IMPACT OF PERFORMANCE APPRAISAL ON

THE ORGANIZATION PERFORMANCE

THESIS SUBMIT TO
DEPARTMENT OF MANAGEMENT SCIENCE
SUPERIOR UNIVERSITY LAHORE
IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE DEGREE
OF BBA

SUPERVISED BY

PROF.ILYASS

SUBMITTED BY:

PIRZADA JUNAID AHMNED

ROLL# 6117

BBA

SESSION 2005-2009

DEPARTMENT OF MANAGEMENT SCIENCE

SUPERIOR UNIVERSITY LAHORE

1
 THESIS
IMPACT OF PERFORMANCE
APPRAISAL ON THE
ORGANIZATION
PERFORMANCE

RESEARCH BY:
PIRZADA JUNAID AHMED

RESEARCH SUPERVISOR:
PROF. ILYAS

DEPARTMENT OF MANAGEMENT SCIENCE

SUPERIOR UNIVERSITY LAHORE
2
IMPACT OF PERFORMANCE
APPRAISAL ON THE
ORGANIZATION
PERFORMANCE

3
 Dedication

“I dedicate this thesis to my Beloved Parents and

Honorable Teacher”

4
 Certificate

It is certificated that the research work contained in this thesis

“Impact of performance appraisal on the organization
performance” has been carried out under my supervision by
Pirzada Junaid Ahmed and is approved for submission in the
partial fulfillment of the requirement for the degree of BBA.

Supervisor

Prof. Muhammad Ilyas

Dated:

Submitted Through

Prof. Riaz

Program Manager of Management sciences

Superior University, Lahore

5
 Declaration

I am Pirzada Junaid Ahmed, Roll no.6117 student of Bachlor of

Business , session 2005-2009, hereby declare that matter
presented in the thesis “Impact of Performance Appraisal on the
Organization Performance” is my own research work under the
kind supervision of our supervisor Prof. Muhammad Illyas and has
not been printed, and published and submitted as research work
thesis or publication in any form in any university and research
institute in Pakistan and Aboard. I also declared that this thesis
work has not been used for any benefit or advantage elsewhere.

Dated
Deponent

6
 ACKNOWLEDGEMENT

I think honestly reflects on who I am, how I got here, what I think I
might do well, and so forth, I discover a debt to others that has shaped
my life. The work of some unknown people makes our lives easier
everyday. I believe it’s appropriate to acknowledge all of these unknown
persons; but it also necessary to acknowledge those people I know have
directly shaped my life and my work.

Firstly, I wish to place on record my indebtedness to my parents for the

continuous support and encouragement I received during my academic
career.

I owe a great depth of gratitude to my ALL TEACHERS for their kind

dealing, helping attitude throughout my stay in the institution. I thank him
for their great help in the completion of my tasks.

I would like to express my gratitude to those people who personally

help me throughout my studies.

Last but not the least, I be obligated a great deal to Prof. Muhammad
Ilyas who helped me in completing my thesis.

Pirzada Junaid Ahmed

7
 Table of Contents

Chapter No.1

Introduction 1

Objective of the study 1

Significance of the study 1

Research Question 2

Chapter No.2

Literature Review 3

Chapter No. 3

Theoretical frame work 13

Chapter No.4

Data and Mythology 16

Chapter No.5

Data Analysis 18

Descriptive Analysis 18

Histogram 19

Scatter Graphs 21

Co-relation Analysis 22

Regression Analysis 23

Chapter No.6

Summary and conclusion 25

8
 Abstract

Performance appraisal is one of the most important processes in human

resource management, because it has a great effect on both the financial and
market share of any organization. The aim of this study is to investigate the
impact of performance appraisal on the organization performance. Our
sample size is 105 employees of PEL. We used regression technique to find
out the relation between variables. We found that there is positive relationship
between performance appraisal and organization performance .

9
 Chapter#1

Introduction

Performance appraisal is one of the most important processes in human resource

management, because it has a great effect on both the financial and market share of any
organization. Performance appraisal is the periodic evaluation of an employee’s
performance measured against the job’s stated or presumed requirements. One way to
review the performance and potential of staff is through a system of performance appraisal.
It is important that members of the organization know exactly what is expected of
them, and the measures by which their performance and results will be measured.
Performance appraisal conducted to identify the training needs of employees and to give
rewards and compensation according to their The whole essence of the management
activities of an organization culminates in the system of performance appraisal
adopted in that organization. It goes without saying that an effective performance
appraisal system can lead an organization to take strides towards success and growth
by leaps and bounds.

