Measuring employee perception of performance management system effectiveness: Conceptualization and scale development

Abstract

Purpose

Concerns about the effectiveness of performance management systems (PMS) have long-driven researchers and practitioners to explore ways of measuring it. It is imperative for organizations to understand, how employees perceive the effectiveness of their PMS, for positive employee outcomes. Hence, the purpose of this paper is to explore the operationalization of the construct “employee perception of PMS effectiveness” (PMSE). An evidence of construct validity for the “two-factor PMS effectiveness” measure with perceived “PMS accuracy” and “PMS fairness” as its two factors is provided. In addition, a scale to measure “employee perception of PMS accuracy” is developed.

Design/methodology/approach

Mixed-methods research methodology.

Findings

Findings confirmed the possible existence of the two-factor PMSE construct, with PMS accuracy and fairness as its factors. Construct validity is established through its correlations with important outcome variables. The development of a valid and reliable 12-item scale for perceived PMS accuracy (Cronbach α value=0.83) is an additional key contribution.

Research limitations/implications

The research presents opportunities for future empirical studies to examine the influence of PMS accuracy and effectiveness on employee outcomes (engagement, retention, etc.). Researchers may also cross-validate the PMSE measure in different socio-cultural contexts.

Practical implications

The perceived PMS accuracy and effectiveness measures can serve as powerful investigative tools to measure employee perceptions regarding PMS. It can help organizations identify and correct the shortcomings in their existing PMS.

Originality/value

This is the first paper to offer a cogent conceptualization and operationalization of employee perceptions of PMS accuracy and effectiveness. Hence, it has key implications for academics and practitioners.

Citation

Sharma, N.P., Sharma, T. and Agarwal, M.N. (2016), "Measuring employee perception of performance management system effectiveness: Conceptualization and scale development", Employee Relations, Vol. 38 No. 2, pp. 224-247. https://doi.org/10.1108/ER-01-2015-0006