US-based corporations.
Design/methodology/approach A 54-item research instrument was developed and implemented
using structured interviews with 54 PEs, who worked at five US-based corporations (Aetna Insurance,
IBM, Johnson & Johnson, Valspar, Wyeth Pharmaceuticals). Responses were statistically analyzed
with descriptive statistics and decision trees.
Findings Time dedicated to implementing PA was the most important factor leading to ethical
issues. PEs with the highest educational levels and most experience spent the least amount of time
(1.86 vs 3.19 hours) implementing PA. Most PEs (79.6 percent) solicited feedback about employees
performance from employees peers but 20 percent did not. Additionally, not a single PE had PA as a
specific objective, making it difficult to sequester time necessary for PA. Older PEs felt PA helped
them manage more effectively and PEs who were Black or White and from Marketing/Sales were most
favorable about meeting employees PA expectations. There were no remarkable differences among
PA systems at the five corporations, e.g. 360-degree training.
Research limitations/implications Structured interviews required delicate interaction due to
sensitivity about the US economy and resulting layoffs within interviewees corporations.
Practical implications PEs, particularly older managers with higher educational levels, should
have a PA objective and be held accountable to it to ensure that they dedicate time necessary to
complete PA in the way the PA system intends.
Originality/value The paper provides insight about PA within the US corporate setting and will
be highly interesting to those in that field.
Keywords Performance appraisal, Ethics, Working practices, Total quality management,
United States of America
Paper type Research paper
Introduction
The evolution of performance appraisal systems
The process of appraising employee performance developed as a business practice
with the emergence of big business in the early twentieth century in the USA. Karl
Marxs work can be said to subject big business to moral scrutiny and encourage it to
place value on employees contributions rather than only on the production of its
products (Newton and Schmidt, 2004). Progress was slow and employees were
considered a means to an end in Kantian terms (Winstanley, 1996) because big
The authors wish to acknowledge the support from the Saint Josephs University Pedro Arrupe
Center for Business Ethics and intellectual guidance from John J. McCall and Stephen J. Porth.
business was busy building products for consumption around defining events of the
first half of last century (the First World War, Great Depression, New Deal, the Second
World War) as well as reluctantly recognizing the creation of workers unions and
coming to terms with them. Following the Second World War, big business or todays
corporations began using PA, especially for their at will or non-union employees
(DeLucca, 2008). However, there were different opinions about the value of
implementing PA. From the perspective of total quality management, PA was
considered an out-of-date managerial premise (Scholtes, 1993). From the perspective of
using standardized job competencies linked to recognition, PA has been shown to
improve corporations financial performance as well as employees development (Eyes,
1993). This is not a new idea. As far back as 1862 and very recently within Malaysian
education, PA emphasized metrics of personal development and not just the bottom
line (Grint, 1993; Spicer and Rusli, 2006).
Ethical treatment of employees was enhanced by the civil rights and environmental
movements, events that caused a revolution of rising moral expectations for US
corporations and created a new environment for doing business that resulted in
numerous legislative acts benefiting the employee, e.g. Civil Rights Act of 1964 at the
national level, Massachusetts Right-to-Know Law at the state level and Collective
Bargaining at the union contract level. Notwithstanding, most employees in the US still
work at will without contractual assurance of job security (Weiss, 2003). Motivated
further by emerging global competition over the last two decades, virtually all US
corporations are implementing PA systems that evaluate employees contributions, such
as 360-feedback.
However, this requires more time for implementation, which is a challenge for PEs,
who are already short of time completing expanded objectives from corporate
downsizing. Furthermore, the basis of PA is people making judgments about other
people in an organized setting; therefore, insufficient time for PA is one way to be
unfair to employees in the short-term and jeopardizes employees development in the
long term (Cascio, 1991). This review of the literature explores how time and other
areas with potential ethical implications for PEs, such as the races of those whose
performance is being evaluated, and addresses the following research questions about
PA in US-based corporations:
RQ1. Do backgrounds of PEs influence their judgments about employees
performance (e.g. educational level)?
RQ2. Does PA help PEs manage more effectively?
RQ3. Does PA help PEs better meet the expectations of employees whose
performance is being assessed?
RQ4. What is the relationship between the time dedicated to conducting PA and the
background of the PE?
Literature review
Winstanleys article about the ethics of performance management sets a tone about
whether it is possible to develop an ethical approach to PA. It acknowledges the
shortcomings of PA systems and identifies four ethical principles integral to the PA
process:
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Figure 1.
Performance appraisal
process
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Research indicates that data from multiple sources are desirable because they give a
complete perspective about employees performance and reduce the chance of ethical
concerns (Longenecker et al., 1987). Additionally, training programs for PEs focus on
eliminating judgmental biases, improving observational/judgmental skills and
enhancing ability to communicate appraisal information in a constructive manner
(Pulakos, 1986; Sanchez and DeLaTorre, 1996).
