Assessing the Ethics of Implementing Performance Appraisal Systems (2010)

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Assessing the ethics ofimplementing performance

appraisal systemsGeorge P. Sillup and Ronald Klimberg

Saint Joseph’s University, Philadelphia, Pennsylvania, USA

Abstract

Purpose – The purpose of this paper is to try to understand better whether performance appraisal(PA) helps performance evaluators (PEs) to manage more effectively and meet employees’expectations in US-based corporations.

Design/methodology/approach – A 54-item research instrument was developed and implemented

using structured interviews with 54 PEs, who worked at five US-based corporations (Aetna Insurance,IBM, Johnson & Johnson, Valspar, Wyeth Pharmaceuticals). Responses were statistically analyzedwith descriptive statistics and decision trees.

Findings – Time dedicated to implementing PA was the most important factor leading to ethicalissues. PEs with the highest educational levels and most experience spent the least amount of time(1.86 vs 3.19 hours) implementing PA. Most PEs (79.6 percent) solicited feedback about employees’performance from employees’ peers but 20 percent did not. Additionally, not a single PE had PA as aspecific objective, making it difficult to sequester time necessary for PA. Older PEs felt PA helpedthem manage more effectively and PEs who were Black or White and from Marketing/Sales were mostfavorable about meeting employees’ PA expectations. There were no remarkable differences amongPA systems at the five corporations, e.g. 360-degree training.

Research limitations/implications – Structured interviews required delicate interaction due tosensitivity about the US economy and resulting layoffs within interviewees’ corporations.

Practical implications – PEs, particularly older managers with higher educational levels, shouldhave a PA objective and be held accountable to it to ensure that they dedicate time necessary tocomplete PA in the way the PA system intends.

Originality/value – The paper provides insight about PA within the US corporate setting and willbe highly interesting to those in that field.

Keywords Performance appraisal, Ethics, Working practices, Total quality management,United States of America

Paper type Research paper

IntroductionThe evolution of performance appraisal systemsThe process of appraising employee performance developed as a business practice

with the emergence of “big” business in the early twentieth century in the USA. KarlMarx’s work can be said to subject big business to moral scrutiny and encourage it toplace value on employees’ contributions rather than only on the production of itsproducts (Newton and Schmidt, 2004). Progress was slow and employees wereconsidered a “means to an end” in Kantian terms (Winstanley, 1996) because big

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0262-1711.htm

The authors wish to acknowledge the support from the Saint Joseph’s University Pedro ArrupeCenter for Business Ethics and intellectual guidance from John J. McCall and Stephen J. Porth.

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Received 14 November 2008Revised 17 March 2009Accepted 12 March 2009

Journal of Management DevelopmentVol. 29 No. 1, 2010pp. 38-55q Emerald Group Publishing Limited0262-1711DOI 10.1108/02621711011009063



business was busy building products for consumption around defining events of thefirst half of last century (the First World War, Great Depression, New Deal, the SecondWorld War) as well as reluctantly recognizing the creation of workers’ unions andcoming to terms with them. Following the Second World War, big business or today’s

corporations began using PA, especially for their “at will” or non-union employees(DeLucca, 2008). However, there were different opinions about the value of implementing PA. From the perspective of total quality management, PA wasconsidered an out-of-date managerial premise (Scholtes, 1993). From the perspective of using standardized job competencies linked to recognition, PA has been shown toimprove corporations’ financial performance as well as employees’ development (Eyes,1993). This is not a new idea. As far back as 1862 and very recently within Malaysianeducation, PA emphasized metrics of personal development and not just the “bottomline” (Grint, 1993; Spicer and Rusli, 2006).

“Ethical” treatment of employees was enhanced by the civil rights and environmentalmovements, events that caused a revolution of rising moral expectations for UScorporations and created a new environment for doing business that resulted innumerous legislative acts benefiting the employee, e.g. Civil Rights Act of 1964 at thenational level, Massachusetts’ Right-to-Know Law at the state level and CollectiveBargaining at the union contract level. Notwithstanding, most employees in the US stillwork “at will” without contractual assurance of job security (Weiss, 2003). Motivatedfurther by emerging global competition over the last two decades, virtually all UScorporations are implementing PA systems that evaluate employees’ contributions, suchas 360-feedback.

However, this requires more time for implementation, which is a challenge for PEs,who are already short of time completing expanded objectives from corporatedownsizing. Furthermore, the basis of PA is people making judgments about otherpeople in an organized setting; therefore, insufficient time for PA is one way to be

unfair to employees in the short-term and jeopardizes employees’ development in thelong term (Cascio, 1991). This review of the literature explores how time and otherareas with potential ethical implications for PEs, such as the races of those whoseperformance is being evaluated, and addresses the following research questions aboutPA in US-based corporations:

RQ1. Do backgrounds of PEs influence their judgments about employees’performance (e.g. educational level)?

