DISTAL FACTORS AND THEIR EFFECT ON EMPLOYEES’ PERFORMANCE APPRAISAL RATINGS AND REMUNERATION: A RATEE’S PERSPECTIVE

Abstract

Empirical research and scholarly theory abound within employee performance appraisal (PA) literature, yet the effectiveness and accuracy of PAs remain unresolved within the practitioner community. There have been numerous scholarly calls to explore the possible impacts that distal factors may play in relation to PAs, but these calls have been largely unanswered. This study involved selecting three key distal factors for a quasi-experimental design methodology, using scenario decision-making and analysis. The three distal factors chosen were (a) the macroeconomic environment, in conjunction with the closer organizational distal factors of, (b) organizational life cycle stage and (c) perceived organizational performance. One of eight, fictitious but realistic, scenarios was provided to MBA alumni with feedback on decisions relative to employee performance requested. By keeping employee performance stable it was expected that manipulation of these external factors would result in changes to performance remuneration and ratings when employees self-assess. Of the three distal factors being studied, only the macroeconomic environment had an effect on merit pay regardless of perceived organizational performance being presented. The manipulation of the organizational life cycle was ineffective, and no conclusions can be drawn in relation to this distal factor. Middle-aged males were more aggressive in their salary expectations in a good macroeconomic environment, regardless of whether their specific organization appeared to be performing well, financially, or not. Self-assessed ratings, on the other hand, increased under all scenario conditions to varying degrees (but not significantly) and this could have just been due to chance. The degree to which demand characteristics were mitigated could have contributed to the lackluster results and, thus, should be investigated before future study replication.