Impact of Performance Appraisal System on Employee Productivity in

Telecom Sector of Pakistan

Introduction:

Performance appraisal system is a systematic approach to evaluate the employees work progress
to make decisions for promotions, compensation and hiring and firing of employees at
organization. Many organizations use formal and informal performance appraisal systems.
Usually large organizations use formal performance appraisal system and small organizations use
informal performance appraisal system. Some researchers identified that performance appraisal
system affect employee behavior. When they perceive there exists unfair performance appraisal
in the organization, they become unmotivated and decreases their interest for the work and has a
result decrease organizational productivity.

Employee productivity is the extent to which organizational members achieve the goals of
organizations efficiently and effectively. Employee productivity is an employee can do and what
cannot. Telecommunication is fastest growing sector of Pakistan. It includes mobile
telecommunication and telephone market. It shows tremendous growth in last few years. It
operates on foreign and domestic investment. Performance appraisal system assists managers to
make decisions for rewards, performance pay scale, hire, fire and promotions that contribute to
increase employee productivity by increase in employee efficiency and effectiveness, employees’
best out and job involvement.

The following study is to investigate the impact of performance appraisal system on employee
productivity in telecom sector of Pakistan by using performance appraisal system as independent
variable and employee productivity as dependent variable. Working hours, work technology and
job grade are controlled variables. The significance of study is to help mangers in setting goals
for employees to achieve. It aids in managers to know how to appraise employees. It supports
mangers to identify and assess the training needs of employees.
Literature review:

During the period second caliph of Islam Hazarat Umar (R.A) [634-644 A.D/13-23 A.H], no
formal appraisal system was used but there was a concept of evaluation of individual
performance [ CITATION Aya07 \l 1033 ]. The concept of individual performance appraisal
system is also traced in Bible.[ CITATION Dan \l 1033 ]

Formal appraisal system began in 1813 in United States to evaluate the performance of army
men[ CITATION Dan \l 1033 ]. The concept increased during World War I and II then eventually
recovered global recognition. Different tools were used for evaluation of individual performance
and every organization has different rationale for its usage [ CITATION Dan \l 1033 ].

With the increase in growth and complexity in operations of telecom sector of Pakistan HR
practices; including training and development, performance appraisal system, compensation,
employee retention are used in each business sector of Pakistan. [ CITATION Zub06 \l 1033 ],
Performance appraisal system must be communicated to employees. Performance appraisal
system used in telecom sector of Pakistan can be categorized as rating performance appraisal
system, narrative performance appraisal system, ranking performance appraisal system and 360
degree performance appraisal system. [ CITATION Ami12 \l 1033 ]

Rating performance appraisal system is; employer evaluates employees on pre-determined scale.
The purpose of rating performance appraisal system is to know who is on the top performance
rate at work [ CITATION Ror09 \l 1033 ]. Narrative performance appraisal system is simple
summary of work targets achieved by employees. Advantage of narrative performance appraisal
system is that it is used in further performance planning. Disadvantage of narrative performance
appraisal system is that it is time consuming [ CITATION Ror09 \l 1033 ].Ranking performance
appraisal system is evaluation of employee performance by ranking them on different grades
[ CITATION Ror09 \l 1033 ].360-Degree performance appraisal system is evaluation of
performance of employees by giving them feedback and getting feedback from them
[ CITATION Ror09 \l 1033 ].
Performance appraisal system is strongly positively correlated with employee productivity that
will increase the organizational productivity [ CITATION Mar09 \l 1033 ], Berrin Erdogan in
2002 conducted research in USA by using dependent variable as system procedural justice and
independent variable as performance appraisal system stated that performance appraisal system
is positively correlated with employee productivity.[ CITATION Ber02 \l 1033 ], similarly Dr.
Manju Malik in 2013 conducted research in India stated the same result[ CITATION DrM13 \l
1033 ].

The associations among pay and benefits, performance appraisal system, career development and
management, supervision and collegiality and open communication (independent variables) are
investigated with job satisfaction (dependent variable) in telecom sector that results in positive
relation between both variables[ CITATION Adn10 \l 1033 ]. For the last three decades in
telecom sector of Pakistan intense research was conducted on the HR practices and organization
performance but there need further research on impact of individual research on employee
productivity.[ CITATION Adn10 \l 1033 ]

The main objective of study is to investigate the impact of performance appraisal system on
employee productivity. The sub objectives of study are to know whether employee productivity
(efficiency, effectiveness, employees’ best output and job involvement) increases with
performance appraisal system or not, whether there is a positive or negative relation between
performance appraisal system or not. To investigate performance appraisal system motivates
employees and it supports mangers in decision making.

Hypothesis:

H1: Performance appraisal system is positively correlated with employees’ productivity

with the increase in efficiency, effectiveness, best output and job involvement of
employees.

H2: Performance appraisal system is positively correlated with employees’ productivity

by controlling technology, job grade and working hours.
Methodology:

This article investigates the impact of performance appraisal system on employee productivity in
telecom sector of Pakistan. Target telecom industries include Mobilink, Warid, Zong, Telenor,
Ufone and PTCL from Abbottabad, Mansehra, Islamabad, Lahore and Karachi. With the increase
of HR practices conducted in telecom sector became motive for researchers to evaluate and
investigate the impact of HR practices on employees and over all organization.

Population:

There are more than 15 large and small telecom companies are operating in Pakistan. The target
population includes 6 companies from 5 areas. Approximately not less than 600 employees
working in target companies of selection areas of Pakistan.

Sample size:

The sample size to investigate impact of performance appraisal system on employee productivity
is 105. Sample size is calculated through sample size calculator software from population of 600
employees with 95% confidence level and 5 % confidence interval and get 234 but the sample
size is selected on the basis of convenience to approach.
Sampling technique:

Sample is selected on the basis of convenience sampling for selecting areas and simple random
sampling for selecting employees.

Data Collection method:

Data is collected through structured closed ended questionnaire adopted and modified from
based paper “Impact of Human Resource management Practices on employees performance - a
case of Pakistani telecommunication sector” by Zubair Aslam Marwat, 2006. Questionnaire is
designed on five likert scale; strongly disagree, agree, neutral, agree and strongly disagree.

Data Analysis:

Statistical tool used to analyze data is correlation that shows the relationship between
performance appraisal system and employee productivity and regression analysis which shows
the cause and effect (impact) of one variable on other.

Variables:

Independent variable: Performance Appraisal System

Dependent Variable: Employee Productivity
Controlled Variables: Technology, Working Hours and Job Grade

Base Paper:

The study based on “Impact of Human Resource management Practices on employees

performance - a case of Pakistani telecommunication sector” by Zubair Aslam Marwat, 2006.
Authors investigated the impact of all HR practices in telecom industry of Pakistan while my
research includes the impact of performance appraisal system on employee productivity by using
their conceptual framework.

Conceptual framework:
Controlled Variables

Technology Working hours Job Grade

Independent Variable Dependent Variable

Performance Employee
Appraisal System Productivity

 Employee Efficiency
 Employee Effectiveness
 Employee Best output
 Employee Job Involvement