CHAPTER 2
LITERATURE REVIEW
This chapter briefly describes the meanings, antecedents and consequences of the variables used in this research. Furthermore, literatures were reviewed and based on the reviews, the hypothesis were developed. Finally, the theoretical framework for this research was shown.
Performance Appraisal (PA)
Performance Appraisal - much have we heard of this word yet many failed to understand what it means (Scholtes, 1993). There are various authors, leaders, managers and gurus who have defined PA according to their knowledge. But again, this buzz word appears to be mere a jargon to the ordinary people on the street (Scholtes, 1993). Probably, the differences in the definition of the word itself are due to the scale of impact it has caused to the people, organization, economy and so forth, individually (Kumar, 2005; Pettijohn et al., 2001).
The existence of the PA principles has been observed since early 1900s (Vance et. al, 1992). At that point of time, it was designed to support a top-down, control-oriented style of management. Vance (1992) noted that PA is a "control system that is used by almost all organizations to specify the behavior that employees must perform in accordance with the organizational objectives". It enabled corporations to retain control over their employees, develop the employees, individually as well as team centered and involved the employee in setting goals for the organization (Mount, 1983; Vance et. al, 1992). Furthermore, PA served as a "tool for managing the effectiveness and efficiency of employees" (Spicer & Ahmad, 2006). Coutts and Schneider (2004) noted PA as a "vital component of a broader set of human resource practices; it is the mechanism for evaluating the extent to which each employee's day-to-day performance is linked to the goals established by the organization". Lowenberg and Conrad, (1998), observed similar initiative. These reviews suggested that PA functioned as a tool for administrative purposes within an organization.
Work Performance (WP)
The concept of work performance is however often vaguely defined and poorly understood (Barrick & Ryan, 2003; Murphy, 2002). Work performance is an extremely broad concept that can be easily oversimplified. Work performance can be defined in two ways. The first definition views work performance as a result or consequence of action. In this instance, work performance can be defined as the accomplishment of assigned tasks (Suliman, 2001). Where performance is the deed itself, it may be defined as the actions or behaviors that are relevant to an organization's goals and that can be scaled (or measured) in terms of an individual's proficiency (or level of contribution) (Suliman, 2001).
Work performance should not be confined to individuals only. It should be considered an outcome of both human and organizational activities (De Waal, 2002). Honiball (2008) noted that work performance is the action or behavior that is relevant to achieving an organization's goals (what is actually done), whereas performance management is the process of linking organizational goals to departmental, team and individual goals (guiding or directing what is done). Performance, according to the HAT dictionary, is defined as the act of performing specific tasks, the execution of, or the functions required of a person, and include many attributes. Performance is an activity and the results of the activity; it is a process and a product; a process and an output and behavior plus accomplishment.
Van der Linde (2005) noted that work performance include both process (carrying out the work) and product (the output), and therefore performance is seen as both performing a service, and the service being performed. The author further noted that in a work setting, the output (product or service) adds value, whereas the process adds cost. "Performance can refer to the performance of an organization (its tasks, duties, goods and services); a department (its tasks, duties, goods and services); a primary process (its tasks and duties in the production of a specific product or service); or a person (the individual's tasks, duties and all goods and services provided)" (Van der Linde, 2005). The opportunity to perform is determined by variables external to the individual (Coetzee, 2003). This is confirmed by a study by Matheson (2005) on work performance, which expounds that evaluation of a person's environment, and current or future work, is required to determine work performance.
Work performance is described as the quality and quantity of human output that is necessary to meet work goals and the standards that are required to do a specific job (Ivancevich & Matteson, 1996). Based on the definition of work performance, it is of value to view the concept of work performance in terms of the systems approach. The system approach is indicated in Figure 2.1. Inputs - personality, knowledge, aptitude, management, and the processes in the organization, resources available to do the work, work experience and the environment - will have an effect on work performance (Coetzee, 2003).
