DISCUSSION

Formal performance appraisals (PA) of employees, which are typically scheduled annually or
semi-annually, are one of the most important human resource management practices and have
been widely researched (Murphy & Cleveland, 1995).

The aim of the present study was to assess the strength and direction of relationship between
performance appraisal satisfaction and job satisfaction of employees working in private
sector organizations in Delhi- NCR.

Survey method was employed to collect data from a total of 108 employees from 26
organisations in various sectors such as banking and financial services, hospitality, real
estate, consulting and retail services. Each researcher administered the survey to 2
employees working within a particular organisation at a managerial position (Junior, middle
or senior management). The survey included two questionnaires: Performance Appraisal
Satisfaction Scale developed by Katavich (2013), where the respondents were required to
indicate their level of agreement with the statements with the help of a five-point Likert Scale
(where, 1= Strongly Disagree and, 5= Strongly Agree). In order to assess the job satisfaction
of the participants Minnesota Satisfaction Questionnaire developed by Weiss, Dawis and
England (1967), was administered. The administration of the questionnaires was followed by
a short interview, where a few questions pertaining to the performance appraisal system of
the organisation were asked from the employees. The obtained data was subjected to three
types of quantitative analysis namely- descriptive analysis, correlational analysis, and simple
regression analysis using SPSS version23. In the descriptive analysis, the means and standard
deviations of the performance appraisal scores, intrinsic satisfaction, extrinsic satisfaction,
and general satisfaction were computed. The findings of the correlational analysis revealed
that Performance appraisal satisfaction was significantly correlated with all the three
measures of job satisfaction, i.e. intrinsic satisfaction, extrinsic satisfaction, and general
satisfaction. Further regression analysis revealed that performance appraisal satisfaction
contributed to significant amount of variance in all the three parameters of job satisfaction.
The findings of the study have been discussed below

Performance Appraisal Satisfaction and Intrinsic Job Satisfaction

The current research found a high correlation (according to Cohen,1998) between

performance appraisal satisfaction and intrinsic job satisfaction (0.511). Further, Performance
Appraisal Satisfaction contributed to 26.2% variance in employees’ Intrinsic Satisfaction at
the job. A number of reasons can be attributed to the link between the two factors.

Herzberg and colleagues (1959) in their The Two-Factor Theory of job satisfaction have
distinguished between intrinsic and extrinsic job satisfaction. Intrinsic job satisfaction refers
to internal factors that are related to satisfaction with the job, i.e. factors related to the self-
actualization of the worker, that is, the need for a sense of self-accomplishment on the job.
Thus, if the employees experience a sense of responsibility, self-directiveness, skill
development and a sense of accomplishment at their job, they are intrinsically satisfied.
Researches over time have shown how performance appraisal satisfaction is linked to
intrinsic satisfaction. The most basic way in which performance appraisal satisfaction is
correlated with and contributes to intrinsic satisfaction is by enhancing employee motivation
(Weerakkody & Mahalekamge, 2013). Various aspects of the performance appraisal system
enhance employee motivation.

According to Boswell & Boudreau (2002), formal performance appraisal systems in an

organisation consists of both an evaluative and a developmental dimension to them. As a tool
for evaluation, performance appraisals help detect strengths and weaknesses, i.e. room for
improvement of employees, and help to set objectives and to improve employee performance.

Furthermore, the developmental use of performance appraisal systems focuses on experiences

and skills that employees should acquire and which are identified by the use of performance
appraisals (e.g., training and development needs) (Kampkötter, 2014). This process of
evaluation and development offers the advantage of identifying the employees’ skill level and
serving the employees’ development needs and career ambitions (Khan, 2013). Thus,
performance appraisals provide a way to the employees to work towards self-growth and
attain self-actualization at work, which is an important component of intrinsic satisfaction
(Herzberg et al.,1959).

