IMPACT OF SUPERVISOR STYLE ON EFFECTIVENESS OF PERFORMANCE APPRAISAL SYSTEM

Transcription

1 IMPACT OF SUPERVISOR STYLE ON EFFECTIVENESS OF PERFORMANCE APPRAISAL SYSTEM ABSTRACT Performance appraisal system is an important HR function in today s organisation where it plays a strategic and integrating role of various functions and is causative to decision making in different state of affairs. The success of the appraisal system depends on various factors including employee engagement, commitment, organisation culture, leadership style and so on. Reactions to appraisal and the appraisal process are believed to significantly influence the effectiveness and the overall viability of appraisal systems (Jawahar, 2007). This indicates that it is important to notice and pay attention to the factors that influence the effectiveness of performance appraisal. Literature review has resulted in identifying various aspects that influence appraisal, including the appraiser s supervisory style. The appraisal system needs to be more objective, improve the feedback process, and increase the frequency of review. The supervisor s role in this outlook, needs focus in order to obtain an effective performance appraisal system. This paper focuses on studying the impact of various supervisory styles on the Performance Appraisal System. The study focuses on measuring the three supervisory styles proposed by Rao, namely Benevolent style, Critical Style and Development oriented style in manufacturing and IT sectors. A benevolent style is where the top level manager or the appraising manager is more affectionate towards his subordinates and is understanding of one s needs at the workplace. A critical leader is a tough task master who believes that employees need to be closely watched in order to be reminded of their duties. He is not flexible towards employees needs, rather is focused on the organisational objectives and is strict with the norms. Development oriented supervisor is the most desirable style where the manager believes in his subordinates and aids in developing one s competencies and abilities. The analysis shows that there is significant difference between the supervisory styles and effectiveness of PAS based on the type of company, namely manufacturing and IT. The measure of association between the various styles and the effectiveness of appraisal system depicts that critical supervisory style is strongly and statistically negatively correlated whereas, development oriented style is statistically positively correlated with performance appraisal system. 1

2 The impact of the various supervisory styles on effectiveness of PAS was studied through regression that resulted in showing significant contribution of the supervisory styles on effectiveness of performance appraisal system. The values also signified that development oriented supervisory style is important and positively explains the variance in the dependent factor whereas the critical supervisory style has a statistically significant negative impact on the perception of employees regarding the effectiveness of PAS. The study shows that developmental style tends to create learning and job satisfaction than the benevolent style and critical style. The findings are in expected directions. The findings can be used to arrive at useful changes to be implemented in the supervisor styles of the organizations to achieve the overall performance appraisal goal. INTRODUCTION Performance Appraisal System (PAS) is one of the very important functions in an organisation that has a check or control on the performance of the individual, the team and the organisation as a whole. Performance appraisal yields critical decisions integral to various human resource actions and outcomes (Jawahar, 2007; Steensma and Visser, 2007). Studies (Taylor et al., 1995) have shown that implementation of PA systems remains one of the greatest challenges of effective HRM. While a good PA system is expected to provide valuable information to an employee about his/her performance and progress at work, appraisal reliability and validity continue to remain a major concern for organizations and also PAs are often met with substantial resistance (Banks and Murphy, 1985; Cleveland et al., 1989; Taylor et al., 1995) There are a number of factors that influence the effectiveness of a performance appraisal system including employee engagement, employee commitment, performance, organisation culture and supervisor style. Of these factors, the leadership style or the supervisor style that accounts to the appraiser s interaction and interface with the employee, has an important role to play, which is analysed in this paper. There are a number of supervisory styles discussed in literature, however the authors have taken the supervisory styles described by Rao (1986) for the study. According to Rao, the supervisors shall be adopting benevolent style or critical style or development oriented style. The study aims to identify the impact of these supervisory styles on performance management system in organisations. LITERATURE REVIEW 2

