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

Nadia's employer links annual bonuses directly to the rating given in her appraisal. Her manager, wanting to keep the team happy, awards almost every employee the top rating. Which problem does this most clearly illustrate?

This illustrates rating inflation caused by tying appraisal to reward. Managers give generous ratings to secure bonuses for staff and avoid conflict, so ratings no longer distinguish performance and honest development feedback is undermined. It is not central tendency, since the ratings are high rather than average.

  1. ARating inflation caused by linking appraisal to reward, which weakens the developmental value of appraisalCorrect
  2. BThe halo effect, where one strong trait influences all other ratings
  3. CCentral tendency, where all employees are rated as average
  4. DFailure to set SMART objectives at the start of the year

Explanation

When pay depends on ratings, managers may inflate them to avoid conflict or to reward staff, so ratings lose differentiation and honest developmental feedback suffers. Central tendency would involve average ratings, not top ones. The halo effect concerns one trait colouring others, which is not described.

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