SELECT COLLEGE

SCHOOL OF POSTGRADUATE STUDIES

THE EFFECTS OF PERFORMANCE APPRAISAL ON EMPLOYEE

PERFORMANCE: A CASE STUDY OF ABYSSINIA BANK S.C
IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE MASTER IN
BUSINESS ADMINISTRATION (MBA) IN HUMAN RESOURCE

BY
DAGMAWI BELACHEW

ADVISOR
Dr. MULUNEH HADETO
APRIL, 2023
ADDIS ABABA, ETHIOPIA
 TABLE OF CONTENT

1. Introduction 1

2. Background of the Study 1

3. Statement of the Problem 3

4. Objective of the Study 5

5. Significant of the Study 5

6. Scope of the study 6

7. Limitation of the Study 6

8. Term definition 7

9. Organization of the study 8

8. Review of the literature 9

9. Methodology of the Study 21

10. Time schedule and budget 22
11. References 23
 CHAPTER ONE
INTRODUCTION
1. Introduction

1.1 Background of the study

Kurt (2014) explains performance appraisal as major issue of controversy when it comes to management
circles. While managers use performance appraisal system but the outcomes is always a disappointment
with the process and one of their function is to ensure organization are effective and efficient. In order for
managers to achieve the organizational goals they individual levels of performance must be assessed.
Brumbach (2008) define performance as a means of both results and behavior, which comes on its own
right and will or can be judged differently from results. Performance measurement is also referred to as
performance appraisal is one exercises that human resources department most daunting task in most of the
organizations that the HR department has to carry out in regular basis. If performance appraisal is not
carried out perfectly it can cause ripples among staff and can be seen to be unfair and ineffective.
Armstrong and Baron (2009) indicate that performance is a multidimensional construct which
measurement is based on several factors.
Performance appraisal is a systematic assessment or evaluation of performance of an employee’s
periodically; and it is the process of evaluating how well employees do their jobs compared with a set of
standards. It also involves communicating to employees how he/she is performing the job.
The information obtained from the appraisal can be used as input for managerial decision making regarding
salary, promotion, transfer, termination layoff, training and so on. Other terms for performance appraisal
include performance review, personnel rating merit rating performance evaluation employee appraisal, or
employee evaluation.

Rater evaluation effectiveness is critically important to the performance evaluation process and
performance feedback needs to be accurate. However, rater willingness to accurately evaluate performance
and identify employees as high and low performers is different than rater ability to rate performance.
Raters will be motivated to differentiate when it becomes an attractive option for them and when they
understand the compelling reasons to do so. The values, norms, and assumptions that make up the
organization’s culture may play a role in both motivations. Organizational culture influences the manager-
employee relationship, the overall performance evaluation process, and the rater’s judgment.
Employee reactions to appraisal in terms of perceived employee fairness, accuracy, and recognition are
important components of appraisal effectiveness because these perceived employee reactions can force
employees to improve their performance (Taylor, Tracy, Renard, Harrison and Carroll 2015). That is,
performance appraisal serves as a means for providing feedback that can result in improved performance
(Tornow, 2013). Research in performance appraisal has demonstrated that performance appraisal
characteristics (such as appraisal purpose and source) can elicit positive employee reactions to
performance appraisal and, which in turn, can motivate employees to improve their performance (DeNisi
and Pritchard 2016).

In general the researcher can say performance appraisal is a method of evaluating the behavior of
employees in the work spot, normally including both the quantitate and qualitative aspects of job
performance. Performance here refers to the degree of accomplishment of the tasks that make up an
individual's job. It indicates how well an individual is fulfilling the job demands. Often the term is
confused with effort, but performance is always measured in terms of results and not efforts. Therefore
with the help of the performance appraisal one can evaluate, identify gaps, suggesting improvements and
rewarding good behavior as well as outstanding performance of the other party.