RQ2. Does PA help PEs manage more effectively?

RQ3. Does PA help PEs better meet the expectations of employees whoseperformance is being assessed?

RQ4. What is the relationship between the time dedicated to conducting PA and thebackground of the PE?

Literature reviewWinstanley’s article about the ethics of performance management sets a tone aboutwhether it is possible to develop an ethical approach to PA. It acknowledges theshortcomings of PA systems and identifies four ethical principles integral to the PAprocess:

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(1) respect for the individual employee;

(2) mutual respect between the PE and employee whose performance is beingevaluated;

(3) fairness in the PA system and its effect on employees whose performance isbeing evaluated (Wayne and Liden, 1995); and

(4) transparency of decision making to ensure employees understand this PAcriterion.

Winstanley’s work was based on a not-for-profit organization, the British School of Osteopathy, where there is more professional autonomy than in large corporationswhere traditional approaches to PA are often flawed during implementation and candemotivate employees (Winstanley, 1996).

An alternative to Winstanley’s four ethical principles is to consider effective PAsystems in terms of relevancy, sensitivity, reliability, acceptability and practicality.Relevance implies there are clear links between the tasks for a job and an

organization’s objectives (Borman, 1991). Sensitivity implies that a PA system iscapable of distinguishing effective from ineffective performance. Reliability refersto consistency of judgment; PEs working independently should agree on anemployee’s PA (Kerr and Sherman, 1995). Acceptability is often considered themost important requirement; any PA system must have the support of employeeswho use it. Unfortunately, many PA systems fail because businesses have not putenough effort into attaining support from those who will implement the PAsystem (Cascio, 1998).

In a broader context, relevance, sensitivity and reliability are simply technicalcomponents of a PA system designed to make decisions about employees. Becausesome degree of error is possible, determining the optimal PA system will help avoidunethical situations and result in the greatest benefit for the corporation and its

employees. Today, corporations, such as the five in this study, have endorsed and areusing a PA system they believe ensures consistent and accurate evaluation of employees’ performance.

Preparing for successful PA implementationPreparing for implementation is as important as actual implementation and a way tohelp prevent unethical situations that occur during implementation. Success beginswith top-down support but requires bottom-up support for it to work (Buchner, 2007).To enhance employees’ awareness about how the PA system is intended to operatewithin the corporation, employees should receive training as well as have improvedperformance and development key objectives (Thornton and Zorich, 1980).

Setting fair performance standardsConsistent and fair performance standards are essential for performance evaluations(Cascio, 1998). It is important to recognize that some jobs, such as production, lendthemselves to quantitative performance measures (e.g. the number of units sold).For others, such as new product development, setting standards is more subjectiveand frequently a matter of manager and employee agreement (Nathan and Cascio,1986).

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Determining the optimal PA systemOnce performance standards are set, corporations need to consider which PA system isoptimal to meet its objectives and motivate employees. A fundamental issue forcorporations is whether the PA system rewards employees for generating short-term

results (e.g. sales during business quarter) or for completing long-term results (Beatty,1989). Additionally, a PA system should help managers groom their employees toaccomplish objectives that will help the corporation gain competitive advantage(Cascio, 1991). In specialized situations, such as drug development within thepharmaceutical industry, efforts do not always result in a new drug during theone-year PA period. To be successful, it is pertinent to customize PA for eachenvironment, the way R&D at Pharmex in the UK did (Randle, 1997).

Of many available PA systems (e.g. computer monitoring), a multi-rater or 360-degreefeedback system is being used by several major corporations such as Lockheed-Martinand the five corporations in this study. Multi-rater PA incorporates feedback from a rangeof employees (e.g. peers) as well as solicits direct input from customers (Tornow, 1993).Furthermore, research about 360-degree PA systems suggests that it is a useful way toenhance the flow of information within a corporation (Garavan and Morley, 1997) anddemonstrated in several successful multi-rater systems, such as the Balanced Scorecardand European Model for Self Appraisal (Kaplan and Norton, 2006). However, anymulti-rater system introduces the chance for compromising an employee’s privacy andrequires a corporation to adopt appropriate measures to protect it (Carayon, 1993).

Generally, PA systems consist of five component areas as depicted in Figure 1:

(1) establishing employee’s objectives;

(2) gathering feedback about employee’s performance;

Figure 1.Performance appraisal

process


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(3) summarizing feedback about the employee;

(4) determining/discussing performance assessment; and

(5) gaining employee’s understanding/setting new objectives.

When implemented with integrity, they aid an employee’s career development and acorporation’s ability to meet its objectives. When the component areas are notimplemented with integrity, they can lead to ethical transgressions.

