Performance appraisal system and business performance: an empirical study in Sri Lankan apparel industry

Abstract

The objectives of this study were to investigate whether Performance Appraisal (PA) significantly relates to business performance in Sri Lankan apparel firms; to find out whether a significant difference exists between large apparel firms and non-large apparel firms with regard to perceived quality of PA and to reveal whether a significant difference exists between large apparel firms and non-large apparel firms with regard to business performance. Three hypotheses were formulated using deductive approach. The study was conducted by using a stratified random sample of 274 apparel firms in Sri Lanka. Type of investigation was correlational and it was cross-sectional in time horizon. The unit of analysis was organisational level: each firm. General Manager or Human Resource Manager served as the respondent on behalf of the firm. Measures of the study were of good quality after assuring reliability and validity. Data were possible to be collected from 68 apparel firms-18 non-large firms and 50 large firms. In order to test the first that was concerned with relationship between perceived systematic use of performance appraisal system of a firm and perceived degree of business performance the Pearson Product-Moment Correlation technique was applied. The second hypothesis and third hypothesis were concerned with difference between large apparel firms and non-large apparel firms with regard to perceived quality of PA and perceived degree of business performance respectively and Independent Sample T test was the appropriate technique to test the validity of the two hypotheses. The results of the study showed a significant and positive relationship between perceived systematic use of PA system and perceived degree of business performance of apparel firms in Sri Lanka. Found relationship was strong (correlation coefficient was .826 that was significant at .0005) implying that an apparel firm, though it is large or non-large, should adopt a more systematic PA system so as to improve its business performance. However the study revealed no statistical evidence to claim that the degree of perceived quality of PA of large apparel firms is significantly different from that of non-large apparel firms and that the perceived degree of business performance of large apparel firms is significantly different from that of non-large apparel firms.