In this study we collect the data from 105 employees of PEL using questionnaire technique
and Different statistical tools will also apply to check the relationship between variables and
significant level. The purpose of this study is to investigate the impact of performance
appraisal on the organization performance.

Objective of the study

The objective of this study is to investigate the determinants of organization performance in

an electronic sector of Pakistan. After analyzing the effects of performance appraisal on
organization performance, relative importance may be given to performance appraisal
according to it contribution in the organization performance.

Significance of the study

The fundamental objective of performance appraisal is to facilitate

management in carrying out administrative decisions relating to promotions, firings, lay
offs and pay increases. For example, the present job performance of an employee is often
the most significant consideration for determining whether or not to promote the person.

10
Managers must recognize that an employee’s development is a continuous cycle of setting
performance goals, providing training necessary to achieve the goals, assessing
performance as to the accomplishment of the goals and then setting new, higher
goals.

A performance improvement plan consists of the following components.

a) Where are we now? The answer to this question is found in the performance appraisal
process.

b) Where do we want to be? This requires the evaluator and the person being evaluated to
mutually agree on the areas that can and should be improved.

c) How does the employee get from where he or she is now to he or she wants to be? This
step is critical to the performance improvement plan. The appraiser and appraise must have
mutual consensus on the specific steps to be taken. These steps may include training the
employee so as to improve his or her performance. It should also contain the mechanism
adopted by the appraiser/ evaluator to assist employee in the achievement of performance
goals.

Research Question?

What is the impact of performance appraisal on the organization performance in an

electronic sector of Pakistan?

11
 Chapter-2

Literature Review

Performance appraisal is one of the most important processes in human resource

management, because it has a great effect on both the financial and program components
of any organization. Performance appraisal is the periodic evaluation of an employee’s
performance measured against the job’s stated or presumed requirements. One way to
review the performance and potential of staff is through a system of performance appraisal.
It is important that members of the organization know exactly what is expected of
them, and the yardsticks by which their performance and results will be measured. The
purpose of this study is to see the impact of performance appraisal on organizational
performance.

Terry and Franklin (2003) investigated about the basic principle of management. They
collected the data on two variables that are job performance and performance standards.
They collect the data from secondary recourse by using internet, books. They define the
performance appraisal as Performance appraisal is the periodic evaluation of an
employee’s performance measured against the job’s stated or presumed requirements.

Ayaz (2007) investigated the impact of performance appraisal on the productivity and job
satisfaction for the Technical Education and Manpower Training Department N.W.F.P.
Pakistan. He collected the data on three variables using questionnaire techniques from 400
employees. He used the regression technique to find out the impact of three variables that
are capacity to perform Opportunity to perform, and willingness to perform on productivity
and the job satisfaction. He found that due to not given appropriate importance to the
performance appraisal cause the slow progress of employees and the organization as a
whole.

Boice & Kleiner (1997) investigated the impact of effective performance appraisal system on
the employee motivation and employee commitment. They collected the data on two
variables by using questionnaire technique from 200 employees. They used regression
technique to find the impact of two variables employee commitment and employee
motivation. They found that to develop the effective performance appraisal system requires
strong commitment from top management and that performance appraisal system should
provide the linkage between employee performance and organization goals. They

12
recommended that to build linkages employees must have individualized objectives and
performance criteria which allow them to relate directly to the organization.

Karppinen (2004) investigated the impact of organization politics on the performance

appraisal system of the organization for the government sector. He collected the data on
three variables using questionnaire technique from 143 employees. He use the regression
technique to find the impact of three variables general political behavior, political behavior
to get ahead and ambiguity in pay and promotion polices and rules on the performance
appraisal system of the organization. He found that respondents have perceived rather
considerable amount of politics at their organization. He also found that that the social
context is a determinant factor within performance appraisals. Especially personal liking or
disliking is believed to steer performance appraisals.

Abdullah and el.al (2009) investigated the effect of human recourse management practice
among the private companies in Malaysia. He collected the data on six variables using the
survey technique from 153 private companies of Malaysia. They used regression technique
to find out the effect of six HR variables that are Performance appraisal, training and
development, team work, compensation, HR planning, Employee security on the business
performance. They founded that four HRM practices (performance appraisal, HR planning,
training and development, team work) are correlated with the business performance. But
two variables (compensation and employee safety) are not significant for the business
performance in Malaysia business organization. They recommended that there should be
Further analysis is needed to determine the potential moderating effects of ideology of its
owner, size and technology usage of the firm. They ignore the very important factor for the
business organization performance is compensation and incentive for employee.