3 The literature review section deals with performance appraisal system, its significance and the level of satisfaction regarding the system in organisations. Various leadership styles and supervisory styles are also reviewed, which is considered to be an important factor in determining the effectiveness of performance appraisal system in organisaitons. Performance Appraisal System Performance appraisal (PA) is among the most important Human Resource (HR) practices (Boswell and Boudreau, 2002). Performance appraisal is now a more strategic approach to integrating HR activities and business policies rather than a functional unit. Organizations aim to assess and evaluate its employees and develop their competence, skills, enhance performance and distribute rewards (Fletcher, 2001) through performance appraisal. This has helped performance appraisal to evolve in to a developmental process from a psychometric and evaluation method (Fletcher, 2001; Levy and Williams, 2004; Waal, 2003). It is now defined as any effort concerned with enriching attitudes, experiences, and skills that improves the effectiveness of employees (Boswell and Boudreau, 2002). However many organizations express dissatisfaction with their appraisal schemes (Fletcher, 1997). This may indicate a lack of success of PA as a mechanism for developing and motivating people. This raises concerns on the process of performance appraisal and it has been found that there are a number of factors that contribute to this dissatisfaction. Performance appraisal has broad implications for attitudes and behaviours in organizations (Erdogan, 2002). Performance appraisal influences administrative decisions, training and development, opportunity factors and those elements in the work system that contribute to performance (Anthony et. al., 1993). Therefore it is a significant element in aiding in decision making in a number of situations in the organization. One of the indicators of the success of a performance appraisal system is Performance appraisal satisfaction or performance appraisal justice, which refers to the general, overall perception of fairness of the HR system (consisting of work systems, career systems, development system, culture system and selfrenewal system) of the organization. This depends on employee involvement, employee engagement and strong internal management support, culture (Sole, 2009), management commitment (Mansor et. al., 2011), affective commitment and turnover intention and hence intrinsic motivation (Bard Kuvaas, 2006). 3

4 Subjectivity is perceived to be a major problem in performance appraisal. Appraiser bias is a major apprehension which has difference in opinion between the line managers and the others. The system needs to be more objective, improve the feedback process, and increase the frequency of review. Having measurable performance parameters would help reduce bias. Using multiple sources of feedback (including the self, peer and 360-degree systems), a review mechanism, and transparency in the system also would help reduce bias (Arvind, 2009). Employees are satisfied with their performance appraisal systems when there is trust in the supervisor and when supervisors are supportive of their subordinates (Korsgaard and Roberson, 1995), feedback, particularly in the areas of skill development, pay for performance, and career advancement occurs during the appraisal session (Landy et al., 1978; Mount, 1983; Nathan et al., 1991), and subordinates feel that they are given enough time to express their perspectives, have opportunity to influence the outcome, and sufficient explanation of their ratings is provided (Dipboye and de Pontbriand, 1981; Taylor et al., 1995). Performance appraisal systems are not viewed positively by managers and employees when the stated purpose is different from the perceived results (Gabris and Ihrke, 2001). An effective system should not only be psychometrically sound but also let the employees hold positive attitudes toward the system. If employees perceive that the performance appraisal system is congruent with their expectations, then positive outcomes should be expected (i.e. higher job satisfaction, greater perceptions of the system being useful and fair. Many of the highest impact items involve process and management leadership, not the technical structure of appraisal forms and systems (Lawler III et al., 2012). This paper aims in studying the impact of leadership on the effectiveness and satisfaction with regard to the performance appraisal system that prevails in the organization. Supervisory styles Leadership is an important quality for managers and appraisers. It helps in not only directing the individual but also in the development and transformation of the sub ordinate. Jeffery Pfeffer (1998) observes three qualities of most successful transformations, namely building trust, encouraging change and measuring the right things and align the incentive system to new practices. Peffer argues that a people centered approach can increase profits and give competitive advantage to itself. Goleman (2002) in his recent book on "The New Leaders" has presented enough evidence on how moods of people influence their work and productivity and 4