Figure 2.1: Work Performance in terms of the system approach
Affective Organizational Commitment (AOC)
Organizational commitment is conceptualized by Allen and Meyer (1990) into three dimensions: (1) attitudinal or affective commitment, which is drawn from positive work experience, (2) continuance commitment, which is derived from prior investment and possible cost of leaving the organization, and (3) normative commitment, which is loyalty, or sense of obligation to remain attached to the organization. All three dimensions, co-existing simultaneously (Wasti, 2005), point to a psychological attachment to the organization, with normative commitment found to be highly correlated with affective commitment. Moreover, Angle and Lawson (1993) noted that individuals with a positive view of being committed to an organization tend to internalize the organization's values as their own and eventually develop affective commitment to the organization.
While the three dimensions of organizational commitment are important, this research focuses on affective organizational commitment (AOC), in which commitment is considered as an affective or emotional attachment to the organization (Meyer & Allen, 1991). AOC is the highest level of commitment that is said to be the most sought after form of commitment by organization. This form of commitment is the most influential one because employees with high AOC stays in an organization because they want to and not because they have to.
Turnover Intentions (TI )
Employees' turnover is a much studied phenomenon. But there is no standard reason why people leave organization. Employee turnover is the rotation of workers around the labor market; between firms, jobs and occupations; and between the states of employment and unemployment (Abassi & Hollman, 2000). The term "turnover" is defined by Price (1977) as "the ratio of the number of organizational members who have left during the period being considered divided by the average number of people in that organization during the period." In most cases, turnover is referred as the entire process associated with filling a vacancy. "Each time a position is vacated, either voluntarily or involuntarily, a new employee must be hired and trained; or this replacement cycle is known as turnover" (Price, 1977). This term is also often utilized in efforts to measure relationships of employees in an organization as they leave, regardless of reason. Some other definitions of turnover intentions are as stated below:
Turnover intentions are the thoughts of the employee regarding voluntarily leaving the organization (Schyns, Torka & Gossling, 2007; Singh, Verbeke & Rhoads, 1996; Whitman, 1999).
Turnover intention is an individual own estimated (subjective) probability that they are permanently leaving the organization at some point in the near future (Vandenberg & Nelson, 1999).
Turnover intentions are conceived as a conscious and deliberate decision to leave the organization (Tett & Meyer, 1993).
As we can see, most definitions refer to a similar meaning - an employee's intentions to leave an organization. This study adopts turnover intention in preference to turnover as one of the dependent variable because turnover intention is highly correlated with turnover and the adoption of turnover may have a "survival" bias (inability to gather enough data to conduct a proper and thorough research) and thereby lead to an incorrect conclusion (Hwang & Kuo, 2006). Accordingly, turnover intention was chosen as the better analytical variable in this research.
Intrinsic Motivation (IM)
Definitions of intrinsic motivation focus on the perception that one's actions are self determined. Deci (1975, 1980) defined intrinsic motivation as caused by the underlying need for a sense of competence and self-determination, with self determination being the more fundamental of the two. Although these two often co-vary in real-life situations, self-determination is conceptualized to be more fundamental because the acquisition of competence has been found not to be motivating unless it occurs within the context of self-determination (Deci, 1980). Deci and Ryan (1980) provide an operational definition of intrinsically motivated behaviors as "those that are performed in the absence of any apparent external contingency". In line with this, intrinsic motivation has typically been measured in the social psychology literature by observing behavioral persistence in a free-choice period following the removal of extrinsic rewards.
According to Williams (2008), one of the best definitions of intrinsic motivation is from the book Motivation in Education by Pintrich and Schunk. Their definition is simple, and sums up people's participation in certain activities. Patrick and Schunk (2008) defined intrinsic motivation as the motivation to engage in an activity for its own sake. Furthermore, they noted that people who are intrinsically motivated work on tasks because they find them enjoyable. This desire comes from within, rather than from any external source or extrinsic motivation. Finally, they suggested that the primary motivations for participating in an activity are:-
satisfaction in completing a specific task or activity
ongoing recognition and praise for contributions (known as Egoboo)
giving for the greater good (such as sharing knowledge freely).
Theoretical Framework
The proposed theoretical framework for this study is as shown in Figure 2.2 below.
