Effectiveness of Performance Appraisal by Employees in Oil and Gas Company in Abu Dhabi - Case Study Example

Thesis on perceived fairness and effectiveness of performance appraisal by employees in Oil and Gas Company in Abu Dhabi XXXXXXXXXXX ID: XXXXXX Type: Fulltime Employed Academic Supervisor: Thesis on perceived fairness and effectiveness of performance appraisal by employees in Oil and Gas Company in Abu Dhabi By: XXXXXXXXXXXXX ID: XXXX A Research Project Presented in Partial Fulfillment of the Requirements for the Master Degree in Business Administration NYIT ( Abu Dhabi ) Semester: Spring 2016/2017 Academic Supervisor: Table of Content (to be included later) Section Topic Page No. ACKNOWLEDGEMENTS To come later… ABSTRACT To come later 1. INTRODUCTION AND ORGANIZATIONAL RESEARCH 1.1 Introduction Performance management systems have been used by many organizations as a strategic management tool aimed at enhancing the performance of employees. Employee performance appraisal is when a senor evaluates the performance of subordinates and judges them accordingly and this has been a common management practice applied by many organizations. In the United States, 75 percent of state employment systems are required by the law to conduct annual performance appraisals. The reason why the application of performance appraisals is widespread is that managers as well as human resource professionals tend to believe that these appraisals are critically needed for effective management of the human resources as well as helping in performance improvements. The parties involved hold onto the assumption that if performance appraisals are effectively designed and administered, the system can provide all the parties, that is the manager, the organization as well as the employee with as many benefits as possible (Ahmed, 1999). For long periods, emphasis has been put on performance management by organizations so as to help improve the commitment of employees as well as improving the job performance. The main challenge that faces organizations when designing the systems is to adopt the best system that caters for all the parties involved especially the employee who is believed to have the largest share of performance appraisals. Traditionally, performance measures were much focusing on financial performance which could be described as a lagging performance whereas in the current world, organizations use leading performance measures such as satisfaction of the customer, efficiency, and employee engagement as part of the performance measures (Landy &Farr, 1983). The way an organization manages its employees has a large impact on the entire performance of the organization. Human resource management practices can help develop the organization’s performance through contributing to the satisfaction of the employee. Among the human resource practices that are being researched on, performance appraisal is one of the most critical and affects the organization’s performance depending on the perceived fairness by the employees. The success as well as the level of competitiveness of an organization deoends much on the level of commitment of the members, more so it depends on how satisfied employees are as regarding the organization’s performance appraisal. Although performance appraisal is one of the most important tools of human resources, sometimes it my create dissatisfaction among the employees as they may perceive it as unfair and ineffective. It has been indicated by researchers in this area that perceived fairness of the performance appraisal system has come out as the most crucial issue that managers face in organizations (Ahmed, 1999). Performance appraisal can be defined as a system of setting standards for the employee, look at the actual performance of the employee and compare it with the standards set, and give feedback to the employee on the same, how to improve as well as seeting new goals for another period and then rewarding the employee accordingly. As indicated by Mohrman, Resnick-West and Lawler (1989), the performance appraisal system exists in a cycle of four activities which include: defining what is entailed in performance, measuring and also evaluating performance, giving feedback to the individual employee and finally give information to other systems in the organization that require to use it. The systems of performance appraisal are conducted so as to reward employees accordingly, provide advice in terms of development, and also to obtain feedback from the employees in terms of the perceived fairness and effectiveness of the system. Previous literature indicate that employee perception of the fairness of performance appraisal is a very crucial factor in the acceptance by the employee as well as satisfaction of the performance appraisal system. A dood employee perception creates a favorable working environment whereas a negative perception affects employees and hence the performance of the company. If the performance appraisal system is perceived as unfair, than this can negatively employee’s commitment, job satisfaction, trust, work related stress which affects the overall employee performance. 1.2 Problem statement Although performance appraisals are widely used in organization, they, in many cases come under scrutiny and criticism. Lack of efficient ways to evaluate performance appraisal systems in organization has for long periods discouraged performance appraisal advances. Many organization in Abu Dhabi are implementing appraisal systems based on accepted practices as well as procedures which in most cases are being rejected by the users. It is very clear that there is much to an efficient performance appraisal system than the normal rating using defined policies and procedures. However, there is still no common method of evaluating the success and effectiveness of a performance appraisal system based on defined set of variables. Researchers have found out that it is a challenging task to identify and organize the most crucial variables in performance appraisals. Nevertheless, perceived fairness by employees is one of the variables that has been understood to be a key component of a successful performance appraisal system. Various research activities have been conducted so as to improve the criteria and rating of performance evaluation as well as performance appraisal procedures so as to improve the effectiveness and perceived fairness of the process. However, dissatisfaction of employees with the process of performance appraisals still exists and these systems are still being viewed as inaccurate and unfair. In this paper for the case in the gas and oil company in Abu Dhabi, performance appraisal is still viewed as a subjective performance by senior managers. 