Assessing time necessary for implementationTraditionally, PA is completed once a year and often includes a non-rated mid-yeardiscussion. Research has indicated that this is too infrequent because raters facedifficulties remembering what employees did over the previous six-to-12 months(Campbell et al., 1970). Corporations with monthly or quarterly PA assessmentsoutperformed competitors on every financial and productivity measure and gotpositive feedback from employees about the fairness of the PA system (Juran, 2004).

However, frequent PA is time consuming and may make employees feel as thoughtheir performance is always being assessed. The amount of time that frequent PArequires is best understood when considered from the perspective of the PE, who hasdifficulty sequestering time to complete PA assessment once a year. Furthermore,when time is constrained, PEs may revert to familiar objective measures, such asfinancial metrics and a “tell and sell” approach (Dorfman et al., 1986).

Identifying who assesses performanceThe PEs who evaluate performance are critically important to the success of any PAsystem. They must accept the importance of PA as an organizational objective andintegral part of their job, rather than a “make-work” hassle. But who should rateperformance in an organization? The most fundamental requirement is that PEs have

adequate opportunity to observe employees’ performance over the assessment periodand suggests several possible raters:

. Immediate managers. These conduct up to 98 percent of PA because they areusually most familiar with employees’ performance and responsible forrewarding employees’ performance (Becker and Klimoski, 1989). Additionally,they have the best opportunity to review employees’ performance routinely inadvance of the PA meeting (Cyr, 1993).

. Peers. In some jobs, such as outside sales, an immediate manager may not havean opportunity to observe actual job performance routinely. In these situations,assessment by peers can provide objective feedback (McEvoy and Buller, 1987).Friendship bias is always possible but it can be reduced by training what peers

need to evaluate (Reilly et al., 1996).. Direct reports. These empower an employee to assess his/her immediate

manager’s performance because employees know how their managers work. Toprotect against retribution, ratings are combined into an overall rating (Campbelland Lee, 1988). This approach has been implemented at IBM since the 1960 s(Bernardin et al., 1993).

. Self-appraisal . Employees with an opportunity to evaluate their ownperformance are motivated and have fewer concerns about unethical

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treatment. Self-appraisal can be improved with a number of techniques, e.g.relative versus absolute scales (Hartel, 1993). Self-appraisal is being used byvirtually all corporations today to include those in this study.

. Customers. In some situations, external consumers can provide informationabout job performance because they share a common interest in the corporation’sproduct and consistently interact with employees. Input from customers is beingused by numerous corporations today (Yammarino and Atwater, 1997).

Research indicates that data from multiple sources are desirable because they give acomplete perspective about employees’ performance and reduce the chance of ethicalconcerns (Longenecker et al., 1987). Additionally, training programs for PEs focus oneliminating judgmental biases, improving observational/judgmental skills andenhancing ability to communicate appraisal information in a constructive manner(Pulakos, 1986; Sanchez and DeLaTorre, 1996).

Implementing PA and its challengesImplementation of PA is challenging because any time judgments are made aboutpeople there is opportunity for ethical transgressions, especially in today’s volatilebusiness environment. Consequently, ethics and trust within a corporation must belinked to improving organizational performance and employee development tosuccessfully implementing PA (Banner and Cooke, 1984; Averson, 2002). If not enoughemphasis is placed on the organization’s performance, it can preclude employeedevelopment (Pringle and Longenecker, 1982; Axline, 1996). Moreover, most PAsystems are the basis of decisions regarding compensation, which creates ethicaldilemmas both for the PE and the employee (Caproni, 2005).

Even when there is harmony between the corporation’s bottom line and employeedevelopment, Winstanley’s research suggests that traditional approaches to PAtypically do not succeed in obtaining their objectives (Winstanley, 1996). This canresult from escalation of employees’ objectives. For example quantitative goals create“Catch-22” situations for employees with regard to their performance (Pringle andLongenecker, 1982). When these goals are achieved, then future goals are made evenmore difficult to achieve and inevitably lead to failure (Longenecker and Ludwig, 1990).

Another issue often at the core of unethical performance appraisals is the lack of objectivity with regard to the ratings. PEs can be too harsh and render lower thanexpected ratings (Kerssens-van Drongelen and Fisscher, 2003). PEs can also be toolenient, leading to inflated ratings that avoid conflict but misguide an employee(Winstanley, 1980). Bowman extends the idea of a “sugar-coated” PA further by

describing how some PEs have a personnel discussion that does not provide clearperformance ratings (Bowman, 1999). Rating is also subject to distortion by one of the

judgmental biases, such as the halo effect, where a PE extrapolates one positiveobservation and projects it into all facets of the employee’s performance (Sumer andKnight, 1996).

