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CHAPTER TWO

LITERATURE

REVIEW

2.0 INTRODUCTION

Performance appraisal is a systematic process of evaluating employee

performance and providing feedback to improve future performance (Aguinis &

Bradley, 2020). It involves setting goals, assessing performance, providing

feedback, and developing plans for future improvement (Fletcher, 2020).

In this chapter, the researcher has reviewed literature that explores what has

been done on performance appraisal of employee performance. The literature

review comprises documentation of information that relates to the subject

under investigation. Moreover, it helps determine new approaches and

stimulates new ideas. The chapter further presents theories related to the

study, empirical literature review, research gaps, conceptual framework,

operationalization of variables, and chapter summary.

2.1 CONCEPTUAL REVIEW

Performance appraisal is an organized, formalized, systematic process of

assessing job-related strengths and weaknesses of an individual appraisee

with the ultimate aim that if he performs well such strengths are encouraged

and reinforced, and if he performs marginally his work habits can easily be

identified and redirected in a manner conducive to the set objectives of the

organization. Appraisals are criterion variables that measure the job

performance of employees at a particular period; a job is a collection of tasks.

It is a process whereby an appraiser objectively communicates to an

appraisee how he or she is performing the job to establish a plan of

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improvement through

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training and development, counseling, mentoring, retraining, or other remedial

measures. Performance or productivity in this context refers to the degree

of accomplishment of the tasks that make the employee's job.

According to Udeze (2000), performance appraisal is about evaluating the

employee's contribution to the productivity objectives of organizations. The

issues of employee productivity and the need to evaluate them have always

been a matter of prime concern to management and even to the employee. This

is so because the employee needs feedback on his output in the

organization for a particular period. By supervising employee's daily

performance on the job, management is in a better position to appraise

performance and provide feedback. The evaluation of performance may either

be informal or formal. The informal appraisal which is based on the day-to-

day working relationships of an employee and the superior provides an

opportunity for the superior to judge the subordinate. This judgment is then

communicated through conversation on the job or by on-the-spot examination

of a particular task. A formal appraisal is through reporting the superior's

observations of an employee's performance to management for necessary

action. According to Gomez-Mejia et al. (2004), management has the overriding

power over performance appraisal as a measure of achieving superior

organizational goals. They opine that appraisal should be just more than a

passive activity that criticizes or praises employees for their performance in

the preceding year. Rather, appraisal must take a future-oriented view of

what employees can do to achieve their potential in the organization, in

which case, management must provide employees with feedback and coach

them to higher levels of productivity. An important feature of an effective

evaluation involves conducting appraisal regularly, either every six months or

annually. Irregularity in appraisal intervals can affect employee morale and

also have negative consequences on overall organizational

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performance (Exley, 2000). Insisting on objective appraisal cannot be

overemphasized because it is a motivational tool for employee productivity

which contributes to organizational survival. Motivation as it relates to

employee productivity is often behind the drive for self-actualization. Self-

actualization is a state of self-fulfillment where people feel that they have

realized their highest potential in life. It involves being creative and nurturing

skills that provide opportunities for success. To a large extent, therefore,

employee motivation is fundamental as it influences behavior which leads to

productivity. This is critical because the enterprise survives on productivity.

Performance assessment focuses on managing the objective, measurable

results of a job or work group. Goals might include sales, costs, or services.

Goals are specific, difficult, and objective. Productivity is an important

measure of success or goal because getting more done with fewer resources

such as; money or people, increases the organization's profits. According to

Noe et al. (2004), productivity usually refers to the output of employees, but

it can be used more generally as a performance measure. For such to be

effective, organizations decide what level of performance they desire. In

contemporary organizations, there are different concepts, roles, uses, types,

and structures of performance appraisal that aim at employee productivity

and overall organizational excellence (Holbrook, 2002).

There have been many researches in the past several decades on performance

appraisal systems (Bretz, Milkovich & Read, 1992; Fisher, 1989). Performance

appraisal sounds easy but researchers tell us that it is commonly used in

performance feedback, performance evaluation, and in identifying employee's

strengths and weaknesses (Ruddin, 2005). The application of performance

appraisal systems by the entire industry has been estimated between 74 to 89

percent (Murphy & Cleveland, 1991). Performance appraisal systems are used

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for different purposes which include Human resource decisions, feedback, and

evaluation (Cleveland, Murphy & Williams, 1989).

Employees' reactions to appraisals and the shared view in which performance

appraisals take place were the attention of psychologists (Levy, 2000; Levy &

Williams, 2004). According to Nasud, an assessment framework is a vital

instrument for determining the worth of an employee's performance (Nasud,

1999). Performance appraisal develops a reward system that combines the

efforts of leaders and employees to achieve the organization's common goals

(Cleveland, Murphy, & William, 1989).

The data acquired and performance evaluations serve as a foundation for hiring

and firing, training and developing current employees, and inspiring and

sustaining a high-quality workforce by appropriately rewarding their efforts

(Lillian, Mathooko, & Sitati, 2011). Performance management systems are

frequently included in performance appraisals. Performance management

systems coordinate and manage all aspects of an organization's resources to

obtain the best results possible (Martin, 1998). According to (McMaster, 1994;

Williams, 2002), performance management entails selecting the strategic

purpose, establishing team goals, developing a performance plan, analyzing

performance (using an appraisal system), identifying development needs, and

assigning rewards.

A study conducted by (Dr. Atakilt Halifom Siyum, 2020) on the Impact of

Performance Appraisal on Employee Productivity in Private and Public

Hospitals in Tigray, Ethiopia suggested that Performance appraisal has

gradually become part of a strategic approach to integrating HR activities

and business policies and helps assess employees and develop their

capability, improve performance and distribute rewards Impact of performance

appraisal on employee's performance.

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Hodgetts (2002) divides the performance appraisal methodology into four

steps. Establishing performance criteria, determining individual performance,

comparing performance to standards, and evaluating performance based on

the comparison are all part of a performance appraisal system.

