DUE PROCESS IN PERFORMANCE APPRAISAL A QUASI-EXPERIMENT IN PROCEDURAL JUSTICE ( A CASE STUDY OF INTERCONTINENTAL BANK PLC. ABA.)

ABSTRACT

In every organization, there is always a type of appraisal whether formal or informal that is being used by the managers. Though the staff that make up an organization are made up of people from different  levels of education, with diverse functions or roles.It is expected that the employees are appraised in one way or the other by their boss. When properly conducted, performance appraisals not only let employees know how well  they  are  performing  but  also  influence  their  future  level  of  effort  and  task direction. The due process metaphor when applied to performance appraisal ensures that the employee is given fair treatment even when charged with legal violations.Employees are permitted to challenge their assessment and provide their own commentary by conducting and presenting a self-appraisal. This study therefore seek to undertake an assessment of the relationship between the appraisal system and the due process metaphor as amanagement strategy and organizational effectiveness in a typical Nigerian environment. It also relates the due- process appraisal system to procedural justice theory.

CHAPTER ONE

1.0     INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Of all the activities in Human Resources Management (HRM), performance appraisal is arguably the most contentious and least popular among those who are involved though it can provide valuable performance information to a number of critical human resource activities such as the allocation of rewards. Managers do not seem to like

doing it, employees see no point in it, and personnel and human resource managers, as guardians of an organization’s appraisal policy and procedures have to stand by and watch their work fall into disrepute. (Bratton J. $ Gold J., 1999).

Employee performance appraisal is carried out within a practical context, which is essentially the day-to-day business of the enterprise. Performance appraisal is commonly perceived to be a key feature of management control and direction wherein the review of employee work performance results in the identification of areas of performance which  deserve praise and/or which  may  need improvement. Without reference to any particular organizational context, appraisal of human performance at work confronts the appraiser with four realities.

First, this activity is inevitable in all organizations-large and small, public and private, local and multinational. This is so for three reasons: (1)Individuals are hired by organizations to perform work needed for the success of the organization; performance appraisal is thus the organization’s way of assessing whether it is getting its rightful due from the individual: (2) individuals differ concerning how well and how conscientiously they do their work: therefore, appraisal is necessary to account for the differences in contributions of individuals: and (3) in today’s legal climate, formal performance appraisal is essential to defend the organization’s negative actions against individuals, particularly those that adversely affect members of minority groups protected by law.(Patten T.H., 1982)

Second, performance appraisal is a serious activity whose conduct is fraught with consequences for both the individual and the organization. From the organization’s perspective,   a   faulty   assessment   can   result   in   false   positive   (rewarding   bad performance) as well as false negative (failing to reward good performance) errors. From the individual’s perspective, results of performance appraisal have implications for the future relationship with the employing organizations. In practice, there is a good measure of rational thought and emotional intelligence involved in setting the appraisal system into motion. The key targets to be achieved need to be discussed between employee and manager, so that the former is genuinely able to commit to the challenge. The criteria to be used are frequently a source of discontent, sometimes for both parties. The criteria need to be achievable as well as measurable, and contingency considerations taken into account in case of totally unexpected events affecting the employee’s performance. The criteria employed should be such as to encourage the employee to rise to the challenge, and be neither irrelevant nor over-enthusiastic, both of which can be de-motivating. The criteria are almost certain to contain some element of timing, and here again the need for results has to be balanced against what is reasonably possible in a given time frame. Positive appraisals can result in the renewal of membership as well as promotions, pay raises and other rewards. Negative appraisals, on the other hand, can result in demotions, and even termination of membership. (Murphy K. R. & Cleveland J. N., 1991)

