Impact of Saudi Aramcos Appraisal System on Employees' Performance - Research Paper Example

Impact of Saudi Aramcos Appraisal System on Employees' Performance Project Paper Title: Assessing the impact of Saudi Aramco’s appraisal system on its employees' morale and performance. Director Open University of Malaysia (OUM) Bahrain Branch Dear Sir, Attached are the following sections of my project paper for your evaluation and approval: Chapter1: Introduction Chapter2: Literature Review Chapter3: Research Methodology Chapter4: Survey Questionairre Chapter5: Results and Data Analysis. Chapter 6: Conclusions References I have thoroughly checked the following document and am confident that it is free from major grammatical errors, weaknesses in sentence construction, spelling mistakes, referencing mistakes and others. It also complies with all OUM MBA program guidelines for writing project paper to the best of my knowledge. Thank you, Student Signature: ___________________ Date: __________________ I have read the student research proposal and I am satisfied that it is in line with the OUM MBA program guidelines for writing project proposal. It is also free from major grammatical errors, sentence construction weaknesses, citation and others. Supervisor's Signature: _________________ Date: __________________ ACKNOWLEDGEMENT It my belief that happiness and knowledge multiply when shared with others. I was profoundly affected by this simple thought shared at the Open University of Malaysia where my professors, colleagues and friends were gracious and understanding towards my growth as a professional and a human being. I thank them all with the bottom of my heart. This intellectual journey would have been incomplete without the presence of my supervisor XXX who guided and mentored me at every step in the development of this project; I express my humble gratitude to him. Finally, I would like to thank my XXX and XXX who have always shown unconditional support towards me. ABSTRACT Performance Appraisals have been the most common methods employed by employers and organzations to incentivize and measure the performance of their employees. The process usually involves a dialouge between the employee and his supervisor where they discuss employee’s performance compared to supervisor’s expectations and to identify areas that require training or development. A number of HR and performance appraisals processes are present at Saudi Aramco, one of the world’s largest oil corporations. This research attempts to measure the acceptability and popularity of such appraisal systems, Performance Management Program (PMP) in particular, by investigating how employees think about it, go through its phases and deal with its outcomes. A self-addressed questionnaire was designed and circulated amongst a representative sample of 397 employees and data was collected upon 37 motivational items with respect to performance appraisal systems at Saudi Aramco. Upon data analysis, it was seen that Saudi Aramco employees have low confidence in performance management systems and are often ambiguous about their roles and responsibilities in the organization. The study also reflects that most employees desire to have a more interactive and two-way communication channel between supervisor and employee for the purpose of performance evaluation. Table of Contents CHAPTER 1Introduction 1 1.1Background of the Problem 1 1.2Problem Statement: 4 1.3Objective of the Study 5 1.4 Significance of the Study 6 1.5Definition of Terms 6 1.6 Limitations of the Study: 7 CHAPTER 2Literature Review 8 2.1 Standard Appraisal Methods 8 2.2Importance of Fair Appraisal System 9 2.3 Errors in Appraisal Systems 11 2.4Employees Reactions to Appraisals 12 2.5 Impact of Appraisal Systems on Employee’s Morale and Performance 13 2.6Roles of Supervisor and Employee in the Appraisal Process 20 2.7HR Appraisal Practices at Saudi Aramco 21 CHAPTER 3Research Methodology 23 3.1 Research Design 23 3.2 Study Population 24 3.3 Sampling Procedure 24 3.4Instrumentation 25 3.5 Scale Validity and Reliability 26 3.6 Data Collection Procedures 27 3.7Data Analysis 28 CHAPTER 4Survey Questionnaire 30 CHAPTER 5Data Analysis and Results 34 5.1DISCUSSION 54 CHAPTER 6Conclusion 58 CHAPTER 7References 61 CHAPTER 1 Introduction 1.1 Background of the Problem Industrial Security, an Administration Area in Saudi Aramco, found that about 50 percent of employees are not punctual. In their letter to various Senior Vice Presidents of Saudi Aramco, Industrial Security indicated that over a period of six months; fifty percent of employees pass through different gates when coming to work after 7:00 a.m. when they should be in their offices. It is being noticed by Human Resources Department that with every new retirement package for employees with twenty five years work experience, almost 80% of Saudi employees retire and about seventy percent of the remaining twenty percent continue working because of the company’s medical benefits provided to their dependents. Human Resource Department also noticed that almost all non-Saudi employees resign once they receive better jobs offer. In light of Industrial Security letter and Human Resources findings, it is clear that the employees’ commitment and morale is at unprecedentedly low level and as a result, Saudi Aramco management’s new challenge is to motivate, recognize, increase self-belonging and reward their employees properly to ensure their optimum productivity. The lack of commitment and interest to work is attributed by many, to the employees’ “below expectation” appraisals and rewards although, the current appraisal system has been used since 2003 and hence it is considered as fairly new appraisal system. This research is intended to provide Saudi Aramco’s management with sufficient reasoning on how vital the current appraisal system can be on the success of the company and its employees. Saudi Aramco’s appraisal and reward systems are based on two components: A Performance Management Program (PMP) that utilizes a five-categories rating scale in apprising their employees. A multi stage forced ranking criteria. The old appraisal system was a simple word document filled by the supervisor that contains tasks completed, strength areas, and weakness areas, development areas. To overcome the many disadvantages of the old system, Saudi Aramco shifted to a Performance Management Program (PMP). The PMP, according to the company; is a continuous, three-phase cycle of planning, managing, and reviewing performance. Within each phase, the supervisor and the employee will both have responsibilities. PMP is not something to be done to employees, it is an activity undertaken with employees. It is a partnership. The Performance Management Program (PMP) is designed to: Improve the performance of Aramco and its employees. Enable supervisors and employees to plan and review performance. Provide a forum for career planning discussions. The PMP utilizes a five-categories rating scale ranging from “S” which is significantly exceeds job requirements to “D” which is dissatisfactory performance. Each of the five-categories has a range of annual salary increase percentages for example; “S” category ranges from (9-11%) increase while “M” which is meeting job requirements ranges from (2-4%) increase. An employee’s performance is being measured by the supervisor against some competences and goals accomplished during the year (Murphy & Cleveland, 1995). Figure 1: PMP Process Then, the general supervisor meets with his supervisors where they start discussing and defending their employees having in mind that the stronger the supervisor is the greater the chance that the employee will get a satisfactory appraisal rating. Once this stage is completed, the manager meets with his general supervisors to discuss and approve their employees rating. Again, the stronger the general supervisor is, the greater the chance that the employees will get a satisfactory appraisal rating. Figure 2: Rating Factors 1.2 Problem Statement: Evaluation of an individual work performance as a formal management procedure is recent. It dates back to the time of Second World War. But, in a broader term, the practice of appraisal or judgment is very natural. As indicated by Dulewicz (1989), "a basic human tendency to make judgments about those one is working with, as well as about oneself". In the absence of a well-structured appraisal system, people tend to judge the performance of others naturally and informally. Performance evaluation systems started as simple techniques of income changing and justification. They evolve to systems that are intended to motivate and aid in the development of an employee (Kleiman, 2010). If new appraisal systems are meant to be not only about income changing and justification but also about motivation and development then, the question that begs to be answered is that are they fair. This research will intend to figure out the following: 1. Is the current appraisal system fair? 2. Where are the bottle-necks in PMP? 3. Where are the bottle-necks in force ranking stages? 