The Roles of Organizational Politics and Fairnesin the Relationship

between Relative Performance Evaluation and Managerial

Performance

Ilham Pranata and SeTin SeTin

Faculty of Business, Maranatha Christian University, Jl. Surya Sumantri 65, Bandung, Indonesia

Keywords: Relative Performance Evaluation, Organizational Politics, Fairness, Managerial Performance.

Abstract: The purpose of this study is to investigate if the perceptions of organizational politics and perceptions of

fairness mediates the relationships between relative performance evaluation and managerial performance. A

survey of 125 managers of manufacturing companies in Indonesia are used to test the models. Data analysis

is undertaken with Partial Least Square. Results indicate that relative performance evaluation has a positive

impact on organizational politics. The finding suggests that general political behaviour and the politics of

going along to get ahead has a negative impact on managerial performance but pay and promotion policies

have no impact on managerial performance. The results also indicate that general political behaviour and

politics of going along to get ahead significantly mediate the relative performance evaluation and managerial

performance relationship. In contrast, the mediating effects of politics on pay and promotion policies on the

relationship between relative performance evaluation and managerial performance is insignificant. We also

find that the use of relative performance evaluation has a negative impact on fairness; and fairness is positively

related to managerial performance. Specifically, the results find that fairness significantly mediate the use of

performance relative evaluation and managerial performance relationship.

1 INTRODUCTION

During the last decade, managerial performance has

become a significant target in organizations (Kumar

et al., 2015). Managerial performance has a major

influence on every decision made by the company

that leads to an increase in organizational

performance (Andersen and Moynihan, 2016;

Jacobsen et al., 2018). Therefore, managerial

performance is seen as a very important research area

for organizations and still requires solutions in efforts

to improve performance (La

u, 2015).

Previous studies have largely associated

managerial performance with performance evaluation

systems, namely financial performance measures and

non-financial performance measures. For example,

Speklea and Verbeeten, 2014 explain that the

performance evaluation system affects the

organizational performance, and that the performance

effect depends on the ability of the contract. Hassan

et al., 2016 shows that job satisfaction mediates the

https://orcid.org/0000-0001-7065-1093

relationship between the performance evaluation

system and managerial performance. Lau, 2015

shows that role clarity significantly mediates the

relationship between non-financial performance

measures and managerial performance. These results

indicate that the relationship between the

performance evaluation system (financial and non-

financial) and managerial performance is an indirect

relationship, namely through various mediating

variables. This means that empirical evidence, which

can increase the understanding that the performance

evaluation system affects managerial performance, is

still needed (Wu, 2020). Previous studies have yet to

associate the relative performance measures with

managerial performance, whereas since the early

2000s, the management accounting literature has

proposed the performance evaluation using relative

performance measures, because they are seen as more

flexible than financial and non-financial performance

measures (Morlidge and Player, 2010). ). Because

there is no empirical evidence whether relative

Pranata, I. and SeTin, S.

The Roles of Organizational Politics and Fairnesin the Relationship between Relative Performance Evaluation and Managerial Performance.

DOI: 10.5220/0010745400003112

In Proceedings of the 1st International Conference on Emerging Issues in Humanity Studies and Social Sciences (ICE-HUMS 2021), pages 141-150

ISBN: 978-989-758-604-0

141

performance measures that are seen as more flexible

and more adaptive can affect managerial

performance, this study examines the relationship

between relative performance measures and

managerial performance.

Considering the vague relationship between

relative performance measures and managerial

performance, this study uses mediating variables to

examine whether and how the relative performance

measures and managerial performance are associated.

Organizational politics and procedural fairness were

chosen as the mediating variables.

The organizational politics variable was chosen

because it is endemic and existed throughout the

organization (Lau and Scully, 2015). In addition,

organizational politics is still rarely researched by

management accounting researchers (Lau and Scully,

2015), even though organizational politics affects

behavior (Lau et al, 2018). Since the research in the

field of management accounting that uses

organizational politics variables is still rare, this study

fills the gap in the literature by associating the relative

performance evaluation system with perceptions of

organizational politics.

Procedural fairness was chosen because the study

of procedural justice is important and fairness affects

the behavior and the performance (Lau, 2015). The

literature shows that fairness has important effects on

many aspects of the organization. Greenberg and

Colquitt, 2005 reveal that everyone in the

organization is concerned about the sense of fairness.

