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When it comes to performance appraisals, notions of fairness are all over the map, study finds

February 22, 2016

For more information, contact: Ben Haimowitz , (718) 398-7642, pres@aom.org

Little consensus about what makes for justice and what doesn't

Annual performance appraisals, those dreaded rites of organizational life, have been getting the brush-off lately, with such behemoths as IBM, Microsoft, and General Electric abandoning the practice. What's wrong with these rituals? While not reaching any overall verdict about their value, new research in organizational justice finds that notions of what makes or doesn’t make performance appraisals fair are all over the map. 

 

The research in the forthcoming issue of the journal Academyof Management Discoveries starts by noting that "the perceived fairness of performance appraisals has been shown to influence employees' commitment to their organization, their subsequent performance, and even their mental states such as anxiety and depression." It then proceeds to document "the idiosyncratic nature of forming global fairness judgments" and to reveal sharp divergence among 49 seasoned administrators over "how important specific aspects of justice are to them."

 

Comments Hayley German of the London School of Economics and Political Science, who carried out the study with Marion Fortin of the University of Toulouse and Daniel Read of Warwick Business School, "The fact that experienced administrators differ sharply in how they evaluate the fairness of the same appraisal suggests why this can be a potential minefield for employers. On the basis of our findings, it comes as no great surprise that annual performance appraisals have been losing favor."

 

To illustrate the wide disparity in approaches to this exercise, the new study offers three examples of the way administrators went about judging the fairness of actual performance appraisals. One placed about a 75% reliance on two factors – whether employees who were being appraised were provided needed information in timely fashion and whether the employees indicated a liking for the employer. A second virtually ignored these two considerations and relied about 80% on whether appraisals took account of employees' views and were based on accurate information. A third paid some heed to timeliness, accuracy, and workers' liking for the employer but attached the most importance to whether employees were treated with dignity in the appraisal process, a factor all but ignored by the other two judges.

 

Divergent though these approaches were from each other, the study found a fair degree of consistency in the weight individual judges assigned to different factors from one appraisal to another. Yet, oddly enough, when asked to rank factors by importance, their answers were at variance with their actual judgments. In the words of the study, "Although participants adopted a consistent judgment policy across different performance-appraisal situations, they showed little insight into their own judgment policy... [M]ost seem to have been unaware of the real policies they used."

 

In short, though experienced in performance appraisals and consistent in their approach, the judges would have difficulty explaining to others what that approach was.

 

The paper reaches these conclusions through an experiment that hews to actual workplace situations. Fifty-six university administrators (the experiment's "reporters") were asked to assess an actual performance appraisal they had recently undergone in terms of eight factors derived from previous research on organizational justice – whether the performance appraisal reflected (1) the reporter’s true work effort and (2) true work quality; whether (3) it took the his or her views and perspectives into account; whether (4) the appraisal was based on accurate information; whether (5) the reporter was treated with dignity and respect; whether (6) appraisers refrained from improper remarks; whether (7) they provided reasonable explanations regarding the appraisal process; and whether (8) essential information was provided in good time. Reporters rated each item on a scale of 1 (to a very small extent) to 7 (to a very large extent), and applied the same scale to two additional items – (9) whether they were pleased with the appraisal outcome and (10) liked working for their employer.

 

These anonymous assessments were then submitted to a group of 49 other university administrators experienced in performance appraisals (the experiment's "judges"), who were asked to rate each reporter's appraisal experience on a scale of 0 (totally unfair) to 100 (totally fair). The importance assigned by each judge to the 10 antecedent factors in the reporters' surveys was calculated through analysis of the relationship of the antecedents to judges' fairness ratings over the course of 56 appraisals. In addition, the judges were asked to provide their own sense of how they ranked the 10 factors in importance and what percentage each contributed to their estimates of fairness.

 

The three antecedent factors rated highest by the judges were timeliness (factor 8 above), accuracy (4), and quality (2), which had a cumulative weight of about 42.6 out of 100. The three lowest-weighing factors were being treated with dignity (5), feeling pleased with result (9), and lack of improper remarks (6), which had a cumulative weight of only 10.5

 

More striking was the great disparity among judges on which factors were important and which were not in achieving fairness. In the words of the study, "although some antecedents were generally more salient, there were large individual variations." This despite the fact that performance appraisal "seems a rather conservative test of agreement on justice situations, [being] highly standardized and often widely discussed by employees, thereby making agreement on justice standards more likely than for many other situations."

 

Indeed, given the lack of consensus about which factors make for fairness, simply weighing each factor equally, the study concludes, does "on average...almost as good a job of explaining global fairness."

 

The fact "that fairness policies can be so diverse may be burdensome for...those who conduct performance appraisals," the study concedes. Still, "focusing on only a few known antecedents of fairness seems risky, as managers typically do not know which antecedents may be most salient to which employee. Importantly, managers need to realize that their own preferences for specific aspects of fairness may not be shared by their employees."

 

Thus, to the question of whether it is worthwhile for managers to ask employees which justice considerations are important to them, the researchers answer with a qualified yes. "Our study suggests that, aside from the positive effects of being listened to and receiving attention...there is value in fulfilling on the antecedents that employees think are important...Managers, however, should act with caution and not take self-reported policies at face value – e.g., if people tell you that they only care about three specific antecedents, it may not be wise to therefore assume that others are unimportant to them."

 

In conclusion, the authors see the results of their performance-appraisal experiment as having broader implications for fostering a sense of fairness among employees. Given the study's findings "that cognitive resources restrict people's justice-processing," managers should “be amenable to questions and discussion” and should take care that, "when it comes to very complex situations with lots of new information (e.g., organizational change)... [they recognize] the importance of a) concentrating on the most salient aspects in initial communication with employees, b) not providing too much detail to overwhelm the judgment process... and c) providing time for employees to process details of the change."

 

The paper, entitled "Justice Judgments: Individual Self-Insight and Between- and Within-Person Consistency," is among the research to be published in the spring 2016 issue of Academyof Management Discoveries, a new journal dedicated to exploring management issues at ground level. The Academy of Management, with more than 18,000 members in 123 countries, is the largest organization in the world devoted to management research and teaching. The Academy's other publications are Academy of Management Journal Academy of Management Review, Academy of Management Perspectives, Academy of Management Learning and Education, and Academy of Management Annals.

 

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