4. What is expected from the employee? 5. What is expected from the supervisor? 6. What are the different considerations when executing the most appropriate appraisal system in the organization? 7. Is there a need to change PMP system? 1.3 Objective of the Study This research will aim to measure acceptability of PMP system in terms of rating and rewarding by investigating how employees think about it, go through its phases and deal with its outcomes. The respondents’ findings will be shared with management to highlight how vital the appraisal system can be to the company and employees. The research also will aim to: Advantages and disadvantages of PMP Advantages and disadvantages of other performance evaluation tools Relationship between PMP and morale Relationship between PMP and employees’ productivity. Utilize these relationships to the best for the company and employees. 1.4 Significance of the Study The study will be of value since it will provide management with relevant information that should help to detect employees’ beliefs, values, preferences, motivations and development areas with regard to PMP. The study will highlight to management bottle-necks in the evaluation process and how to overcome these obstacles. The study will highlight also how PMP affects the morale of the employees and consequently their performance. The study will also reveal whether or not the current system is adequate or necessitate a change. 1.5 Definition of Terms Appraisal system: Personnel evaluation method seeking the measurement of employee work effectiveness using objective criteria commitment D: Does not meet requirements; performance and results do not meet minimum job requirements E: Exceeds some requirements; some results and performance level exceeds minimum job requirements. E+: Exceeds most requirements; most results and performance level exceeds minimum job requirements. M: Meets requirements; minimum standards of performance and results are met Morale: The state of the spirits of a person or group as exhibited by confidence, cheerfulness, discipline, and willingness to perform assigned tasks. Performance: The way in which someone or something functions. Productivity: The quality of being productive. PMP: Performance Management Program Retirement package: Benefits employees get once they retire. It usually includes financial and medical benefits. S: Significantly exceeds most requirements, results significantly exceeds most expectations and job requirements. Self-belonging: Feeling or sensing that a person is part of a family or an organization. 1.6 Limitations of the Study: Limitations do exist on all studies and this study is no different. There is a limitation in the sample due to its relatively small size. There is also a limitation in this study since it includes portion of employees whom get apprised by PMP. Other employees are excluded such as Saudi Aramco School Teachers, employees in Professional Development Program, College Degree Program, Advanced Degree Program, Part-Time Casuals, Out-of-Kingdom Training Program and Contractors. Moreover, there are various appraisal systems, which are evident in many organizations today, but only the PMP system will be discussed since it is applicable in Saudi Aramco. CHAPTER 2 Literature Review 2.1 Standard Appraisal Methods Most academics identify several reasons or objectives to give performance appraisals such as reviewing past performances, kindling awareness of work performance amongst employees, rewarding past performance and future goal-setting[Hal89][Ber84]. The main objective of any appraisal system is to provide a sound evaluation of the employee’s performance throughout a certain period of time. Many companies perform appraisal utilizing different methods that fit the company's needs, functions and processes (Chu & Chen, 2007). In many cases, management within the same company applies different appraisal methods or combines two or more methods in their appraisal system. In Saudi Aramco, the appraisal system has been dynamic by introducing many enhancements to strengthen its reliability. (Alexander Hamilton Institute [AHI] (1986) listed the five major appraisal methods with brief description of their mechanisms. The rating scale system seems to be the most popular among others and it basically divides employees’ performances into subcategories. For example, Saudi Aramco’s old appraisal system had the following subcategories: Excellent, Very Good, Good, Fair and Poor. Each category is associated with a different appraisal percentage. The second appraisal method is the essay appraisal in which the appraiser describes the evaluation of the employee in essay form. The third appraisal system is the ranking system, which “assigns employees to spots along a standard distribution curve or compares individual employees to obtain a ranked list” (AHI, 1986, p. 61). This particular method is slightly more risky than others, since it relies heavily on comparing the employee with others, which will leave the judgment in most of the cases to personal relationships with the employees and personal preferences of the supervisor. The fourth appraisal method is the reporting of critical incident. In this method, the supervisor will relay on how the employee deals with certain job events. Then the supervisor will base his evaluation of the employee on number of such events. This method requires the supervisor to daily record the employee performance based on these daily work events. This method if applied in a good manner will give the supervisor a very good feedback about the actual performance of his employees. However, one of its major drawbacks is the huge effort and time that the supervisor needs to devote in order to comply with this method. The fifth appraisal method is management by objectives. In this method the supervisor meets with the employee prior to the beginning of the appraisal period and set some goals and competencies that the employee needs to achieve and master. The evaluation thereafter will depend on the actual achievement of the employee after the end of the appraisal period. This method requires that the supervisor and employee agree on the stated objectives and goals, otherwise the management by objective appraisal method will not work in a perfect manner. Saudi Aramco’s PMP is a mixture of the above mentioned appraisal methods with emphases on the management by objective appraisal method. 