Fairness in the performance evaluation system can be

a major determinant of an employee's performance,

so it is important for organizations to know and

maximize the performance evaluation system which

is considered fair by the employees. (He and Lau,

2012). This study provides novelty by showing the

relationship between the relative performance

evaluation system and perceptions of procedural

fairness.

This study aims to examine whether and how a

performance evaluation system which uses relative

performance measures is connected to managerial

performance by examining the mediating variables of

organizational politics perceptions and procedural

fairness perceptions. The results of this study

contribute to management regarding the importance

of understanding the use of relative performance

measures and their impact on organizational politics,

sense of fairness and managerial performance. The

results of the research become a reference for theory

and practice, because they increase knowledge and

understanding of the relationship between the

performance evaluation system and managerial

performance. Regarding the studies in the field of

management accounting that rarely take up on

organizational politics while the perception of the

existence of organizational politics is likely to have

an impact on performance, this study is a stepping

stone that provides an understanding of how

organizational politics works in a management

accounting setting.

Literature Review and Hypothesis Development

Relative performance measures are performance

measures that use peer group performance

comparisons as a benchmark (Van Elten, 2017) or

performance measures that compare employees'

performance with peer employees and / or average

performance within a division (O'Grady and Akroyd,

2016). Relative performance measures provide

opportunities for employees to take uncooperative

actions which would cause harm to the company,

such as collusion and conduct conspiracy (Lazear,

1989). Relative performance measures also provide

opportunities for employees to engage in spreading

false rumors, hiding valuable information, and

destroying coworkers' data (Gibbons and Murphy,

1990).

The perceptions of organizational politics are

individual perceptions of the existence of politics in

the workplace (Lau et al., 2018). Kacmar and

Carlson, 1997 define organizational politics as

actions taken by individuals for their own interests by

affecting the behavior of others. There are 3

dimensions of organizational politics according to

Kacmar and Carlson, 1997, firstly, general political

behavior (individuals serve themselves and behave

when good regulations and rules do not exist and

cannot regulate behavior and actions); second,

politics of going along to get ahead (political behavior

occurs when other people also act / behave

politically); and third, politics on pay and promotion

policies (this political behavior occurs when

individuals avoid the implementation of salary and

promotion policies).

Procedural fairness refers to an individual's

perception of fairness towards a particular activity /

procedure (Lind and Tyler, 1988). Some criteria for

fairness according to Leventhal, 1980, namely (1)

consistency rule to be fair, which is a procedure to

follow the same rules and be enforced in the same

way every time they are used; (2) bias-suppression

rule, meaning that the decision maker has no interest

in the resulting procedure (3) accuracy rule, which is

a procedure based on accurate information; (4)

correctability rule, which is a rule that has the

opportunity to be changed / corrected; (5)

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142

representativeness rule, which is a rule that is closely

related to participatory decision making; (6) ethicality

rule, namely a procedure that must comply with moral

and ethical values. Mahoney et al., 1965 defines

managerial performance as individual performance

which includes: planning, investigation,

coordination, evaluation, supervision, staff selection,

negotiation, and representation.

Performance Evaluation, Relative Performance

Measure, and The Perceptions of Organizational

Politics

Kacmar and Carlson, 1997 define the general political

behavior as the behavior of individuals acting in self-

serving ways to get results. This refers to the political

behavior that is conducted to gain authority. When

resources are scarce, people compete for scarce

resources, such as increment, office space, budgets,

and promotions (Beugre and Liverpool, 2006). Scarce

resources lead individuals to commit unethical

actions such as spreading false rumours, hiding

valuable information, and destroying co-workers'

data. The use of relative performance provides

incentive for employees to engage in spreading false

rumours, hiding valuable information, and destroying

coworkers' data (Gibbons and Murphy, 1990). Based

on the above arguments, it is suspected that there is a

positive effect between relative performance

evaluation and the perceptions of general political

behavior.

H1a. The use of relative performance measures

has a positive effect on subordinates' perceptions of

general political behavior.