1.3 Objective of the study The overall objective of this study is to look at the system of performance appraisal in an Oil and Gas Company in Abu Dhabi from the employee’s point of view. The question the organizations is asking whether the employee perceive the system as fair and effective or otherwise. As indicated in the literature review, many researchers and academics believe that performance appraisal is not as practical as it is believed and has several flaws. This study aims to study the impact of the employee perceived fairness of performance appraisal on their satisfaction and job performance. This research paper examines what the employee of the gas and oil company feel about the Performance appraisal system being used by them and whether they perceive it as effective or not. The study has three major objectives which the research will test at the end and see if they are true. These objectives are as follows: What are the elements of effective system of performance appraisal that exist in the organization’s system? Does it mean that effective performance appraisals help to motivate employees so that tey can work harder and improve performance? Is performance appraisal a worthy tool to measure employee performance and does it help in motivating and developing employees? The study will survey the staff on what they feel about the performance appraisal system applied and whether the elements of an effective system are present in the organization. 1.4 Arrangement and Approach of the study The study will help in improving the system of performance appraisal in the organization to be fairer on the part of the employees so as to ensure that it leads to greater employee satisfaction and commitment to the organization. It will also conduct a literature review of the practices used in other organizations and recommend on the best and useful systems for use by the management of the organization being studied. 2. PROJECT PROPOSAL AND PLANNING 2.1. Target Audience We aim to conduct our study on the employees of an ADNOC Group Company called Abu Dhabi Petroleum Ports Operating Company (IRSHAD). Our target audience/consumers are the Management of IRSHAD and specifically the Human Resource Department (Employee Relations Section) which is responsible for Performance Management. The research and survey will be conducted on a cross section of the company consisting of employees form all functions and all levels. 2.2. Methodology of Research Quantitative Research is used to quantify the problem by generating numerical data or data that can be transformed into useable statistics. Quantitative research uses methods such as Surveys and questionnaires and surveys with set questions and pre-defined answers. Answers can be measured in strengths of feeling such as ‘strongly agree’ ‘disagree’ or numbers such as scales out of 10. This form of research is very flexible and can be carried out such as through the online or the phone. We will be using an online Survey consisting of a questionnaire relevant to our study. We have chosen to this Quantitative Research Methodology for the following reasons: a. It is more structured than Qualitative Methods. b. It is more reliable, logical and objective. c. Easy to generalize the findings d. Easy to focus on the important aspects and ignore the irrelevant information than is collected using qualitative methods e. The numerical data that this method generates is easy to translate into statistics and perform analytical studies such as graphs, charts etc. f. Collection of data by surveys is relatively faster and less time consuming g. A large population can be covered 2.3. Literature Review There is a vast amount of research on the topic of performance appraisal. However, there is a limitation in terms of understanding the performance of performance appraisals and this has been fully acknowledged by many new researchers. Most of the early studies focused on improving the psychometric features of the rating system so as to reduce the subjectivity in the performance ratings. There was a lot of attention and emphasis on the psychometric aspects of performance appraisals and this has kept on to date. In the 1960’s and 1970’s, many researches started focusing on rating scale formats of performance appraisals and since then, there have been new formats including the Behavioral Observation Scale (BOS), the Mixed Standard Scale and the Behaviorally Anchored Rating Scale (BARS). Other research topic of that time included topic on how to reduce the number of rating errors and also improve on the observational skills as well as the practices on developing performance appraisals (Ahmed, 1999). 2.4. The organization The organization being studied is Abu Dhabi National Oil Company (ADNOC), an Oil and Gas company in Abu Dhabi which carries out the distribution of oil and gas products not only in the United Arab Emirates but also internationally . The organization’s Performance management system includes a performance appraisal tool whereby the process of performance appraisal is legally carried out by the management. This is an organization with a very large work force and thus it is very crucial for the employees to perceive the system as fair and effective (Lawler, 1967). 2.4.1. Organization’s Activities Abu Dhabi National Oil Company (ADNOC) is a major diversified group of energy and petrochemical companies. Their business activities include exploration and production of crude oil and natural gas; refining, marketing, supply and transportation, and the manufacture of petrochemicals. Their integrated upstream and downstream activities are conducted by 14 specialist subsidiary and joint venture companies. One of such companies is Abu Dhabi Petroleum Ports Operating Company (IRSHAD). 2.4.2. Strategic Management It is IRSHAD's mission to operate and maintain the petroleum and industrial ports of Abu Dhabi to the highest quality, cost effective, and safety management standards. In addition, it is IRSHAD’s mission to contribute to the smooth and safe exports of Abu Dhabi's oil & gas industry and to develop new lines of business related to the fields of port terminals or any other fields. Its headquarters are in Abu Dhabi city and it has operations in Ruwais, Das, Zirku, Fujairah. IRSHAD is headed by a CEO. The divisions under the CEO are HSEQ, Finance, Strategy &Corporate Development, Operations, Administration and Technical. 2.4.3. Current projects undertaking Recently it diversified into Container Terminal Operations at Ruwais Port. Among its business ventures is also operating the Marine Passenger Ferry Terminal between Abu Dhabi City and Zirku Island. It also provides expert diving services to other Oil and gas companies. 2.4.4. Industry Analysis IRSHAD is a leading company for provision of marine services to the petroleum ports of Abu Dhabi. Chapter 2 to be continued… References Ahmed, S. (1999). The Emerging Effectiveness for Human Resource Management: An Exploratory Study with Performance Appraisal. The Journal Of Management Development. 18, 6, 543-556. Landy, F. J. &Farr, J.L. (1983). The Measurement of Work Performance: Methods, Theory and Applications. Orlando, FL, Academic Press. Lawler, E. E. (1967). The Multi-Trait-Multivariate Approach to Measuring Managerial Job Performance. Journal of Applied Psychology, 51, 369-381. Read More