Heslin and el.al (2005) investigated the effect of implicit person theory on the performance
appraisal system for the public corporation that operates a combination of complex nuclear,
fossil-fuel, and hydroelectric generating stations in Canada. They collected the data on two
variables using questionnaire technique from 82 mangers. They used the regression
technique to find the impact of two factors implicit person theory, behavioral observation
scale. They found that implicit person theory is a motivational variable that predicts the
extent to which managers acknowledge change in employee behavior.

13
Mullins (1996) investigated the relationship between management and the organization
behavior. He collected the data on two variables using questionnaire technique from 350
employees. He use the regression technique to find out the impact of variables that are
individual’s strength and individual’s weaknesses on the organizational performance.. He
found that performance appraisal can identify an individual’s strength and individual’s
weakness and also indicate how such strength may best utilize and weakness overcome.

Nicols (2003) investigated the impact of cost on performance appraisal system of the
organization. He collected the data on two variables using questionnaire technique from 250
employees. He used the regression technique to find the impact of two variables
performance appraisal cost and perception and benefit of performance appraisal system. He
found that performance appraisal systems could be eliminated with no harm done and with
great economic and emotional benefit. Consequently, change-minded executives should not
listen to claim to redesign their company’s performance appraisal system but should instead
give serious thought to scrapping it.

Ali and Ahmed (2008) investigated the impact of reward and recognition programs on
employee motivation and satisfaction level for the Pakistani organizations. They collected
the data on 9 variables using questionnaire technique from 80 employees of Uniliver
Company. They use the SPPS software and use the mean and standard deviation to find the
effect of 9 variables work content, payment, promotion, recognition, working conditions,
benefits, personal, leader/supervisor role, and general on the employee motivation and
satisfaction level. They found that there is a statistically significant relationship between
reward and recognition respectively, and motivation and satisfaction. They
recommended that the business unit could use the outcomes of the research study to
revisit its current reward and recognition programs and in particular focus on
addressing the needs of diverse groups of people within the business unit.

Gbadamosi and Al-Qahtnay (2005) investigated the influence of performance appraisal

discomfort and beliefs on three facts of on organizational commitment for the public sector
of the Saudi Arabia. They collected the data on five variables by using questionnaire
technique from 188 employees. They use the regression technique to find the impact of 5
variables performance appraisal discomfort, performance appraisal benefit, affective
commitment, continuance commitment, normative commitment on the organizational
commitment. They found that job satisfaction was significantly and positively related to only
normative commitment and showed very weak and insignificant positive relationship with

14
affective and continuance commitment. They also found that high degree of performance
appraisal discomfort and low belief in its effectiveness may be associated with
organizational commitment and thus areas of concerns for the HR practitioner.

Chen et al (2009) investigated the relationship of team creativity, job satisfaction,

organizational commitment, and work performance under the impact of an on-going
organizational change. They collected the data on 5 variables by using questionnaire
technique from 600 employees. They used the regression technique to find the effect of 5
variables team creativity, job satisfaction, organizational commitment, and work
performance on organizational performance. They found that job dissatisfaction cans results
creativity with employee commitment and environmental supports. They recommended
that by identifying the relationships of independent and dependent variables, the managers
and organization can better understand the process of organizational change and find ways
to enhance staff of the organization and improve employee performance and job
satisfaction.

Mann & Kehoe (1993) investigated the effect of quality improvement activities on the
business performance. They collected the data on nine variables by using questionnaire
technique from 121 manufacturing companies. They use regression technique to find out
the effect of 9 variables that are employee communication, departmental communication,
supplier communication, customer communication, vendor performance, business control,
quality cost, employee morale, total quality management. They found that all the quality
activities investigated, particularly TQM, has beneficial effects on business performance.
They recommended that o obtain a greater understanding of the relationship between
quality activities and business performance, researchers need to develop a more
sophisticated method of measuring the effects of quality activities.