2.2 Importance of Fair Appraisal System A Performance Appraisal System aims to advance organizational efficiency and outcomes by providing developmental evaluation by associating rewards to performance[Bos00][Mil91][Ryn05]. In the past few decades, organizations have considered performance appraisal system as a key organizational and HR process for talent management and constructive development of their employees[Lee85]. A number of characteristics such as identification of job duties, participative goals setting, training and appraisal feedback are required in order to make the appraisal system really efficient and trustworthy amongst employees[Ebe88]. Considerable research has also been done with regards to the fairness of appraisal systems. It is important to note that a high level of understanding of the appraisal system relates to a higher level of fairness and hence acceptance. [Pet07] Fairness is an essential human requirement that allows progress and prosperity. The importance of fairness cannot be overlooked when discussing an issue like appraisal system. A fair appraisal system that gives exact evaluation of the employee performance is mandatory for a healthy and productive organization. It is an appraisal system that is not affected by human bias or personal preferences. However, fairness is difficult to be found in most of the appraisal systems. "Your employees aren't perfect, and neither are you. These simple human facts will continue to make performance appraisal an uncertain process, subject to bias and misjudgment” (AHI, 1986, p. 9). The major factor that makes fairness a very important component of any appraisal system is the unique affect it has on the productivity and morals of the employees. If any employee believes that the appraisal system of his employer is fair, then, he/she would perform at his/her best level. The impression such employees have, of being appraised in a fair manner, allows them to focus on their work tasks and ignites their inner abilities of discovering new methods of improving their levels of performance. It further prevents them of brining to their attentions the negative side of their employment. Eckles, Carmichael and Sarchet (1981) mentioned that the main objective of the performance appraisal system is to enhance the employee's development and career planning. For that, fairness of appraisal system constructs a very solid base that the organization can build on for the development and advancement of its employees. 2.3 Errors in Appraisal Systems The appraisal system is usually associated with many errors that bound its capabilities. Most of these errors are made by the boss (the appraiser). AHI (1986) provided a list of errors that are usually made by the appraiser. Among the most important is the halo effect in which the appraiser depends on first impression. So, if one employee is rated as low performer, this rating will stick to his appraisal until the change of his appraiser. Another important error that appraiser fall into is allowing personal bias to affect rating. In fact, this is a drawback that not every supervisor can bypass. "This is particularly True when Apprising "Knowledge Worker" whose performance is not easily measured in numbers" (AHI, 1986). Such errors establish unreliable appraisal system that can't be used for enhancing the employee's performance. Moreover, Kirkpatrick (1982) looked at the issue with different perspective. He defined two major traps that the supervisor needs to avoid when conducting an evaluation. The first one is the Halo Effect which Kirkpatrick (1982) looked at in a detailed manner defining it as the tendency of the supervisor to overrate one of his favorite employees. The book had stated 7 different reasons for the occurrence of the halo effect. These seven reasons are 1) Effect of Past Record, 2) Compatibility, 3) Effect of Recency, 4) The one-asset person, 5) The Blind-Spot Effect, 6) The High Potential Effect and 7) The No Complaints Bias. The second trap that Kirkpatrick (1982) discussed is the Horns Effect. In here the appraiser tends to underrate the employee. The book has also named 8 reasons for such an effect. The reasons are 1) The boss is perfectionist; 2) The subordinate is Contrary, 3) The oddball Effect (Rated low due to being different), 4) Membership in a weak team, 5) The guilt by association effect, 6) The dramatic incident effect, 7) The personality trait effect and 8) The self comparison effect. Saudi Aramco utilizes PMP as the appraisal system, yet, if the appraisers cannot avoid getting into the above mentioned mistakes, then this appraisal system will not meet its objectives regardless of its robustness. In the publication, “Performance Appraisal Systems: Matching Practice with Theory”, authors propose a number of ways to reduce the errors in a Performance Appraisal System[Hal89]. These actions include encouraging supervisors to indulge in frequent counseling sessions, incentivizing managers to develop their sub-ordinates, providing skills training that is directly related to performance appraisal, linking the performance appraisal process to the company’s human resource planning, focusing performance appraisals on future behavior, establishing explicit performance goals in the appraisal process and building an evaluative feedback loop into the performance appraisal system. 2.4 Employees Reactions to Appraisals The appraisals have great impact on employees' morals and productivity. Eckles et al. (1981) provides three types of employees' reactions to the appraisal system. The first set of employees would question the appraisal system ability, even if they were provided the fairest system ever. They are doubtful and believe that some data might be used against them. The second set of employees is the type who believes that the appraisal system provides them with the feedback that tells them how their supervisors evaluate their growth in the company. In other words, they see the appraisal system as a mirror of their development and that helps them in knowing where they exactly stand in the company. The third type of employees tends to neglect the appraisal system and believe that they can survive with it or without it. 2.5 Impact of Appraisal Systems on Employee’s Morale and Performance There is an abundance of literature that focuses its research on the impact that Performance Appraisal Systems have on employee’s morale, performance and productivity. Peer-review research shows that performance appraisal systems aim to pay the employees by performance and accelerate the efficiency of poor performers at the same time enhancing that of better performers.[Seo09]. This section investigates the extent to which appraisal systems achieve their aim. The write-up describes the objectives, methods and findings of a number of research studies done on in this regard. In 1999, researchers Taylor and Pierce conducted a longitudinal study on the effects of a performance management system on employees’ work-related attitudes in a governmental organization[Pau99]. The study was conducted in a regional environmental council in New Zealand and covered 218 professional/managerial staff included in their performance management system. Author’s research aimed at (i) investigating effects of performance planning and merit pay on work-related attitudes of the employees (ii) co-relation between lower-than-expected evaluation ratings and drop in employee’s morale (iii) behavioral reactions to lower-than-expected ratings such as blaming others and (iv) explore new ways to increase the effectiveness of performance appraisal system by obtaining participant feedback. The various variables that were measured and observed to be related to performance appraisal system are commitment to the organization, organization-based self-esteem, job satisfaction, satisfaction with supervisor, co-operation with supervisor, recent effort on the job, expected performance ratings and blame targets. The results of the research reveal that participants positively responded to the goal setting part of the appraisal system. Even for below-average performance workers, the goal-setting capability of appraisal systems increased their level of commitment and co-operating with their reporting manager. However, the employees were not satisfied by the bonus component of these systems. Their concerns were centered around the unfairness in ratings and bonus distributions. This was especially an observation amongst high-performance employees who experienced a drastic drop in their morale following appraisals. It was also grasped that there was a considerable decrease in supervisor satisfaction and co-operation after the appraisal and bonus distribution amongst the high-performing employees. This downward trend was seen at least up to six months duration since the appraisal. No noteworthy change was found over company-based self-confidence, job satisfaction or effort. The authors’ research, hence, cast reservation over the effectiveness of