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Research methodology
An effectively implemented PA system can improve employees work performance
and, therefore, the overall performance of the corporation but PA is an inexact human
process and subject to inaccuracies. PEs are faced with challenges before and/or during
implementation. Additionally, employees are very sensitive about PA because a low
PA rating can result losing their job. To understand how these challenges affect the
PE, a structured interview instrument was developed and included three domains
intended to learn about:
(1) backgrounds of the PEs and how they conducted PA;
(2) employees whose performance was being evaluated; and
(3) outputs of PA for the PEs and employees being evaluated.
The questions that populated the domains were derived from one authors extensive
experience implementing PA within corporations (Sillup) and awareness of
phraseology most likely to elicit responses. For example, questions that were vague
would not be answered. To avoid pre-determining responses, a comprehensive list of
questions were asked to determine the 54 items in the instrument and to identify
potential relationships among the responses. Accordingly, questions asked about the
PE were also asked about the employees whose performance was being evaluated.
Furthermore, the order in which the questions were asked built a crescendo from
easy-to-answer background information, e.g. age range, to more incisive questions
about the outputs of PA.
Questions for all domains were assessed for their content, criterion-related and
construct validity (DeVellis, 1991). Content validity for the first two domains was
easier to determine because the domain was more defined, e.g. years working
professionally. Content validity for the third domain addressing outcomes was more
difficult because it inquired about outcomes as well as attitudes of the respondents, e.g.
determining employees progress. Here, construct validity was met by incorporating
questions that represented a randomly selected subset of possible PA outputs. For all
three domains, it was believed that criterion-related validity was met because answers
to the questions attained information that had an empirical outcome along with an
optimal outcome of PA (i.e. employee accomplishes objectives and receives appropriate
development). Similarly, construct validity for the three domains was attained because
there was a theoretical relationship between the answer to one question and answers to
other questions. For example, analyzing the PEs educational levels and their
experience with the amount of time spent implementing PA.
Preliminary discussions with respondents indicated sensitivity about PA and
determined that they were hesitant to reveal the requested information (Murphy, 2006).
This information emphasized development of qualitative grand tour questions rather
than more incisive quantitative questions (Werner and Schoepfle, 1987; Kerlinger,
1979). For example, to determine what position respondents held within a corporation,
they were asked a specific question (e.g. identify the department in which they worked)
and also asked a general question [e.g. identify in what area of the company they
worked by selecting one of four general areas of work concentration,
Manufacturing/Operations (M/O), Marketing/Sales (M/S), Research & Development
(R&D) or General Administration (GA), which includes Human Resources, Legal,
General Management]. For three questions, 44, 51 and 52, a five-point Likert format
was used to ascertain more quantifiable data, e.g. how PA helped PE manage more
effectively.
The instrument was tested during eight interviews with members of the five
corporations participating in the study during the fourth quarter of 2007. PE
respondents indicated that their responses remain anonymous and that sensitive areas,
such as their own performance ratings, be excluded. This required changes, such as the
changes for Questions 2 and 23, which originally asked for the PEs and employees
educational levels and academic institutions because identifying respondents
academic institutions could lead to their identity. Another example was not
identifying specific departments, such as Quality Assurance, in Question 7 for the PE
and Question 28 for the employee being rated. Instead, the four general areas of work
concentration were used (Table I).
The resulting instrument consisted of 54 questions and three domains:
(1) Information about the PEs and how they conducted PA (Q1-Q21 to include
questions about amount of time spent on PA, etc.);
(2) Information about the employees whose performance was being evaluated (Q22
Q39 to include questions about years of professional employment, etc.); and
(3) Outputs for the PEs and employees being evaluated (Q40-Q54 to include
questions about how the PA system helped the PE manage more effectively
(Q51) and how the PA system helped to meet employees expectations about
their performance (Q52)).
Given the heightened sensitivity of respondents, the research instrument was
implemented with each respondent by one of the authors during an hour-long
structured interview. The interviews were conducted between January and June 2008
with 54 managers, who routinely conduct PA, from five Fortune 100 companies
Aetna Life and Casualty (Aetna), International Business Machines (IBM), Johnson &
Johnson (includes employees from three different J&J companies, hereafter referred to
as J&J), Valspar Corporation (Valspar) and Wyeth Pharmaceuticals (Wyeth). All
interviewees gave permission for their responses to be included in the analyzable
database
After all the data were collected, responses that required coding for statistical
analysis were coded. Then, statistical analyses were completed using descriptive
statistics and decision-tree analyses.