Kacmar and Carlson, 1997 define politics of going

along to get ahead as the political behavior that occurs

when other people act / behave politically. The use of

relative performance provides incentives that will

lead to collusion (Gibbons and Murphy, 1990;

Mookherjee, 1984). Collusion / conspiracy would be

more effective when employees can observe co-

workers' compensation and output. If the output /

individual performance is poor and the performance

of colleagues in the organization is underperforming

and this will lead to collusion. The consequence that

occurs is that individuals who perform poorly can be

considered as good, if the performance of their

colleagues is still below their performance. Based on

the above arguments, it is suspected that there is a

positive influence between the evaluation of relative

performance and the perception of politics of going

along to get ahead.

H1b. The use of relative performance measures

has a positive effect on subordinates' perceptions of

politics of going along to get ahead.

The politics of pay and promotion policies

describes the behavior of individuals who tend to

reject and avoid the implementation of promotion and

payment policies for personal purposes (Kacmar and

Carlson, 1997). Relative performance measures can

increase the chances that salary increment and

promotions are less relevant towards pay and

promotion policies. Performance measures that

compare peers' performance would make it easier for

individuals to serve themselves (only those

individuals who continue to experience salary

increment compared to others) by engaging in

political means, such as "currying" company leaders.

The individuals who are engaged in this political

behavior are most likely those who have the authority

to affect policies and decisions regarding pay and

promotion (Lau et al., 2018). Based on the above

arguments, it is assumed that there is a positive

influence between relative performance evaluation to

perceptions of the politics of pay and promotion

policies. H1c. The use of relative performance

measures has a positive effect on subordinates'

perceptions of the politics of pay and promotion

policies.

The Perceptions of Organizational Politics and

Managerial Performance

General political behavior refers to behavior to gain

authority. This includes the formation of coalitions to

strengthen networks and positions to create the

impression that political players in the organization

are overpowering and to gain control of information

which is the source of strength (Beugre and

Liverpool, 2006; Kacmar and Carlson, 1997). This

behavior has a functional effect, which is related to

the acquisition of authority (Baum, 1989). This

behavior tends to be in line with dysfunctional

behavior that can reduce performance. When the

individual feels that his views are being opposed by

his team members, he would assume that his abilities

are being assessed negatively, which in turn leads to

dissatisfaction, stress, and relationship conflict.

General political behavior also makes it difficult to

exchange information with people in the

organization, with hiding information, which

ultimately leads to poor and ineffective coordination

(Bai et al., 2016; Mahoney et al., 1965). This study

suspects that general political behavior can reduce

managerial performance.

H2a. Subordinates' perceptions of general political

behavior have a negative effect on managerial

performance.

The Roles of Organizational Politics and Fairnesin the Relationship between Relative Performance Evaluation and Managerial Performance

143

Politics of going along to get ahead refers to

political behavior in which individuals adopt a

strategy by not taking action to avoid conflict in order

to get help or avoid punishment from other political

groups (Lau et al., 2018). When individuals are

engaged in selfish politics, they can threaten the

interests of others (Lau et al., 2018). This behavior

can reduce performance, namely conducting

collusion / conspiracy and distorting information that

might harm the company. This dysfunctional

behavior is generally labeled as counterproductive

working behavior. Counterproductive refers to

actions that have a negative impact on the welfare of

the organization (Rotundo and Sackett, 2002). When

conspiracy occurs, evaluation activities in

performance evaluation would not go well, because

some parties wanted employees who can be invited to

conspire for personal purposes (Mahoney et al.,

1965). Therefore, this study suspects that politics of

going along to get ahead negatively affects

managerial performance.

H2b. Subordinates' perceptions of politics of

going along to get ahead have a negative effect on

managerial performance.

The politics of pay and promotion policies occur

when payment methods and promotional policies are

applied inconsistently and non-compliantly. This

might have a negative effect on the motivation of the

subordinates. The politics of pay and promotion

policies focus on refusing to establish a policy and

promotion for personal purposes. Refusing to follow

company policies for personal interests indicates a

lack of individual integrity, which is suspected to

reduce performance. Adams' equity theory (1965)

reveals that when a person feels a difference in the

level of input and output (reward & salary) with other

people and ultimately employees would feel

inequality. If employees feel inequality, it has the

potential to reduce performance in terms of goal

setting, agenda setting, work scheduling, and

employee evaluations (Mahoney et al., 1965).