Third, performance appraisal is a complex activity that confronts even the most well- meaning appraiser with a maze of interrelations that frustrate assignment of clean, accurate, and merit-based ratings. Moreover appraisal gets progressively more complicated with the introduction of additional variables and quality demands. Even modest increments in complexity add disproportionately to the challenge. In theory, the evaluation of employee performance might seem to be a straightforward process, but in practice several problems often produce adverse reactions to performance appraisal. McGregor, in his now classic article “An Uneasy Look at Performance Appraisal,” argues that managers are uncomfortable when they are put in the position of “playing God.” This unwanted judgmental role is thought to be one important reason for managerial resistance to performance appraisal processes. McGregor argues that judging the personal worth of another individual conflict with “the respect we hold for the inherent value of the individual “. (McGregor, Douglas, 1957)This argument is advanced by others who, like McGregor, see performance appraisal as creating a situation in which the superior must behave in a “threatening, rejecting, and ego-deflating” manner with those employees judged to deserve criticism. (Likert R.,

1959) Yet others, such as Maier, point out that the appraisee can be expected to act defensively when criticized by supervisors. (Maier, Norman R.F., 1958)Take the relatively simple case of the waiter serving food in a restaurant. Customer satisfaction is the result of a large number of variables (e.g. , menu, quality of ingredients used, skills of cooks, coordination among different personnel, physical atmosphere) brought

into alignment by a chain of decisions and behaviors involving  the entire restaurant staff as well as the suppliers who furnish the ingredients. To reward or to punish any one person for satisfaction of  restaurant  customers would  be both  inaccurate  and unfair. As complexity increases, it becomes progressively more difficult to meet the criteria that good appraisal systems need to meet: i.e., observability, measurability, job relatedness, importance to job success, controllability, and practicality. (Cascio W. F.,

1991)

The fourth reality is that performance appraisal tends to get entangled in politics of organizations. This is partly due to the complexities of the process, and also to the nature of human organizations. While joining hands to produce a valued output, individuals also compete with each other for a share of the returns of organizational success. (Burns T., 1966) When sitting in judgment on co-workers, therefore, there is an ever-present danger of the parties being influenced by the political consequences of their actions in appraising performance-rewarding allies and punishing enemies or competitors. (Longenecker C.O. et al, 1987)

A critical element influencing  the potential success of an appraisal system  is the reaction to the system of those persons being evaluated (Carroll & Schneier, 1982; Murphy & Cleveland, 1991). One particular type of employee reaction that has been found to be related to acceptance or rejection of appraisal is the perceived fairness of an appraisal system (Murphy & Cleveland, 1991). Bretz, Milkovich,and Read (1992), in their summary of three large scale surveys of U.S. private sector organizations,

identified   fairness   as   the   most   important   performance   appraisal   issue   that organizations face.

Murphy and Cleveland (1991) note that the organizational justice literature (Greenberg,1990)  may  provide  a  fruitful  theoretical  background  for  research  on factors affecting perceptions of appraisal fairness. Basically,  organizational justice theory posits two categories of justice- procedural and distributive. Procedural justice pertains to the fairness of procedures used in determining outcomes, while distributive justice is concerned with fairness of the outcomes themselves. A limited amount of appraisal-related research has been performed within this framework. Although not explicitly conducted under the “organizational justice” rubric, early research (Landy, Barnes & Murphy, 1978; Landy, Barnes-Farrell, & Cleveland, 1980) indicated that appraisal procedures and processes (e.g. opportunity to express feelings) influenced employee perceptions of fairness and accuracy to a greater degree than did the specific ratings employees received. Greenberg (1986) identified procedural and distributive justice factors of perceived appraisal fairness. The procedural factor was composed of five variables (e.g., two-way communication during the appraisal session), while the distributive   factor   contained   two   variables   (e.g.,   receipt   of   rating   based   on performance achieved). Folger and Konovsky (1989) found that appraisal-related procedural justice factors contributed more unique variance toward the prediction of trust in supervisor and organizational commitment than did salary-related distributive

justice measures, whereas the distributive justice measures predicted more unique variance for satisfaction with pay than did the procedural justice factors.