performance appraisal systems in public organizations in increasing employee subsequent determination and cultivating their work-related attitudes. Seong Soo Oh and Gregory B. Lewis conducted a more recent study on the role of performance appraisal systems in inspiring intrinsically motivated employees[Seo09]. The hypothesis of Oh and Lewis’ search was that there is a basic incongruity between performance appraisal system and an intrinsically motivated workforce. Research was conducted using data from the US Merit Systems Protection Board survey for public administration organizations over a sample of 4384 full-time employees. The employees were asked to agree or disagree with the statement, “The performance appraisal system motivates me to do a better job.” They were also asked to mark three most important motivating factors of a list of 14 provided by the authors. The results of their survey showed that only 18% of federal employees strongly felt that the performance appraisal system motivates them to do a better job in contrast to 58% of employees that felt the other way around. Amongst the employees who listed themselves as intrinsic motivators, only 9% believed that the appraisal system motivated them to perform better as 39% of them strongly disagreed with the statement. In order to adapt the model across different organizations, the authors controlled their survey for a variety of demographic and organizational variables. A peer-reviewed research by Mary Jo Ducharme, Parbudyal Singh and Mark Podolsky focused on exploring links between performance appraisals and pay satisfaction[Mar05]. The article assessed employee pay approval under four situations: (i) when performance appraisals are interrelated to performance pay outcomes, (ii) when performance appraisals are not interrelated to performance pay outcomes, (iii) when no performance appraisal systems are established but performance pay is used and (iv) when no performance appraisal systems are established and performance pay is not used. Past research has indicated that performance pay practices have noticeably led to improved efficiency and is cited amongst the HR best practices[Laz00]. The database for their research was based on Canadian Workplace and Employee survey that includes more than 24,000 employees 6000 organizations across all industries. Participants of the survey were asked, “to indicate if their current position was evaluated by performance appraisal and whether the results affected their level of pay and benefits.” The findings of the study indicated that in the case where performance appraisals were interrelated to performance pay outcomes, the employees had more pay satisfaction than in cases where there was no link between the performance appraisals and performance pay outcomes. Employee satisfaction also was high in cases where constructive performance related feedback was provided to the employee. The authors implicate that it is useful for the managers to co-relate employee’s performance pay with performance appraisal. Additionally, the authors suggest that to achieve a line of sight for the employee, it is important to establish a performance appraisal mechanism within the organization regardless of an explicit connection with performance pay. This observation of authors is different from that of other studies mentioned above. However, the study emphasizes that several conditions should be controlled for the appraisal system to be fair and effective. Antonio Giangreco, Andrea Carugati, Massimo Pilati and Antonio Sebastiano performed a study on the Performance appraisal systems in the Middle East[Ant10], hence is highly significant in understanding the impact of appraisal systems at Saudi Aramco. The aim of the research paper is to contextualize the use of performance appraisal system beyond Western cultures through its application in Middle East organizations. They also studied the role of culture in appraisal system planning and use. The study was implemented at the Hebron Public Hospital (Palestine). The data collected and reviewed by the authors incorporated the performance assessments of the whole of HPH employees for 3 successive years (2000, 2001 and 2002) and covered all five personnel categories at HPH i.e. specialized doctors, resident doctors, nurses, technicians and administrative staff. The data review was followed by personal interviews (spanning two years) with employees concerning areas of their history with the appraisal system, the accomplishments of the hospital in its recent past, the employees’ point of view on the appraisal system quantitative outcomes, the major issues and obstacles experienced in the appraisal process and in the hospital. The authors found from their research that the employees in the Hospital in Palestine acknowledged that a Performance Appraisal System is required to provide improvement to the organization, to understand human behavior and experience and to reveal the organizational politics. From the analysis of the responses received from the interviews and data review, the authors have defined the measures of a Performance Appraisal System that drive its success or failure. They emphasize that culture and context play different yet important roles in the use of the appraisal system. Performance Appraisal Systems are a good measure of collecting and reflecting feedback to the employee[Car82]. I.M. Jawahar conducted a peer-reviewed research on the role of appraisal feedback on the post-feedback performance of the employee[IMJ10]. The goals of the study done by Jawahar were (i) to examine if employee’s reactions to feedback influence their future performance (ii) to study if employee’s reactions intervene in the relationship between feedback-related characteristics such as employee attitude and his or her (future) performance and (iii) to explore further the feedback-related characteristics that impact employee’s reactions. The study conducted on a software company (270 employees) located in the West Coast of United States had six key hypotheses that included that employee’s job knowledge, feedback criticism, participation in feedback discussion, job relatedness of criteria, setting of goals and improvement suggestions are related to his or her perception of accuracy, utility and satisfaction with feedback. The results of the study showed that the effect of feedback on performance is not always positive and consistent. Moreover, it was observed from statistical models that employees’ reactions to the feedback mediated the influence of feedback related characteristics on performance. Hence, if an employee has a perceived that feedback is accurate, the result would have a positive effect on his future performance. Since feedback to employees is not always going to be positive, there is a need to examine for additional factors that might be connected with positive reactions, irrespective of the nature of the feedback. The outcomes of this study suggest job knowledge, job relatedness of evaluation, goal setting, and recommending ways to improve performance as the most significant factors that affect employees’ reactions and thereby their future performance. Literature shows that there is also considerable research conducted on the impact the changes in appraisal system have on job performance of employees. In 1988, Eberhardt and Pooyan conducted a quasi-experiment that assessed the impact of appraisal system redesign on employee satisfaction[Ebe88]. The study took place in a 300-bed private hospital in a North Central state in US. Due to technological, economical, social and legal changes in the environment, the hospital re-designed its performance appraisal system towards what is known as the pay-for-performance reward system. The old appraisal system was a seniority-based system and generally rewarded longevity amongst employees. The redesign of the appraisal system included activities such as identification of job duties, collecting joint supervisor and subordinate inputs and supervisor and subordinate agreement on goals or performance benchmarks. The survey about the effect of appraisal system redesign on employees was conducted through questionnaires