Employee Outcomes
Work Performance
Affective Organizational Commitment
Turnover Intention Dependant variable
Employee Satisfaction
Intrinsic MotivationIndependent Variable mediating variable
Figure 2.2 Theoretical Framework
Employee Satisfaction with Work Performance
Studies suggest that HR practices affect organizational outcomes by shaping employee behaviors and attitudes (Huselid, 1995). More specifically, these HR practices increase organizational effectiveness by creating conditions where employees become highly involved in the organization and work hard to accomplish organizational goals. HR practices are expected to influence, organization's and employee's performance via the workforce's ability (e.g. using selective hiring, training), motivation (e.g. pay for performance by using PA), and opportunity to contribute (e.g. using teams and suggestion systems) (Gerhart, 2005). Furthermore, Korsgaard, Roberson and Klein (1991) noted that PA process offer a number of potential benefits, including improved job performance.
Moreover, PA seems to be a vital component of a broader set of human resource practices; it is the mechanism for evaluating the extent to which each employee's dayto- day performance is linked to the goals established by the organization (Lowenberg & Conrad, 1998). Studies concluded that PA factors do influence job satisfaction, which, in turn has the potential to lead to higher levels of performance (Babin & Boles, 1996; Brown & Peterson, 1994). Smither (1998) further noted that one factor that contributes to an effective PA system entails ensuring that the system focuses on performance. Therefore, a relationship between HR practices such as PA and work performance would be very obvious.
From the literatures, the purpose of goal setting and feedback within PA process is to increase individual performance (Pettijohn et al., 2001). Thus, there could be a positive relation between employee satisfaction with PA and work performance.
Another notable function of PA includes equipping employees with new knowledge and skills. Coyle-Shapiro and Conway (as cited by Kuvaas, 2006) noted that employees perceived investment in employee development will lead to employee being obligated to repay the organization via high work performance. These arguments led to the establishment of the first research hypotheses, which state:
Hypothesis 1: PA satisfaction will positively influence work performance
Employee Satisfaction with Effective Organizational Commitment
PA process help clarify organizational expectations regarding an employee's activities, actions, and results. "If an employee does not know what he has the authority to decide, what he is expected to accomplish, and how he will be judged, he will hesitate to make decisions and will have to rely on a trial and error approach in meeting the expectations of his superior" (Rizzo, House & Lirtzman, 1970). This relationship is supported by Jaworski and Kohli (1991), who contend that managerial feedback informs salespeople of the expected results and their performance as it pertains to these expectations. This clarity increases focus, which in turn increases performance and satisfaction. Thus, in their clarifying role, PA reviews are often credited with reducing role ambiguity, which leads to higher levels of job satisfaction and affective organizational commitment (Babakus, Cravens, Johnston & Moncrief, 1996).
Kuvaas (2006) noted that PA activities can be used by organizations to communicate organizational strategies, goals and vision to their employees. Moreover, the affective and emotional aspects of super-ordinate goals may capture the hearts of employees and give people a cause they can rally around (Latham, 2003). Therefore, it is possible for employees to experience higher levels of commitment because PA activities are able to communicate super-ordinate strategies, goals and vision to them. Thus, the employees may become more effectively committed to their organization.
Working competitively involves placing high value on people, considering their experiences, ideas and preferences. Their participation in organizations seems to be necessary because employees and managers have to discuss companies' objectives together. It is fundamental to consider not only the staff's specific qualifications needed for the positions in the organizational structure, but also their knowledge, experiences, skills and results for future innovations. These competences, which are identified by PA in all the hierarchical levels of an organization, are important aspects concerning the success of a company's competitive strategy (Ubeda & Santos, 2007). Levy and Williams (2004) noted that PA activities have potential to increase employees' perceptions of being valued by the organization, a perception which is central to affective organizational commitment.
Furthermore, Lee and Bruvold (2006) noted that employees will probably show higher affective commitment to the organization if they perceive that PA activities reflects employee's development. Roberts and Reed (1996) noted that PA satisfaction may be positively related to affective commitment due to the enhance employee participation and perceived clarity of goals within the PA process. Therefore, the following hypothesis is stated:
Hypothesis 2: PA satisfaction will positively influence affective organizational commitment.
