Performance appraisals are social in nature. It is hard to believe but it is true. People use performance appraisals to determine how they are doing in the organization. A strong performer who receives a low appraisal will be upset and a low performer who receives an excellent appraisal will happy based upon some perceived norm. The performance appraisals validity is based on how well it matches actual performance.
That norm comes to define an average amount of effort. Average effort relates to an average performance appraisal while lots of effort equates to a better performance appraisal. The same can be said of low performance and a low appraisal. The more comparative to socially approved standards, the more likely people trust the validity of the appraisal.
The perceived fairness is based on distributive justice (Taneja, Srivastaya & Ryichandran, 2015). The employee asks the question, "Does my work justify the appraisal?" If an employee puts in a lot of work but receives a low appraisal they will be upset. If other employees are perceived as putting in low levels of work but receive high rewards it will seem unfair and unjust.
Creating accurate appraisals helps in improving effort through perceived equity and distributive justice. When appraisals are accurate and valid across all members of an organization it creates a culture where performance is met with raises and merits. Employees who trust the validity of a performance appraisal are likely to work harder.
A bubble occurs when different managers rate the same performance differently. Some will naturally focus on one aspect of performance and others will focus on what is important to them. However, all should find some similarity in their performance levels to create cross-manager validity and greater buy in to the measures. The process of development is a collective and social one where people look to each other to gauge the entire system.
Taneja, S., Srivastaya, R. & Ravichandran, N. (2015). Consequences of performance appraisal justice perception: a study of indian banks. Journal of Organizational Behavior, 15 (3).