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ACCA Applied Knowledge · Business and Technology · Review and appraisal of individual performance

A company pays annual bonuses solely on the appraisal rating given by each employee's line manager. Which is the main risk of this approach?

The main risk is that managers may inflate or bias ratings, because the rating directly determines pay. This leads to inconsistent and unfair rewards across teams and weakens the credibility of the appraisal system. Calibration or moderation of ratings is often used to reduce this problem.

  1. AManagers may inflate ratings to avoid conflict or to benefit their team, making ratings unfair and inconsistentCorrect
  2. BEmployees will no longer be told how they performed
  3. CTraining needs will automatically be met

Explanation

Tying pay to a single manager's subjective rating creates pressure for leniency or bias, producing inconsistent and unfair rewards. The other options are not consequences of this approach: feedback can still be given, and training needs are not met automatically.

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