By delineating the prerequisites of effective PA and reviewing the challenges of successfully implementing PA, the literature establishes the basis to examine potentialethical challenges to PA within the US “at will” corporate setting.


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Research methodologyAn effectively implemented PA system can improve employees’ work performanceand, therefore, the overall performance of the corporation but PA is an inexact humanprocess and subject to inaccuracies. PEs are faced with challenges before and/or during

implementation. Additionally, employees are very sensitive about PA because a lowPA rating can result losing their job. To understand how these challenges affect thePE, a structured interview instrument was developed and included three domainsintended to learn about:

(1) backgrounds of the PEs and how they conducted PA;

(2) employees whose performance was being evaluated; and

(3) outputs of PA for the PEs and employees being evaluated.

The questions that populated the domains were derived from one author’s extensiveexperience implementing PA within corporations (Sillup) and awareness of phraseology most likely to elicit responses. For example, questions that were vague

would not be answered. To avoid pre-determining responses, a comprehensive list of questions were asked to determine the 54 items in the instrument and to identifypotential relationships among the responses. Accordingly, questions asked about thePE were also asked about the employees whose performance was being evaluated.Furthermore, the order in which the questions were asked built a crescendo fromeasy-to-answer background information, e.g. age range, to more incisive questionsabout the outputs of PA.

Questions for all domains were assessed for their content, criterion-related andconstruct validity (DeVellis, 1991). Content validity for the first two domains waseasier to determine because the domain was more defined, e.g. years workingprofessionally. Content validity for the third domain addressing outcomes was moredifficult because it inquired about outcomes as well as attitudes of the respondents, e.g.

determining employees’ progress. Here, construct validity was met by incorporatingquestions that represented a randomly selected subset of possible PA outputs. For allthree domains, it was believed that criterion-related validity was met because answersto the questions attained information that had an empirical outcome along with anoptimal outcome of PA (i.e. employee accomplishes objectives and receives appropriatedevelopment). Similarly, construct validity for the three domains was attained becausethere was a theoretical relationship between the answer to one question and answers toother questions. For example, analyzing the PEs’ educational levels and theirexperience with the amount of time spent implementing PA.

Preliminary discussions with respondents indicated sensitivity about PA anddetermined that they were hesitant to reveal the requested information (Murphy, 2006).This information emphasized development of qualitative grand tour questions ratherthan more incisive quantitative questions (Werner and Schoepfle, 1987; Kerlinger,1979). For example, to determine what position respondents held within a corporation,they were asked a specific question (e.g. identify the department in which they worked)and also asked a general question [e.g. identify in what area of the company theyworked by selecting one of four general areas of work concentration,Manufacturing/Operations (M/O), Marketing/Sales (M/S), Research & Development(R&D) or General Administration (GA), which includes Human Resources, Legal,General Management]. For three questions, 44, 51 and 52, a five-point Likert format

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was used to ascertain more quantifiable data, e.g. how PA helped PE manage moreeffectively.

The instrument was tested during eight interviews with members of the fivecorporations participating in the study during the fourth quarter of 2007. PE

respondents indicated that their responses remain anonymous and that sensitive areas,such as their own performance ratings, be excluded. This required changes, such as thechanges for Questions 2 and 23, which originally asked for the PEs’ and employees’educational levels and academic institutions because identifying respondents’academic institutions could lead to their identity. Another example was notidentifying specific departments, such as Quality Assurance, in Question 7 for the PEand Question 28 for the employee being rated. Instead, the four general areas of workconcentration were used (Table I).

The resulting instrument consisted of 54 questions and three domains:

(1) Information about the PEs and how they conducted PA (Q1-Q21 to includequestions about amount of time spent on PA, etc.);

(2) Information about the employees whose performance was being evaluated (Q22 – Q39 to include questions about years of professional employment, etc.); and

(3) Outputs for the PEs and employees being evaluated (Q40-Q54 to includequestions about how the PA system helped the PE manage more effectively(Q51) and how the PA system helped to meet employees’ expectations abouttheir performance (Q52)).

Given the heightened sensitivity of respondents, the research instrument wasimplemented with each respondent by one of the authors during an hour-longstructured interview. The interviews were conducted between January and June 2008with 54 managers, who routinely conduct PA, from five Fortune 100 companies – Aetna Life and Casualty (Aetna), International Business Machines (IBM), Johnson &

Johnson (includes employees from three different J&J companies, hereafter referred toas J&J), Valspar Corporation (Valspar) and Wyeth Pharmaceuticals (Wyeth). Allinterviewees gave permission for their responses to be included in the analyzabledatabase

After all the data were collected, responses that required coding for statisticalanalysis were coded. Then, statistical analyses were completed using descriptivestatistics and decision-tree analyses.

