Distal factors and effects on performance appraisal ratings and satisfaction

191 Pages·2015·3.03 MB·English

by  Philip Ferguson

ATHABASCA UNIVERSITY

DISTAL FACTORS AND THEIR EFFECT ON EMPLOYEES’ PERFORMANCE
APPRAISAL RATINGS AND REMUNERATION: A RATEE’S PERSPECTIVE
BY
PHILIP ANDREW FERGUSON

A THESIS
SUBMITTED TO THE FACULTY OF GRADUATE STUDIES
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF DOCTOR OF BUSINESS ADMINISTRATION

ATHABASCA UNIVERSITY FACULTY OF BUSINESS

ATHABASCA, ALBERTA
[November 10, 2015]

©PHILIP FERGUSON
DISTAL FACTOR EFFECTS ON RATINGS AND SALARY INCREASES

Approval of Dissertation

The undersigned certify that they have read the dissertation entitled

“Distal Factors and Their Effect on Employees’ Performance Appraisal
Ratings and Remuneration: A Ratee’s Perspective”

Submitted by

Philip Ferguson

In partial fulfillment of the requirements for the degree of

Doctor of Business Administration

The dissertation examination committee certifies that the dissertation
(and the oral examination) is approved.

Co-Supervisors
Dr. Kay Devine (Internal)
Athabasca University

Dr. Peter Newsted (Internal)
Athabasca University

Committee members
Dr. Karen Hunter
University of Lethbridge

Dr. Sue Bruning
University of Manitoba

November 10, 2015

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Dedication

I would like to dedicate this dissertation to my wife, Charleen, for being supportive and
confident that I would be successful in completing my degree.
Acknowledgements

First of all, I would like to thank Dr. Peter Newsted for being an excellent supervisor and
mentor from the outset. In addition, I would like to thank Dr. Kay Devine for her
ongoing guidance and support. Next, I would like to thank Dr. Karen Hunter for her
valuable support, specifically in relation to the statistical analysis portion of this
dissertation. Finally, I would like to thank Dr. Sue Bruning for accepting the role of
external examiner and providing valuable feedback. I could not have done this without
all of your input and incredible patience.
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Abstract

Empirical research and scholarly theory abound within employee performance appraisal
(PA) literature, yet the effectiveness and accuracy of PAs remain unresolved within the
practitioner community. There have been numerous scholarly calls to explore the
possible impacts that distal factors may play in relation to PAs, but these calls have been
largely unanswered. This study involved selecting three key distal factors for a quasi-
experimental design methodology, using scenario decision-making and analysis. The
three distal factors chosen were (a) the macroeconomic environment, in conjunction with
the closer organizational distal factors of, (b) organizational life cycle stage and (c)
perceived organizational performance. One of eight, fictitious but realistic, scenarios was
provided to MBA alumni with feedback on decisions relative to employee performance
requested. By keeping employee performance stable it was expected that manipulation of
these external factors would result in changes to performance remuneration and ratings
when employees self-assess. Of the three distal factors being studied, only the
macroeconomic environment had an effect on merit pay regardless of perceived
organizational performance being presented. The manipulation of the organizational life
cycle was ineffective, and no conclusions can be drawn in relation to this distal factor.
Middle-aged males were more aggressive in their salary expectations in a good
macroeconomic environment, regardless of whether their specific organization appeared
to be performing well, financially, or not. Self-assessed ratings, on the other hand,
increased under all scenario conditions to varying degrees (but not significantly) and this
could have just been due to chance. The degree to which demand characteristics were
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mitigated could have contributed to the lackluster results and, thus, should be
investigated before future study replication.

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Table of Contents
Approval of Dissertation ................................................................................................................. ii
Dedication ...................................................................................................................................... iii
Acknowledgements ........................................................................................................................ iii
Abstract .......................................................................................................................................... iv
List of Figures ................................................................................................................................ ix
List of Tables................................................................................................................................... x
Chapter 1 – INTRODUCTION AND SIGNIFICANCE OF THE PROBLEM .............................. 1
Chapter 2 – LITERATURE REVIEW ............................................................................................ 8
General PA Research .................................................................................................................. 8
Proximal, Distal and Intervening Factors .................................................................................. 18
Employee Self-assessment ........................................................................................................ 23
Independent Variables ............................................................................................................... 24
Perceptions of Organizational Performance .......................................................................... 24
Influence of the Macroeconomic Environment ..................................................................... 27
Influence of the Organizational Life Cycle Stage ................................................................. 29
Dependent Variables ................................................................................................................. 33
Performance Ratings ............................................................................................................. 33
Salary Remuneration and Merit Pay ..................................................................................... 35
PA Interview Stage of Concern ............................................................................................. 37
Literature Review Summary ..................................................................................................... 38
Research Question and Hypotheses .......................................................................................... 40
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Growth Stage Hypotheses ..................................................................................................... 43
Maturity Stage Hypotheses ................................................................................................... 47
Chapter 3 – METHODS ................................................................................................................ 51
Introduction ............................................................................................................................... 51
Scenario Decision-Making ........................................................................................................ 51
Demand Characteristics ............................................................................................................ 54
Survey and Scenario Building ................................................................................................... 58
Survey Sample – Plan ............................................................................................................... 59
Survey Pretest............................................................................................................................ 62
Chapter 4 – RESULTS .................................................................................................................. 67
Introduction ............................................................................................................................... 67
Descriptive Statistics ................................................................................................................. 67
Scenario Coding Scheme .......................................................................................................... 72
Outliers ...................................................................................................................................... 73
Experimental Manipulation Test ............................................................................................... 74
Results by Scenario ................................................................................................................... 78
Hypotheses Results ............................................................................................................... 86
Post-Hoc Analysis ..................................................................................................................... 89
Post-Hoc Analysis of Control Variable Effects ........................................................................ 90
Post-Hoc Analysis After Removing the Organizational Life Cycle Stage ................................ 94
Discriminant Analysis ............................................................................................................... 96
Post-Hoc Analysis Based on Higher Level Distal Factors ...................................................... 102
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Post-Hoc Analysis – Manifest Content Analysis of Distal Factor Usage ............................... 110
Chapter 5 – DISCUSSION .......................................................................................................... 113
Implications for Research and Practice ................................................................................... 118
Limitations and Future Directions........................................................................................... 121
Chapter 6 – CONCLUSION ....................................................................................................... 127
References ............................................................................................................................... 128
Appendix A – Alternative Feedback Systems Benefits and Pitfalls ....................................... 150
Appendix B – Example Scenario Situation ............................................................................. 151
Appendix C – The Full Survey ............................................................................................... 153
Appendix D – Qualitative Responses in Open Comment Field of Survey ............................. 164
Appendix E – Research Ethics Approval Page ....................................................................... 181