H2c. Subordinates' perceptions of the politics of

pay and promotion policies have a negative effect on

managerial performance.

Relative Performance Measures and The

Perceptions of Procedural Fairness

In the context of performance evaluation, employees

will consider a performance evaluation procedure as

a fair procedure if the procedure (1) leads to a

performance evaluation that is based on complete and

accurate information, (2) reflects on long-term

interests, (3) makes it possible to appeal and correct

unfair judgments, (4) reflects performance within

their control, (5) protect their interests, and (6) show

respectful and dignified treatment (Lau and Moser,

2008). This study suspects that the use of relative

performance measures can be perceived as unfair by

employees, because relative performance measures

are not clearly defined, less consistent and show

unclear performance expectations. This study

suspects that the procedural of relative performance

measures will be perceived as unfair by employees.

H3: The use of relative performance measures has a

negative effect on subordinates' perceptions of

procedural fairness.

The Perceptions of Procedural Fairness and

Managerial Performance

Leventhal, 1980 defines a fair procedure is based on

six criteria, namely ethicality, avenue for appeal,

representation, bias suppression, accuracy and

consistency. Employees would feel fair towards a

procedure if one of the criteria is met (Niehoff and

Moorman, 1993). Tang and Sarfield-Baldwin, 1996

explain that if a manager can establish consistent and

fair rules for all employees and provide reward to

employees based on performance without personal

bias, then employees will perceive procedural

fairness. If employees feel fair, it can improve their

performance in terms of cooperation, transparency

and information disclosure (Mahoney et al., 1965).

This study suspects that procedural fairness improves

managerial performance.

H4. Subordinates' perceptions of procedural fairness

have a positive effect on managerial performance

Mediating Effects of Perceptions of

Organizational Politics and Perceptions of

Procedural Fairness

The main objective of this study is to ensure whether

perceptions of organizational politics mediate the

relationship between relative performance measures

and managerial performance. Continuing the

hypothesis of H1a, H1b and H1c, that the use of

relative performance measures has a positive effect

on perceptions of organizational politics, and H2a,

H2b, H2c, namely perceptions of organizational

politics have a negative effect on managerial

performance, this study suspects that organizational

political perceptions mediate the influence between

the use of relative performance measures with

managerial performance.

H5a. The effect of using relative performance

measures on managerial performance is

significantly mediated by subordinates' perceptions

of general political behavior.

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144

H5b. The effect of using relative performance

measures on managerial performance is

significantly mediated by subordinates' perceptions

of the politics of going along to get ahead.

H5c. The effect of using relative performance

measures on managerial performance is

significantly mediated by subordinates' perceptions

of the politics of pay and promotion policies.

Murphy and Cleveland, 1995 explain that relative

performance measures in their use would produce

negative reactions to the performance evaluation

system because the performance measures are

relatively inconsistent in terms of getting feedback

and in delivering information. Continuing from H3,

namely the use of performance measures that have a

negative effect on managerial performance and H4,

namely procedural fairness has a positive effect on

managerial performance, this study suspects that

subordinates' perceptions of procedural fairness

mediate the effect of using relative performance

measures on managerial performance. H6. The

effect of using relative performance measures on

managerial performance is significantly mediated by

subordinates' perceptions of procedural fairness.

Figure 1: Conceptual Model.

2 METHODS (AND MATERIALS)

2.1 Sample Selection and Data

Collection

This study uses primary data which are collected

through a questionnaire survey on operational level

managers at the manufacturing companies in West

Java Province, Indonesia. Snowballing techniques

were used for sample selection . The questionnaires

were distributed personally through postal, link and

personal in the period April 2020 - October 2020.

This survey method was chosen because this study

intends to find out respondents' perceptions of

organizational politics and procedural fairness from

the use of relative performance measures. The

survey method can accommodate the real perception

of the respondents (managers) and the respondents

are the most reliable source for certain types of

information (Nazari et al., 2006). The manufacturing

industry was chosen to limit the industry (He and

Lau, 2012) and the manufacturing industry is one of

the industries that plays an important role in

developing the economy in the future, so it is very

important to improve managers' performance

through a performance evaluation system.

