The Effects of Employee Performance Appraisal on the Company Performance Results: The Mediating Role of HRM Outcomes With an Innovative Application of the Efficiency Index

Abstract

Purpose: The main goal of the article, identified with the main research problem, is to determine the mediating role of HRM outcomes in the relationships between employee performance appraisal (EPA) and company performance results and to establish whether there are any identifiable regularities in this scope in four specific contexts, i.e. the pre-pandemic and pandemic periods of COVID-19 in the HQs and foreign subsidiaries of MNCs. Design/methodology/approach: The empirical research included 200 MNCs headquartered in Central Europe. To capture the actual relations between the variables under study, the raw data in the variables were adjusted with the efficiency index (EI), which is a novelty in this type of research. The Partial Least Squares Structural Equation Modeling (PLS-SEM) was used to verify the research hypotheses and assess the mediating effects. Findings: EPA had a positive effect on results in HRM, finance, innovativeness and quality, both in the pre-pandemic and pandemic periods, although this effect was not always statistically significant. Furthermore, the company’s performance results in HRM mediate positively the relationships between EPA and the other three categories of company performance results, regardless of the organizational level (HQs’ or subsidiaries’) and time period under consideration. Additionally, during the pandemic, the company’s performance results in HRM mediate the relationships between EPA and the company’s performance results in innovativeness stronger than in the pre-pandemic time, both at the HQs and local subsidiaries. This suggests that the EPA used such solutions in conjunction with other HRM subfunctions that stimulated entrepreneurial, creative and innovative behavior of employees in such a way that organizations could achieve better innovation results during the crisis than before it. Research limitations/implications: The study has some limitations, including the research sample’s structure, not fully representing the general population. Only HQs respondents were asked about performance results in foreign subsidiaries, excluding local informants. The qualitative benchmarking method used is problematic, relying on comparisons instead of objective measures. Furthermore, the analysis did not consider potential differences in economic, legal, or social conditions among the various countries where foreign subsidiaries were located. Originality/value: In addition to confirming the results of some other studies, the article also provides new knowledge. It determines the mediating role of HRM outcomes in the relationship between EPA and company performance results in finance, innovativeness, and quality. Moreover, it identifies certain regularities in the four studied contexts, which is a novelty in this type of research. It also uses an innovative approach to including employee KPIs as the efficiency index in analyzing the relationships between the variables under study.