The relative use of formal and informal information in the evaluation of individual performance

Individual performance evaluation is a critical managerial function. Judgments of individual performance are evident in certain managerial decisions, such as those regarding the pay, promotion, and termination of subordinates. While much has been written about the measurement of performance and about performance-appraisal techniques, little is known about the information managers use in evaluating individual performance. Accordingly, this study was conducted for two reasons: 1) to study the extent to which informal information (unofficial, or "non-sanctioned") is used in individual performance evaluation, and 2) to examine the relationships among a number of explanatory variables and the relative use of formal and informal information.

A questionnaire was used to measure the relative use of formal and informal information in performance-related decision making (the dependent variable), attitudes toward the information used (ATTITUDES), role stress, two dimensions of superior's leadership style (structure and consideration), and one personality variable (locus of control). The responses indicate that informal information is used relatively more than formal information in the evaluation of individual performance. Further, the managers perceived the informal information easier to use and understand, more qualitative, and more confidential than the formal information.

Covariance structural equations modeling (LISREL) was used to study the relationships among the research variables. As hypothesized, attitudes toward the information are strongly related to the relative use of formal and informal information. The hypothesized relationship between the research variable ATTITUDES and role stress, and the influences of leadership style and locus of control on stress are also supported. Not supported by the data, however, are the hypothesized relationships among the relative use of formal and informal information and role stress, leadership style, and locus of control, and the hypothesized relationships among ATTITUDES, leadership style, and locus of control.

The findings suggest a discrepancy between the formally agreed upon rules of governance in organizations and the true system of rewards. Contractual disputes and other dysfunctional consequences are implied. However, another plausible explanation is that the informal information is necessary in order to compensate for the inadequacies of the formal information. Thus, the formal and informal information may be complementary.