The most controversial yet indispensable HR tool that has drawn the

concentration of researchers and practitioners (Murphy & Cleveland, 1991;

Neely, et al., 2000) is undoubtedly 'Performance Appraisal'. Despite its'

conflicting uses (Cleveland, Murphy, & William, 1989), performance appraisal is

widely used to measure and manage employee performance in all kinds of

organizations, large or small (Locker & Teel, 1988; Murphy & Cleveland, 1991).

Despite all the criticisms related to its' accounting nature (Bourne, Mills,

Wilcox, & Platts, 2000), rater bias (Murphy & Balzer, 1989; Smither & Reilly,

1987), and rater training (Borman, 1979), rater agreement on the usage of

performance appraisal (Murphy K. R., Balzer, Kellem, & Armstrong, 1982), it is

used by the HR professionals (Judge & Ferris, 1993) for promotional decisions,

salary administration, (Cleveland, Murphy, & William, 1989) training and

development.

Cardy and Leonard (2011) described performance appraisal as an interaction

that is formal and structured which exist between an individual and his

supervisor, which comes in the shape of interviews that are periodic (yearly

or less), where the output of that individual is assessed and appraised, to

identify strengths and weaknesses together with chances for likely

improvement and subsequent skills development. According to Mondy et al

(2004), performance appraisal has been defined as a systematic process of

review and evaluation of an individual's or team's contribution to the

achievement of the organizational goals. Performance appraisal as described by

Manoharan et al. (2009) is a very significant management tool for measuring

the efficiency of employees in a

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place of work. A performance appraisal system can also be an important

tool that the organization can use to improve the quality of workforce

performance (Mwema and Gachunga, 2014). Various organizations use appraisal

results, directly or indirectly, to determine reinforcements. This is to say that

the results are used to get employees who seem good and who would be given

higher merit remuneration increases, bonuses, and or promotions.

Performance reviews of workers are surely among the best practices to

boost performance, and morale and increase productivity. It is meant to

boost the efforts of a worker and his team to gradually see to the success of

the overall organizational mission accomplishment (Cardy & Leonard, 2011). It

is used in some companies to interpret resultant rewards in the company;

that is people who may be given merit allowance increases, bonuses, or

cadre movement. Also, it can be employed to get the low performers who

may be advised, demoted, dismissed, or suffer a remuneration decrease.

According to Dessler (2008), performance appraisal involves determining the

main objective, establishing the goals of a team, developing a performance

plan, performance analysis (through an appraisal system), and identifying

developmental needs and rewards for assignment.

DeNisi and Kluger (2000) specify that feedback on performance is a

determining segment of all management of performance systems. This can

be explained to be the data relating to the past behavior of an employee

relating to identified standards of the behavior of an employee and results. Its

main aim is to improve the performance of an individual and the team, as

well as the engagement of the employee, stimulation, and satisfaction in the

job (Aguinis, 2009). According to DeNisi and Pritchard (2006), organizations

should have components in the performance development reviews that can

motivate employees to double their efforts and enhance their contribution to

the

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organizational goals and objectives. The reward is what employees get for

services rendered. Therefore, this study will evaluate the effect of performance

appraisal, employee feedback, and performance-based rewards on employee

productivity.

2.1.1 EMPLOYEE PRODUCTIVITY

According to Mathis & John (2003), productivity is a measure of the quantity

and quality of work done, considering the cost of the resources used. The

more productive an organization is, the better its competitive advantage.

This is because of the efficiency of the resources that have been used.

McNamara (2005) further affirms that results are usually the final and

specific outputs desired from the employee. They may be in terms of financial

accomplishments, impact on a community; and so whose results are

expressed in terms of cost, quality, quantity, or time. McNamara (ibid) also

asserted that measuring productivity involves determining the length of time

that an average worker needs to generate a given level of production. It

could also be the amount of time that a group of employees spends on

certain activities such as production, travel, or idle time spent waiting for

materials or replacing broken equipment.

The method can determine whether the employees are spending too much time

away from production on other aspects of the job that can be controlled by

the business.

Employee productivity may be hard to measure, but it has a direct effect on

a company's profits. An employer fills his staff with productivity in mind and

can get a handle on a worker's capabilities during the initial job interview. Yet,

there are several factors on the job that help maximize what an employee does

on the job (Lake, 2007). Brady (2008) expresses that, perhaps none of the

resources used for productivity in organizations are as closely scrutinized as

human resources. Many of the activities undertaken in an HR System are

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designed to

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influence individual or organizational productivity. Pay, appraisal systems,

training, selection, job design, and compensation are HR activities that are

directly concerned with productivity. Furthermore, Bernardin (2007) maintains

that controlling labor costs and increasing productivity through the

establishment of clearer linkages between pay and performance are deemed to

be crucial components of human resource management (HRM) to achieve

competitive advantage. In addition, increased concerns over productivity and

meeting customer requirements have prompted renewed interest in methods

designed to motivate employees to be more focused on meeting (or exceeding)

customer requirements and increasing productivity.

2.1.2 ORGANIZATIONAL PERFORMANCE

According to Tangen (2005), performance can be described as an umbrella term

for all concepts that consider the success of a firm and its activities.

Performance can refer to actual results/outputs of certain activities, how an

activity is carried out, or an ability to achieve results. Atkinson (2012) defined

performance as the achievement of results ensuring the delivery of desirable

outcomes for a firm's stakeholders. Awino (2011) asserts that for an

organization to be successful it has to record high returns and identify

performance drivers from the top to the bottom of the organization. Njihia et al.

(2013) highlight performance measurement as one of the tools that help firms

monitor performance, identifying the areas that need attention, enhancing

motivation, improving communication, and strengthening accountability.

Performance is equivalent to the famous 3Es, that is, economy, efficiency, and

effectiveness of a certain program or activity (Javier, 2007). Daft (2010) defined

organizational performance as the organization's ability to attain its goals by

using resources efficiently and effectively. Organizational performance is the

ability of the organization to achieve its goals and objectives (Sok, O'Cass &

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Sok, 2013) Performance can be assessed based on information obtained

through primary resources or secondary resources. In general, performance can

be measured taking into consideration two types of performance: financial

performance and non-financial performance (Jarad, 2010).