to all of the 1,369 employees of the hospital. The results of the research imply that the performance appraisal system redesign was effective in terms of subordinates' insights of their managers' behaviors. Those personnel who had their performance appraised under the new system perceived their managers’ behaviors to a considerably greater extent than those whose performance was still being evaluated under the old system. Another performance appraisal system Australian study researched upon the impact of the developmental appraisal program on employee’s perceptions[Phy95]. The study focused on the understanding the behavioral change employees undergo after the introduction of an appraisal program. Conducted on the employees of Australian Commonwealth Government finance agency, the study explored different appraisal characteristics such as feedback, goal setting, supervisor support, action planning and participative goal setting. An important finding of the project was that appraisals do have a positive value. Though, the results of the study indicated that a performance appraisal system enhanced feedback satisfaction rather than self-rated behavior. However, more favorable employee response of greater satisfaction leads to performance improvement amongst the employees. While other researchers were focusing on the benefits of feedback on employees, Mushin Lee and Wonjun Shin led a research project in comprehending the results of no performance appraisal feedback on employee’s behavior[Mus00]. Literature provides us with certain evidence that performance appraisal feedback interventions can lead to a decrease in performance[ANK96] as it triggers negative attitudes in employees and a widespread dissatisfaction in work. Lee and Shin conducted a survey across clerical and technical members (405) of a large Korean academic institute that never provided feedback. The results of the study exhibited that most employees expected their supervisor to give them high appraisal ratings. In cases, where feedback was provided, there was a trend of discontentment as a result of a mismatch of expectations. Author’s analysis show that expectation inflation is caused before the feedback, which is a predictor of employee’s attitude towards his or her supervisor, job satisfaction and organizational commitment. Even though providing feedback causes a negative attitude towards the appraisal system, it, however, has a positive effect on other employee attitudes. 2.6 Roles of Supervisor and Employee in the Appraisal Process The appraisal system is conducted between two parties: the supervisor and his employee. Every one of them has a certain role in the appraisal process. The major role of the supervisor in the appraisal process is to develop a positive attitude toward the appraisal system as described by Eckles at al. (1981). The supervisor should use the appraisal system as a conduit to better future performance of his employees, which means that he keeps the high performers at their high performance level if not better and increases the level of performance of low performers. The supervisor is urged to utilize the appraisal system fairly preventing his personal preferences of affecting the rating of employees. He also should concentrate on the amount and quality of the job being done not the person who has done it . On the other hand, the employee is responsible for his weaknesses that appear in the appraisal system. For that, he has to strengthen his skills in his weak areas. He should be utilizing his appraisal as a ladder to success not a pitfall that leads to failure. He could do that by knowing his goals and responsibility at the beginning of the appraisal period then attempting on a serious manner to attain them. He should discuss his goals and competencies set by the supervisor at the beginning of the appraisal period not at the end. The employee should be brave enough to accept his rating and move forward to a better appraisal rating instead of blaming it on his supervisor. In other words, the employee should trust the appraisal system and make a commitment to use it for his best. This study will shed light on the appraisal system utilized in Saudi Aramco, the study is attempting to fill the knowledge gap in quantifying the effect of this appraisal system on the employees morals and productivity. It will do that by sinking deep into the issue and try to investigate its breadth, magnitude and solutions. 2.7 HR Appraisal Practices at Saudi Aramco Saudi Aramco, an international oil and gas company operating over 70 years in services, has a number of HR practices in improving work efficiency, co-ordination and rewarding per performance of the employees[Ham06]. The employee strength in Saudi Aramco grew from 20,000 employees in 1955 to 52,000 in 2006. Their key HR practices include Apprentice training program for young Saudi high school graduates at International Universities, a Professional Development Program designed to integrate Saudi professionals into workforce, an internal e-learning infrastructure and a performance management system. CHAPTER 3 Research Methodology 3.1 Research Design The section details descriptions of participants and research methodology used in understanding the HR appraisal systems at Saudi Aramco. The research is an applied research since it is going to investigate whether the PMP system is a reliable system or a system that needs enhancements. The primary data will be collected through self-administered surveys that will be communicated to sample elements. The collected data will be statistically analyzed utilizing Microsoft Excel. The denominator of analysis in this research study is the individual employee who has familiarity, understanding and opinions about the existing HR appraisal system at Saudi Aramco. The study will intend to get the feedback of Saudi Aramco employees about the appraisal system in the company. For that, secondary data was utilized to set the base for the appraisal system understanding as a whole and forming the proper survey questions. The selection of surveys was based on their effectiveness in providing accurate data in a swift and cheap manner. The survey's questions will be structured to inspect the overall satisfaction of the employees toward the appraisal system. It should further define the shortcomings of the system if any. The use of means and standard deviation will assist in knowing the distribution of the overall satisfaction among different departments in Saudi Aramco. Furthermore, the survey will check the respondents’ feedback about what is expected from the employee and his supervisor when it comes to appraisal system. Possible enhancements of the PMP system will be explored through the survey by placing number of questions regarding this issue. 3.2 Study Population The study population is employees of Saudi Aramco's who work in different business disciplines. Saudi Aramco has over 65,000 employees from different nationalities, gender and age groups. English language is the primary language for the study population. 