A total of 125 from 142 respondents' answers

were collected and can be analyzed. The respondents

consisted of 68 men and 57 women. 50 respondents

were below 30 years old, 31 respondents were 41-50

years old, 30 respondents were 30-40 years old, and

14 respondents were 51-60 years old. With high

school education (5), Bachelor (96), Masters (19),

Doctoral (5). Of the 125 respondents, 32 are

accounting managers, 31 marketing managers, 28

production managers and the remaining 34 are from

the HRD, supply chain, finance, IT, general

manager, audit, general affairs, R&D, purchasing,

administration, legal, Directorate of Technology, tax

departments, and Merchandising. 38 respondents

came from the textile and garment manufacturing

industry, 29 from pharmaceuticals, 23 from

consumption, 12 from automotive, and 23 from other

fields.

2.2 Measurement of Variables

RPE is measured using an instrument developed by

Van Elten, 2017. A total of 7 (seven) question items

are used to measure RPE, namely whether when

superiors evaluate manager performance, they

compare the manager's performance with peers'

performance in completing additional tasks outside

their primary responsibility; accept additional

assignments outside of the main responsibility;

express ideas; resolve employee turnover; pressing

overtime hours; better actual performance conditions;

and worse actual performance conditions. Seven-

point scales were used for respondents' answers, from

never important to always important.

The perceptions of organizational politics were

measured using an instrument developed by Kacmar

and Carlson, 1997 with 8 question items, namely two

items related to general political behavior; three items

about politics of get along to get ahead; three items

related to politics on pay and promotion policies.

Seven-point scales were used on respondents'

answers, from strongly disagree to strongly agree.

Perceptions of procedural fairness are measured using

The Roles of Organizational Politics and Fairnesin the Relationship between Relative Performance Evaluation and Managerial Performance

145

five question items developed by Colquitt et al.,

2001.This instrument measures respondents'

perceptions of the fairness of performance evaluation

procedures in organizations, whether it meets the

principles of fairness according to Leventhal, 1980,

namely ethicality, consistency, accuracy,

representation, bias suppression and avenue for

appeal. Seven-point scales were used for respondents'

answers, from strongly disagree to strongly agree.

Managerial performance is measured by eight

question items developed by Mahoney, 1965.

Respondents are asked to evaluate their performance

related to planning, investigation, coordination,

evaluation, monitoring, staff selection, negotiation,

and representation. Seven-point scales were used for

respondents' answers, from strongly bad to strongly

good.

3 RESULTS AND DISCUSSION

Structural equation modeling (SEM) with a variant-

based technique is used for Data Analysis, namely

Partial Least Square (PLS). SEM-PLS was used

because this study was aiming at casual-predictive

analysis and had weak theoretical support. Studies

with weak theoretical support are suitable for using

PLS (Joreskog & Wold, 1982). Another reason is that

the indicators used are reflective and PLS is also

suitable for reflective indicators (Hair et al., 2014).

3.1 Measurement Model and

Structural Model

The measurement model is a model that connects

latent variables with the manifest variables. If the

manifest variables have a factor loading value <than

0.5, it is recommended to remove the variable from

the model (Hair et al., 2014). This study has 6 latent

variables and 28 manifest variables. Figure 2 shows

that all indicators have a loading factor greater than

0.5, so it can be concluded that all manifest variables

are valid in reflecting their respective latent variables.

To find out whether the indicators used to measure

latent variables have a high degree of suitability, the

calculation of construct reliability and variance

extracted were conducted. Table 1 shows the results

of the calculation of construct reliability and variance

extracted for each latent variables.

Figure 2: Full Model Standardization Coefficient.

Table 1: Construct Reliability (CR) and Average Variance

Extracted (AVE) .

Indic-

ator

Loading Factor

UKR PU PBUM PKGP KP MP

1 0.574

0.770 0.650 0.750 0.786 0.644

2 0.727

0.755 0.772 0.655 0.647 0.732

3 0.616

- 0.683 0.862 0.719 0.763

4 0.662

- - - 0.792 0.689

5 0.625

- - - 0.682 0.637

6 0.709

- - - - 0.788

7 0.703

- - - - 0.763

- - - - - 0.657

0.844 0.735 0.745 0.802 0.848 0.891

AVE 0.508 0.581 0.515 0.578 0.529 0.506

Note: UKR (relative performance evaluation); PU (general

political behaviour); PBUM (politics of going along to get ahead);

PKGP (politics on pay and promotion policies); KP (procedural

fairness); MP (managerial performance).