Findings
Descriptive statistics
The 54 interviews of PEs from the five corporations were divided as follows:
Aetna 14, IBM 6, J&J 13, Valspar 12 and Wyeth 9. A total of 31 were men
and 23 were women. Education levels included six respondents with an Associate
Arts/Science (AA/S), 14 respondents with a Bachelor Arts/Science (BA/S), 18
respondents with a Master of Business Arts/Science (MBA/S), nine with a PhD (PhD),
one physician (MD) and six licensed Practical/Registered Nurses (LP/RN). They
worked in four areas of their respective corporations: M/S (21 respondents), R&D (21
respondents), M/O (three respondents) and GA (nine respondents). Race was
categorized as African/American or Black (B), American Indian/Alaskan Native (AI),
Asian/Pacific Islander (API), Hispanic (H), Other (O), Unknown (U) or white (W). Of the
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Q1
Q2
Q3
Q4
Q5
Q6
Q7
Q8
Q9
Q10
Q11
Q12
Q13
Q14
Q15
Q16
Q17
Q18
Q19
Q20
Q21
Q22
Q23
Q24
Q25
Q26
Q27
Q28
Q29
Q30
Q31
Q32
Q33
Q34
Q35
Q36
Table I.
Structured interview
questionnaire
Q37
respondents, 30 were W, ten were B, six were H and eight were A/PI. Respondents age
ranges were 21-30 (1), 31-40 (19), 41-50 (26), 51-60 (7) and 61-65 (1). PEs worked an
average of 19.1 years professionally and had an average of 14.4 years with the
corporations for which they were now working.
Respondents managed from one to ten employees (21), to 11-20 employees (10), to
21-40 employees (15) to 50-100 employees (8) with budgets of $1-2 million (18), $2-5
million (11), $5-8 million (16) and $8-10 million (9). All respondents assessed PA once a
year and provided informal feedback to employees about six months before the formal
PA. The vast majority (87 percent) received PA training at their corporation but none
had conducting employees PA as one of their primary objectives. A majority of PEs
helped employees set their objectives (85.2 percent). Albeit a majority of PEs solicited
feedback about employees performance from their peers (43 of 54 or 79.6 percent), over
20 percent did not. Even fewer PEs worked on career development plans for their
employees (68.5 percent).
Of the 54, 51 (92.3 percent) of the PEs managed both men and women of multiple
education levels, of multiple races and age ranges. Ten of the employees had only one
year of experience; the largest category contained 21 employees who worked between
1-20 years. Most of the PEs worked in M/S and R&D; 21 of 54 in each category. Over
half of the employees did not manage others within the organization (51.9 percent) and
almost half had no budget (44.4 percent). Encouragingly, the majority of employees
whose performance was rated received training on the PA process to include how
ratings were done (49 of 54 or 90.7 percent). As a continuation of training, 51 of the 54
PEs (94.4 percent) had their employees do a self-appraisal (Q39) and all employees
received interim feedback from their PE. Regarding their objectives, all but one
employee had financial metrics included in their annual objectives.
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Table I.
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The output of PA yielded results consistent with the input. All PEs recognized
favorable PA ratings. Recognition ranged from merit to salary increase (50 percent), to
greater responsibility if performance was sustained over two years (20.4 percent), to
merit increase plus opportunity to participate in development programs (9.3 percent),
to merit increase plus greater responsibility (20.4 percent). There were no instances
when PEs created new objectives for their employees key responsibility areas. For
personal development, 55.6 percent created new or updated existing plans.
Decision trees analyses
Decision trees are a popular statistical data mining technique for classification. Generally
speaking, a decision tree model consists of a set of rules for dividing a large
heterogeneous population into smaller, more homogenous groups with respect to a
particular target variable. Thus with our particular database, we first used Q51, how
well PA helped managers manage more effectively, as our target variable. This provided
some interesting results. First as can be seen in Figure 2, the response to Q51 was 3.54
where the following Likert gradations were observed: 1 not at all, 2 not much,
3 somewhat, 4 quite a lot and 5 very much. There were no 1 ratings and only
three ratings of 2. Ratings of 3 (27), 4 (16) and 5 (8) weighted the average. The first
significant split of the decision-tree (Education Level of Performance Evaluator) found
that 40 of the 54 respondents had an educational level at or above the AA/AS level with a
mean of 3.38 (to Q51) or slightly less than the overall mean. When the remaining 14 were
further split against the age range of the PE, nine were older than 40 and had a high
average of 4.44 while the other five were younger than 41 with a lower average of 3.20. So
PEs who found that PA helped them to manage more effectively were those at or above
the AA/AS educational level and more mature (ages between 50-65).
Another decision-tree analysis using how PA helped the PE meet employees
expectations about their performance (Q52) as the target variable started with a mean
of 3.54, the same as the mean for Q51. Again, there were no 1 ratings or ratings which
indicated no help from the PA system and only one rating of 2. The average was
Figure 2.
Did performance appraisal
help performance
evaluators manage more
effectively?
