On employees’ performance appraisal: the impact and treatment of the raters’ effect

Abstract

By putting in place a performance appraisal scheme, employees who improve their work efficiency can then be rewarded, whereas corrective action can be taken against those who don’t. The aim of this paper is to develop a technique that helps to measure the subjective effect that a given rater’s assessment will have on the performance appraisal of a given employee, assuming that an assessment of one’s work performance will have to be undertaken by a rater and that this rating is essentially a subjective one. In particular, a linear mixed modelling approach will be applied to data that comes from a South African company which has 214 employees and where an annual performance evaluation has been run. One of the main conclusions that will be drawn from this study, is that there is a very significant rater’s effect that needs to be properly accounted for when rewarding employees. Without this adjustment being done, any incentive scheme, whether its motive  is reward based or penalty based, will ultimately fail in its intended purpose of improving employees’  overall performance.