According to Hair et al., 2014, composite reliability

(CR) is considered satisfactory if the CR is> 0.7 and

the average variance extracted (AVE) value is ≥ 0.5.

The results show that the construct reliability value of

each variable ranges between 0.735-0.891 and shows

a value above the minimum threshold of 0.7. These

results conclude that the respondents' answer is

consistent in answering the statement items. The

results of the validity test with the average variance

extracted (AVE) for each construct ranged from

0.506-0.578, and this value exceeds the minimum

threshold of 0.5. This means that the construct

explains more than half of the variance of its

indicators. The test of goodness of fit was conducted

to determine whether the model obtained has

accurately described the relationship between the

variables being researched so that it could be

categorized as a good model (Hair et. Al., 2014). The

results of the model fit test using parameters, namely

the value of RMSEA, NFI / TLI, IFI and CFI. If the

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146

RMSEA value is below 0.08 and the Incremental Fit

Index (IFI), Tucker-Lewis Index (TLI) and

Comparative Fit Index (NFI) values are> 0.9 then the

model is acceptable (Hair et al., 2014). The results

show that the RMSEA value is 0.071, and the IFI, TLI

and CFI values respectively are 0.931, 0.923 and

0.930 (> 0.9) so it can be concluded that the model

estimation results are acceptable, meaning that the

empirical model obtained is in accordance with the

theoretical model. R Square value was used to test the

structural model. Subordinates' perceptions of general

political behavior, politics of going along to get

ahead, pay and promotion policies, as well as

perceptions of procedural fairness simultaneously

have an effect of 38.1% on managerial performance.

This R Square value indicates a fairly strong

predictive power (Ringle & Hansmann, 2004).

3.2 Hypothesis Testing Results &

Discussion

The Impact of Relative Performance Measures

on Perceptions of Organizational Politics

The results of the path analysis between the relative

performance measures and the three forms of

organizational politics show positive and significant

results. The path between relative performance

measures and general political behavior (path

coefficient = 0.402; p-value <0.05); relative

performance measures and going along to get ahead

(path coefficient = 0.394; p-value <0.05); relative

performance measures and pay and promotion

policies (path coefficient = 0.177; p-value <0.05).

Based on the test results, it can be concluded that both

the direction and strength of the path coefficients for

the relationship between relative performance

measures and the three forms of organizational

politics support H1a, H1b, and H1c hypotheses.

These results support Gibbons and Murphy, 1990,

namely that the use of relative performance measures

provides incentives for the emergence of general

political behavior, such as distorting information,

manipulating information for self-interest. The

findings also support Kacmar and Carlson's 1997

argument that authority gives people an advantage in

competing for scarce resources in several ways, for

example forming coalitions to strengthen their

positions, creating a favorable image for themselves.

The use of relative performance measures in

evaluating employee performance can increase the

chances of forming coalitions that generate shared

political power and behavior to advance. These

findings also support Gibbons and Murphy 1990;

Mookherjee, 1984 which explains that relative

performance measures create incentives for collusion

which can reduce employee efforts to perform well.

This will increase the chances of political behavior on

pay and promotion policies, namely individuals tend

to avoid and reject the implementation of pay and

promotion policies for personal purposes, with the

intention that only these individuals continue to

experience salary increment compared to others by

"currying" the leadership in the company.

Table 2: Hypotheses Testing H1 – H6.

Hypotheses

Path

Coefficients

t-statistics

Results

H1a (+) UKR - PU 0.402 3.647 Sig

H1b (+) UKR -

PBUM

0.394 3.617 Sig

H1c (+) UKR -

PKGP

0.177 1.687 Sig

H2a (-) PU - MP -0.257 -2.468 Sig

H2b (-) PBUM -

-0.178 -1.811 Sig

H2c (-) PKGP - MP -0.143 -1.625 Not Sig

H3 (-) UKR - KP -0.458 -5.043 Sig

H4 (+) KP – MP 0.407 4.164 Sig

H5a UKR – PU -

-0.103 -2.047 PU mediates

H5b UKR – PBUM

-MP

-0.070 -1.980

PBUM

mediates

H5c UKR – PKGP

-MP

-0.025 -1.170

PKGP does not

mediate

H6 UKR – KP –

-0.186 -3.203 KP mediates

Note: UKR (relative performance evaluation); PU (general

political behaviour); PBUM (politics of going along to get ahead);

PKGP (politics on pay and promotion policies); KP (procedural

fairness); MP (managerial performance).

