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

A company ties annual pay rises solely to appraisal ratings, and managers know that rating scores directly determine their team's pay. Which problem is most likely to arise from this link?

Managers are likely to inflate ratings. When appraisal scores directly determine pay, managers avoid conflict and employees hide weaknesses, so the honest, developmental side of appraisal is damaged. The link does not remove training needs, prevent objective setting, or stop high performers being identified.

  1. AManagers inflate ratings, so appraisal becomes less honest and developmental discussion suffersCorrect
  2. BEmployees will no longer need any training
  3. CAppraisal can no longer be used to set objectives
  4. DThe organisation will be unable to identify high performers

Explanation

When ratings determine pay, managers may be lenient to avoid conflict or to keep staff happy, and employees become defensive about weaknesses. This undermines the honest, developmental purpose of appraisal. The other options do not follow from linking pay to ratings.

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