5 how leaders in turn through their styles influence the moods of their people. Thus influence of leadership styles on employees is significant and had been studied in a number of researches as mentioned above. Organizational success in achieving its goals and objectives depends on the leaders of the organization and their leadership styles. By adopting the appropriate leadership styles, leaders can affect employeejob satisfaction, commitment and productivity. Transformational leadership is more important in terms of follower satisfaction than transactional leadership. Organizations should have the right person (with ability) to do the right job and give employees suitable training to increase their job performance and ability. Besides that, supervisors should take actions to improve their workers such as providing strong leadership and mentoring for staff members, building working conditions that are conducive and provide challenging and stimulating work assignments (Voon et. al., 2011) The charismatic, transformational and visionary of the leadership style are positively related to the organizational performance (Wang et al., 2010). Hersey and Blanchard s (1988) situational leadership theory indicates that successful leaders adjust their styles depending on the readiness of the followers to perform in a given position. The possible leadership styles include: (a) selling: a high-task, high-relationship style; (b) telling: a high-task, low-relationship style; (c) participating: a low-task, high-relationship style; and (d) delegating: a low-task, low-relationship style. Drucker (1993) indicated that the quality and performance of managers are the key criteria in deciding organizational success. An enterprise without a manager s leadership is not able to transmute input resources into competitive advantage. Therefore, it is clear that the leadership style of a manager has a close relation to the development of organization. Rensis Likert categorized four styles or systems of leadership that exemplify different behavioral aspects of leaders as exploitative authoritative, benevolent authoritative, consultative management, participative group leadership styles. Rao (1986) has classified the leadership styles, on the basis of the earlier research at the Indian Institute of Management, as benevolent style, critical style and development style. A Benevolent or Paternalistic leadership style is one in which the top level manager believes that all his employees should be constantly guided and treated with affection like a parent treats his children. This style is relationship oriented that assigns tasks on the basis of 5

6 one s own likes and dislikes, understands their needs, salvages the situations of crisis by active involvement of oneself, distributes rewards to those who are loyal and obedient and shares information with those who are close. A Critical leadership style is characterized as closer to Theory X belief pattern where the manager believes that employees should be closely and constantly supervised, directed and reminded of their duties and responsibilities, is short term goal oriented, cannot tolerate mistakes or conflicts among employees, personal power dominated, keeps all information to himself, works strictly according to norms and rules and regulations and is highly discipline oriented. The description indicates that a critical leader is a tough leader and a task master, which involves pressure on the employees to perform. This may result in the disliking of the style and hence the supervisor. A Developmental leadership style is characterized as an empowering style, where the top manager believes in developing the competencies of his staff, treats them as mature adults, leaves them on their own most of the times, is long term goal oriented, shares information with all to build their competencies, facilitates the resolution of conflicts and mistakes by the employees themselves with minimal involvement from his side. Developmental style by nature, seems to be the most desired organization building style. However some individuals and some situations require at times benevolent and critical styles. Some managers are not aware of the predominant style they tend to use and the effects their style is producing on their employees. This classification is based on the observations made by Stewart and Rao as a part of a collaborative study by the author and David McClelland of Harvard University using the Psychosocial Maturity models of Stewart (Stewart and Rao, 1976). His study has clearly demonstrated that developmental style is the most desirable style and it is associated with creation of empowerment, growth, learning, morale and satisfaction on the part of the employees. In Goleman's terms this style creates resonance while the critical climate creates dissonance. Benevolent or relationship dominant style has the potential of creating not only dependence but also resentment and avoidance of work. Leadership programs in future therefore should focus on the developmental style as a desirable style. Performance appraisal has long been recognized as an important personnel function with the potential to improve employee motivation and hence performance, and to provide 6

7 management with the control needed to achieve organizational objectives. Performance appraisal interview (PAI) where superiors meet individually with their subordinates to assess their performance and to agree on what should be their future aims, plays a major role in the success of the appraisal system. Studies (Cederblom, 1992, Cummings and Schwab, 1989 and Goodson and McGee, 1991) have shown that performance appraisal interviews are dependent on employee performance and relationship between the employee and the superior. The appraisal decisions depend on the appraisers styles of management, regardless of taking into account the actual performance of the employees and awarding them genuine ratings on the basis of output/ results shown by them (Ayaz Khan, 2006). Hence based on the literature review, the following framework of relating the supervisor style and the effectiveness of performance appraisal system, is deduced. Critical style of supervisor Benevolent style of supervisor Developmental Style of supervisor Effectiveness of Performance Appraisal System Figure 1 - Theoretical framework depicting the relationship between Supervisory style and Effectiveness of Performance Appraisal System OBJECTIVES OF THE STUDY The study has the following objectives: 1. To study the existing level of different supervisory styles in organizations, in terms of benevolent, critical and development oriented styles and the level of effectiveness of performance appraisal system in the perception of the employees 2. To study if there is statistical difference in the perception of employees regarding the supervisory style and effectiveness of PAS based on their company sector. 7