The Impact of The Perceptions of Organizational

Political on Managerial Performance

The path between general political behavior and

managerial performance (path coefficient = -0.257; p-

value <0.05); go along to get ahead and managerial

performance (path coefficient = -0.178; p-value

<0.05. The test results show that both the direction

and strength of the path coefficients for the

relationship between general political behavior and

managerial performance, and the relationship

between politics of going along to get ahead and

managerial performance support the H2a and H2b

hypotheses.

These findings support Beugre and Liverpool,

2006; Kacmar and Carlson, 1997; Bai et al., 2016,

namely that general political behavior makes it

difficult to exchange information with people in the

organization, which in turn leads to a poor and

ineffective coordination. This finding also supports

The Roles of Organizational Politics and Fairnesin the Relationship between Relative Performance Evaluation and Managerial Performance

147

Lau et al., 2018, namely that organizational politics is

selfish. When some individuals are engaged in selfish

politics, they threaten the interests of others. When

conspiracy occurs, performance evaluation activities

will not run well (Mahoney et al., 1965).

The results of the path analysis between pay and

promotion policies and managerial performance (path

coefficient = -0.143; p-value 0.150 (greater than 0.10)

indicate an insignificant relationship. The results

show that the perceptions of subordinates to the

politics of pay and promotion policies have no effect

on managerial performance. This result contradicts

with Adams' Equity Theory, 1965, namely that when

a person feels a difference in the level of input and

output (rewards and salaries) with others, he will feel

unfairness, disappointment and have the potential to

reduce performance in terms of goal setting, agenda

setting, work scheduling, and employee evaluation

(Mahoney et al., 1965). The results of this study seem

less common. This may be affected by the relatively

small sample data which is likely to reduce the power

of the statistical test. In addition, the instrument is not

clearly specified. whether salary increments are given

based on company's performance as a whole or also

taking into account of the performance achievement

per division. Respondents are mostly young, namely

<30 years (40%) and education level with the

majority of Bachelor (77%) are also likely to affect

on this result, because it is likely that young managers

with an undergraduate level of education are more

focused on seeking working experience rather than

focus on pay and promotion so that pay and

promotion policies do not affect their performance.

The Impact of Relative Performance Measures

on Procedural Fairness

The results of the path analysis indicate that the

relative performance measure is negatively and

significantly related to procedural fairness (path

coefficient -0.458; p-value <0.05). These results

provide support for the hypothesis (H3). The results

conclude that the use of relative performance

measures has a negative effect on subordinates'

perceptions of procedural fairness. These findings

support Lau and Moser, 2008, namely that

performance measures that are less consistent

(relatively) can be perceived as unfair by employees.

The Impact of Procedural Fairness on

Managerial Performance

The results of the path analysis show that procedural

fairness is positively and significantly related to

managerial performance (path coefficient 0.407; p-

value <0.05). These results provide support for the

hypothesis (H4). The test results conclude that

subordinates' perceptions of procedural fairness have

a positive impact on managerial performance. These

findings support Tang and Sarfield-Baldwin, 1996,

namely that employees who have a positive

perceptions of procedural fairness will improve the

managerial performance.

The Impact Of Relative Performance Measures

on Managerial Performance is Mediated by

Organizational Politics

Table 2 shows that the absolute t

statistic

value of the

relative performance measurement on managerial

performance is mediated by general political behavior

(2.047) and is greater than t

critical

(1.96), then with a p-

value <0.05, H5a is supported. The test results

conclude that the subordinates' perceptions of general

political behavior significantly mediate the use of

relative performance measures on managerial

performance. These results are associated with

previous findings that show support that relative

performance measures have a positive effect on

subordinates 'perceptions of general political

behavior, and subordinates' perceptions of general

political behavior have a negative effect on

managerial performance (H1a and H2a are

supported).

Table 2 also shows that the absolute t

statistic

value

of the impact of using relative performance measures

on managerial performance is mediated by

subordinates' perceptions of the politics of going

along to get ahead (1.980) and is greater than t

critical

(1.96), then with p-value <0.05, H5b is supported.

