The relationships between performance evaluation effectiveness and job satisfaction of electronics manufacturing in Thailand.

Author:Srikarsem, Usana

    Changes in business environment lead to increasingly difficult to operate today's business. Kotter and Hestett reported that the companies should emphasize on the satisfaction in three groups; customers, employees, and stakeholders to enhance their performance (cite in Duboff and Heaton, 1999). Consistent with the manager who is an anonymous interviewee in this study stated that "At present, chef executive offices (CEO) or managers are affected by key performance indicator (KPI). The major KPIs are used to evaluate CEO consisting of three dimensions: organization performance, customer satisfaction, and employee satisfaction." In manufacturing context, the inability of control of firm workers may cause to the failure of firms (Maiga and Jacobs, 2005). In addition, the cause of changing environment affects businesses shift to focus on intellectual resources for competition (Eskildsen and Nussler, 2000). As a result, the managers are likely to use more information to help them to manage their firm in various perspectives.

    Management accounting is a key function in providing information to decision making. One of most primary important is developing performance evaluation system or performance measurement to assist managers in planning and controlling their organization (Chenhall and Langfield-Smith, 2007). Because the performance measurement has used to support the strategy (Kaplan and Norton, 1996) the most important to drive the successful strategy is human resource or employees. The effective measures lead to attract, retain, and develop high quality employee (Shellhorn, 2008). Many scholars emphasize on job satisfaction in many contexts because it may affect firm performance (Chenhall and Langfield-Smith, 2007). However, less literature carries out empirical data on how performance evaluation system affects job satisfaction. Consequently, this research aims at examining the effect of performance evaluation effectiveness on job satisfaction via employee loyalty. We separated performance evaluation effectiveness in to five dimensions: monitoring improvement, employee competency development, coordination efficiency, accountability increase, and feedback quality. Also, this study investigates the organization vision and intra-communication effectiveness as a moderator to moderates the relationship between performance evaluation effectiveness and employee loyalty. In addition, three-way interaction of the association among performance evaluation effectiveness, organization vision, and intra-communication on employee loyalty was examined.

    The remainders of this paper are organized as follow. The second section provides the literature review and the links of hypotheses development. The third section illustrates the research methodology, including sample, variables measurement, and data analysis. The fourth section describes the results and the test of hypotheses as well as the discussion. Then the fifth section is additional test. The sixth section presents implication and limitation of this study, also suggestions for future research. The last section is the conclusion.


    This study purposes conceptual framework as shown in Figure 1. The model posits that employee loyalty depends upon performance evaluation effectiveness and moderates by two important factors, organization vision and intra-communication effectiveness. Then the degree of employee loyalty will lead to the degree of job satisfaction. This conceptual framework is starting with the literature review and following by the hypotheses.


    2.1 Performance Evaluation Effectiveness and Employee Loyalty

    2.1.1 Dependent Variable

    Employee Loyalty

    Although customer loyalty is facilitated to define employee loyalty in many studies (Eskildsen and Kristensen, 2006). In this study, employee loyalty is tended to action orientation concept. It is included the behaviour of the employees, employee committed or responsible of their work, and employee less likely to look for another job (Duboff and Heaton, 1999, Eskildsen and Nussler, 2000).

    2.1.2 Independent Variable

    Performance Evaluation Effectiveness

    Performance measurement has studied in many disciplines such as human resource management, management, operation management and also management accounting. Although, performance measurement is the most favorite topic, it is difficult to define (Neely, Gregory, and Platts, 1995). In literature in management accounting, the major role of performance measures translates an organization strategy into desired behaviors and outcomes (Lillis, 2002; Van der Stede, Chow, and Lin, 2006). Traditionally, financial measures are used for this purpose (Kaplan and Norton, 1992). At present, high competitiveness leads to managers concern with increased customer satisfaction, flexibility, and responsiveness. It is more likely that financial measures are inadequate to provide useful information (Van der Stede, Chow, and Lin, 2006). The effective design of performance measurement system suggested that it need to incorporate multiple dimensions not financial only, but nonfinancial measures also (Kaplan and Norton, 1996). The scholars in human resource address that the performance measurement is a "set of metrics used to quantify both the efficiency and effectiveness of actions" (Neely, Gregory, and Platts, 1995). Franco-santos, et al. (2007) used systematic approach from their review to Identify five categories of business performance measurement as shown below:

    (1) "measure performance" this category includes the role of monitor progress and measure performance or evaluate performance;

    (2) "strategy management" this category is formed the roles of planning, strategy formulation, strategy implementation or execution, and focus attention or provide alignment;

    (3) "communication" which encompasses the roles of internal and external communication, benchmarking and compliance with regulations;

    (4) "influence behaviour" which includes the roles of rewarding or compensating behaviour, managing relationships and control; and

    (5) "learning and improvement" that addresses the roles of feedback, double-loop learning and performance improvement.

    However, based on their conclusion, they mention that "a set of condition of a business performance measurement system has been proposed from which researchers can choose those which are necessary and sufficient conditions for their studies. Then, this study focuses on the performance evaluation effectiveness including an evaluation of goal achievement, impact, and the relation between impact and resources. Therefore, we categorize performance evaluation effectiveness in to five dimensions: (i) Monitoring Improvement, (ii) Employee Competency Development, (iii) Coordination Efficiency, (iv) Accountability Increase, and (v) Feedback Quality. As mentioned above, performance evaluation effectiveness may lead to incentive for employee performance. The link between each of dimensions and employee loyalty will be discussed as follows.

    (i) Monitoring Improvement

    The performance evaluation system is used to determine whether it meets the needs of the firms (Ittner, Larcker, and Meyer). The school of thoughts, the balance scorecard, addressed use of objective measure and balancing multiple performance measures in reward system that lead to diminish dysfunctional behavior (Kaplan and Norton, 1992, 1996). As a result, performance evaluation effectiveness continuously monitors employee to meet set specific goals of each function to reach goals of firms.

    (ii) Employee Competency Development

    The performance evaluation system is used to determine whether it meets the needs of the management and employees (Lillis, 2002; Van der Stede, Chow, and Lin, 2006). Each of functions or human resource department should be responsible for performance by set training program. Thus performance evaluation effectiveness will lead to take the necessary action to refine, alter, or employ opportunity guideline to improve the ability of employee.

    (iii) Coordination Efficiency

    Performance Evaluation Effectiveness will be established to identify key job element at the successful of each level. If the perception of need for participation...

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