In the present research, employees seem to recognise the evaluative use of the performance
appraisal with the employees frequently stating the ‘opportunity to review self’, ‘attention to
be paid to individual skills’, and the system providing them an ‘awareness of a person's
strengths and limitations’ as important strengths of one’s performance appraisal system.
Since employees believe that the performance appraisal system provides for appropriate
evaluation of their skills and that such ‘Appraisal information is used to train employees’ (as
stated by employees of one particular organisation, thereby recognising its developmental
use), it links up to employees intrinsic job satisfaction.

An interesting finding by Samarakone (2010) indicated that human beings in a number of

ways prefer negative recognition as opposed to no recognition at all. Applied in the context of
the performance appraisal process, the very fact that a performance appraisal system is in
place in an organisation serves the bare minimum need of the employees- it provides an
avenue to recognise employees’ work efforts. As one of the employees in the current study
stated that the performance appraisal process made him ‘feel that his effort is being
acknowledged’, which was ‘motivating’. Thus, employees whose work efforts are recognised
through the performance appraisal ratings tend to be satisfied with their job.

Efficient implementation of the performance appraisal process can help the organization in
various ways. (Naji, Mansour & Leclerc, 2015). Effective implementation of the performance
appraisal process begins right from deciding the system that is to be used to assess the
employee performance within an organisation.

Analysis of the pooled qualitative and quantitative data of the organisations reveal that at
least 12 out of 26 organisations use some kind of goal setting technique as a performance
appraisal criterion. Tziner and Latham (1989) state that the process of goal-setting itself
provides the appraisee a broader picture of his/her work unit and the organization's
objectives. The appraisee understands how goals set by him/her relate to and contribute to
his/her work unit and his/her organization accomplishments. This makes an employee feel
that the nature of his/her work is important and thereby it leads to greater intrinsic
satisfaction.

The increased intrinsic satisfaction of the employees as a result of the clear-cut goal setting is
also in line with Ryan and Deci’s Self-Determination theory (2000) that states that intrinsic
satisfaction of people will be enhanced if the communicated goal provides them ground for
work behavior. Employees record higher levels of motivation and satisfaction when they are
presented with explicit goals that they are supposed to meet (Gómez-Miñambres, 2012;
Catania, 2012). Performance appraisal systems enhance intrinsic satisfaction as they enable
employees to experience greater meaningfulness of their work.

The satisfaction with the goal setting technique and the consequent satisfied job attitudes can
be seen through the response of one particular employee who stated, ‘The thing is you define
and set your own KRAs (a kind of goal setting technique) and work accordingly , that is the
best part’ and the fact that an employee stated that ‘Goals are set keeping in mind needs of
the organisation that results in organisational growth; employees are satisfied because they
are involved in setting of goals”

Performance Appraisal Satisfaction and Extrinsic Job Satisfaction.

Performance appraisals are used for a variety of reasons such as promotions, pay raises,
detailed and valuable feedback, and career progression. However, one of the most important
application of formal PA are performance-related pay (PRP) systems, which are often used to
align the objectives of employees with those of the firm and to motivate and reward
employees (Milkovich & Newman, 2004). When the performance is appraised accurately and
precisely within a particular organisation, goal achievement is reviewed and either rewarded
with bonus payments or used as a basis for future promotion decisions (Brown & Heywood,
2005). Thus, if an employee is satisfied with one’s appraisal systems and feels that the
rewards systems (which is a factor extrinsic to a job) are fairly distributed according to the
appraisal system, one’s extrinsic satisfaction increases ((Kim, 2016; Kampkotter,2014). In
the present study the correlation between performance appraisal satisfaction and job
satisfaction is found to be 0.637, which is a high correlation. The high correlation is
corroborated by the responses of one of the employees working with an organisation who felt
that the fact that the ‘increments are based on appraisal’ - is an important strength of the
organisation’s appraisal system.

Results of the simple regression analysis are quite interesting. The findings revealed that
performance appraisal satisfaction causes 40.6% variance in extrinsic satisfaction which is
higher than the contribution of performance appraisal satisfaction to intrinsic satisfaction
(26.2%).