This study concentrates on the application of due-process metaphor, which gives the employees considerable opportunity to present their views throughout the appraisal process with Intercontinental Bank Plc. Aba Branch as the major case study. The due process metaphor of performance appraisal is consistent with prior theoretical models of procedural justice.

1.2 STATEMENT OF THE PROBLEM

In most organizations, the performance appraisal system is a legitimate activity but there are difficulties concerning both accuracy and fairness. Statements such as “I haven’t had an appraisal since I’ve been here”; “No one ever tells you how you are doing around here” emanates from the employee whenever he or she feels cheated and not rewarded properly. Even when it is time for promotion, the employer tends to overlook the performance appraisals.

Some managers are not queried with the way they distort their subordinates’ appraisals and even when the subordinate disagrees with the scores given to him. The appraiser may actually be prejudiced against the appraisee or be anxious not to be prejudiced; either could distort the appraiser’s judgment. Appraisers often carry out appraisals because of their position in hierarchy rather than because they have a good understanding of what the appraisee is doing. They have insufficient knowledge of the

appraisee.  Also  the  ‘halo  effect’-  the  general  likeability  (or  the  opposite)  of  an appraisee can influence the assessment of the work that the appraisee is doing.

The due process appraisal system helps to check the above problems. It will bring about greater accuracy and fairness in the appraisal system and greater satisfaction with appraisals.

In a situation where openness and participation are encouraged, any system will be discussed first with those involved, with the result that appraisals are more likely to be joint problem-solving affairs rather than a ‘calling to account’ by a superior.

1.3      OBJECTIVES OF THE STUDY.

The objectives of the study are:

1.       To review the purpose of the appraisal system with a view to determine the extent to which it provides employees and organizational representatives the opportunity to present their views throughout the appraisal process.

2.       To determine the effects of the due process appraisal system on the employees’

job satisfaction.

3.       To determine the extent to which the due process appraisal system effect the managers’ reactions to performance appraisal.

4.       To   determine   whether   the   due   process   appraisal   system   increases   the employees’ acceptance of the appraisal system and their scores.

5.       To determine the consistency of application of the performance appraisal.

1.4     RESEARCH QUESTIONS.

The following research  questions are  expected  to  assist  in undertaking  this research study:-

a)       Is job satisfaction an effect of the due process appraisal system?

b)       If it is, does it provide the opportunity for employees to present their views during the appraisal process?

c)       How well do managers react to the due process appraisal system?

d)       What is the purpose of instituting an appraisal system in an organization?

e)       Is the organization consistent in the use of the appraisal system?

1.5     FORMULATION OF HYPOTHESIS

The researcher wishes to investigate the following hypothesis:-

a)        Ho:  Employees  evaluated  under  a  due-process  appraisal  system  will  report greater satisfaction with both the appraisal system and their appraisal score than those evaluated by an appraisal system providing less due process.

H1:Employees evaluated under a due-process appraisal system will not report greater satisfaction with both the appraisal system and their appraisal score than those evaluated by an appraisal system providing less due process.

b)       Ho:  Employees  evaluated  under  a  due-process  appraisal  system  will  report greater job satisfaction than those evaluated by an appraisal system providing less due process.

H1: Employees evaluated under a due-process appraisal system will not report greater job satisfaction than those evaluated by an appraisal system providing less due process.

c)        Ho:  Employees evaluated  under a  due process appraisal  system  will report greater fairness of the appraisal system and greater accuracy in their own appraisal  than  those  evaluated  by  an  appraisal  system  providing  less  due process.

H1: Employees  evaluated under a due process appraisal system will not report greater fairness of the appraisal system and greater   accuracy in their own appraisal  than  those  evaluated  by  an  appraisal  system  providing  less  due process.

1.6     SIGNIFICANCE OF THE STUDY.

The significance of this study is that it will emphasize the application of due process metaphor to performance appraisal. It is common knowledge that appraisal systems often  violate  employees’  due  process  by  providing  the  m  with  infrequent  and relatively general performance feedback, allowing them little or no input into the appraisal process. Also, sometimes bias is introduced in performance ratings.