8 3. To study if there is any significant association between the supervisory styles and effectiveness of PAS 4. To study the strength of impact of different supervisory styles on effectiveness of performance appraisal system NEED FOR THE STUDY This study is relevant, particularly, when the organizations are very keen in implementing effective Performance Appraisal Systems. A successful performance appraisal system depicts that the organisation have started to reap benefits out of the system in terms of productivity, performance and engagement. This calls for the right selection of human resources, especially in the higher cadres who will be in a position to appraise the subordinates. Apart from supervisor selections, organizations are keen on supervisor style training too. Yet, the Performance appraisal systems do not achieve the intended goals. Therefore, the importance of the present study is related to resolving the associated problems of this process and would suggest a path for the supervisors in order to implement a successful PAS. The present study attempts to throw light on the impact of the three supervisor styles on the PA process. Further, the study may help the HR departments in selecting the right supervisor personalities and implement the right training for appraisal supervisors. The study may also lead to further research in the field of improving performance appraisal systems. METHODOLOGY The study is descriptive and casual in nature. It describes the existing level of supervisory styles in organisations and the effectiveness of Performance Appraisal systems as perceived by the employees. Also the study intends to explore the cause and effect relationship between the style of the supervisor and the effectiveness of PAS. Already validated instrument developed by T.V. Rao is used for measuring the supervisory style and effectiveness of implementation of PAS. A pilot study was done in order to test the reliability of the questionnaire for the intended target group of employees in manufacturing sector and IT sector. The reliability of the study was Simple random sampling was used to identify the companies and further the respondents. Final data was collected from 151 respondents in both the sectors. Mean value analysis, ANOVA, correlation and regression were the tools used to achieve the above said objectives. ANALYSIS 8

9 The analysis of the study was done using SPSS. Specific tools for specific objectives were used. Descriptive statistics was used to analyse the mean scores and the nature of the sample. About 151 valid responses were analysed. 39% of the response was from employees from medium scale industries and 61 were from large scale companies. 50 % of responses were collected from manufacturing sector and 50% from IT sector. About 56% were men and 44% were women. ANOVA was used to identify if there were any statistically significant difference in the perception of employees regarding the supervisory style and effectiveness of PAS based on their company sector. Correlation was used to study if there was any association between the supervisory styles and effectiveness of PAS. And regression was used to analyse the strength of impact of different supervisory styles on effectiveness of performance appraisal system Existing level of supervisory style and effectiveness of PAS The existing level of supervisory style and effectiveness of PAS is measured using the Mean score and standard deviation. Table 1 gives the mean values of effectiveness of PAS, benevolent style, critical style and development oriented style of supervisor. Table 1: Existing level of Supervisory style and effectiveness of Performance Appraisal System Factors Mean Std. Deviation Effectiveness of PAS Benevolent style Critical style Development oriented style The table shows that Development oriented style (M = 4.399) has scored the highest value among the other supervisory styles that depicts that the respondents observe their leaders to be more development oriented and have given a favoured score. Whereas, the respondents may not have been very happy with the critical part of their supervisor, which has been obviously scored less (M= 3.134). However the standard deviation of the critical style leadership is higher when compared to the other scores. This reflects the wide difference in perception of a supervisor as critical. Difference in perception of supervisor style and PAS based on company sector 9