This difference can be explained by a study undertaken by Kampkotter(2014). The study

analysed the effects of performance appraisals on employees’ job satisfaction. The results
showed that receiving formal performance appraisals has a positive and highly significant
effect on job satisfaction. However, For PA related to monetary consequences, this effect
even got even stronger. Thus, there is a positive association of performance-related pay
(extrinsic factors) and overall (job) satisfaction (Heywood & Wei, 2006; Green & Heywood,
2008). Since the positive effect seemed to be driven by appraisals related to monetary
outcomes, the researchers inferred that that performance appraisals are a direct driver of
extrinsic job satisfaction.
Similarly, in the present study since determining rewards becomes the most important
consequence of performance appraisals, performance appraisal satisfaction is more likely to
be linked with attainment extrinsic factors (such as pay), than with intrinsic job satisfaction,
thereby indicating a difference in the regression analysis results.

Further the very tool used for the assessment of employee job satisfaction provides an
explanation for the greater correlation of performance appraisal satisfaction with extrinsic
satisfaction as compared to intrinsic satisfaction. Minnesota Satisfaction Questionnaire
(Weiss et al.,1967) as a tool measures Intrinsic, Extrinsic and General Job Satisfaction. The
items measuring intrinsic satisfaction included statements such as ‘Being able to keep busy
all the time’, ‘The chance to do different things from time to time’- items which do not
appear to be related to the performance appraisal process in a direct way. By contrast, the
items assessing extrinsic job satisfaction include statements like- ‘The praise I get for doing a
good job’, ‘The competence of my supervisor in making decisions’- i.e. statements which
appear connected to performance appraisal process in a more direct way. This can therefore
be one of the plausible reasons as to why the correlation between performance appraisal
satisfaction and extrinsic satisfaction was higher, in the current study, than the correlation
between performance appraisal satisfaction and intrinsic satisfaction.

Another reason that explains the above finding may be, the capacity of an extrinsic motivator
to erode intrinsic motivation generated by a particular activity. According to Gagne and Deci
(2005), when a given task is intrinsically appealing to the employee, it is possible that the
positive effects can be undermined in a case where the extrinsic rewards are also linked to the
given task. Thus, the use of pay increments, promotions etc. (extrinsic motivators that are the
most important outcomes of the performance appraisal process) as one of the motivating
factors has the potential to erode intrinsic motivation (sense of achievement at work) that
might have been generated by the performance appraisal.

Further, Kuvaas (2006) found that lack of a performance review or a performance review
system that is not very regular, leads to low intrinsic satisfaction among employees.
Performance feedback has an impact on the intrinsic satisfaction of the employees since
people are basically feedback seekers (Ashford, 1986). Feedback is a vehicle through which
the appraisee receives information about how well he/she meets organizational expectations
and work requirements. As such, this knowledge of results plays a motivational role because
it allows the individual to experience positive feelings about himself/herself. In the present
study, it was found that 6 organisations did not have a performance review system at all in
place. In 20 out of 26 organisations, the formal performance review took place only once a
year. Further, in most of the organisations there was no definite system of informal
performance feedback mechanisms in place. This could have led to lower motivation among
the employees which must have therefore led to a lower correlation between performance
appraisal satisfaction and intrinsic job satisfaction in the current study.

Performance Appraisal Satisfaction and General Job Satisfaction

The items in the job satisfaction questionnaire used in the current study, the Minnesota
Satisfaction Questionnaire (Weiss, Davis and England, 1967) are divided mainly into
intrinsic (12 items) and extrinsic (6 items) factors leading to job satisfaction. Since the overall
job satisfaction includes both intrinsic and extrinsic job satisfaction (and since both had a
high correlation with performance appraisal satisfaction), it follows that General Satisfaction
too has a high correlation with performance appraisal satisfaction (0.606). The satisfaction
with performance appraisal is the most frequently measured appraisal reaction (Keeping and
Levy, 2000) and studies have frequently reported that there is a positive relationship between
satisfaction with performance appraisal and overall job satisfaction (Ellickson, 2002)

Further, performance appraisal satisfaction explains 36.8% variance in the general

satisfaction scores.

