Does Organizational Justice in Performance Appraisal System Affect Work Performance? Evidence from an Emerging Market

Performance appraisal, which is known as an integral part of the human-resource management system, plays an important role not only in allocating a fair-reward and providing development advices for the employees, but also in shaping the employees' perspective on its workplace and justice-perception on their jobs, managers, organization. The increased workplace tension and job-loss was just a few consequences, which prior studies had documented, could stem from bad performance appraisals. Meanwhile, an equitable and transparent performance appraisal could be a learning tool, and turn it into an opportunity for professional growth. This study extended the literature of the effect of performance appraisal on productivity and employees by proposing a further linkage between the employees' perception on fair performance appraisal and organizational justice-considered practices (distributive justice, procedural justice, and interactional justice) to job satisfaction and work performance in Malaysia. Prior studies did not explore much this relation due to the geographical sample limitation and governance practice context, i.e. developed countries. Participants of this research were employees of large and well-established companies in Kuala Lumpur, which were considered to have well and transparent appraisal systems and a perfect recently context to find the effect of organizational justice conflict. Data collection procedure used questionnaire and was processed with factor analysis and regression to examine the simultaneous effects of few independent variables on a dependent variable. There are some interesting results. First, the interactional justice has more influence than other types of organizational justice in evaluating employee's performance, which is contrary with previous researches. This shows that, employees are more concerned on interaction during and after the evaluation process. The employees are keen on knowing how they have been evaluated and what the feedback of their superior is after the performance appraisal process. The empirical results provide strong support for the relationship between employee perception of organizational justice in performance appraisal system and work performance. It also supports a significant relationship between performance appraisal satisfaction and work performance. The important implication for organization in this study is a pivotal role of the employees' perceptions of the success or failure of a system. Therefore, it is very essential for the management to keep in view the perceptions of their employees, while designing or modifying the appraisal system.