Effect of Performance Appraisal Process on Employee Intentions and Behaviors: A Social Exchange Perspective

Abstract

Performance appraisal is a management tool to assess employees’ performance. Various processes that organizations use to conduct performance appraisal are known as performance appraisal processes (PAP). As the key objective of performance appraisal is to measure employees’ task performance, most of the research on PAP concerns the effects of PAP on employees’ task performance. Research suggests that PAP is a socio-emotional process and may affect employees’ intentions and behaviors beyond their task performance. However, how PAP affects employees’ intentions and behaviors has received scarce research attention and hence need to be further investigated. Limited research that has studied the relationship between PAP and employees’ intentions and behaviors has largely ignored the processes and mechanisms that drive this relationship and the boundary conditions within which this relationship works. To address the highlighted issues, this study examined the direct effects of PAP on employees’ intentions and behaviors (i.e., Organizational Citizenship Behavior (OCB), Voice Behavior (VB), and Turnover Intentions (TOI)). Using social exchange theory as the theoretical framework, the study identified three mediators (i.e., psychological empowerment, organizational commitment, and job involvement) and four moderators (i.e., Leader Member Exchange (LMX), Perceived Organizational Support (POS), trust, and Perceived Fairness (PF)) of the relationship between PAP and employees’ intentions & behaviors. The study also developed hypotheses regarding how these mediators and moderators will affect this relationship. Using a quantitative approach based on cross sectional design employing multiple sources, the study empirically tested the direct, mediating and moderating hypotheses using the hierarchal regression and bootstrapping methods. Results based on triadic data from 250 employees, their immediate supervisors and representatives from their HR functions largely supported the hypotheses. The findings of this study suggested that PAP has significant positive effects on OCB, VB and significant negative effect on TOI. Moreover, both psychological empowerment and organizational commitment fully mediated by the relationships of PAP – OCB and PAP – VB and partially mediated by the relationship of PAP – TOI. Further, the relationships between PAP – OCB, PAP – VB, and PAP – TOI were moderated by LMX, Trust, and PF, however, POS only moderated the relationship between PAP and TOI. The study made significant contributions in organizational and behavioral science research. The study provided managerial insights about how to use PAP to positively affect employees’ intentions and behaviors (i.e. OCB, VB, & TOI). The study identified three intermediary mechanisms of the relationship between PAP and employee intentions & behaviors to show how this relationship works. Additionally, the study highlighted the important and critical role of four moderators to explain the varying effect of PAP on employee intentions and behaviors, hence showing when this relationship works and when it doesn’t work. Theoretical contributions, practical implications, study limitations and future research avenues were also discussed.