10 Table 2 shows the mean and significant difference between the various sectors of the employees, in observing the effectiveness of PAS and their supervisor s supervisory style. It can be observed that there is statistically significant difference in the perception of all the factors which indicates that the employees in manufacturing and IT sector perceive these factors differently. Table 2: Difference in perception of supervisor style and PAS based on company sector Factors Manufacturing company IT company F value Sig (p value) Effectiveness of PAS * Benevolent style * Critical style E * Development oriented style * *statistically significant at 0.01 level The employees of IT sector allot more score to the effectiveness of PAS, benevolent style and development style of the supervisor than for the critical style of the supervisor. This indicates that the IT employees are more happy with benevolent and development style leadership and they observe the presence of such characteristics in their supervisors. As IT sector adapts to a culture similar to western countries that has less power distance, the critical style is scored less than that of the respondents from manufacturing sector, where the power distance is more. Analysis of association between supervisory styles and effectiveness of PAS The association between the three supervisory styles was studied through correlation. Also the correlation of the supervisory styles to effectiveness of implementation of PAS was also determined. Benevolent style and development oriented style correlated positively with one another. Critical style correlated negatively and strongly with benevolent style (r = ) and correlated negatively with development style (r = ). This clearly indicates that critical style is quite contradictory to the other supervisory styles and was observed so by the respondents. The association of the supervisory styles with effectiveness of PAS also indicated that effectiveness is strongly and negatively correlated (r = ) with critical style. It was positively and significantly correlated with benevolent style (r = 0.504) and development oriented style (r = 0.477). Hence when the benevolent style and development style is enhanced in the supervisor, the performance appraisal system seems to be more positively and effectively implemented in the organisation. The magnitude of the negative correlation with critical style is higher than the magnitude of the positive correlation with the other two styles. Therefore the 10

11 critical supervisory style creates more disorder than the other styles creating a positive impact on the performance appraisal system. Table 3: Correlation between supervisory styles and effectiveness of PAS Effectiveness of Benevolent Critical Development PAS style style style Effectiveness of PAS ** **.477 ** Benevolent style.504 ** **.210 ** Critical style ** ** Development oriented.477 **.210 ** style **. Correlation is significant at the 0.01 level (2-tailed). oriented Strength of impact of different supervisory styles on effectiveness of performance appraisal system The impact of different supervisory styles on effectiveness of performance appraisal system and its strength was measured using regression. The three supervisory styles were taken as independent variables that would have an impact of effectiveness of performance appraisal system. The model summary indicates that the three supervisory styles have about 58.8% influence on effectiveness of PAS. This conveys that the effectiveness can be controlled to a major extent by the supervisory style of the appraiser. Table 4: Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate a a. Predictors: (Constant), Development oriented style, critical style, Benevolent style Table 5: Coefficients table a Unstandardized Coefficients Standardized Coefficients Model B Std. Error Beta t Sig. 1 (Constant) Benevolent style Critical style Development oriented.455 style a. Dependent Variable: effectiveness of PAS 11

12 It can be seen from table 5, that critical style (β = 54.6 % negative, t = 8.49 negative, p <0.001) has the highest impact on the dependent variable. About 54.6% of the impact is due to critical style leadership and it is in the negative side, which means that it has a negative impact on effectiveness of performance appraisal system and hence appraiser s need to be thoughtful before exercising critical actions and review on their subordinates especially while following up and during the periodic reviews. The development oriented style is also having a significant and a positive impact on effectiveness of PAS (β= 37.9%, t= 7.071, p < 0.001). This indicates that the development style can be adapted as it plays a significant role in effective performance appraisal system. The benevolent style has a relatively lower t value (1.676) which is significant only at 9% significance level and has a β value of 10.9%. Though the value is relatively low, it is positive and hence importance needs to be given to this supervisory style too. The regression analysis suggests to follow up development oriented style and benevolent style and generates the following regression variate that can predict the effectiveness of PAS in organisations. Effectiveness of PAS = (benevolent style) (critical style) (development style) Benevolent style of supervisor Critical style of supervisor Effectiveness t= 1.676; β= 10.9% of Performance Appraisal System Developmental Style of supervisor R 2 = 58.8* t= ; β= %* t= 7.071; β= 37.9%* Figure 2: Model depicting strength of relationship of various supervisory styles on Effectiveness of Performance Appraisal System DISCUSSION The analysis and results shows that the employees view their supervisors in a positive tone as the mean score of development style is in a score of 5. The respondents have given 12