Findings Descriptive statisticsThe 54 interviews of PEs from the five corporations were divided as follows:Aetna ¼ 14, IBM ¼ 6, J&J ¼ 13, Valspar ¼ 12 and Wyeth ¼ 9. A total of 31 were menand 23 were women. Education levels included six respondents with an AssociateArts/Science (AA/S), 14 respondents with a Bachelor Arts/Science (BA/S), 18respondents with a Master of Business Arts/Science (MBA/S), nine with a PhD (PhD),one physician (MD) and six licensed Practical/Registered Nurses (LP/RN). Theyworked in four areas of their respective corporations: M/S (21 respondents), R&D (21respondents), M/O (three respondents) and GA (nine respondents). Race wascategorized as African/American or Black (B), American Indian/Alaskan Native (AI),Asian/Pacific Islander (API), Hispanic (H), Other (O), Unknown (U) or white (W). Of the


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Q1 Gender of performance evaluator (PE)Q2 Educational level of PE (AA/AS, LPN/RN, BA/BS, MA/MS, PhD, MD)Q3 Race of PE [African/American or Black (B), American Indian/Alaskan native (AI), Asian/Pacific

Islander (API), Hispanic (H), Other (O), Unknown (U), White (W)]Q4 Age range of PE (21-30, 31-40, 41-50, 51-60,.60)Q5 Number of years PE is working professionally within industryQ6 Number of years PE is with current corporationQ7 PE business area (Marketing/Sales, Research and Development, Manufacturing/Operations,

General Admin.)Q8 Number of people directly managed by PE (1-10, 11-20, 21-40, 50-100,.100)Q9 Budget range of PE ($1m-2m, $2m-5m, $5-8m, $ . 10m)Q10 How frequently do you “formally” review employees’ performance? [annually (A), mid-year

review (AwMY), other (O)]Q11 PE received PA training at current corporation, specifically about performance ratings

(yes-no)Q12 PE has employees’ PA as one of his/her objectives (yes-no)Q13 How much of your time does it take to do a PA for an employee?

Q14 PE helped set employees’ objectives for current PA period (yes-no)Q15 PE helped set employees’ objectives toward meeting corporation’s key responsibility areas for

current PA period (yes-no)Q16 PE helped set employees’ objectives toward meeting corporation’s personal competencies for

current PA period (yes-no)Q17 PE helped set core values (e.g. integrity) for employees’ current PA period (yes-no)Q18 PE solicited feedback about employees’ performance from employees’ peersQ19 PE solicited feedback about employees’ performance from customersQ20 PE helped to establish employees’ personal development/career plansQ21 Has the type of PA system changed since you have been with the corporation/began your career?

If yes, how so?Q22 Gender of employees being evaluatedQ23 Educational level of employees being evaluated (AA/AS, LPN/RN, BA/BS, MA/MS, PhD, MD)Q24 Race of employees being evaluated [African/American or Black (B), American Indian/Alaskan

native (AI), Asian/Pacific Islander (API), Hispanic (H), Other (O), Unknown (U), White (W)]Q25 Is range of employees being evaluated? (21-30, 31-40, 41-50, 51-60, .60)Q26 Number of years employees are working professionallyQ27 Aware of number of years employee has been with current corporation (yes-no)Q28 Employees’ business area (Marketing/Sales, Research and Development, Manufacturing/

Operations, General Admin.)Q29 People managed by employees being evaluatedQ30 Budget range of employees being evaluatedQ31 Did employees receive PA training at current corporation, specifically about performance

ratings? (yes-no)Q32 Were financial measurements included in the employees’ objectives for the current PA period?

(yes-no)Q33 Is there one PA system being used by the corporation? (yes-no)Q34 PE reviewed employee’s progress toward meeting current objectives with employee’s internal

peers (yes-no)Q35 PE reviewed employee’s progress toward meeting current objectives from his/her own review

(yes-no)Q36 PE reviewed employee’s progress toward meeting current objectives from external customers

(yes-no)Q37 PE reviewed employee’s progress toward meeting key responsibility areas and core competencies

(yes-no)

( continued )

Table I.Structured interviewquestionnaire

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respondents, 30 were W, ten were B, six were H and eight were A/PI. Respondents’ ageranges were 21-30 (1), 31-40 (19), 41-50 (26), 51-60 (7) and 61-65 (1). PEs worked anaverage of 19.1 years professionally and had an average of 14.4 years with thecorporations for which they were now working.

Respondents managed from one to ten employees (21), to 11-20 employees (10), to

21-40 employees (15) to 50-100 employees (8) with budgets of $1-2 million (18), $2-5million (11), $5-8 million (16) and $8-10 million (9). All respondents assessed PA once ayear and provided informal feedback to employees about six months before the formalPA. The vast majority (87 percent) received PA training at their corporation but nonehad conducting employees PA as one of their primary objectives. A majority of PEshelped employees set their objectives (85.2 percent). Albeit a majority of PEs solicitedfeedback about employees’ performance from their peers (43 of 54 or 79.6 percent), over20 percent did not. Even fewer PEs worked on career development plans for theiremployees (68.5 percent).