Jafri and et al (2009) investigated the impact of selection of performance appraisal method
on performance appraisal system of any organization. They collected the data on six
variables by using questionnaire technique from 150 mangers. They use the linear regression
technique to find the effect of six variables that are training needs evaluation, Coincidence
with institutes, Excite staff to be better, Ability to compare, Cost of method, Error free on
the performance appraisal system of an organization. They found that MBO is the best
method to apply in putative organization as a performance appraisal method and 360
degree feedback, BARS and checklist are the most suitable methods for appraisal but the
critical incident, the graphic rating Scale and the essay are the worst method to use. They

15
recommended that Developing clear, realistic performance standards can to reduce
communication problems in performance appraisal feedback among managers, supervisors,
and employees.

Othman (1994) investigated the key problems in implementing the performance appraisal
system for united nation. They collected the data on three variables using questionnaire
technique from 400 employees. They used the regression technique to find out the impact
of three variables of that are training staff in the new performance appraisal system, for
priority management development and skills training in general, eventually for performance
awards or cost savings as training needs diminish on the implementation of performance
appraisal system, They found that organizations, like people, must strive to learn from their
mistakes. Sound and transparent performance appraisal and performance management are
central elements in establishing a more effective United Nations and bolstering the
organization's credibility. They recommended that to establish and continually enhance the
new performance appraisal system, the Secretary-General and the General Assembly should
monitor the development and implementation of the new system very carefully, particularly
in its initial stages.

Gardner et al (2004) investigated the impact of pay level on the organizational performance
for the construction companies of USA. They collected the data on six variables using
questionnaire technique from 91 employees. They use the partial correlation test technique
to find out the effect of 6 variables that are pay level, change in pay(abs.), change in pay (%),
OBSE, performance, tenure on the organizational performance. They found that pay level,
change in pay(abs.), change in pay (%) are the significant factors and OBSE and tenure are
not significant variables to effect the organizational performance. They recommended that
future research consider additional factors such as perceived organizational support,
organizational commitment, particularly continuance commitment, and fulfillment of the
psychological contract that also may link pay level and performance.

Marimuthu et al (2009) investigated the impact of human capital development on the firm
performance for the organizations of Malaysia. They collected the data on four variables
using questionnaire technique from 150 firms. They use the regression technique to find out
the impact of four variables that are training, education, knowledge, skills on human capital
effectiveness and its effect on firm performance. They found that training and development
of human capital have positive impact on organizational performance. They recommended
that companies should come up with some effective plans especially in investing the

16
various aspects of human capital as not only does it direct firms to attain greater
performance but also it ensures firms to remain competitive for their long term survival.

Mullins (1992) investigated the relationship between patrol officer basic academy training
and job performance for the organizations of USA. He collected the data on four variables
using questionnaire technique from 41 patrol officers. He use the correlation technique to
find the impact of four variables that are quarterly exams, Academy final exams, state
standards exams, cooper physical abilities test on the job performance. He found that the
training academy variable overall correlated highly with each other. He recommended that
much more attention should be given to the training programs that are not concentrating as
patrol officer basic training. They used very small sample size that not give him the more
accurate result.

Holzer et al (1993) investigated the effect of training grants on firms training effort. They
collected the data on two variables using questionnaire technique from 180 employees.
They uses regression technique to find out the impact of two variables that are training
funds and available recourses on the firm training efforts. They found that the one off led to
increase the training effort during the period of grant.

Arcimoles (1997) investigated the impact of employee training upon the financial
performance of the organizations of France. He collected the data on three variables using
questionnaire technique from 61 organizations of French. He use the co-relation technique
to find out the impact of three variables that are financial expanse on training program,
employee training, and profitability, on the financial performance of the organization. He
found that expenditure on training by firms make immediate and permanent improvements
in productivity and profitability.

Gee and Nystrom (1999) studied the level of skills training in US manufacturing plants. They
collected the data on three variables using questionnaire technique from 342 US
manufacturing plants. They used the regression technique to find out the level of three
variables that are training selection, training evaluation and total quality management. They
found that different level of skills training is strategically related to different levels of quality
management practices.