Kiragu (2009) highlights performance in terms of four perspectives which are

the financial, customer, internal processes, and innovativeness. The financial

perspective identifies the key financial drivers of enhancing performance which

are profit margin, asset turnover, leverage, cash flow, and working capital

(Odhuno & Wadongo, 2010). The customer focus describes performance in

terms of brand image, customer satisfaction; customer retention, and

customer profitability. Njihia et al. (2013) assert that the only worthy

performance measure is financial performance because of its value to

shareholders, executives, and the market. This measure is an indicator of

organizational success and sustainability because it is the reason for the

existence of firms.

On the contrary, Ittner & Larcker (2009), claim that a firm's performance should

not be measured by financial performance but also by operational and

market indicators. Non-financial measures have been deemed to be more

effective in motivating managerial performance because they are more

reflective of the overall corporate strategy (Banker et. al., 2012).

2.1.3 EMPLOYEE MOTIVATION AND ORGANIZATIONAL PERFORMANCE

According to Ton & Huckman (2008), motivation could be affected by

turnover, which will affect the productivity and the performance of an

employee. The negative effect of turnover is the direct costs which include

severance, and the recruitment and training of new employees. Furthermore,

turnover is linked with several indirect costs such as operational disruption

following the departure of key employees. This could be due to either the

loss of the firm- specific human capital that resides in departing employees

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or the loss of the

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social capital embedded in relationships with each other and the

organization. Turnover also leads to demoralization of employees who remain

with a firm, due to the loss of a respected colleague or the fact that turnover

may require additional work to be absorbed by remaining employees whose

capacity is already stretched.

Conversely, there are positive effects on turnover, which suggests that turnover

reflects the beneficial aspects of worker mobility, such as the improvement

of matches between employees and the firm over time. Organizational

psychologists have also asserted that workers may be highest when they

first join an organization and may decrease over time. Further, worker

mobility implied by turnover may serve as a source of new knowledge for

firms. Even though the average effect of turnover on work group performance

is negative, the effect is less pronounced for complex tasks than for simple

ones. The difference in turnover's effect is ascribed to the fact that the

performance of complex tasks requires greater innovation or exploration

than simpler tasks requiring repetition. Turnover may matter more in

organizations where jobs are not standardized and procedures do not exist for

transmitting knowledge to new members (Ton & Huckman, 2008).

According to Leadership Insight (2013), organizations need to protect the

investment in their workforce by retaining employees and their intellectual

capital to ensure business continuity and ability to meet key business

objectives. HR Connect (2007), pointed out that training and development could

be done through coaching. A critical coaching tool for achieving top results is

motivating employee performance. Motivation is defined as something that

causes or influences a person to act or perform. In coaching, motivation is

the creation of conditions that encourage an employee to achieve a high level

of performance. Motivation works best when its focus is on enhancing and

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sustaining performance. How well employees perform is what is important,

which includes working conditions, providing support to employees that helps

them get their work done well and serve their internal and external

―customers effectively. This is the focus of the coaching tool of motivation. A

manager who functions as a coach must realize that providing positive

reinforcement for good performance increases the likelihood of continued good

performance. Positive feedback and other forms of recognition are powerful

ways to provide positive reinforcement for the right performance.

Dobre (2013) asserts that human resources can create a competitive advantage

for their organizations. Employee performance depends on a large number of

factors, such as motivation, appraisals, job satisfaction, training and

development, and so on, to influence to a substantial degree the organizational

performance. Also, Kalimullah (2010) noted that a motivated employee has own

goals aligned with those of the organization and directs his/her efforts in that

direction. In addition, these organizations become more successful, as their

employees continuously look for ways to improve their work. Getting employees

to reach their full potential at work is a tough challenge, but this can be

achieved by motivating them.

Employees want to earn reasonable salaries, as money represents the most

important incentive, due to its influential value (Sara, 2004). Financial rewards

have the capacity to maintain and motivate individuals towards higher

performance, thus, pay has a significant impact in establishing employees

'diligence and commitment. Still, studies have established that pay does not

boost productivity in the long term and money does not improve

performance suggestively. Concentrating on financial incentives only as a

motivator could affect employees 'attitudes, as they might pursue only

financial gains.

Therefore, it is important to delve into other non-financial factors that have a

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positive influence on motivation, like social recognition and performance

feedback (Dobre, 2013).

Moreover, employees can be motivated via proper leadership, ensuring that

things are done the right way. To achieve these goals, the leader must gain the

employees 'trust and make them follow him through proper motivation

(Baldoni, 2005). Trust represents the perception of one individual about others

and his willingness to act based on a speech or to comply with a decision.

Hence, trust enhances employees 'motivation and fosters interpersonal

communication.

In addition, Dobre (2013) indicates that empowerment is also a powerful

tool that helps to motivate employees. Empowerment is an approach to

leadership that empowers subordinates as a main constituent of managerial

and organizational effectiveness. In this regard, employees are given authority

and the freedom to make decisions, which encourages them to discover and

use their full potential, that is, they are given more control over their jobs.

Therefore, the empowerment process focuses on solving the problems of the

organizations through people. Employee participation and empowerment are

about the contributions of the employees in administration and decision-

making regarding the policies, objectives, and strategies of the organization.

2.1.4 PERFORMANCE APPRAISAL AND EMPLOYEES' PRODUCTIVITY

Cardy and Leonard (2011) identify Performance appraisal as an interaction that

is formal and structured which exist between an individual and his overseer,

which comes in the shape of periodic interviews (yearly or less), where the

output of that individual is assessed and appraised, to pinpoint strengths and

weaknesses together with chances for likely improvement and subsequent

skills development. Various organizations use appraisal results, directly or

indirectly, to determine reinforcements. This is to say that the results are

used

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to get employees who seem good and who would be given higher merit

remuneration increases, bonuses, and or promotions. Performance reviews

of workers are surely among the best practices to boost performance, and

morale and increase productivity. Performance appraisal according to

Manoharan et al. (2009) is a very significant management tool for measuring

the efficiency of employees in a place of work. It is meant to boost the efforts

of a worker and his team to gradually see to the success of the overall

organizational mission accomplishment (Cardy and Leonard, 2011). It is used

in some companies to interpret resultant rewards in the company that is

people who may be given merit allowance increases, bonuses, or cadre

movement. Also, it can be employed to get the low performers who may be

advised, demoted, dismissed, or suffer a remuneration decrease. Armstrong

(2012) pointed out that it often includes a performance management system.