Of the 54, 51 (92.3 percent) of the PEs managed both men and women of multipleeducation levels, of multiple races and age ranges. Ten of the employees had only oneyear of experience; the largest category contained 21 employees who worked between

1-20 years. Most of the PEs worked in M/S and R&D; 21 of 54 in each category. Overhalf of the employees did not manage others within the organization (51.9 percent) andalmost half had no budget (44.4 percent). Encouragingly, the majority of employeeswhose performance was rated received training on the PA process to include howratings were done (49 of 54 or 90.7 percent). As a continuation of training, 51 of the 54PEs (94.4 percent) had their employees do a self-appraisal (Q39) and all employeesreceived interim feedback from their PE. Regarding their objectives, all but oneemployee had financial metrics included in their annual objectives.

Q38 PE conducted employees’ PA during one-on-one sessions (yes-no)Q39 Were employees asked to do a self-appraisal in preparation for their PA? (yes-no)Q40 PE considered input from internal peers to rate employees’ progress toward meeting current

objectives (yes-no)

Q41 PE considered only his/her own judgment to rate employees’ progress toward meeting currentobjectives (yes-no)

Q42 PE considered input from external customers to rate employees’ progress toward meeting currentobjectives (yes-no)

Q43 Employees were recognized for their favorable annual performance rating; reward may begreater responsibility (e.g. more budget), increased compensation or promotion (yes-no)

Q44 How were employees recognized for a favorable annual performance rating (favorable rating is a4 or 5 on a 1-5 Likert scale)

Q45 PE determined employees’ progress on their key responsibility areas (yes-no)Q46 PE created new or updated existing objectives for their key responsibility areas (yes-no)Q47 PE determined employees’ progress on core competencies (yes-no)Q48 PE created new or updated existing objectives for core competencies (yes-no)Q49 PE determined progress on personal development/career plan (yes-no)Q50 PE created new or updated existing personal development/career plan (yes-no)Q51 Did PA help performance evaluator manage more effectively? (1-5, 5 high)Q52 How well did the PA system help the PE meet employees’ expectations about their performance?

(1-5, 5 high)Q53 PE identified her/his need for training on PA system by employee (yes-no)Q54 PE identified need for employee’s training on PA system (yes-no) Table I.


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The output of PA yielded results consistent with the input. All PEs recognizedfavorable PA ratings. Recognition ranged from merit to salary increase (50 percent), togreater responsibility if performance was sustained over two years (20.4 percent), tomerit increase plus opportunity to participate in development programs (9.3 percent),

to merit increase plus greater responsibility (20.4 percent). There were no instanceswhen PEs created new objectives for their employee’s key responsibility areas. Forpersonal development, 55.6 percent created new or updated existing plans.

Decision trees analysesDecision trees are a popular statistical data mining technique for classification. Generallyspeaking, a decision tree model consists of a set of rules for dividing a largeheterogeneous population into smaller, more homogenous groups with respect to aparticular target variable. Thus with our particular database, we first used Q51, howwell PA helped managers manage more effectively, as our target variable. This providedsome interesting results. First as can be seen in Figure 2, the response to Q51 was 3.54where the following Likert gradations were observed: 1 ¼ not at all, 2 ¼ not much,3 ¼ somewhat, 4 ¼ quite a lot and 5 ¼ very much. There were no “1” ratings and onlythree ratings of “2”. Ratings of “3” (27), “4” (16) and “5” (8) weighted the average. The firstsignificant split of the decision-tree (Education Level of Performance Evaluator) foundthat 40 of the 54 respondents had an educational level at or above the AA/AS level with amean of 3.38 (to Q51) or slightly less than the overall mean. When the remaining 14 werefurther split against the age range of the PE, nine were older than 40 and had a highaverage of 4.44 while the other five were younger than 41 with a lower average of 3.20. SoPEs who found that PA helped them to manage more effectively were those at or abovethe AA/AS educational level and more “mature” (ages between 50-65).

Another decision-tree analysis using how PA helped the PE meet employees’expectations about their performance (Q52) as the target variable started with a mean

of 3.54, the same as the mean for Q51. Again, there were no “1” ratings or ratings whichindicated no help from the PA system and only one rating of “2”. The average was

Figure 2.Did performance appraisalhelp performanceevaluators manage moreeffectively?