13 a lesser score to the critical part (3.13) of the supervisory style, which indicates that they wish to score less for the critical side of the supervisor. In general employees are more comfortable with a benevolent leader who is able to understand their troubles and hindrances in the process of achieving their goals. Fiedler (1967) believed that leadership is a kind of relationship to apply power and influence to make people work together and accomplish common goals. Rauch and Behling (1984) and Hsieh (1993) regarded leadership as the process of influencing a group to move towards the goal. Hence the supervisor needs to use this influence in a positive way to result in effective achievement of goals. The results of the analysis of variance shows that there is a significant difference in the perception of respondents regarding the supervisory styles and appraisal system, based on their industry background as from IT sector or manufacturing sector. The employees in manufacturing sector could view their supervisors as more critical than those from the IT sector. IT is relatively a new field in India and mainly emerged to satisfy the IT solutions requirements of the western countries. Whereas manufacturing sector is traditional and has a higher power distance that results in the superiors being more critical and tough to get their work done. From Hofstede s original research, it is evident that consumers in the Indian society operate within a high power distance cultural context. The association between the benevolent style and development style of supervisors is correlated positively and the results suggest that supervisors need to adapt to these styles in order to obtain successful performance appraisal system. Wang et al., (2010) notes that the development, motivational and transfer intent of employees are positively related to the leadership style. Both development and motivational strategies are positively related to the organizational performance. The interaction of the leadership style and the human resource management strategy significantly contributes to the organizational performance. Thus it is important to understand the requirements of the organisation and adapt to a suitable supervisory style that would aid in organizational performance. To retain high-working capacity employees, leaders should also tend to the charismatic leadership conforming to no conventional patterns and engaging in innovative and normative actions, besides introducing a development and inspiring strategic incentive system (Wang et al., 2010) The results of the regression analysis convey the importance of supervisory styles on performance appraisal systems in organisations. Klein et al. (1987) argue that performance 13

14 appraisal interview outputs depend on the interaction between employee performance and goal setting, and between employee-superior relations and goal setting. His study shows that when superiors treat the good and poor performing employees differently, when setting goals with them, and goal setting has different implications for these two groups of employees, the impact of performance appraisal goal setting on employee attitudes should be moderated by employee level of performance. In addition, given that the performance appraisal interview is essentially a dynamic exchange between two persons, superior and employee, the quality of their relationship ought to affect how employees react to their discussion, especially to an aspect as personally sensitive as goal setting. CONCLUSION Measurement and management systems may require a lot of time and effort, especially at the beginning of the process as internal resources. Supervision and leadership plays a major role in designing and developing effective performance measurement system. Also the management commitment calls for formal and professional performance management reviews that could influence employees commitment to achieving targets and improving performance. In general, employees view performance-monitoring systems as systems intended to force them to work harder, and managers see such systems as efforts to put increased pressure on them to produce added results. This situation is changing along with the difference in perception of employees, processes, systems and technology. The study recommends that the Development oriented supervisory style is more effective than Benevolent and Critical style. It also ensures that Critical style leadership do have a negative impact and negative correlation with effectiveness of Performance Appraisal System and hence is not a successful system in the long run. However, the Performance Appraisal system has to be practiced, taken into account, the size of the organisation, background and the traditional practices of the industry, the type of employees and other moderating factors that would influence the effectiveness of the PAS. The authors advocate that specific steps need to be taken to exercise a balanced supervisory style that would result in effective performance appraisal systems and organisational performance. The study presents a wide future scope of studying the various moderators in the relationship. 14

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17 37. Taylor, M.S., Tracy, K.B., Renard, M.K., Harrison, J.K. and Carroll, S.J. (1995). Due process in performance appraisal: a quasi-experiment in procedural justice. Administrative Science Quarterly, 40 (3), pp Waal, A.A.D. (2003). Behavioral Factors Important for the Successful Implementation and Use of Performance Management Systems. Management Decision, 41, pp Wang, Fu-Jin., Jen, ShiehChich and Tang Mei-Ling. (2010). Effect of leadership style on organizational performance as viewed from human resource management strategy. African Journal of Business Management, 4(18), p I would like to request the reviewers to see if the inference for regression is enough or if more parameters need to be considered. Also I would like to know if more focus and points are to be added in the discussion and conclusion part of the article. In general, an overall review will also help me to improve the paper work. Thank you. Dr. J. Anitha, Associate Professor, GRG School of Management Studies, Peelamedu, Coimbatore anithaj@grgsms.com Handset: Ms. S. Saranya, Research Scholar, PSGR Krishnammal College for Women, Peelamedu, Coimbatore saranyanilgiris@gmail.com 17