Academic journal article Public Personnel Management

Impact of Performance Appraisal Justice on the Effectiveness of Pay-for-Performance Systems after Civil Service Reform

Academic journal article Public Personnel Management

Impact of Performance Appraisal Justice on the Effectiveness of Pay-for-Performance Systems after Civil Service Reform

Article excerpt

Introduction

According to Folger and Konovsky (1989), perceived fairness, including distributive justice and procedural justice, may strongly influence employees' reactions to pay increases. With the expansion of civil service reform, especially the adoption and implementation of pay-for-performance, some researchers, such as McFarlin and Sweeney (1992), have paid attention to the relationship between employees' perceptions of fairness and their pay-for-performance. For instance, McFarlin and Sweeney (1992) found that distributive and procedural justice might influence pay satisfaction at the personal level and organizational commitment at the organizational level. Similarly, Rubin and Kellough (2012) found that employees' perceptions of procedural fairness are likely to be positively associated with a decrease in employee complaints regarding personnel systems.

Research Question 1: Do people assess pay-for-performance as more effective in the process of civil service reform when they think that pay-for-performance, especially performance appraisal, has been implemented fairly?

Research Question 2: How do human resources (HR) directors, who played a major role in the civil service reform process, assess the impact of fair performance appraisal procedure on the effectiveness of pay-for-performance?

With regard to the research questions, the present study has three main purposes. First, the study analyzes previous studies on performance appraisal justice, focusing especially on the relationship between performance appraisal justice and the effectiveness of pay-for-performance in the public sector. Second, looking at U.S. state governments, it examines how HR directors who have experienced significant civil service reform and implemented pay-for-performance assess their states' performance appraisals in terms of performance appraisal justice. Finally, the study examines the extent to which performance appraisal justice and the effectiveness of pay-for-performance are influenced by the degree of civil service reform.

Through the theoretical and practical examination of HR directors' assessment of pay-for-performance in U.S. state governments, the present study aims to contribute to the improvement of pay-for-performance systems in the public sector. As Meng and Wu (2015) found that the employees' perceived fairness of pay-for-performance could significantly influence personal or organizational outcomes such as job engagement, this study provides evidence for why scholars or practitioners should make efforts to establish or find ways to improve the effectiveness of pay-for-performance in terms of performance appraisal fairness in the process of civil service reform. More specifically, this study provides scholars and practitioners in the public sector with information on how state governments' HR directors evaluate their states' pay-for-performance. Furthermore, it introduces lessons for designing or developing pay-for-performance systems, such as improving procedural protections (e.g., due process) that need to be considered when designing performance appraisals, in the process of civil service reform.

Literature Review

Performance Appraisal Justice and Effectiveness of Pay-for-Performance

We define performance appraisal as "the formal process of evaluating organizational members" (Erdogan, 2002, p. 556). Employees are concerned about how performance appraisal is implemented within organizations. Performance appraisal is influenced by social context (e.g., Levy & Williams, 2004; Murphy & Cleveland, 1995; Pichler, 2012). For example, the effectiveness of performance appraisal depends on social context: distal variables (e.g., technology, HR strategies, economic conditions), process proximal variables (e.g., rater issues that directly affect how the appraisal process is conducted), and structural proximal variables (e.g., multi-source feedback systems, performance appraisal purpose, rater training) (Levy & Williams, 2004; Murphy & Cleveland, 1995). …

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