This is a management system used to manage and direct the resources of an

organization to get the optimum likely performance. According to Dessler,

(2008), it involves ensuring the main objective, establishing the goals of a

team, developing a performance plan, performance analysis (through an

appraisal system) identifying developmental needs and rewards assignment.

2.1.5 PERFORMANCE APPRAISAL FEEDBACK AND EMPLOYEE PERFORMANCE

In 2017 Emerald Publishing Limited conducted a study on positive outcomes of

negative feedback: succeeding with performance appraisals, the main

objective of the paper was to review the latest trends and management

development across the globe and pinpoint the practical implications from

cutting-edge case studies and research studies. The methodology approach

was prepared by independent writers who added their impartial comments and

placed the articles in context. The findings indicate that organizations that

endeavor to constantly improve are best placed to gain a competitive edge over

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their competition and performance appraisal and performance appraisal

feedback are critically important because the process offers organizations a

valuable opportunity to measure how each staff about previously established

standards and expectations. But until appraisal feedback becomes a reality

some staff will always underperform therefore organizations must be able to

address the issues to avoid alienating those employees who are willing to pull

their weight. And negative feedback remains an important part of the appraisal

mix (Emerald Publishing Limited, 2017). The methodology used for this study

was biased because the approach was prepared by independent writers who

added their impartial comments and placed the articles in context.

Kuvaas (2011) carried a research on the interactive role of performance

appraisal reactions and regular feedback and he intended to test the

relationship between performance appraisal reactions and staff outcomes in

terms of affective organizational commitment and workplace performance. The

study adopted a cross-sectional survey of 803 from three organizations located

in Norway. His study established that perceived helpfulness of performance

appraisal was directly related to affective commitment and the relationship

between performance appraisal and work performance was significant only

for employees reporting higher levels of perceived regular feedback. At the

same time, the relationship between performance appraisal reactions and

work performance was moderated by regular feedback which suggests

formal performance appraisal cannot compensate for low levels of regular

feedback (Kuvaas, 2011).

Robinson and Fink (2009) established that there are several flaws in the

evaluation process. However, formal performance appraisal programs have

often yielded disappointing and unsatisfactory results. According to Robinson

and Fink (2009), performance appraisal should be abandoned as the last hope

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as they outline pitfalls and problems as evidence and at the same time

consider the potential of performance appraisal programs. The issues should

not dwell on whether to scrap but rather it should be to make them better.

The irony is that time becomes an enemy when performance appraisal

feedback is not dealt with openly. To prevent the larger problem continuous

feedback and documentation are very important. One reason for failure is

that firms often select extensively from the wide battery of available

performance appraisal techniques without really thinking about which

particular technique is best suited to a particular appraisal objective.

2.1.6 PERFORMANCE APPRAISAL PROCESS AND EMPLOYEE PERFORMANCE

Longenecker, Frink, and Caldwell (2014) conducted a study on current US

trends in formal performance appraisal process in a cross-section of

manufacturing firms and service firms in their study the authors identified the

current trends that have emerged from improved opportunities that exist for

companies that are currently engaged in the practice of formally appraising

their employees. Their study targeted 183 firms in the US that were reviewed by

a panel of three people and their contents were analyzed to identify the

formal performance appraisal process, rating, and procedure for opportunity

for improvement. The data that was collected was analyzed using qualitative

analysis that revealed the average rating procedure that had been in place

for more than five years, the purpose of the performance appraisal process,

and identification training and development. The study also established that

organizations employ a wide variety of performance criteria in assessing

their employees. The data obtained to form the actual formal performance

appraisal process of organizations were rather limited and the researchers

provided critical insights into the current practice limiting potential

generalizability. The social implication of the study suggests that companies

can do a much better

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job of equipping their staff to more effectively reap the organizational

benefits of this key practice (Longenecker, Frink, & Caldwell, 2014).

Zhang, Zheng, and Li (2012), conducted a study on the performance appraisal

process and organizational citizenship behavior. The objective of their study

was to examine how the performance appraisal process is associated with

organizational citizenship behavior, the study was anchored on two theories

namely impression management theory and social exchange theory, the study

used commitment as a mediator and rating reward as a moderator. The

researchers used a multi-source sample of 777 and examined the mediating

role of affective commitment with structural equation modeling and Sobel

tests and the moderating role of rating–reward linkage with an ordinary least

squares regression model. The study found that there is a relationship between

the performance appraisal process and organizational citizenship behavior

mediated by affective commitment and perceived rating reward linkage

strengthened the direct association between organizational citizenship and

performance appraisal process whereas it weakened the relationship between

affective commitment and appraisal process (Zhang, Zheng, & Li, 2012).

2.1.7 PERFORMANCE APPRAISAL GOALS AND EMPLOYEE PERFORMANCE

Empirical studies show that effective performance appraisal leads to

important outcomes such as job satisfaction, employee productivity, quality

work, and employee trust and commitment. A study conducted by Pettijohn and

Taylor (2009) examined the relationship between performance appraisal and

sales performance and they established that if performance appraisals are

properly conducted the outcome has positive impacts a similar study was

conducted by Daley (2003) conducted an investigation on general performance

appraisal practices focusing on the use of explicit performance standards

and the study established that there is a strong relationship between

performance

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appraisal system that have been adopted as means of implementing pay for

performance schemes and the productivity incentives that these system

provided. Another study by Omusebe, Gabriel, and Douglas (2013) found that

there was a positive and significant effect between employee efficiency and

performance appraisal in Mumias Sugar Company. Walsh (2003) conducted a

study on perceived satisfaction and fairness of performance appraisal in the

United States. The study investigated the employee's reaction to

satisfaction and fairness with the existing performance appraisal tools. The

data obtained from four hundred and forty respondents from two

organizations and the findings of the study established that respondents

perceived the performance appraisal tools to be fair as nine out of ten

scales used for measuring reaction. Yang (2008) conducted a study on

individual performance and his findings were that individual performance is

hard to verify, he asserts that organizations can use rewards based on

rewards and direct bonuses on individual performance if employee performance

is noticeable. In agreement with Yang (2008) Bishop (2011) investigated

employee performance and he revealed that recognition, acknowledgment, and

reward of performance of employees direct discrimination between

employee productivity. Asim (2013) also carried out a study on the effects of

employee motivation on employee performance, and the findings and

conclusion were if staff are more motivated their performance will increase.

