In every organisation, it is essential to acknowledge the abilities of the employees to perform and further enhance their future job performance. To do so, companies use the performance appraisal (PA) system as the mechanism to evaluate the performance of the employees based on the job’s particular standards. This PA system emphasises providing a basis for employees’ rewards and enhancing employees’ performance; hence, its existence is significant in improving organisational functions. Nonetheless, the implementation of the PA system continues to encounter some issues that affected the organisation and these issues can be said to predominantly emerge from the behaviors of the managers and the employees. Such issues are unfair criteria, rating bias, and insufficient feedback which consequently led to a crisis in the modern PA system. Hence, in implementing the Performance Approach, it is recommended that managers should conclusively focus and consider the rewards and punishments in the ākhirah. This thought paper will provide an examination of the issues arising from the prevailing PA and offer an Islamic Governance approach to reduce the issues and as guidance for the managers and employees.
Keywords: Performance Appraisal (PA) System, Organisation, Islamic Governance Approach, Managers, Employees, Performance Criteria
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