Using data derived from a survey of a sample of union members in one large manufacturing company, this paper reports on an investigation of employees' attitudes toward personnel evaluations (Satei) and wage differentials within the firm. The paper begins with a detailed analysis of the company's organizational structure, human resource management system, and labor-management relations. Next, the survey methodology and the data analysis are discussed. The analysis deals with four general issues : (a) how employees perceive the appraisal process ; (b) the correspondence between employees' perceptions of their relative rankings in the wage distribution and their objective positions in that distribution, (c) the process of gaining employee acceptance of and consent to the evaluation, and (d) the effects of the appraisal and the sharing of information concerning it on employee work effort and motivation. The principal findings are as follows : Because the personnel assessment ---a kind of management-by-objectives system--- does not inform employees of their relative standing in the wage distribution of the firm, it is a source of uncertainty and anxiety for them. Employees tend to perceive their wages to be lower than those of comparable coworkers, even when no actual wage differential exists. Such perceptions result in negative employee attitudes toward the entire appraisal process. The evidence suggest, however, that when managers make a serious effort to consult with subordinates about the appraisal, explaining the ratings and the reasons for them, employees are more comfortable with the outcome and accepting of the process. Due in part to the improvement in attitudes, the information-sharing consultations produced some increase in employee work motivation and effort. This finding is consistent with organizational behavior theories that stress the importance of perceived "procedural justice" on work motivation. It is contrary, however, to incentive theory in personnel economics, which would predict a negative effect of information leakage on work effort.