In developed nations, studies have shown that there is a shift from a micro-

analytical approach to a macro-strategic approach perspective which is

organizational performance. This is explained by a study by Delaney and

Huselid (2006) in their studies of profit and nonprofit firms in the United

States the study established that there is a positive association between

human resources management practices such as staff training, staff

selections, and

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job performance to perceptual organization performance measure. Conversely,

micro-analytical research to determine the relationship of employee attitudes

and behavior with performance has also created interest in the field of

performance management, particularly in the developed world. Studies have

shown that there is a strong relationship between performance and personal

factors such as motivations, commitments, competency, and job satisfaction

as well as the introduction of performance-related pay (Elorza, Aritzeta, &

Ayestaran, 2011).

2.1.8 PERFORMANCE APPRAISAL METHODS AND EMPLOYEE PERFORMANCE

A study conducted by Evans and Bae (2018) on Simulation-based analysis of

forced distribution performance appraisal system in the identification of best-

performing employees within their organization, the objective of the study

was to quantify the limitations of a performance appraisal system in the

identification of the best-qualified individuals to future requirements of the

organization. The methodology adopted by their study was an exploratory study

using discrete event simulation based on the assignment, promotion, and

evaluation of 2,500 officers in the US Army. The data that was obtained

provided a basis for estimating simulation with the inputs that included

system structures, policy constraints, human behavior, and system

dynamics. They found out the effect of system dynamics and system

structures on the outcome of employees and suggested that decreasing the

number of a rater's subordinates has a significant effect on the accuracy of

the performance appraisal method, however, the researchers allowed

organization leadership to evaluate the possible consequences associated

with evaluation policy before policy implementation. This study advances a

framework for assessing the effect of system dynamics and system

structures and the extent to which it

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enhances the accuracy of an organization's performance appraisal system

(Evans & Bae, 2018).

Mutunge (2013) conducted a study to investigate staff perception of the

effectiveness of the performance appraisal system at the Teachers Service

Commission in Nairobi Kenya, the study adopted a descriptive research survey

method, the research used a stratified random sampling technique to arrive

at a 49 staff out of the possible 3000. From the researcher's collected data,

the study established that the performance appraisal system used at the

Teachers Service Commission is simple and has been consistent over time

and all staff members are subjected to the same standards as far as the

performance appraisal system is concerned. However, the study also

established that the performance appraisal system does not seem to involve

all the staff during the process of development. It also had several loopholes

that encourage subjective evaluation of the staff some of the loopholes

include lack of clarity on the parameters used, lack of knowledge of the

appraise, and personal differences between appraise and appraiser among

others. She recommends that the performance appraisal system at the

Teachers Service Commission needs a total overhaul since it has quite

several loopholes that should be addressed and also needs to be reviewed

to ensure that it's based on more realistic ideals (Mutunge, 2013).

Another study was conducted by Nyaoga (2010) on the effectiveness of the

performance appraisal system in private universities in Kenya concerning

Kabarak University. He established that the performance appraisal tool that

performance appraisal is the only tangible metric way an organization can

know the level of staff performance of its diverse employees. The respondents

indicated that they were aware that the type of performance appraisal system

used in the organizations was not based on any serious formal purpose for

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which they were designed. According to Nyaoga (2010), the effectiveness of

performance appraisal in private universities was only based on training the

staff involved in the rating process and are multi rating system. He

concluded by saying that because the performance appraisal systems in

these universities were not effective and they existed just as a matter of

formalities, the organizations could not measure employees' performance hence

making it difficult to achieve the organization's objective. Awori (2007)

conducted research on performance appraisal in state corporations in Kenya,

his findings indicated that the corporations use performance appraisal tools

and the preferred choice was management by objectives as opposed to the

balanced scorecard; self-reviews, upward, and peer review.

Mackenzie (2008) also investigated the performance appraisal system for

organizational success. The objective of his study was to examine the issues

associated with performance appraisal and to identify proven and suitable

methodologies that will result in a process that is suitable, equitable, and

credible and one that reinforces the desired organization directions. This

was attained by evaluating the need for performance appraisal, problems

associated with various methodologies examining the qualities that need to be

measured in both terms of organization and individual and finally identifying

the means of improving organization performance. The study established that

the current process within the study organization focused on dealing with

diminished performance issues and subsequently, the efforts of the individual

are not necessarily aligned with the desired organizational direction and little

incentive exists amongst managers to challenge the current process and

encourage risk-taking to improve service delivery.

2.2 CONCEPTUAL REVIEW

2.2.1 PERFORMANCE APPRAISAL AND ITS PURPOSE

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The basic purpose of a performance appraisal is to generate accurate and valid

information regarding the behavior and performance of members of the

organization. The more accurate and valid the information generated by the

system, the greater its potential value to the organization.

Akinbowale (2013) observed that while all organizations share some basic

primary goal in their performance appraisal system, a tremendous amount of

variety exists in the specific use that organizations make of the information

obtained from the performance appraisal of employees. The author, however,

categorized the purpose of performance appraisal into three broad headings as

follows:

2.2.2 INDIVIDUAL EVALUATION AND MOTIVATION

According to the authors, the results of performance appraisal frequently

serve as the basis for the regular evaluation of the performance of members

of the organization. They argued that whether an individual is judged to be

competent or incompetent, effective or ineffective, promotable or un-

promotable, and so on is based upon the information generated by the

performance or appraisal system. With particular emphasis on employee

motivation, they further attempt to influence the motivation and future

performance of their members by tying the administration of various rewards,

such as salary increases and promotions to the ratings generated by the

appraisal system.