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Figure 3.
Did performance appraisal
help performance
evaluators meet
employees expectations
better?
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Figure 4.
Did time to implement
performance appraisal by
performance evaluators
make a difference?
Discussion
Similar PE backgrounds and PA systems
There were no remarkable differences among PEs and employees at the five
corporations for educational levels, distribution of race and age range as well as
professional experience. Furthermore, across the corporations, over half of the employees
had neither direct reports nor budgets for their respective job levels. An interesting
difference contrary to conventional wisdom that experience matters was the low level of
experience. Ten of the employees had only one year of experience and one of the largest
company areas, M/S, contained 21 employees who worked between one and 20 years.
All five corporations adopted and supported the use of a 360-degree feedback PA
system that was implemented on an annual basis with a mid-year check. Within each
corporation, a substantial majority of PEs and employees (87 percent) received training
about their PA system and PEs helped their employees set objectives (85.2 percent),
which, in all but one case, included financial metrics. Over 94 percent of PEs required
their employees to conduct a self-appraisal
Whom did PA help manage more effectively?
Results indicated it was PEs who had educational levels at or above AA/AS and who
were more mature with ages ranging between 50-65. This was consistent with
qualitative observations during the structured interviews. Additionally, age seemed to
bring confidence, especially when a mature PE was a relatively new hire but already
had vesting from another corporation.
How did PA help PEs meet employees expectations about their performance?
M/S was the area within all five corporations that benefited most. This is illuminating
because M/S employees have extensive experience dealing with employees working
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consistent with research that emphasizes the cultural differences between the US and
non-western cultures like the Pacific Rim countries where there is more focus on group
performance rather than individual performance (Hofstede, 1993). Understanding this
from the perspective A/PI managers could suggest how to modify the PA process to be
consistent with the values of those cultures.
Other areas for future research are further evaluating training for PEs and
assessing senior managements implementation of PA. To learn more about how PEs
are being trained to deal with employees working remotely, discussions with training
mangers and PEs from M/S in industries currently facing this situation would provide
valuable information. To determine how senior management endorses PA, learning
their expectations for PA could provide insights about their support for PA and go a
long way toward avoiding ethical concerns about a PA system during its
implementation.
This studys findings recommend the practical application of requiring assessment
of PA as a specific annual objective instead of a job-description task, especially for PEs,
to ensure it gets the time needed to implement it. The findings also infer that, while a
consistently implemented PA system helps to avoid unequal treatment and/or unfair
discrimination among diverse employees, there is room to improve the way the diverse
employees within a corporation experience PA. Unless we link development that is
beneficial to the employee to achieving objectives that are beneficial to the corporation,
US corporations may be reverting back to where they were a century ago.
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About the authors
George P. Sillup, PhD, MS, is an Assistant Professor, Department of Pharmaceutical Marketing
and Fellow, Pedro Arrupe Center for Business Ethics at Saint Josephs Universitys Haub School
of Business. Prior to joining the full-time faculty at Saint Josephs University in 2004, He worked
in the pharmaceutical/medical device industry for 28 years, where he held various positions from
salesman to COO in major corporations like Johnson & Johnson as well as in start-up businesses,
in which he sold products, attained reimbursement coverage with US and international
authorities for new technologies and launched several new medical device/pharmaceutical
businesses into global markets. For the past 12 years, he has been on several boards of directors.
He is establishing a presence in the peer-reviewed literature largely based on his keen interest in
business ethics. Most recently, he and a colleague have analyzed data supporting their fourth
annual update about newspaper coverage of ethical issues facing the pharmaceutical industry in
the pharmaceutical industrys trade publication, Pharmaceutical Executive, to develop an article,
which has been published in the International Journal of Pharmaceutical & Healthcare
Marketing.
Ronald K. Klimberg, PhD, MS, is a Professor in the Decision and System Sciences Department
at Saint Josephs University Haub School of Business. Before joining the faculty of Saint Josephs
University in 1997, he was a professor at Boston University (ten years), an operations research
analyst for the Food and Drug Administration (ten years) and a consultant (seven years). He was
the 2007 recipient of the Tengelmann Award for his excellence in scholarship, teaching, and
research. His research has been directed toward the development and application of quantitative
methods, e.g. statistics, forecasting, data mining, and management science techniques, such that
the results add value to the organization and are effectively communicated. He has published
over 30 articles and made over 30 presentations at national and international conferences in the
areas of management science, information systems, statistics, and operations management. His
current major interests include multiple criteria decision making (MCDM), multiple objective
linear programming (MOLP), data envelopment analysis (DEA), facility location, data
visualization, risk analysis, workforce scheduling, and modeling in general. He is currently a
member of INFORMS, DSI, and MCDM. Ronald K. Klimberg is the corresponding author and can
be contacted at: klimberg@sju.edu
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