Mary K. (2009) investigated the relationship between managers’ self-reported budget

performance and satisfaction with perceived organizational rewards. He collected the data
on 16 variable using questionnaire techniques from 30 employees. He use the linear

17
regression technique to find the relationship of sixteen variables that are feeling of security
Opportunities to help others, Opportunities for Developing Close Friendship, Feelings of self-
Esteem, Sense of Prestige Associated with the Position Received by Others Inside the
Organization, Sense of Prestige Associated with the Position Received by Others Outside the
Organization. Sense of Authority Associated with a Respondent’s Position, Opportunities for
Independent Thought and Action, Opportunities for Setting Goals, Participation in
Determining Methods and Procedures, Opportunities for Personal Growth, Feelings of Self-
Fulfillment, Feelings of Worthwhile Accomplishment, Feelings of Being Informed, Feelings of
Pressure, Pay Associated with a Respondent’s Position on. With the managers’ self-reported
budget performance and satisfaction. He found that overall significant relationship, between
an individual’s self-reported budget performance and satisfaction with three components of
the organization’s reward structure. The relationships between an individual’s satisfaction
with the sense of authority associated with a respondent’s and satisfaction with the
opportunities for developing close friendships within the organization were not significant
for the related to an individual’s budget performance.

Vemic (2007) investigated the relationship of training and development and the learning
organization. He collected the data on five variables by using questionnaire technique from
150 employees. He use the regression technique to find out the impact of 5 variables that
are human recourse management, knowledge management, learning organization,
education, development, knowledge workers on the learning of employee. He found that
the learning organization attract more talented employees toward them and better utilized
them in their organization.

Uhlaner et al (2007) investigated the relationship between knowledge management (KM),

innovation and firm performance of smaller firms, based on a panel of more than 400 Dutch
firms. They collected the data on 6 variables by using questionnaire technique from 400
Dutch organizations. They use the regression technique to find out the impact of 6 variable
that are KM strategies, innovation performance, sales turnover growth, company-size,
sector, firm age, and employment on firm performance. They found that KM input
strategies related to knowledge acquisition is positively related to sales turnover growth.
They also fined that relation between KM throughput and KM output (innovation) is not
significant to measures and firm performance.

18
Coneey et al. (2002) investigated the relationship between employees training and quality
management for the organizations of Australia and New Zealand. They collected the data on
six variables using questionnaire from 962 of Australians organizations and 327 New Zealand
organizations. They used the regression technique to find out the relationship among these
variables that are productivity improvement, customer satisfaction, and employee moral
with these variables. They found that employee training have the positive effects upon
employee morale and general enterprise effectiveness.

Harter et al. (2002) examined the aggregated employee job satisfaction sentiments and
employee engagement with the employee turnover, profit and customer satisfaction. They
collected the data on six variables using questionnaire technique from 7,939 business units
in 36 organizations. They use the correlation technique to find out the impact of 6 variables
that are outcomes of productivity, profit, employee turnover, employee accidents, and
customer satisfaction on employee satisfaction-engagement. They found that positive and
substantive correlations between employee satisfaction-engagement and the business unit
outcomes of productivity, profit, employee turnover, employee accidents, and customer
satisfaction. The strength of Harter and his colleagues’ research is the large number of
participants (n = 198,514), business units (n = 7,939), and firms (n = 36) included, thereby
providing a level of precision and statistical power rarely found in scholarly research.

Southiseng and Walsh (2007) investigated the impact of training and development on the
employee performance in telecommunication industry of Lao People’s Democratic Republic.
They collected the data on four variables using direct interview and telephonic interview
technique from 12 employees. They used correlation technique to find out the impact of
four variables that are T&D Role, Capacity of T&D, T&D Planning process and T&D
relationship with finance on employee performance. They found that T&D practices have the
positive impact on employee performance of telecommunication industry.

Schneider et al. (2003) explored the relationships between several facets of employee
satisfaction and organizational financial (return on assets; ROA) and market performance
(earnings per share; EPS). They collected the data on 6 variables using questionnaire
technique from 35 organizations. They use the regression technique to find out the
relationship among these variables that are attitudes concerning satisfaction with security,
satisfaction with pay, and overall job satisfaction with financial (ROA) and market
performance (EPS). They found that there is a significant positive relationship between
attitudes concerning satisfaction with security, satisfaction with pay, and overall job

19
satisfaction with financial (ROA) and market performance (EPS). They also fined that the
relationship between satisfaction with pay and the performance indicators appeared to be
reciprocal in nature.

