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Perceived unfairness in appraisal: Engagement and sustainable organizational performancePurpose – The purpose of this paper is to explore the contribution of appraisal systems to sustainable organizational effectiveness. It argues that competitive advantage is increasingly reliant on discretionary effort. As the emphasis of appraisal has shifted from a developmental to a performance focus, perceived unfairness in both procedures and outcomes threatens to undermine commitment and, therefore, sustainable performance. Design/methodology/approach – Drawing on a range of theoretical frameworks, current practices and experiences are examined and future trends considered. Empirical research includes a ten-year study of practising managers and ethnography, questionnaires and interviews in two large organizations. Findings – Appraisal frequently creates actual and perceived injustice in terms of both procedures and rewards. It also generates tensions between managing performance and encouraging engagement. Research limitations/implications – This study indicates that further research in other sectors will contribute to the development of greater understanding of sustainable strategic approaches to HRM. Practical implications – Emphasis on performance in appraisal devalues developmental aspects and sometimes affects employee well-being. Separation of the two through mentorship schemes may help to address the paradox, whereby the performance management element of appraisal undermines rather than enhances organizational effectiveness. Originality/value – The conventional wisdom of the appraisal culture is challenged. We argue it is essential to expand the discourse between performance, justice and ethical value systems if sustainable competitive advantage and well-being are to be achieved.