2.2.3 INDIVIDUAL DEVELOPMENT

In addition to serving as a basis for the administration of organizational

rewards and punishments, the author contended that the information

generated by an appraisal system can also be employed to facilitate the

personal development of organizational members. A sound appraisal system

can generate valid information regarding the areas of personal strength and

weakness of individual employees. Concerning this, the author affirmed that if

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such information is fed back to individuals in a clear, unambiguous, and non-

threatening manner, the information can serve two valuable purposes.

First, if the information indicates that the person is performing effectively, the

feedback process itself can reinforce and reward the employee by increasing

feelings of self-esteem and personal competence. Secondly, if the information

identifies an area of weakness, this can serve to stimulate a process of training

and development to overcome the weakness identified.

2.2.4 ORGANIZATIONAL PLANNING

Besides providing the basis for the evaluation motivation, and development of

individual organization members, the author noted further that an effective

performance appraisal system also generates information that can be of

significant value to the organization in planning its future human resources

needs and policies.

The members of an organization are the human capital of that organization.

Consequently, a performance appraisal system generates information that

permits the organization to assess the state of its human capital and plan its

recruiting, staffing, and development policies, in an informed, systematic, and

rational manner.

Cameron (2008) thought that to ignore individuals in the review process is

to ignore a major input in the achievement of organizational outcomes. It is

often said that organizations that perform well are a reflection of the efforts

and successes of their staff. Recognizing these efforts and appropriately

praising them is imperative for organizational success. This is the basic

purpose of performance appraisal (Burnas, 2002).

Cooper (1998) made the point that as managers we must be less concerned

with supervising and concentrate on being leaders. He found out that

sustainable cultural change can take place within an organization only when

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the individuals within the organization first change themselves from the inside

out. Sometimes, appraisal processes can be counter-productive to

organizational success as they are at odds with processes that encourage

some degree of risk-taking to meet client needs or develop new methodologies

through trial (Mackenzie, 2000).

Applebaum (2011) suggested that Performance Appraisal is mainly used for

three purposes:

As a basis for reward allocation such as salary increases, promotions, and other

forms of rewards.

Performance Appraisal is a tool for identification of deficiencies and will

spot the areas where development efforts are needed.

Performance Appraisal can be used for the selection and development

Programme. It will differentiate satisfactory performers from unsatisfactory

ones. The performance will help the management to perform functions relating

to the selection, development, salary, promotion, penalties, layoffs, and

retrenchment.

High employee performance leads an organization to success and provides the

employees with greater opportunities to make progress in the organization.

Employees themselves must believe that in performance appraisal there are

great opportunities for them. Without fairness in appraisals, performance

appraisal systems, rewards, motivations, and developments create negative

impact and frustration.

Kay (2007) identified five purposes of performance appraisal as shown below:

Performance appraisal is used mainly for the achievement of organizational

goals.

Performance appraisal is used for the setting of individual objectives.

Used for the evaluation of individual performance against objectives.

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Performance appraisal is used for the improvement of performance.

Performance appraisal is used for the allocation of rewards.

2.3 THEORETICAL REVIEW

2.3.1 GOAL-SETTING THEORY

Goal-setting theory, as developed by Latham and Locke (1979), highlights four

mechanisms that connect goals to performance outcomes; direct attention to

priorities; stimulate effort; challenge people to bring their knowledge and

skills to bear to increase their chances of success; and the more challenging the

goal, the more people will draw on their full repertoire of skills. This theory

underpins the emphasis in performance management on setting and

agreeing objectives against which performance can be measured and

managed. Goal theory supports the agreement of objectives, feedback, and

the review aspects of performance management. Goal-setting theory asserts

that people with specific and challenging goals perform better than those

with vague goals, such as 'do your best', specific easy goals, or no goals at

all. Thus, goal-setting theory assumes that there is a direct relation between

the definition of specific and measurable goals and performance: if managers

know what they are aiming for, they are motivated to exert more effort, which

increases performance (Locke and Latham, 2002). Challenging goals are usually

implemented in terms of specific levels of output to be attained (Locke and

Latham, 1990) as cited in.

2.3.2 EXPECTANCY THEORY

Expectancy theory which was developed by Victor Vroom (1964), states that

motivation is the function of an individual's expectancy that effort will lead

to performance, instrumentality judgment that performance will lead to

certain outcome, and valence of outcomes (Miyamoto, 2007). The strength of

expectancy theory is that it is practical, simple, and easy to apply, and

most

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important is that the theory works. Quick (1988), also stated that human

behavior, expectancy theory explains, is a function of two factors which are

the perceived value of the reward that certain behavior yield and the expectation

in the doer that certain behavior yield that reward. Expectancy theory can be

translated into five simple steps that can help managers motivate their

employees.

The five steps include defining the expectation, making the work valuable,

making the work doable, giving regular feedback, and rewarding employees

when they meet the expectations. Managers would find these steps very

helpful and a manager who practices and follows these steps would be able

to motivate the employees. Employees' skills and knowledge play an

important role as more skillful and more knowledgeable employees will find

it easier to complete the job. However, the difficulty of the job can only be

determined by the employee himself or herself, because each of the employees

has a different level of skills and knowledge, and the manager cannot

assume that the job which is easy for a particular employee is also easy for

the other employees.

The advantage of Expectancy theory is that it provides a framework for

understanding how motivation operates in a given situation. The manager might

assume that giving several positive outcomes is enough to motivate their

employees; however, this may be wrong because one outcome may lead to

another in an extended sequence. For example, choosing to work hard may be

associated with an increase in wages; however, this does not stop there

because demand for employees will increase from time to time. Managers

might find it hard to cope with employees' demands as their demands might

change or remain, and the only way to know is through two-way communication

or having feedback form from time to time. Expectancy theory implies that

individuals will only use effort toward something for a reward. This

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implication

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seems to conflict with altruism, which describes actions done purely to

benefit others without regard for personal rewards. What it means from the

view of the researcher is that people will not work unless there are awaiting

rewards for them before they can work hence laziness will become the order

of the day leading to low performance. In addition, rewards may not

necessarily be directly connected to effort and performance; it means that

specific job skills and education that are necessary might not be there.