Acton and Golden (2002) investigated the impact of training practices on the employee
retention for the IT companies of Ireland. They collected the data on 9 variable using
questionnaire techniques from 200 employees of Software Company of Ireland. They use
the regression technique to find out the impact of 9 variables that are Training method,
Management of Training Process, Benefits from Training, Type and Degree of Training
Received, Organizational Staff Management, Respondent Profile , Organizational Staff
Management, Respondent Type and Degree of Training, Organizational management of
Training on the retention of employee in IT organizations. They found that the provision of
training does not have any impact on staff retention rates. Organizations that provide high
quality training do not see their employees stay longer with them. They recommended
Americans telecom should focus on the off job training of the employee performance could
be enhanced.

Klink and Streumer (2006) investigated the impact of on the job training on the employe
performance. They collected the data on four variables using questionnaire technique from
36 employees. They used the regression technique to find out the impact of these variables
that are Trainee characteristics, Workplace characteristics, Training characteristics, and
Conditions for the self-study on the employee performance. They found that trainee
characteristics and workplace characteristics have the significant impact on the employee
performance.

20
 Chapter no.3

Theoretical Foundation
Performance appraisal is one of the most important processes in human resource
management, because it has a great effect on both the financial and program components
of any organization. Performance appraisal is the periodic evaluation of an employee’s
performance measured against the job’s stated or presumed requirements. One way to
review the performance and potential of staff is through a system of performance appraisal.
It is important that members of the organization know exactly what is expected of
them, and the yardsticks by which their performance and results will be measured.
Performance appraisal conducted to identify the training needs of employees and to give
rewards and compensation according to their performance. By rewards and compensation
employees are motivated that in result increase the turnover on production. When there is
increase in turnover on production in its results sales of the company are also increase.
When sales are increase then it captures a high market share. That shows that organization
has high performance.

Performance Appraisal

Rewards & Compensation

Production turns over

Organizational Sales
Perfomance

Training & Development Market Share

21
Equity theory suggests that employee perceptions of what they contribute to the organization, what
they get in return, and how their return-contribution ratio compares to others inside and outside the
organization,' determine how fair they perceive their employment relationship to be. It would also
suggest that high pay levels represent high outcomes that should motivate employees to adjust their
inputs (performance) upward.(Adam 1963)

Agency theory, until recently best known in the economics, finance, and law literatures, focuses on the
opposing interests and goals of the organization's stakeholders, and the ways that employee
compensation can be used to align these interests and goals (eisenhardt, 1989; fama & jensen, 1983)

Reinforcement theory states that a response followed by a reward is more likely to happen again
in the future. The theory emphasizes the importance of a person actually experiencing the
reward. Reinforcement theory is a limited effects media model applicable within the realm of
communication. The theory generally states that people seek out and remember information that
provides cognitive support for their pre-existing attitudes and beliefs. The main assumption that
guides this theory is that people do not like to be wrong and often feel uncomfortable when their
beliefs are challenged.

“Efficiency wage theory” explain the constant experimental regularities in inter-industry wage
differentials that are inconsistent with the perfectly competitive model of labor markets.

Drawing from organizational learning theory, the assumption has often been made that effective
acquisition and utilization of new knowledge is a source of flexibility, adaptability and competitive
advantage (Stata, 1989, Spicer and Sadler-Smith, 2006), and hence associated with better organizational
performance.

Thierry’s (2001) ‘reflection theory of compensation’ is particularly instructive with respect to the
relationship between pay level and self-esteem. Thierry proposes four ways in which pay can have
meaning for an employee: motivational (instrumentality), relative position (feedback and status),
control (autonomy), and spending (what can be purchased with pay). According to Thierry, ‘the pay an
individual receives encompasses a variety of meanings that we consider to be vital to that person’s self-
identity . . .pay “reflects” information about what is happening in other fields [external to the person],
the meaning of which connects to the person’s self-identity’ (Thierry, 2001pp. 151–152). Although
Thierry refers specifically to self-identity that is a broader
The theory and the practice of the Employment Training Panel, according to one evaluation, is that "the
availability of Panel funds provides companies with the incentive to retrain a work force with outdated
skills, rather than laying off employees. Companies are encouraged to take a long-range view towards
their employees."

23
 Chapter#4

Data and Methodology

Data

In order to find out the impact of performance appraisal on the organization performance in an
electronic sector of Pakistan, We collected the data on two variables that are performance appraisal and
the organization performance. In this study we use performance appraisal as independent variables and
organizational performance as dependent variable. We also use training and development and
compensation as moderatining variables. We used questionnaire technique to collect the data. We
distributed our questionnaire to 150 employees of PEL but we get the response of 105 questionnaires so
the final sample size of our study is 105. In our sample size 35 are mangers and 70 are official staff.