3.3 Sampling Procedure Using 95% confidence level and 5% error, the appropriate sampling size was found to be 397. The study sample will include engineers, scientists, doctors, operators, clerks, operational foremen, industrial security officers, mechanics, electricians, computer specialists and other different job holders. The study is intended to cover most of the nationalities inside the company to ensure capturing every single diverse feedback. Most of the sample units will be professionals with bachelor degree educational level and higher, yet people with high school education and lower educational level will be given a fair portion of the study sample-size pie. All of the mentioned employees speak fair to good English language and most of them are fluent English speakers. The age range for the sample will be from 23 to almost 60 years with work experience that ranges from few months to 35 years. Since the company has extended arms that cover the whole Kingdome of Saudi Arabia, The study sample will not be taken entirely from Dhahran (Headquarter of the Company), employees in various company districts will be part of the study sample. In addition, the sample will have both genders. A general characteristic of the study sample is that it is diverse in terms of geography, demography and job level. The procedure in which the sample will be selected from the population is a probability design using stratified sampling technique. The reason for selecting the probability design is because of its universal acceptance, accuracy, and its outcomes can be generalized. Moreover, the reason for selecting the stratified sampling is that it will ensure that the 397 sample size will cover a wide spectrum of diverse respondents i.e., occupation, age group, gender, work location, nationalities...etc. 3.4 Instrumentation The main research instrument is a self-administrated survey that will be distributed through corporate email which has a link to a website that contains the survey. The main reason behind selecting survey and not any other instrument is its ability to gather data quickly and with reasonable accuracy. It also gets the work done with minimum cost. The surveys will be sent to more than 1000 employees in order to get the minimum required sample size of 397. The study is intending to have 95% confidence level with sampling error of less than 5%. The surveys will be statistically analyzed to estimate proportions and means. Prior to filling the survey, respondents will be asked to reveal some personal information such as occupation, work location, age group, experience, gender…etc. This information will not include the name of the respondents to ensure confidentiality. This information must be answered by the respondents; otherwise, submittal of the survey will be enabled by the website link. This information will be utilized in the data analysis phase to examine different behavior of each stratum. For simplicity, Likert Scale will be utilized widely in constructing the surveys. Following are sample items of the survey questions: Listed below are different insights about PMP appraisal system. Please indicate how strongly you agree or disagree with each point by using the following scale and indicate the rating on the blanks provided: 1 = Strongly Disagree 2 = Disagree 3 = Neither Agree nor Disagree 4. Agree 5 = Strongly Agree ____ Appraisal system practiced in Saudi Armaco is fair and provide justice. ____ The appraisal system employed by Saudi Armaco has a significant impact on your performance, specifically on productivity and morale. ____ The appraisal system of Saudi Aramco affects not only you but also your supervisor. 3.5 Scale Validity and Reliability In order for the survey to be reliable, many questions will be formed to be similar to address the feedback of the respondents regarding a certain survey aspect. This technique will provide the wanted scale reliability through a good presentation of a battery of scale. The survey will be designed in a way that assures reliability by asking the respondents several questions about the same concept. For example, one potential dimension of the survey is to assess whether employees find the appraisal system as a fair one. Certainly, a direct question would be "Is the appraisal system fair?" another question or statement could be "The appraisal system in Saudi Aramco provides the required fairness." Following such a method would offer excellent realization of the study reliability. The survey will be designed to establish the optimum validity. The questions will be designed in a way that is simple to ensure valid answers and to obtain face validity. Each question will be discussing one idea only and it will be written in a simple language. The content validity will be addressed as well, if one question for example asks the respondent if appraisal system affects their performance, the researcher cannot draw a conclusion that the appraisal system is the only factor that affects the employee performance. Moreover, for validity assurance, the survey will include questions that cover all aspects related to PMP such as competencies, development areas, goals, meeting scheduling with supervisor and other aspects. For instance, when the survey asks about the annual goals to be accomplished, it will cover the number of the goals, weight of each goal and how reasonable these goals are. 3.6 Data Collection Procedures Once the survey is written on a word document, it will be converted to online format through a certain website. Afterward, an email will be sent to 1000 employees along with the link to the website. The main objectives of the survey will be discussed in the email, showing its significance and potential which will eventually increase the number of responses. The email will include little guidelines that would ease the respondents' task of answering the survey. The number of responses will be monitored on a real-time basis and if the number of responses are less than 397, another email will be sent to remind those who did not participate in the survey to go ahead and participate. The reminder email could contain statements that express how important this survey is to the employee and how important the employee participation is to the success of this survey. After achieving the minimum required number of respondents, all the data will be collected and stored for the next step that is data analysis. 3.7 Data Analysis The collected survey data will be checked and verified throughout the different phases (editing, coding, data entry and data analysis). When editing the data, the researchers will check and adjust for omissions and consistency which will make the data ready for coding and storage. Then, coding will be performed and the numerical scores will be assigned. Afterward, the data will be transformed to Microsoft Excel to perform the data analysis. The data analysis will include both descriptive analysis and inferential analysis. Inclusion of descriptive analysis will be intended to simplify the data and make them easy to interpret. Applied research type will end with a set of recommendations to assert the managers' decisions about PMP. Hence, the inferential analysis will be used to predict the behavior of the entire population of Saudi Aramco in order to help managers' decision. The use of means and standard deviation will be important in defining the distribution of the overall satisfaction of the appraisal system in the different departments, age, occupation, work location and gender within Saudi Aramco. Moreover, proportions will be utilized heavily in the data analysis part to estimate the proportion of occurrence, In other words, if one survey question is considered, then the proportion will give percentages of the different feedbacks of the respondents. The proportion is very valuable in giving a general indication of what the overall outcome of the study is. The central tendency with its three ways: Mean, Median and Mode will be utilized in assessing the data results. CHAPTER 4 Survey Questionnaire Listed below are different insights about PMP appraisal system. Please indicate how strongly you agree or disagree with each point by using the following scale and indicate the rating on the blanks provided:. We assure the confidentiality of the information provided by you. Your cooperation will be highly appreciated. Please tick/ fill one appropriate answer. Personnel information: Organization Name Job title: Gender male female Age: 21-25 years 26-30 years 31-35 years 36-40 years Above 40 years experience at this post 0-5 years 6-10 years 11-15 years 16-20years More than 20 year Likert five-point scale: 1 – Strongly Disagree, 2 – Disagree, 3 – Neither Agree not Disagree, 4 – Agree, 5 – Strongly Agree State your level of agreement with the following statements S.No Definition 5 4 3 2 1 1 Every Employee’s goals are aligned with unit and company goals 2 All employees in the firm are evaluated 3 Evaluations include performance spanning the entire review period 4 All major job responsibilities are evaluated 5 Feedback is provided on both positive and negative performance 6 It is readily available for use 7 It is easy to use 8 It is acceptable to those who use it for decisions 9 Benefits of system outweigh the costs 10 Standards