There are many uses of the performance appraisal; one of such is for making administrative  decisions  relating  to  promotions,  firings,  layoffs,  and  merit  pay increases. The due process appraisal system helps to make real the administrative decisions made by management in relation to the performance of the employee.

Also the significance of this study is to emphasize procedural justice which is the process through which decisions are made when there are conflicts of interests which is the primary determinant of disputing parties’ perceptions of fairness.

1.7     THE SCOPE OF STUDY

This  research  focuses  on  such  issues  as  general  overview  of  due  process  in performance appraisal in the modern day organizations, the responsibility of management in developing and instituting such systems and ensuring its consistent and regular application in the day-to-day management of the work situation. The study

will  also  identify  problems  (if  any)  associated  with  the  system  as  obtained  in

Intercontinental Bank Plc., Aba and proffer suggestions for improvement

1.8     LIMITATIONS OF THE STUDY.

The private sector organization studied is one that places more emphasis on employment stability than on pay and employee development. This fact may have heightened   the   salience   of   the   due-process   manipulation   for   employees   and strengthened its favourable effects.

The administrative heads were reluctant to give out information on how the current appraisal system operated and were also not supportive enough during the experiment using experimental and control groups of subordinates and their administrative heads. Time was also a serious constraint in the sense that the managers and their employees needed to be well grounded in the due-process appraisal system to be able to really appreciate it, in other words they needed training. This did not stop them from recognizing its positive effects, anyway. There were also financial constraints.

1.9 DEFINITIONS OF TERMS.

PERFORMANCE: This refers to the degree of accomplishment of the tasks that make up an individual’s job. Often confused with effort, which   refers to energy

expended, performance is measured in terms of results. [Byars L.L. and Rue L.W.,

1991]

PERFORMANCE APPRAISAL: This is a  process of determining and communicating to an employee how he or she is performing on the job, and ideally, establishing a plan of improvement. [Byars L.L. and Rue  L.W., 1991]

APPRAISAL SYSTEM: This is a system that is typically designed on a central basis, usually by the personnel function and require that each line manager appraise the performance of their staff on an annual, six monthly or even quarterly basis. [Torrington D. and Hall L., 1998]

DUE  PROCESS  OF  LAW:  This is  intended  to  ensure  that  individuals  get  fair treatment when charged with legal violations. [Folger, Konovsky, and Cropanzano,

1992]

PROCEDURAL JUSTICE: This emphasizes the process through which decisions are made in the conflicts of interests as the primary determinants of disputing parties’ perceptions of fairness. [Leventhal, 1976; Folger, 1977; Thibaut and Walker, 1978; Lind and Tyler, 1988; Tyler and Lind, 1992].

1.10 BRIEF PROFILE OF INTERCONTINENTAL BANK, PLC

The bank was first established as a merchant bank in February 1989,under the

name,Nigerian Intercontinental Merchant Bank Limited.

It commenced business with paid up ordinary share capital of N12 million and in September 1, 1989,Intercontinental Securities Limited (INTERSEC), an investment company was set up.

In  1993,the bank acquired  substantial equity  stake  in  Associated  Discount House Limited        (ADHL),        the        largest        discount        firm        in        Nigeria. In 1996, the bank acquired majority equity stake in Equity Bank of Nigeria Limited, a nimble  and  dynamic  commercial  bank,  to  enhance  commercial  operations  of  the Group  and  a  controlling  equity  stake  in  an  insurance  company,  West  African Provincial Company (WAPIC) Plc, which expanded the Group’s business into the lucrative insurance business. WAPIC is one of the biggest insurance companies in Nigeria.

In 1999, it became Intercontinental Bank Limited in July following conversion to a Commercial Bank. It also acquired another commercial bank, Gateway Bank Limited in the same year.

In October 2005, it merged with three other banks: Equity, Gateway and Global.

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