The effects of relative and criticism-based performance appraisals on task-level escalation in an IT project: a laboratory experiment

While performance appraisals provide an opportunity for managers to review employee performance, prior research points to potential negative consequences associated with performance appraisals. Specifically, prior IS research suggests that relative and criticism-based appraisals can have an undesirable impact on employee behaviour. Motivated by this, in this study we theorised and empirically investigated how relative and criticism-based appraisals can influence an IT project member’s tendency to continue working on a task despite encountering serious setbacks (i.e., task-level escalation). To shed light on the underlying mechanisms through which appraisals influence task-level escalation, we proposed and tested two mediating pathways based on goal orientation theory and prospect theory. In a laboratory experiment, we found that a relative appraisal led to greater task-level escalation as compared to an absolute appraisal. Proving goal orientation and avoiding goal orientation mediated this relationship. In addition, we found that a criticism-based appraisal led to greater task-level escalation as compared to a praise-based appraisal. Risk propensity and self-esteem mediated this relationship. Lastly, we found that the effects of both a relative appraisal and a criticism-based appraisal on task-level escalation were significantly different from a control group that did not involve any form of performance appraisal.