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List of Figures

Figure 1.1: Factors affecting appraisal effectiveness ...................................................................... 2
Figure 1.2: Geographical (ecological) environment........................................................................ 4
Figure 2.1: Interaction of factors in performance appraisal context ............................................. 14
Figure 2.2: Organization life cycle and employee stakeholder importance .................................. 32
Figure 2.3: Pre-appraisal interview stage of concern .................................................................... 38
Figure 2.4: Proposed framework ................................................................................................... 42
Figure 4.1: Population employment sector ................................................................................... 71
Figure 4.2: Sample employment sector ......................................................................................... 71
Figure 4.3: Comparison of rating means, grouped by macroeconomic environment condition ... 78
Figure 4.4: Comparison of salary means, grouped by macroeconomic environment condition ... 79
Figure 4.5: Rating means across scenarios .................................................................................... 82
Figure 4.6: Salary increase means across scenarios ...................................................................... 85
Figure 4.7: Salary increase means removing organizational life cycle stage ................................ 96
Figure 4.8: Ratings means grouped across distal factor conditions ............................................ 109
Figure 4.9: Salary increase means grouped across distal factor conditions ................................ 109

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List of Tables

Table 2.1 More prominent distal and proximal factors ................................................................. 14
Table 2.2 Summary of hypotheses for organizations in the growth stage..................................... 44
Table 2.3 Summary of hypotheses for organizations in the maturity stage .................................. 48
Table 3.1 Scenario composition .................................................................................................... 61
Table 3.2 Pre-test rating and salary increase responses ................................................................ 64
Table 3.3 Pre-test responses to open-ended question .................................................................... 65
Table 4.1 Comparison of research sample vs MBA alumni industry population data .................. 68
Table 4.2 Sample distribution – years doing performance appraisals ........................................... 69
Table 4.3 Sample distribution – years full-time employment experience ..................................... 69
Table 4.4 Reclassification of AU MBA alumni industry population data .................................... 70
Table 4.5 Correlations between all control variables and dependent variables ............................ 72
Table 4.6 Scenario coding scheme ................................................................................................ 73
Table 4.7 Effectiveness of situational manipulation on scenario conditions ................................ 76
Table 4.8 ANOVA results across all scenarios – ratings and salary increases ............................. 79
Table 4.9 Post-hoc test – Fischer’s least significant differences on ratings .................................. 81
Table 4.10Post-hoc test – Fischer’s least significant differences on salary increases ................... 84
Table 4.11 Scenario hypotheses supported / not supported .......................................................... 86
Table 4.12 Fisher’s least significant differences – ratings by control variables ........................... 91
Table 4.13 Fisher’s least significant differences – salary increases by control variables ............. 92
Table 4.14 ANOVA removing organizational life cycle stage ..................................................... 94
Table 4.15 Fisher’s least significant differences – ratings and salary increases ........................... 95
Table 4.16 Discriminant analysis – ratings after removing organizational life cycle ................... 99
Table 4.17 Discriminant analysis – salary increases after removing organizational life cycle ... 101
Table 4.18 Univariate analysis of variance – ratings .................................................................. 103
Table 4.19 Univariate analysis of variance – salary increases .................................................... 104
Table 4.20 Fisher’s least significant differences – ratings by distal factor state ......................... 106
Table 4.21 Fisher’s least significant differences – salary increases by distal factor state ........... 107
Table 4.22 ANOVA for ratings based on distal factor state ....................................................... 108
Table 4.23 ANOVA for salary increases based on distal factor state ......................................... 108
Table 4.24 Open comment field – manifest content analysis ...................................................... 111
Table 5.1 Scenario hypotheses supported / not supported .......................................................... 115

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