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weighted by 30 ratings of “3”, 16 of “4” and seven of “5”. The first significant splitidentified that M/S was the area of the company whose employees benefited most(Q7 ¼ PE Business Area); 21 of the 54 respondents were from M/S and had a mean of 3.76. This is interesting because there were also 21 respondents from R&D along with

nine from GA and four from M/O. The next significant split was on the remaining 33and based on Q3 (Race of PE). Of the non-M/S people, 24 of these 33 have a race of B orW and have the same average as the overall average for Q52 (3.54). B and Wrepresented the majority (40 of 54) of the PEs; 30 were W and 10 were B. On the otherhand, nine of these 33, with a race of H or A/PI, had a significantly lower average forQ52 (3.00 v. 3.54) as depicted in Figure 3.

The last decision tree used the amount of time spent by PEs to conduct PA (Q13) asthe target variable. Overall, the average was 3.19 hours. The first split was on Q25 (AgeRange of Employees Being Evaluated). Of the employees being evaluated, 12 were in the21-39 age range and had a much higher average of 4.75 hours. Meanwhile, the remaining42 were older and had a low average of 2.74. Next, splitting on the 42 older employees(Q28 ¼ Employees’ Business Area) yielded higher levels of education with seven of the

PEs generating a very low average of 1.86 hours. The other 35 employees with educationlevels of MD, PhD and lesser degrees took longer but were still low; 2.91 hours vs 1.86hours. Then, the 35 employees who solicited feedback about their employees from theemployees’ peers (Q18) revealed that the 30 who solicited feedback from employees hadan average of 3.03 while those who did not had an average of 2.20. So, as shown inFigure 4, ranking the longest to shortest amounts of time to conduct PA is as follows:

. young employees – 4.75 hours;

. overall average – 3.19 hours;

. older employees, with lower education and did solicit feedback – 3.03 hours;

. older employees, with lower education and did not solicit feedback – 2.20 hours;

and. older employees with higher education – 1.86 hours.

Figure 3.Did performance appraisal

help performanceevaluators meet

employees’ expectationsbetter?


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DiscussionSimilar PE backgrounds and PA systemsThere were no remarkable differences among PEs and employees at the fivecorporations for educational levels, distribution of race and age range as well asprofessional experience. Furthermore, across the corporations, over half of the employeeshad neither direct reports nor budgets for their respective job levels. An interesting

difference contrary to conventional wisdom that experience matters was the low level of experience. Ten of the employees had only one year of experience and one of the largestcompany areas, M/S, contained 21 employees who worked between one and 20 years.

All five corporations adopted and supported the use of a 360-degree feedback PAsystem that was implemented on an annual basis with a mid-year check. Within eachcorporation, a substantial majority of PEs and employees (87 percent) received trainingabout their PA system and PEs helped their employees set objectives (85.2 percent),which, in all but one case, included financial metrics. Over 94 percent of PEs requiredtheir employees to conduct a self-appraisal

Whom did PA help manage more effectively? Results indicated it was PEs who had educational levels at or above AA/AS and whowere more “mature” with ages ranging between 50-65. This was consistent withqualitative observations during the structured interviews. Additionally, age seemed tobring confidence, especially when a mature PE was a relatively new hire but alreadyhad vesting from another corporation.

How did PA help PEs meet employees’ expectations about their performance? M/S was the area within all five corporations that benefited most. This is illuminatingbecause M/S employees have extensive experience dealing with employees working

Figure 4.

Did time to implementperformance appraisal byperformance evaluatorsmake a difference?

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“remotely” based on volunteered comments during interviews. M/S respondents weremore guarded with their responses compared to PEs in other areas of corporations,which is not surprising because cutbacks are often aimed at sales forces. Interestingly,when race was considered in the same analysis, employees who were B and W

demonstrated the most satisfaction as reported by PEs while Hs and A/PIs had theleast satisfaction. This suggests an alignment by race between the PE and employee.Three-fourths of the PEs are Bs and Ws (40 of 54) and 30 of the 40 PEs are W.

What are the outputs of PA? Similarity among the corporations was again observed. All PEs recognized favorablePA ratings comparably, e.g. merit and salary increase (50 percent) to greaterresponsibility with or without salary increase (40.8 percent). Moreover, there were noinstances when PEs created any new objectives for employee’s key responsibilityareas. For personal development, about two-thirds (68.5 percent) of PEs worked oncareer development plans for their employees but only about half of employees creatednew or updated existing plans.

What prevented PA from making a more positive impact? One possibility is that, while a majority of PEs solicited feedback about employees’performance from employees’ peers (43 of 54 or 79.6 percent), over 20 percent did not.Another is that not a single PE had conducting employees PA as one of theirobjectives, which can make it difficult to sequester time necessary to conduct PA.Either has the potential to instigate ethical situations.