According to Herzberg (1959), job satisfaction is a combination of both intrinsic and extrinsic
factors contributing to satisfaction at work. Thus, the same factors are linked to explain the
correlation between performance appraisal satisfaction and general satisfaction of the
employees. Some such factors discussed above are the motivational role of performance
appraisals, evaluation and development of employee skills, performance appraisal and pay
link etc.

Apart from the factors stated above the relationship between performance appraisal
satisfaction and general job satisfaction can be explained using the theory of organizational
justice. Two primary components of organizational justice are distributive justice and
procedural justice (Cropanzano and Folger, 1996). In the performance appraisal context,
distributive justice refers to the fairness of the evaluation received, whereas procedural justice
refers to the fairness of the process used in determining the evaluation (Greenberg, 1986).
Although both types of fairness perceptions are important, fairness in performance appraisal
has been conceptualized largely in relation to due process (Folger et al., 1992; Taylor et al.,
1995). In the current research, analysis of the items included in the performance appraisal
scale indicates that majority of the items included on the scale (21 items) are assessing the
fairness and transparency of the performance appraisal system (i.e. procedural justice) and
only a few items (4 items) are assessing facets of distributive justice.

Moreover, a number of studies have found perceptions of organizational politics ( lack of

organizational justice) to predict job satisfaction (Cropanzano et al., 1997; Ferris and
Kacmar, 1992; Gandz and Murray, 1980). Job satisfaction reflects partly employees’
reactions toward their opportunity for within-organizational advancement (Schneider et al.,
1992). Therefore, when employees perceive their performance ratings, and hence pay
increase and promotion, to be determined by than performance factors rather than political
considerations, they are likely to experience increased job satisfaction.

Applied in the context of the current research, according to the responses of the employees
working across different organizations, employees from at least 13 organizations have clearly
stated that their performance appraisal system is ‘fair, transparent and objective’. Perceptions
of fairness in the procedure of performance appraisal may have led to an increase in job
satisfaction in the employees in the current research (Poon,2004)

An interesting finding to note is that the employees in the current study indicated high
correlation (0.606) between performance appraisal satisfaction and job satisfaction, despite
the fact that almost 104 employees felt that the performance rating that they received was
‘about’ or in fact ‘lower than what they had expected’ and only 4 felt that it was higher than
their expectations. Research evidence provides reason for this pattern. According to Poon
(2004), if the employees perceive that the manipulation of ratings has ben done purely for
motivational purposes (since the appraisal system is fair and transparent), it will have no
impact on their job satisfaction, regardless of the performance rating actually received.

Perceptions of fairness and therefore job satisfaction may be mediated by the leader-member
exchange (LMX). According to the theory, leaders form strong respect-based relationships
with their employees and are fair in dealing with them thereby winning their trust in the
system. It must be seen that in the current study, the performance appraisal system, be it a
360 feedback, or any other rating system etc., necessarily involves the manager of the
employee in the performance appraisal process. Further, the employees felt that there is a
fairness in the system where there is a’ scope of communication with the boss’ and that the
system is ‘open and approachable’, meaning thereby that the employees trusted the
supervisors to an extent. It is therefor possible that the fairness perceptions are linked to the
trust in the supervisor , which then leads to increased job satisfaction (Dusterhoff ,
Cunningham & MacGregor , 2014). Supporting the findings of the current research, Sparr
and Sonnentag (2008) reported that the relationship between perceived justice of performance
appraisals and job satisfaction was fully mediated by LMX.

Further, it must be seen that employees from 18 organisations had adequate awareness about
the performance appraisal system used in the organisation. Dobbins et al. (1990) showed that
performance appraisal variables such as amount of participation, satisfaction and awareness
of the appraisal system were related to more general organizational variables such as role
ambiguity and role conflict. Furthermore, employee participation in the PA process is
positively related to the satisfaction with the PA system, perceived fairness (Cawley et al.,
1998). Such factors taken together make employees more accepting of and more favorably
disposed to the appraisal feedback and system and thus more satisfied with their jobs (Levy
& Williams, 1998)

It must be noted that while 36.8% variance in general satisfaction can be attributed to
performance appraisal satisfaction, the remaining 63.2% variance in general satisfaction are
accounted for by other factors, not included in the purview of the current study.

