The Impact of Performance Appraisal on Employee Trust in Leadership: The Mediating Role of Employee Satisfaction

Introduction

Trust is part of the overall organizational climate, including trust in the managerial system, managers, and supervisors (Farndale et al., 2011). It is defined as the acceptance of being vulnerable, based on the expectation of positive outcomes from the other, such outcomes include intentions or behaviors (Rubel et al., 2018; Farndale et al., 2011; Wong, 2012; Rousseau et al., 1998). Vulnerability includes giving the trustee control over issues considered important by the trustor, and the acceptance of the trustor to be involved in a risk-taking situation with the trustee, such as sharing sensitive information (Mayer & Gavin, 2005; Mayer & Davis, 1999).

At the organizational level, the trust that employees place in their leaders is an important dimension that shapes loyalty and cooperation within employment relationships (Haynie et al., 2016). This trust is affected by the decisions made by leaders, supervisors, and senior management (Farndale et al., 2011). Additionally, these decisions affect employee performance (Vanhala & Dietz, 2019), and lead to positive organizational outcomes, especially when including the employees in the decision-making process (Mayer & Gavin, 2005; Kiffin-Petersen & Cordery, 2003), such as the decisions taken based on the performance management system, and performance appraisal evaluation.

Performance management is represented by the strategies designed for improving employees’ performance and directing them to achieve the organization’s strategic goals. It includes the process of collecting, interpreting, and utilizing the performance information to track and improve the employees’ performance, which in turn improves the overall organizational performance (Cho & Lee, 2012; Rusu et al., 2016). It also includes personal performance plans, reward and punishment policies, and performance appraisals (Behn, 2002).

Performance appraisal is one of the final stages of the performance management process, where employees are informed of the final results of their performance and related subsequent decisions; such as rewards, areas to be improved, and future plans (Dessler, 2017; DeCenzo et al., 2013; Brown et al., 2010). A set of skills and competencies are needed from supervisors, managers, and leaders, who set the goals, evaluate the performance, and provide feedback during the performance appraisal process. Such skills are essential for this process to succeed and to be trusted by the employees (Cho & Lee, 2012).

This study is focused on finding a link between performance appraisal and employees’ trust. Previous studies show that human resources management practice (including performance appraisal process) is a powerful predictor of employees' trust in the employer (Vanhala & Dietz, 2019). They show that a performance appraisal process that is accepted by employees leads to trust in their employer (Noda, 2020; Kim & Park, 2017). In this regard, negative feedback is accepted and considered constructive if it is provided by a trusted manager, supervisor, or leader (Farndale et al., 2011).

Performance appraisal is done by the immediate team leader, who can be the supervisor, manager, or even the head of the department. The dependent variable of this study is trust in leadership, which is defined as the employees’ acceptance of being vulnerable to the organization’s leadership based on the situations and interactions with their leaders (Whitener, 2001; Burke et al., 2007). On the other hand, the independent variable of this study is the performance appraisal process. According to DeCenzo et al. (2013), the performance appraisal process has to be accurate, and fair, also, feedback must be provided to the employee. This study presents performance appraisal accuracy, performance appraisal justice, and performance appraisal feedback as the sub-dimensions of the performance appraisal process.