Employees' perception of the performance evaluation process elements: Evidence from banking industry

Abstract

In this study, we argue that evaluation system elements, more precisely performance measures and managers' biases, fairness perception, pay transparency, and incentive types, have important consequences for employees' performance. Since managers have limited time for performance evaluation, performance information is usually incomplete and includes subjectivity. This leads to performance evaluation biases, more precisely to centrality and leniency biases. Additionally, we argue that employees' fairness perception is very important not only for the evaluation process but also for their satisfaction. Moreover, a growing body of literature emphasizes the role of pay transparency in the performance evaluation process. Finally, the study analyses how important it is for employees to receive rewards they value and expect. We developed a survey where we collect data from one bank in Serbia. Most employees think that branch managers use subjective performance evaluation, but that their evaluations are fair. However, results show that centrality and leniency biases exist and there is still room for improvement.