1.2 Statement of the problem

A lot of research has been done into the linkage between human resource management (HRM) and
organization's performance management as well as the effects and the relationship of performance
appraisal with that of employee performance both at an international level of research as well as in
Ethiopian academic institutions (mostly for dissertation purposes). However, the question of how, has
received much less attention.
The main challenge that faces managers in all types of organizations is how to get maximum performance
from their employees. Performance appraisal, therefore, seems to be inevitable. In the absence of a
carefully structured system of appraisal, people will tend to judge the work performance of others,
including subordinates, naturally, informally and arbitrarily. The human inclination to judge without a
structured performance management system can create serious motivational, ethical and legal problems in
the employees as well as on workplace. Without a structured performance management system, there is
little chance of ensuring that the judgments made will be lawful, fair, defensible and accurate.
In addition if we refer to previous studies, we can notice that performance appraisal research has come in
for criticism because of its overemphasis on psychometric problems (Selvarajan & Cloninger, 2009). In
this case, according to DeNisi and Pritchard (2006), appraisal researches should put an increased focus
on developing functional and effective performance appraisal systems that can be useful in both
understanding and affecting employees. Another important moment is determination of related to
performance appraisal elements, reaction to which from employees’ perspective would result in increased
performance. There were many previous researches where it was stated that different components of
performance appraisal may elicit positive employees’ reactions, which, eventually, lead to enhanced
performance. Thus, Colquitt, Conlon, Wesson, Porter, and Ng (2001) discussed the apprehension of
perceived fairness; Taylor, Tracy, Renard, Harrison, and Carroll (1995) and Roberson and Stewart (2006)
studied employees’ reactions to performance appraisal in terms of perceived accuracy. As it can be noticed
these factors as well as their impact on employees’ performance were generally studied individually rather
than in relation to an appraisal system, while little or no attention was given to the interrelations in between
these elements as well.

On top of the above if we see Abyssinia bank employee performance management, the observed
experience is that when an employee PA is submitted to the HR department the HR file manager record the
performance appraisal on a tracking sheet which this excel format will convert it in to a percentage this
is done just to indicate the total percentage collected out of the overall employees of the organization.
Finally the HR department will report these percentages to the management which indicates that the
organization is heavily concentrated on using the PA for administrative purpose only. Decenzo & Robbins,
(2010) indicated that performance appraisals must convey to employees how well they have performed on
established goals. It’s also desirable to have these goals and performance measures mutually set between
the employees and the supervisor. Without two-way, 360-degree feedback regarding an employee's effort
and its impact on performance. We run the risk of decreasing his or her performance. Plus the performance
management should be set in a way that is very clear and measures should be clearly identified and a well-
structured communication should be there.

1.1. Research questions

In order to address the stated research problems, the following research questions were developed:-
 1. How does the objective setting prior to the performance appraisal lead to effective
employee performance?
2. How does linking the outcome/result of the performance appraisal with any type of
recognition method have an impact on employee performance?
3. what are the effect of accuracy of rating performance appraisal on employees performance
4. What are the effect of performance appraisal (……) on employees performance

1.3 Objective of the study

General Objective:
The main objective of this study is to assess the effect of performance appraisal on employee
performance.

The Specific Objectives are:

The study has the following specific objectives:-
 To determine the objective setting prior to the performance appraisal lead to effective employee
performance at Abyssinia bank
 To evaluate the effect of accuracy of rating performance appraisal on employees performance;
 To examine the effects of linking performance appraisal outcomes to a recognition methods on the
overall performance of an employee of Abyssinia bank.
 To investigate the effect of performance appraisal (……) on employees performance

1.4 Significance of the study

This study brings into light employees understanding and appreciation of the employee performance
management and the relevance of an interpersonal factor objective setting, rater accuracy and recognition
for the effectiveness of employee performance.
Although the primary purpose of this study is for academic use it is expected that findings from this study
will be important to the management and members of Abyssinia bank as well as to other organizations
especially those who are found in the same industry, to understand how performance management should
be managed and its importance for the improvement of employee performance if a well-structured
performance management is exercised. Plus the findings of the study would contribute to knowledge and
literature and can also serve as a stepping stone for future researchers who will be interested in related
studies.

