Employee empowerment, performance appraisal quality and performance

Abstract

This study provides an empirical insight into the mediating role of the quality of performance appraisal systems, assessed using four quality dimensions (trust, clarity, communication and fairness), on the association between the level of employee empowerment of lower level managers and their performance, assessed in respect to their business unit’s performance. Data were collected from 203 Australian lower level managers using an online survey. The findings reveal that while employee empowerment is positively associated with all four dimensions of the quality of the performance appraisal system, one specific dimension, trust, mediates the association between employee empowerment and business unit performance. Specifically, trust is found to mediate the effect of employee empowerment on both financial and non-financial business unit performance. These findings highlight the importance of enhancing employee empowerment and improving the quality of performance appraisal systems, in particular the level of trust. This study provides an initial empirical insight into whether ‘real autonomy’ is provided by focusing on the extent to which empowerment extends to other aspects of employees’ organisational experience, specifically their performance appraisal system, and the subsequent impact on performance.

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Fig. 1
Fig. 2

Notes

  1. 1.

    The recommended threshold guidelines for the assessment of the fit of the structural equation model are CMIN/DF < 5; CFI > 0.80; GFI > 0.90; AGFI > 0.80 (Hair et al. 2005) and close to or lower than 0.05 for RMSEA (Browne and Cudeck 1993).

  2. 2.

    As indicated business unit performance is divided into financial and non-financial performance dimensions in line with the CFA results.

  3. 3.

    While two control variables, age and organisational size, were also incorporated into the SEM model, they

    are not reported in the final model as neither variable was found to be significantly associated with the four dimensions of performance appraisal system quality or both financial and non-financial performance.

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Appendices

Appendix 1: Questionnaire items and CFA statistics

These are the retained items after confirmatory factor analysis. The first item of each scale has no t-value since it has a fixed parameter in AMOS.

Constructs and items Factor Loading t-value SE Cronbach alpa
Employee empowerment     0.799
They have a high level of collaboration/involvement in decision making. 0.745*** NA NA  
There are official channels or certain norms or rules to guarantee their participation in the decision-making process. 0.714*** 8.677 0.108  
They contribute directly to the decision-making process, rather than through intermediaries (e.g. supervisors). 0.756*** 8.976 0.111  
They have authority/power to make and implement decisions about tasks. 0.609*** 7.592 0.103  
  1. Goodness-of-fit: CMIN/DF = 0.200; GFI = 0.999; CFI = 1.000; AGFI = 0.995; RMSEA = 0.000
The quality of the performance appraisal system    
Fairness 0.864   
My last performance rating accurately represented how well I have performed in my job 0.786*** NA NA
My last performance appraisal was fair 0.845*** 12.374 0.081
My supervisor’s las rating of my performance was justified 0.848*** 12.405 0.082
My last performance rating was free from bias 0.069*** 9.557 0.093
  1. Goodness-of-fit: CMIN/DF = 1.034; GFI = 0.995; CFI = 1.000; AGFI = 0.975; RMSEA = 0.013
Constructs and items Factor Loading t-value SE Cronbach alpa
Communication     0.788
The progress towards my goals set in previous appraisal meetings is frequently reviewed by my supervisor with me 0.769*** NA NA  
My supervisor gives me guidance about how to improve my performance 0.818*** 8.461 0.135  
I am given opportunities to express my feelings when my performance is evaluated 0.648*** 8.077 0.096  
Goodness-of-fit: Scores not available as only three items
NB One item—“My supervisor is mainly focused on evaluating my performance rather than providing feedback” did not load on this dimension     
Trust     0.872
My supervisor is competent to evaluate my performance 0.708*** NA NA  
My supervisor is familiar with the details and responsibilities that my job entails 0.879*** 10.551 0.125  
I have confidence and trust in my immediate supervisor regarding his/her general fairness 0.834*** 11.750 0.103  
I trust my supervisor to accurately report my performance to his/her supervisor 0.926*** 11.068 0.118  
Goodness-of-fit: CMIN/DF = 2.631; GFI = 0.994; CFI = 0.997; AGFI = 0.936; RMSEA = 0.090

Clarity

This dimension only consisted of the following item:

It was made clear to me when I was hired that the results of my performance evaluation would be tied to certain personnel actions (i.e. pay rises, promotions, terminations ect.

Construct and items Factor Loading t-value SE Cronbach alpha
Organisational performance     
Financial performance     0.863
Profit goals have been achieved. 0.824*** NA NA  
Sales goals have been achieved. 0.872*** 12.444 0.092  
Return on investment goals have been achieved. 0.777*** 11.661 0.089  
Goodness-of-fit: Not available as only three items     
Non-financial performance     
Our product(s) are of a higher quality than that of our competitors. 0.710***    0.803
We have a higher customer retention rate than our competitors. .0911*** 8.731 0.150  
We have a lower employee turnover rate than our competitors. 0.670*** 8.708 0.116  
Goodness-of-fit: Not available as only three items.     

Appendix 2: The results of exploratory factor analysis with all items for all variables

  Cross loadings
1 2 3 4 5
Fairness1 0.790 0.151 0.074 0.161 0.118
Fairness2 0.765 0.285 0.070 0.085 0.035
Fairness3 0.737 0.323 0.078 0.116 0.104
Fairness4 0.698 0.307 0.002 0.034 0.177
Communication1 0.628 0.349 0.260 0.124 0.126
Communication2 0.456 0.591 0.223 0.037 0.067
Communication3 − 0.245 0.370 − 0.405 − 0.163 − 0.032
Communication4 0.428 0.595 − 0.039 0.121 0.206
Trust1 0.288 0.724 0.239 0.134 0.063
Trust2 0.255 0.775 0.167 0.110 0.191
Trust3 0.361 0.713 0.106 0.165 0.216
Trust4 0.357 0.752 0.086 0.128 0.137
Clarity 0.545 0.112 0.417 0.092 − 0.019
Employeeempowerment1 0.207 0.143 − 0.031 0.744 0.230
Employeeempowerment2 0.185 0.203 0.160 0.748 − 0.023
Employeeempowerment3 0.037 0.111 0.059 0.828 − 0.010
Employeeempowerment4 0.026 − 0.051 0.122 0.723 0.213
Financialperformance1 0.057 0.197 0.840 0.061 0.184
Financialperformance2 0.136 0.125 0.837 0.050 0.185
Financialperformance3 0.084 0.177 0.723 0.138 0.299
Nonfinancialperformance1 0.061 0.242 0.165 0.216 0.740
Nonfinancialperformance2 0.108 0.188 0.304 0.113 0.796
Nonfinancialperformance3 0.189 0.075 0.165 0.057 0.785

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Baird, K., Tung, A. & Su, S. Employee empowerment, performance appraisal quality and performance. J Manag Control 31, 451–474 (2020). https://doi.org/10.1007/s00187-020-00307-y

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Keywords

  • Employee empowerment
  • Performance appraisal system
  • Performance