Dependent Variable

We use organizational performance as a dependent variable. The performance of any organization can
be measure by three factors organization market share, production turnover and their sales.
Organization performance can be defined as Organizational performance comprises the actual output or
results of an organization as measured against its intended outputs.

Independent Variable

We use performance appraisal as independent variable that is defined as Performance

appraisal is the periodic evaluation of an employee’s performance measured against the job’s
stated or presumed requirements.

Moderators

In this study we use Training and development and Reward and compensation as
moderating variables. The T&D have commonly been designed as an essential
instrument for changing the employees’ attitudes and behaviors towards the
organizational goals.

24
Compensation refers to all forms, returns and tangible services and benefits employees receive as part
of an employee relationship. On the other hand reward management system, is concerned with the
formulation and implementation of strategies and policies, the purpose of which are to reward people
fairly, equitably and consistently in accordance with their value to the organization and thus help the
organization to achieve its strategic goals.

Methodology

To present the overall picture of all variable we used descriptive static analysis. We used histograms to
describe the frequency distribution of data used in this study. Histogram helps us to determine whether
frequency distribution of each variable is normal or not. In this study we used scatter graph to identify
the relationship between variables. We used correlation provides the values and signs of the coefficients
of correlations. This table also provides the P-values of the test of the null hypothesis which states that
the said variables are not correlated to each other. We also use regression analysis. The objective of the
regression in this study is to find such an equation which could be used to find the predicted value of the
organization performance for a given set of values of performance appraisal. The specified multiple
regression equation takes the following form:

Organization Performance i = C + B1 (Performance Appraisal i) + Ei

As specified in the above equation organization performance is the dependent variable and
performance appraisal is independent variable. C is the constant term. B1 is the partial regression
coefficients of the independent variables. A partial regression coefficient represents the change in
dependent variable, ceteris paribus, due to one unit change in independent variable. Ei is the error term.
To test the significance of the individual coefficients t-test is also employed in this study. We also use
the R square value that helps us to find out the contribution of independent variable in change in
dependent variable.

25
 Chapter #5

Data Analysis

In this part of the study empirical findings have been shown and interpreted. Table 5.1 presents the
descriptive statistics which show the overall picture of the variables.

Table 5.1

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

Performance Appraisal 105 2.40 5.37 3.5892 .66779

Organization Performance 105 2.00 5.00 3.7460 .76589

Valid N (list wise) 105

In the above table the minimum values, maximum values, mean values and the values of standard
deviation of all the two variables have been shown. Mean value provides the idea about the central
tendency of the values of a variable. Number of observations of each variable is 105. Standard deviation
and the extreme values (minimum in comparison to maximum value) give the idea about the dispersion
of the values of a variable from its mean value. These statistics are helpful to have an idea about the
central tendency and the dispersion of a variable in absolute terms rather than relative terms.

26
Figure 5.1 shows the histogram. We use histogram to get the graphical picture of frequency distribution
of variables. In below histogram the frequency distribution of Brand extension is Normally distributed.
Here the variable is slightly skewed but approximately normal.

Figure 5.1

27
Figure 5.2 shows the histogram. We use histogram to get the graphical picture of frequency
distribution of variables. In above histogram the frequency distribution of organization
performance is Normally distributed

Figure 5.2

28
 F
igur
e
5.3
exh
ibit
s
the
scat
ter
plot
gra
ph.
By
this graph we intend to have some idea about the relationship between performance appraisal and
organization performance. This graph shows the positive relationship between the performance
appraisal and organization performance. These results have been confirmed by the table of correlations.

29
30
 Table 5.2 represents the table of correlations. This table reflects variable – performance
appraisal– is positively correlated to organization performance (r= .699, p = .000). All the above
correlations are statistically significant at less than five percent level of significant. In the case of this
correlation the null hypothesis of no correlation can be rejected as the P-values are less than 0.05. Here
we reject null hypothesis that is there is no relationship between performance appraisal and
organization performance and accept alternative hypothesis that is there is relationship between
performance appraisal and organization performance as the significant level is less than 0.05.