According to Hackman and Oldham (1975), (in their job characteristics model) there are five
“core” job characteristics that affect important work-related outcomes including overall job
satisfaction by increasing the experienced meaningfulness, experienced responsibility at the
job etc. These core characteristics include factors like skill variety, task identity, task
significance, autonomy, and feedback (focus of the current study). Thus, it is quite possible
that job satisfaction may have resulted because of an impact of the other 4 core
characteristics, not included in the current study.

Implications

1. Since for many of the organisations an important limitation that came up was a lack of
transparency and biasness in the system and that such factors influence employees’
 perceptions of fairness (Poon,2004) and therefore their job satisfaction, it is important
to ensure the appraisal systems are fair, unbiased and transparent.
2. Since performance appraisal review and performance appraisal feedback emerged as
important basis leading to job satisfaction (Tziner and Latham ,1989) and
dissatisfaction, the performance appraisal review system must be made more regular.
3. Employees of at least 6 out of 26 had inadequate awareness of the company’s
performance appraisal mechanism, training must be provided in this area since it is
directly linked to employee’s satisfaction at work. Programs aimed at increasing
employees awareness of the performance appraisal systems must be implemented at
an organizational level.

Limitations
1. The performance appraisal scale did not include items assessing distributive
justice.
2. Questions pertaining to employee’s job satisfaction were not asked in the
interview.
3. The questionnaires being a self-report measure may have become prone to social
desirability.
4. Only managerial level employees were included. Therefore the findings from the
study cannot be generalized to employees working at other levels in an
organizational setup.
5. Public sector organisations were not included which limits the generalizability of
the study to employees working only in private sector organizations.

Suggestions for future research

1. Various factors affecting job satisfaction (apart from performance appraisal

satisfaction) as given by Hackman and Oldham (1975) can be investigated.
2. The relation between performance appraisal satisfaction and other outcome measures
such as organizational commitment etc. can be investigated.
3. Public sector organisations can be included in any future research.
4. Different performance appraisal techniques can be used to compare their impact on
job satisfaction measures.
 5. Research can be done on individuals who have worked for different time spans in an
organisation and assess the relation of performance appraisal satisfaction and job
satisfaction in such employees.

Conclusion

The findings of the current study are in line with the hypotheses stated. Hypothesis H1A
which stated, ‘There will be a significant and positive relationship between performance
appraisal satisfaction and general satisfaction of employees’ was accepted. The correlation
value of performance appraisal satisfaction and general satisfaction was significant at .01
level (r=.606) Hypothesis H2A stating, ‘There will be a significant and positive relationship
between performance appraisal satisfaction and intrinsic satisfaction of employees’, was
accepted. The correlation value of performance appraisal satisfaction and intrinsic
satisfaction was significant at .01 level (r=0. 511). Similarly, H1C stating that, ‘There will be
a significant and positive relationship between performance appraisal satisfaction and
extrinsic satisfaction of employees’ was accepted since the obtained value of correlation
between the two variables (r=0.637) was significant at .01 level.
Further, the findings indicated that General satisfaction of employees was significantly
influenced by their satisfaction with performance appraisal system (Hypothesis H2A).
Performance appraisal satisfaction contributed to 36.8% variance in the general job
satisfaction of the employees (R2 =0.368, p=0.000). Similarly, Hypothesis H2B stating,
‘Intrinsic satisfaction of employees will be significantly influenced by their satisfaction with
performance appraisal system’, was also accepted (R2 =0.262, p=0.000). Finally, hypothesis
H2C which stated that, ‘Extrinsic satisfaction of employees will be significantly influenced
by their satisfaction with performance appraisal system’, (R2 =0.406, p=0.000), was also
accepted. Therefore all the six research hypotheses were accepted, lending greater support to
the strength of relationship between performance appraisal satisfaction and job satisfaction in
an organizational setup.