Agency theory and performance appraisal: How bad theory damages learning and contributes to bad management practice

Abstract

Performance appraisal interviews remain central to how employees are scrutinised, rewarded and sometimes penalised by managers. But they are also often castigated as ineffective, or even harmful, to both individuals and organisations. Exploring this paradox, we highlight the influence of agency theory on the (mal)practice of performance appraisal. The performative nature of human resource management increasingly reflects an economic approach within which its practices are aligned with agency theory. Such theory assumes that actors are motivated mainly or only by economic self-interest. Close surveillance is required to eliminate the risk of shirking and other deviant behaviours. It is a pessimistic mind-set about people that undermines the supportive, co-operative and developmental rhetoric with which appraisal interviews are usually accompanied. Consequently, managers often practice appraisal interviews while holding onto two contradictory mind-sets, a state of Orwellian Doublethink that damages individual learning and organisational performance. We encourage researchers to adopt a more radical critique of appraisal practices that foregrounds issues of power, control and conflicted interests between actors beyond the analyses offered to date.