Table 5.2

Correlations

Performance Appraisal Organization Performance

**
Performance Appraisal Pearson Correlation 1 .699

Sig. (2-tailed) .000

N 105 105

**
Organization Performance Pearson Correlation .699 1

Sig. (2-tailed) .000

N 105 105

**. Correlation is significant at the 0.01 level (2-tailed).

31
Table 5.3 presents the results of the regression analysis. The results show that performance appraisal
significantly affects the organization performance as shown by the values of the t-statistic and the
corresponding P-values. T-test is used to test the significance of the individual partial regression
coefficients. Here we reject null hypothesis that is there is negative relationship between performance
appraisal and organization performance and accept alternative hypothesis that is there is positive
relationship between performance appraisal and organization performance as the significant level is less
than 0.05. This test shows that the coefficients of the predictor are statistically significant at less than
five percent level of significance.

Table 5.3

a
Coefficients

Standardized
Unstandardized Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) .867 .295 2.942 .004

Performance Appraisal .802 .081 .699 9.928 .000

a. Dependent Variable: Organization Performance

Organization Performance = C + B (Performance Appraisal)

Organization Performance = 0.867 + 0.802 (Performance Appraisal)

If we consider impact of independent variable in this equation is zero than the value of constant (C) is
0.867. It shows that the relationship between Performance Appraisal and Organization Performance is
positive. It also show that if increase in 1 unit of performance appraisal than organization is increase in

32
0.867 time units. That equation shows that organizations should focus on conduct performance
appraisal system more effective and fair to improve their organization performance.

Necessary statistics have been shown in table 5.4. The value of the coefficient of determination
(R2) is 0.489. This shows that the correlation between the observed values performance appraisal and
the fitted values of the organization performance is forty nine percent. This show that if there is 100%
improvement in the organization level then 49 percent result of performance appraisal and remaining
51 percent due to other variables. The adjusted coefficient of determination (adj. R 2) shows is adjusted
for the degrees of freedom. The value of the adjusted coefficient of determination (adj. R2) is not
affected by the inclusion of the irrelevant variables. The value of the adjusted coefficient of
determination (adj. R2) is 0.484, which shows that forty eight percent variations in organization
performance are explained by the variations in independent variables.

Table 5.4

Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate

a
1 .699 .489 .484 .55015

a. Predictors: (Constant), Performance Appraisal

33
 Chapter #6

Summary and Conclusion

This study had conducted to find out the impact of performance appraisal on the organizational
performance in an electronic sector of Pakistan. So for this purpose we used regression technique and
correlation to find out the impact of performance appraisal on the organizational performance. In this
study we collect the data from 105 employees of PEL using questionnaire technique. In this study we
used performance appraisal as independent variable and organization performance as dependent
variable. In this study we found that the impact of performance appraisal on organization performance
is positive and statistically significant. This study show that performance appraisal play a very important
role to improve organization performance.

Descriptive statistics was used and found the minimum and maximum range of data and also found the
Means and standard deviation of variables.

To check the relationship between dependent and independent variable a scatter plot were drawn, The
lines went from left to right upward in all variable which that shows all independent and dependent
variable have positive relationship, its means that independent variable(performance appraisal)
influences organization performance.

A Histogram graph were drawn to study or to find the frequency distribution of data and it was found
that the data is distributed normally because almost all of it gave bell shaped curves.

In correlation positive relationship was found between independent and dependent variable, because
correlation value is lies in the range of moderate positive (0.30-0.70) and strongly positive its means the
relationship between independent variables and dependent variable is positive. There is a strong
positive relationship between performance appraisal and organizational performance is 0.699 which lies
above the moderate positive. The results show that the over all result is positive and shows that the
performance appraisal has impact on organization performance.

T-test was applied to check the significance of independent variables on dependent variable and its was
found that in performance appraisal and organization performance alternative hypothesis accepted and
null hypothesis are rejected and the performance appraisal influences organization performance
because these variable have positive significance level that is 0.00.

34
R-test was applied and we have found that 49% of organization performance is affected by our selected
independent variables and the remaining 51% are affected by remaining variables that are not included
in our study.

The coefficients of both variables statistically significant coefficients are positive as they were
expected. The impact of performance appraisal on organization performance is statistically significant.
This shows that performance appraisal play a very important role to improve organization performance.

Positive and significant effect of performance appraisal on organization performance suggests

that organizations should focus on conduct performance appraisal system more effective and fair to
improve their organization performance.

Although this study has included many important determinants in the analysis on the basis of
theoretical narrations, yet in future studies it would be useful to include some other variables in the
analysis as well. Inclusion of other variables e.g. H.R practices and leadership style etc may improve the
value of the coefficient of determination.

35
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