When these things (provision of education, and training) managers will

become an employee champion and change agents in the organization rather

than making them lazy (Amata et al., 2016).

2.3.3 MASLOW'S HIERARCHY OF NEEDS THEORY

Maslow's Hierarchy of needs theory places employees' needs into five

categories which include basic physical needs, needs for personal growth, and

career growth and development.

According to Maslow employers should meet each level of employee's needs,

for the employee to fully commit to organizational goals. Employers who fail

to meet employees' needs at any level of the hierarchy can easily create a lack

of fulfillment in staff professional lives which causes them to eventually try to

fill these needs in their way which is possibly finding a new employer who

can provide better opportunities to satisfy their needs (Juan, 2010).

Maslow's Hierarchy of needs theory was adopted in the model framework for

development purposes and it does not assume rational decision-making, but

rather it incorporates both unforced and thoughtful decision-making. Human

behavior is assumed to follow a consistent, reasonable, and often automatic

path which may be biased, irrational, and inaccurate (Folan & Browne, 2015).

Human behavior is based on various behavioral criteria such as occurrence,

extent, and contradiction. Interest behavior in this study applied the underlying

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theory to launch and decide the dynamics under the current study. This theory

applies to this study because individual growth is the key vehicle for

organizational success.

2.4 EMPIRICAL LITERATURE REVIEW

The empirical review highlights the past studies on the variables of the study.

This includes the studies conducted on employee performance among

employees and the performance appraisal system in Mountain Top and its

impact on organizational productivity. It reviews the aspects of job

performance, employee motivation, performance-based rewards, and

organizational productivity.

2.4.1 PERFORMANCE APPRAISAL FEEDBACK AND EMPLOYEE PERFORMANCE

In 2017 Emerald Publishing Limited conducted a study on positive outcomes of

negative feedback: succeeding with performance appraisals, the main

objective of the paper was to review the latest trends and management

development across the globe and pinpoint the practical implications from

cutting-edge case studies and research studies. The methodology approach

was prepared by independent writers who added their impartial comments and

placed the articles in context. The findings indicate that organizations that

endeavor to constantly improve are best placed to gain a competitive edge over

their competition and performance appraisal and performance appraisal

feedback are critically important because the process offers organizations a

valuable opportunity to measure how each staff about previously

established standards and expectations. But until appraisal feedback

becomes a reality some staff will always underperform therefore

organizations must be able to address the issues to avoid alienating those

employees who are willing to pull their weight. Negative feedback remains

an important part of the appraisal mix (Emerald Publishing Limited, 2017). The

methodology used for this study was

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biased because the approach was prepared by independent writers who added

their impartial comments and placed the articles in context.

Kuvaas (2011) carried a research on the interactive role of performance

appraisal reactions and regular feedback and he intended to test the

relationship between performance appraisal reactions and staff outcomes in

terms of affective organizational commitment and workplace performance. The

study adopted a cross-sectional survey of 803 from three organizations located

in Norway. His study established that perceived helpfulness of performance

appraisal was directly related to affective commitment and the relationship

between performance appraisal and work performance was significant only

for employees reporting higher levels of perceived regular feedback. At the

same time, the relationship between performance appraisal reactions and

work performance was moderated by regular feedback which suggests

formal performance appraisal cannot compensate for low levels of regular

feedback (Kuvaas, 2011). Robinson and Fink (2009) established that there are

several flaws in the evaluation process. However, formal performance

appraisal programs have often yielded disappointing and unsatisfactory

results.

According to Robinson and Fink (2009), performance appraisal should be

abandoned as the last hope as they outline pitfalls and problems as evidence

and at the same time consider the potential of performance appraisal

programs.

2.4.2 PERFORMANCE APPRAISAL PROCESS AND EMPLOYEE PERFORMANCE

Longenecker, Frink, and Caldwell (2014) conducted a study on current US

trends in formal performance appraisal process in a cross-section of

manufacturing firms and service firms in their study the authors identified

the current trends that have emerged from improved opportunities that exist

for companies that are currently engaged in the practice of formally

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appraising

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their employees. Their study targeted 183 firms in the US that were reviewed by

a panel of three people and their contents were analyzed to identify the

formal performance appraisal process, rating, and procedure for opportunity

for improvement. The data that was collected was analyzed using qualitative

analysis that revealed the average rating procedure that had been in place

for more than five years, the purpose of the performance appraisal process,

and identification training and development. The study also established that

organizations employ a wide variety of performance criteria in assessing

their employees. The data obtained to form the actual formal performance

appraisal process of organizations were rather limited and the researchers

provided critical insights into the current practice limiting potential

generalization. The social implication of the study suggests that companies

can do a much better job of equipping their staff to more effectively reap the

organizational benefits of this key practice (Longenecker, Frink, & Caldwell,

2014).

Zhang, Zheng, and Li (2012), conducted a study on the performance appraisal

process and organizational citizenship behavior. The objective of their study

was to examine how the performance appraisal process is associated with

organizational citizenship behavior, the study was anchored on two theories

namely impression management theory and social exchange theory, the study

used commitment as a mediator and rating reward as a moderator. The

researchers used a multisource sample of 777 and examined the mediating role

of affective commitment with structural equation modeling and Sobel tests

and the moderating role of rating–reward linkage with an ordinary least

squares regression model. The study found that there is a relationship

between the performance appraisal process and organizational citizenship

behavior mediated by affective commitment and perceived rating reward

linkage strengthened the direct association between organizational

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citizenship and

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performance appraisal process whereas it weakened the relationship between

affective commitment and appraisal process (Zhang, Zheng, & Li, 2012).

2.4.3 PERFORMANCE APPRAISAL GOALS AND EMPLOYEE PERFORMANCE

Empirical studies show that effective performance appraisal leads to

important outcomes such as job satisfaction, employee productivity, quality

work, and employee trust and commitment.