and evaluations for each job function are important and relevant 11 Only the functions that are under the control of the employee are measured 12 Evaluations take place at regular intervals and at appropriate moments 13 System provides for continuing skill development of evaluators 14 Results are used for important administrative decisions 15 Detailed guidance is provided to employees about what is expected of them and how they can meet these expectations 16 The system distinguishes between effective and ineffective behaviors and results, thereby also identifying employees displaying various levels of performance effectiveness 17 Measures of performance are consistent 18 Measures of performance are free of error 19 Measures include all critical performance facets 20 Measures do not leave out any important performance facets 21 Factors out of employee control are not included 22 Employees perceive the performance evaluation and rewards received relative to the work performed as fair (distributive justice) 23 Employee perceive the procedure used to determine the ratings and subsequent rewards as fair (procedural justice) 24 Employee input about their performance is gathered from the employee before the appraisal meeting 25 Employees participate in the process of creating the system by providing input on how performance should be measured 26 Performance is evaluated frequently and feedback is provided on an ongoing basis 27 Appraisal meeting is a two-way communication process and not one-way communication delivered from, the supervisor to the employee 28 Standards are clear and communicated on an ongoing basis 29 Communications are factual. Open, and honest. 30 There is an appeal process, through which employees can challenge unjust or incorrect decisions 31 The appeal process, when used really works 32 Performance is evaluated consistently across people and time 33 Supervisors suppress their personal self-interest in providing evaluations 34 Supervisors evaluate performance dimensions only for which they have sufficient information 35 Employee privacy is respected 36 The forced ranking appraisal system is adequate for the firm 37 The forced ranking system is viewed as a fair system to you (as an evaluated subordinate) CHAPTER 5 Data Analysis and Results Q1 Most of the respondents agree that Employee’s goals are aligned with unit and company goals Q2 Most of the respondents are uncertain whether or not all employees are evaluated Q3 Most of the respondents strongly agree that the evaluation period is well spanned. Q4 Most of the correspondents agree that all major jobs are evaluated Q5 Most of the respondent disagree that feedback is provided on both positive and negative performance Q6 Most of the respondents are uncertain that the feedback is readily available for use Q7 Most of the respondents say that the feedback is easy to use Q8 Most of the respondent strongly disagree that it is acceptable to those who use it for decisions Q9 Most of the respondents agree that the benefits of system outweigh the costs Q10 Most respondents agree that the standards and evaluations for each job function are important and relevant Q11 Most respondents are uncertain that only the functions that are under the control of the employee are evaluated. Q12 Most respondent strongly disagree that evaluations take place at regular intervals and at appropriate moments Q13 Most respondents disagree that the system provides for continuing skill development of evaluators Q14 Respondents strongly agree that results are used for important administrative decisions Q15 Respondents are uncertain whether or not a detailed guidance is provided to employees about what is expected of them and how they can meet these expectations Q16 Most respondents strongly disagree that he system distinguishes between effective and ineffective behaviors and results, thereby also identifying employees displaying various levels of performance effectiveness Q17 Most respondents strongly disagree that the measures of performance are consistent Q18 Most respondents strongly disagree that the measures of performance are free of error Q19 Most respondents agree that measures include all critical performance facets Q20 Most respondents disagree that measures do not leave out any important performance facets Q21 Most respondents agree that the factors out of employee are not included Q22 Most respondents disagree that employees perceive the performance evaluation and rewards received relative to the work performed as fair (distributive justice) Q23 Most respondents disagree that the procedure used to determine the ratings and subsequent rewards as fair (procedural justice) Q24 Most respondents agree that the employee input about their performance is gathered from the employee before the appraisal meeting Q25 Most respondents strongly disagree that employees participate in the process of creating the system by providing input on how performance should be measured Q26 Most respondents agree that the performance is evaluated frequently and feedback is provided on an ongoing basis Q27 Most respondents strongly disagree that the Appraisal meeting is a two-way communication process and not one-way communication delivered from, the supervisor to the employee Q28 Most respondents strongly disagree that Standards are clear and communicated on an ongoing basis Q29 Most respondents disagree that Communications are factual. Open, and honest. Q30 Most respondents strongly agree with the appeal process, through which employees can challenge unjust or incorrect decisions Q31 Most respondents strongly agree that the appeal process, initiates a fair hearing Q32 Most respondents agree Performance is evaluated consistently across people and time Q33 Most respondents strongly disagree that Supervisors suppress their personal self-interest in providing evaluations Q 34 Most respondents strongly agree that Supervisors evaluate performance dimensions only for which they have sufficient information Q 35 Most respondents agree that Employee privacy is respected Q 36 Most respondents strongly agree that the forceful ranking appraisal system will benefit the firm over long term Q 37 Most respondents strongly disagree that the forced ranking system is viewed as a fair system by you. 5.1 DISCUSSION In this chapter the discussion on the survey that was conducted would be done. The survey had a total of 397 respondents and was chosen from a study sample that included engineers, scientists, doctors, operators, clerks, operational foremen, industrial security officers, mechanics, electricians, computer specialists and other different job holders. The monitoring of workers stands at the heart of the employment relationship. Getting workers to exert effort, assigning individual workers to the most appropriate jobs, setting pay, deciding which workers should be retained and which should be promoted all require that management judge the performance of workers. This judgement requires learning about worker productivity, the process of monitoring. In some establishments, this process may be informal and in others it may be straightforward because of the nature of technology (individual output can be observed). Yet, the most common approach to monitoring remains a formal system of performance appraisal (Jackson and Schuler 2003). Performance appraisal usually involves ‘evaluating performance based on the judgements and opinions of subordinates, peers, supervisors, other managers and even workers themselves’ (Jackson and Schuler 2003: 455). After tabulating the results of the survey a total of four patterns were observed. These patterns would be discussed one by one. Firstly, most of the respondents find the whole evaluation procedure as unfair and a high percentage of them strongly disagree with the validity of the evaluation process. Questions on the consistency of the process, the evaluation process being error free, supervisors suppress their personal self-interest in providing evaluations, procedure used to determine the ratings and subsequent rewards as fair, employees participate in the process of creating the system by providing input on how performance should