Employee Satisfactions with Turnover Intentions
Leader-member exchange is a theory of exchange in leadership which focuses on the relationship between a supervisor and each individual subordinate. This relationship is viewed as dyadic or, in other words, as taking place between the supervisor and each of his/her subordinates separately (Graen & Uhl-Bien, 1995). To a certain extent, the PA process is used to further build the relationship between the supervisors (leaders) and employees (members). PA system allows room for improvement in the communication between boss and subordinate through the use of feedback between them. PA feedback will involve, inform, and motivate employees and also create improved supervisor-employee communications (Villanova et al., 1993), which in turn could enhance the relationship between the supervisor and employees. In empirical studies, leader-member exchange was negatively related to turnover intention (see meta-analysis by Griffeth, Hom & Gaertner, 2000). Therefore, there could possibly be a negative relationship between PA satisfaction and employee turnover intentions.
One factor which affects PA satisfaction is the perceived fairness of the PA evaluation process. "An important element affecting fairness perceptions is judgment based on evidence - raters must be seen to apply performance standards consistently across employees without distortion by external pressure, corruption, or personal biases" (Poon, 2004). PA evaluations made on the basis of political considerations may violate employees' due process. Subsequently, Vigoda (2000) noted that when employees feel unfairly treated, they are likely to react by initially changing their job attitudes, followed in the longer term by responses that are more retaliatory such as quitting. Therefore, on the basis of the preceding arguments and related research evidence, the following hypothesis is stated:
Hypothesis 3: PA satisfaction will negatively influence turnover intention.
Intrinsic Motivation as Mediator
An understanding of intrinsic motivation and its component parts is necessary in order to understand its relationship with employee outcomes. In contrast to extrinsic motivation, which is based on rewards and punishments controlled by the organization (e.g. expectancy theory (Vroom, 1964)), intrinsic motivation is based on positively valued (rewarding) experiences that a person gets directly from their work tasks (Deci, 1975; Deci & Ryan, 1985). These positive experiences serve to get an individual excited, involved, committed, and energized by their work (Thomas & Tymon, 1997). At its heart, intrinsic motivation is about passion and positive feelings that people get from their work. These feelings reinforce and energize employees self-management efforts and make work personally fulfilling. Building intrinsic motivation, then, helps to create an upward spiral of positive feelings and experiences (Thomas, 2000). Thomas and Velthouse (1990) argued that intrinsic motivation is the key motivational/psychological component of employee empowerment. Manz (1991) noted that intrinsic motivation enables employees to become self-managing or self leading, which in turn creates high level of self-knowledge, self-awareness, and personal responsibility (Hall & Moss, 1998). Individuals with high intrinsic motivation will become more self-correcting in response to changing demands from the environment, without waiting for formal training and development from the organization.
From the ES perspective, intrinsic motivation focuses on enriching attitudes, experiences and skills. Earley, Northcraft, Lee and Lituchy (1990) noted that goal setting and feedback are widely believed to affect performance positively through enhancing the motivation necessary for work performance. Accordingly, there could be a possible relationship between ES satisfaction and employee outcomes, which may be mediated by intrinsic motivation.
ES activities such as participation, identification of goals/objectives and feedback may affects satisfaction with ES, which finally may affect employee motivation and productivity (Roberts & Reed, 1996). Moreover, Latham (2003) noted that by using ES systems to communicate and translate strategic visions and goals to employees, employees may experience enhance intrinsic motivation through higher meaningfulness of work. This is based on the argument that super ordinate goals have the capacity to convey to employees something in which they can believe (Latham, 2003).
Ganesan and Weitz (as cited by Kuvaas, 2006) found a positive relationship between intrinsic motivation and affective commitment, which suggest that some of the benefits associated with a challenging and interesting job are attributed to the organization. Richer, Blanchard and Vallerand (2002) noted that employees with interesting, enjoyable and exciting jobs have less interest in quitting their job. This is due to the less likeliness to be attracted by extrinsic rewards offered by other organizations. Finally, several studies have reported negative and significant correlations between intrinsic motivation and turnover intentions (e.g. Kuvaas, 2006; Richer et al., 2002). Therefore, similar consequences are expected in the Malaysian setting, which leads to the exploration of the final hypothesis in the present field study:
Hypothesis 4: The relationships between:
a) PA satisfaction and work performance;
b) PA satisfaction and affective commitment; and
c) PA satisfaction and turnover intention
are mediated by intrinsic motivation.