The test results conclude that the perceptions of

subordinates on the politics of going along to get

ahead significantly mediate the use of relative

performance measures on managerial performance.

These results are associated with the previous

findings which show that relative performance

measures have a positive effect on politics of going

along to get ahead, and the perception of subordinates

of politics of going along to get ahead negatively

affects managerial performance (H1b and H2b are

supported).

Results are differ for the political mediating role

of pay and promotion policies. Table 2 shows the

absolute t

statistic

value of the effect of using relative

performance measures on managerial performance

mediated by subordinates' perceptions of pay and

promotion policies is (1,170) and less than t

critical

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(1.96), so with p-value <0.05, H5c is rejected. The

test results conclude that the perceptions of

subordinates on the politics of pay and promotion

policies do not significantly mediate the use of

relative performance measures on managerial

performance. These results are associated with

previous findings which show support, that relative

performance measures have a positive effect on

subordinates' perceptions of pay and promotion

policy politics (H1C is accepted), but subordinates'

perceptions of pay and promotion policy politics have

no effect on managerial performance (H2C is

rejected). This finding also supports Hair et al.,

(2014) that mediation is not significant if there is an

insignificant path coefficient.

The Impact of Relative Performance Measures

on Managerial Performance Mediated by

Procedural Fairness

Table 2 shows that the absolute t

statistic

value of the

impact of using relative performance measures on

managerial performance is mediated by subordinates'

perceptions of procedural fairness (3.203) and is

greater than t

critical

(1.96). Because the absolute value

of the t-statistic is greater than the t-critical value,

then with a p-value of <0.05, H6 is supported. The

test results conclude that the subordinates'

perceptions of procedural fairness significantly

mediate the use of relative performance measures on

managerial performance. These results are associated

with previous findings which indicate that relative

performance measures have a negative impact on

subordinates' perceptions of procedural fairness, and

procedural fairness has a positive impact on

managerial performance (H3 and H4 are supported).

4 CONCLUSIONS

This study concludes that first, The relative

performance measure are proven to be positively

related to general political behaviour; politics of

going along to get ahead; and politics of pay and

promotion policies. Second, general political

behaviour and politics of going along to get ahead are

proven to decrease managerial performance, but it is

not proven for politics of pay and promotion policies.

Third, relative performance measure is proven to be

negatively related to procedural fairness. Fouth,

procedural fairness is proven to be positively related

to managerial performance. Fifth, general political

behaviour and politics of going along to get ahead

significantly mediate the relationship of relative

performance measures on managerial performance;

but politics of pay and promotion policies are not able

to mediate the relationship of relative performance

measure on managerial performance. Sixth,

Procedural fairness significantly mediates the

relationship of relative performance measures on

managerial performance.

As seen from a theoretical perspective, the

findings of this study have proven that the use of

performance evaluation using relative performance

measures can increase organizational politics, reduce

feelings of fairness and reduce managerial

performance. Therefore, this study has a practical

contribution, namely to remind organizations to be

careful in designing a performance evaluation system,

because the performance evaluation system has an

impact on the existence of organizational politics, has

an impact on the sense of fairness and affects

performance. This research also supports procedural

fairness theory, namely that the fairness of the

performance evaluation system tends to be the main

determinant of employees' behavior where a fair

evaluation process can generate commitment and

improve performance (Lau, 2015; He and Lau, 2012;

Greenberg and Colquitt, 2005).

Limitations and suggestions for future research

are: First, this study is limited to several variables,

namely organizational politics and procedural

fairness as variables that affects managerial

performance. Future research can examine other

variables that might be caused by organizational

politics such as stress and job satisfaction. Second,

this study uses a survey method, therefore the

limitations of this method are most likely inherent in

this study, for example the limitations in obtaining a

representative and unbiased sample. Future studies

can use experimental methods, to ensure the

relationship between relative performance measures

and managerial performance. Third, this study is

supported by a relatively small sample of data, and

this is likely to reduce the power of statistical tests.

Therefore, future studies are suggested to expand the

sample data and considering a more heterogeneous

sample in order to ascertain the influence of the

politics of pay and promotion policies on managerial

performance.

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