A study conducted by Pettijohn and Taylor (2009) examined the

relationship between performance appraisal and sales performance and they

established that if performance appraisals are properly conducted the

outcome has positive impacts a similar study was conducted by Daley (2003)

conducted an investigation on general performance appraisal practices

focusing on the use of explicit performance standards and the study

established that there is a strong relationship between performance

appraisal system that have been adopted as means of implementing pay

for performance schemes and the productivity incentives that these system

provided. In another study by Omusebe, Gabriel, and Douglas

(2013) found that there was a positive and significant effect between employee

efficiency and performance appraisal in Mumias Sugar Company. Walsh (2003)

conducted a study on perceived satisfaction and fairness of performance

appraisal in the United States. The study investigated the employee's

reaction to satisfaction and fairness with the existing performance appraisal

tools. The data obtained from four hundred and forty respondents from two

organizations and the findings of the study established that respondents

perceived the performance appraisal tools to be fair as nine out of ten scales

used for measuring reaction.

Yang (2008) conducted a study on individual performance and his findings were

that individual performance has to be verified, he asserts that organizations

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can use rewards based on rewards and direct bonuses on individual

performance if employee performance is noticeable. In agreement with

Yang (2008) Bishop (2011) investigated employee performance and he

revealed that recognition, acknowledgment, and reward of the performance

of employees direct discrimination between employee productivity. Asim (2013)

also carried out a study on the effects of employee motivation on employee

performance, and the findings and conclusion were if staff are more

motivated their performance will increase.

In developed nations, studies have shown that there is a shift from a micro-

analytical approach to a macro-strategic approach perspective which is

organizational performance. This is explained by a study by Delaney and

Huselid (2006) in their studies of profit and nonprofit firms in the United

States the study established that there is a positive association between

human resources management practices such as staff training, staff

selections, and job performance to perceptual organization performance

measure. Conversely, micro-analytical research to determine the relationship

of employee attitudes and behavior with performance has also created

interest in the field of performance management, particularly in the

developed world. Studies have shown that there is a strong relationship

between performance and personal factors such as motivations,

commitments, competency, and job satisfaction as well as the introduction of

performance-related pay (Elorza, Aritzeta, & Ayestaran, 2011).

2.4.4 PERFORMANCE APPRAISAL METHODS AND EMPLOYEE PERFORMANCE

A study conducted by Evans and Bae (2018) on Simulation-based analysis of

forced distribution performance appraisal system in the identification of

best- performing employees within their organization, the objective of the study

was to quantify the limitations of a performance appraisal system in the

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identification of the best-qualified individuals to future requirements of the

organization. The methodology adopted by their study was an exploratory study

using discrete event simulation based on the assignment, promotion, and

evaluation of 2,500 officers in the US Army. The data that was obtained

provided a basis for estimating simulation with the inputs that included

system structures, policy constraints, human behavior, and system dynamics.

They found out the effect of system dynamics and system structures on the

outcome of employees and suggested that decreasing the number of a

rater's subordinates has a significant effect on the accuracy of the

performance appraisal method, however, the researchers allowed organization

leadership to evaluate the possible consequences associated with evaluation

policy before policy implementation. This study advances a framework for

assessing the effect of system dynamics and system structures and the

extent to which it enhances the accuracy of an organization's performance

appraisal system (Evans & Bae, 2018).

Mutunge (2013) conducted a study to investigate staff perception of the

effectiveness of the performance appraisal system at the Teachers Service

Commission in Nairobi Kenya, the study adopted a descriptive research survey

method, the research used a stratified random sampling technique to arrive

at 49 staff out of the possible 3000. From the researcher's collected data,

the study established that the performance appraisal system used at the

Teachers Service Commission is simple and has been consistent over time

and all staff members are subjected to the same standards as far as the

performance appraisal system is concerned.

Another study was conducted by Nyaoga (2010) on the effectiveness of the

performance appraisal system in private universities in Kenya concerning

Kabarak University. He established that the performance appraisal tool that

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performance appraisal is the only tangible metric way an organization can

know the level of staff performance of its diverse employees. The respondents

indicated that they were aware that the type of performance appraisal system

used in the organizations was not based on any serious formal purpose for

which they were designed. According to Nyaoga (2010), the effectiveness of

performance appraisal in private universities was only based on training the

staff involved in the rating process and are multi rating system. He

concluded by saying that because the performance appraisal systems in

these universities were not effective and they existed just as a matter of

formalities, the organizations could not measure employees' performance hence

making it difficult to achieve the organization's objective. Awori (2007)

conducted research on performance appraisal in state corporations in Kenya,

his findings indicated that the corporations use performance appraisal tools

and the preferred choice was management by objectives as opposed to the

balanced scorecard; self-reviews, upward, and peer review.

Mackenzie (2008) also investigated the performance appraisal system for

organizational success. The objective of his study was to examine the issues

associated with performance appraisal and to identify proven and suitable

methodologies that will result in a process that is suitable, equitable, and

credible and one that reinforces the desired organization directions. This

was attained by evaluating the need for performance appraisal, problems

associated with various methodologies examining the qualities that need to be

measured in both terms of organization and individual and finally identifying

the means of improving organization performance.

2.4 CONCEPTUAL FRAMEWORK

2.5 SUMMARY OF GAPS IN LITERATURE

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Performance appraisal offers a valuable opportunity to focus on goals and work

activities; to identify and correct existing problems and to encourage better

performance in the future.

Leading organizations therefore strive to put the right performance

measurement system which is value-based, that helps them set agree upon

performance goals and give the desired outcomes. Performance measurements

generate data that is used to gauge the direction in which the organization is

headed and it allows the organization to design, control, and account for staff

performance as laid out in the organization strategy.

Several studies have been conducted in Kenya on the appraisal system Awori

(2007) conducted research on performance appraisal in state corporations in

Kenya.

Makawiti (2011) carried out a study on perceptions of academic staff in the

Kenyan public.

Universities on the application of performance appraisal results in training and

promotion decisions. A similar study was conducted by Kagendo (2012) on

factors affecting the performance appraisal of teachers in public secondary

schools in Ruiru, Magutu (2009) carried out a study on the effectiveness of the

performance appraisal system in Kenya concerning Kabarak University.

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