be measured resulted in more than 70 per cent of the respondents answering in ‘uncertain’, ‘disagree’ or ‘strongly disagree’. This does not make for a good reading. This clearly indicates that the randomly selected employees are not happy with the evaluation process. If the company wants these changes and evaluations to show results then they would need the interest and support of their employees Secondly, the results of the survey have also shown that most of the respondents are not perfectly clear on the tasks and assignments that are delegated to them. This indicates an obvious lack of authority and leadership within the company. Questions like if detailed guidance is provided to employees about what is expected of them and how they can meet these expectations and appraisal meeting is a two-way communication process and not one-way communication delivered from, the supervisor to the employee were responded in ‘uncertain’, ‘disagree’ or ‘strongly disagree’ by the respondents. This is another problem that needs to be addressed. Thirdly, results show a varied opinion on the usage of the feedback system and the procedure by which an employee can interact. Questions like the feedback is easy to use, employee input about their performance is gathered from the employee before the appraisal meeting, performance is evaluated frequently and feedback is provided on an ongoing basis, the appeal process, and through which employees can challenge unjust or incorrect decisions have all been positively answered as most the respondents have chosen the ‘Strongly agree’ and ‘Agree’ options for these question. This shows good signs that the employees are involved in the feedback process and they are generally happy with the way they are conducted. But there were some negative responses on the feedback as well. Questions like feedback is provided on both positive and negative performance, feedback is readily available for use and employees participate in the process of creating the system by providing input on how performance should be measured are answered in a negative way. The employee feel that their accomplishments are not quite as well recognized as they should be and the opinions of the employees in reshaping the evaluation process are not considered. Lastly, results of the survey showed that the questions relating to the effectiveness of this change had a good response from the respondents. Questions like evaluation period is well spanned, all major jobs are evaluated, benefits of system outweigh the costs, performance is evaluated frequently and feedback is provided on an ongoing basis, Supervisors evaluate performance dimensions only for which they have sufficient information, employee privacy is respected and forceful ranking appraisal system will benefit the firm over long term were answered in a positive manner with most of the respondents choosing the ‘Agree’ and ‘Strongly Agree’ options. These results show that the employees believe a change like this is the right way to go and would benefit the company and them if executed well The overall results show some disinterest and complaints from the side of the employees but that much can be expected from them as this is a new system and everyone needs time to adapt to change. Though many employees also believe that this is a workable idea and would lead the company into the right direction, but they are not happy with some of the ways this evaluation system is being executed and they felt that they were in most cases their voices were going unheard. So these issues need to be resolved to expect a successful outcome. CHAPTER 6 Conclusion Performance Appraisals have been the most common methods employed by employers and organzations to incentivize and measure the performance of their employees. The process usually involves a dialouge between the employee and his supervisor where they discuss employee’s performance compared to supervisor’s expectations and to identify areas that require training or development. Employees have a reasonable need to know how their performance is viewed. At a fundamental level, without sufficient communication between the employee and the reporting manager, undesirable work habits could be formed or good work habits may get modified. Saudi Aramco, an international oil and gas company operating over 70 years in services, has a number of Human Resources practices aiming to improve job productivity, employee motivation, co-ordination and rewarding per performance. The current appraisal system at Saudi Aramco is based upon two key elements: a Performance Management Program (PMP) that utilizes a five-categories rating scale in apprising their employees and a multi stage forced ranking criteria. The PMP focusses on objective appraisal methods using techniques such as the rating system, essay appraisals, critical incident reporting and management by objectives. Even though Saudi Aramco has been working towards designing a comprehensive appraisal system, an internal survey and study done by HR observed that Saudi Aramco was facing challenges in motivating, recognizing and increasing self-belonging amongst employees in order to ensure their optimum productivity. To carry forward the issues escalated by the Industrial security letter, this project aims to provide Saudi Aramco’s management with sufficient reasoning on how vital the current appraisal system can be on the success of the company and its employees. The objective of the research was to measure acceptability of PMP system in terms of rating and rewarding by investigating how employees think about it, go through its phases and deal with its outcomes. The respondents’ findings will be shared with management to highlight how vital the appraisal system can be to the company and employees. To address the key areas of investigation i.e. exploring the acceptability of Performance Management Program amongst Saudi Aramco’s employees, a quantitative research methodology was used. For the purpose of this study, a sample population of 397 respondents was chosen to study and analyze employee reactions to PMP. The Sample population included engineers, scientists, doctors, operators, clerks, operational foremen, industrial security officers, mechanics, electricians, computer specialists and other different jobholders. The self-administered questionnaire was developed with 37 motivation items based on a five-point Likert scale whereby ‘‘1’’ corresponds to ‘‘Strongly Disagree’’ and ‘‘5’’ correspondes to ‘‘Strongly Agree.’’ Apart from the questionnaire, employee information such as Job title, gender, age and work experience was collected from the respondents. Upon analyzing the feedback received from the survey respondents, a number of insights upon the organization culture and employees’ morale were discovered. It was evident that the employees at Saudi Aramco have little or no confidence in the performance appraisal system as most respondents found the whole evaluation system unfair and strongly disagreed with the validity of the evaluation process. The Sample population also reflected ambiguity in employee expectations with respect to his or her job role, delegated assignments and tasks. There was an unclear and varied response on the usage of feedback system and the interaction proceedures between employees indicating little or no confidence in the objectives of PMP. The results of the survey showed that the questions relating to the effectiveness of PMP change had a good response from the respondents. The results of the survey have a number of wide applications and utility for Saudi Aramco’s Human Resources Department. With the help of survey recommendations, HR teams can create policies along with PMP redesign that have a positive correlation with employee productivity and hence overall organizational improvement. The supervisors or reporting managers can use survey results to engage employees in a constructive goal forming sessions so that expectations are matched while performance appraisal is done. CHAPTER 7 References Alexander Hamilton Institute. (1986) . Performance Apprisals: The Latest Legal Nightmare. 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