Another possibility is the time taken to implement PA. With time as a proxy forsuccessful PA implementation, the results are quite interesting. Younger employeesspent considerable time, almost five hours compared to an overall average of just overthree hours, were less confident and exhibited more concern about maintaining

employment. Older PEs with lower educational levels who solicited feedback fromemployees’ peers, took just over three hours. Older employees with lower educationallevels, who did not solicit feedback, only took about two hours to conduct PA and wereimpatient during interviews. Finally, older PEs with higher education took less thantwo hours. When it came to summarizing an employee’s PA and communicating it tothem, older PEs with higher education levels regarded PA as a “check-the-box”exercise. This is certainly not the way to develop employees.

Concluding remarks/implications for further researchPEs with more education and maturity believed PA helped them manage moreeffectively. However looking at the time they spent to conduct PA, it raises someethical concerns, particularly for those managers who are older with higher education

levels. They are usually in positions of greater responsibility within the corporationand have greater influence on employees’ careers. It’s very concerning when 20 percentof these PEs are not soliciting feedback about an employee’s performance from theirpeers. This is not only inconsistent with parameters of 360-degree PA, but alsosuggests a lack of concern about employees’ development.

Furthermore, the results suggest that it is important to understand the implicationsof race on PA, principally those races with a lower representation within corporations,e.g. H and A/PIs. It would be interesting to compare PA systems cross-culturally


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consistent with research that emphasizes the cultural differences between the US andnon-western cultures like the Pacific Rim countries where there is more focus on groupperformance rather than individual performance (Hofstede, 1993). Understanding thisfrom the perspective A/PI managers could suggest how to modify the PA process to be

consistent with the values of those cultures.Other areas for future research are further evaluating training for PEs and

assessing senior management’s implementation of PA. To learn more about how PEsare being trained to deal with employees working remotely, discussions with trainingmangers and PEs from M/S in industries currently facing this situation would providevaluable information. To determine how senior management endorses PA, learningtheir expectations for PA could provide insights about their support for PA and go along way toward avoiding ethical concerns about a PA system during itsimplementation.

This study’s findings recommend the practical application of requiring assessmentof PA as a specific annual objective instead of a job-description task, especially for PEs,to ensure it gets the time needed to implement it. The findings also infer that, while aconsistently implemented PA system helps to avoid unequal treatment and/or unfairdiscrimination among diverse employees, there is room to improve the way the diverseemployees within a corporation experience PA. Unless we link development that isbeneficial to the employee to achieving objectives that are beneficial to the corporation,US corporations may be reverting back to where they were a century ago.

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About the authorsGeorge P. Sillup, PhD, MS, is an Assistant Professor, Department of Pharmaceutical Marketing

and Fellow, Pedro Arrupe Center for Business Ethics at Saint Joseph’s University’s Haub Schoolof Business. Prior to joining the full-time faculty at Saint Joseph’s University in 2004, He workedin the pharmaceutical/medical device industry for 28 years, where he held various positions fromsalesman to COO in major corporations like Johnson & Johnson as well as in start-up businesses,in which he sold products, attained reimbursement coverage with US and internationalauthorities for new technologies and launched several new medical device/pharmaceuticalbusinesses into global markets. For the past 12 years, he has been on several boards of directors.He is establishing a presence in the peer-reviewed literature largely based on his keen interest inbusiness ethics. Most recently, he and a colleague have analyzed data supporting their fourth

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annual update about newspaper coverage of ethical issues facing the pharmaceutical industry inthe pharmaceutical industry’s trade publication, Pharmaceutical Executive, to develop an article,which has been published in the International Journal of Pharmaceutical & Healthcare

Marketing .

Ronald K. Klimberg, PhD, MS, is a Professor in the Decision and System Sciences Departmentat Saint Joseph’s University’ Haub School of Business. Before joining the faculty of Saint Joseph’sUniversity in 1997, he was a professor at Boston University (ten years), an operations researchanalyst for the Food and Drug Administration (ten years) and a consultant (seven years). He wasthe 2007 recipient of the Tengelmann Award for his excellence in scholarship, teaching, andresearch. His research has been directed toward the development and application of quantitativemethods, e.g. statistics, forecasting, data mining, and management science techniques, such thatthe results add value to the organization and are effectively communicated. He has publishedover 30 articles and made over 30 presentations at national and international conferences in theareas of management science, information systems, statistics, and operations management. Hiscurrent major interests include multiple criteria decision making (MCDM), multiple objectivelinear programming (MOLP), data envelopment analysis (DEA), facility location, datavisualization, risk analysis, workforce scheduling, and modeling in general. He is currently a

member of INFORMS, DSI, and MCDM. Ronald K. Klimberg is the corresponding author and canbe contacted at: [email protected]


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Assessing the Ethics of Implementing Performance Appraisal Systems (2010)

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