1.5 Scope and limitation of the study

The scope this study includes the effect of performance appraisal on workers efficiency in Abyssinia
bank. Even though currently Abyssinia bank has 818 branches in country and among them 710 branches
found in Addis Ababa, so it’s impossible to cover all branches which available in Addis Ababa. For that
matter the study is concentrated on only three corporate branches. Because the banks full operation is
founded in corporate branches and they include a lot employee when compare from another grade level
branches. Besides it’s so better to focus on it fully.
1.5.1 Limitation of the study
The following are some of the limitation of study
Lack of access to some information in the organization may affect the study.
Conducting this research without having a free time to be spent on the study affects the quality of the paper.
In addition to this there is also a financial constraint.
Due to financial and time constraint the number of questionnaires that will be distributed to the employees
will be very limited.

1.6 Terms of definition

Performance Appraisal: is a measurement of work and its results by using the scale and index so that
we can measure the desired quantity and quality with precision and free of personal judgments and
vague criteria of evaluation. Measurement of an activity is done by activity and comparison of its
results with a criterion that we can evaluate the desired quantity and quality precisely. Performance is
the way through which employees perform their duties and the evaluation is judging the performance of
employees. (Scott, 2009)

Employee Performance: is job related activities expected of a worker and how well those activities
were executed. Performance criteria are standards for employee behavior at work. This criterion
contains much more than how an employee does the work. Employees are rated on how well they do
their jobs compared with a set of standards determined by the employer.
Performance Management: is a systematic process for improving organizational performance by
developing the performance of individuals and teams. It is a means of getting better results by
understanding and managing performance within an agreed framework of planned goals, standards and
competency requirements. Processes exist for establishing shared understanding about what is to be
achieved, and for managing and developing people in a way that increases the probability that it will be
achieved in the short and longer term. It is owned and driven by line management. (Armstrong, 2009)

Objective Setting: Objectives or goals (the terms are used most of the time interchangeable) define what
organizations, functions, departments and individuals are expected to achieve over a period of time. It
results in an agreement on what the role holder has to achieve and is an important part of the performance
management processes of defining and managing expectations. It forms the point of reference for
performance reviews.

Rater Accuracy: on its dictionary term accuracy is the degree to which the result of a measurement,
calculation, or specification conforms to the correct value or a standard. Rater accuracy related with
perceived fairness, consistency of measuring employee contribution to the job, removing error/biasness.

Interpersonal Factors: are those factors that relate to the kind of treatment the appraise receives in the
hands of the appraiser (Thurston & McNall, 2010). Interpersonal factors are important in the employee
performance as they influence the outcome of the interactions. The quality of these interactions during
the process also contributes to fairness perceptions in the whole process. (Greenberg 1993)

Recognition: is ways to make those who work feel valued and appreciated for their work. It is an
effective tool to encourage and motivate others to strive for superior performance by allowing others to
be motivated to strive for excellence and for others to see the great work of their peers.
(https://www.creighton.edu/fileadmin/user/StudentServices/SLIC/LEAD_Ce
nter/Recognition_PDF.pdf - Leader Tips)
1.7 Organization of the study

This dissertation shows the effect of performance appraisal on employee performance and the
organization of this thesis was organized into five chapters.

Chapter one introduces the thesis title and how performance appraisal impact an employee
performance. In this chapter the research objective as well as questions, the significant, scope,
limitation of the study is included as well.

In Chapter two we find the literature review which overviews different scholars’ perception and
identification about performance appraisal and its relation with the interpersonal relationship, rater
accuracy, recognition as well as objective setting and their contribution to the employee performance.

Chapter three is all about the methodology, by providing the population and sampling size as well as
the method of sampling, research instrument used data collection techniques and data analysis
procedures. Following in Chapter Four the data collected based on the sampling and the method used
are analyzed and interpreted.

Finally on Chapter five the researcher summarized the findings of the study and also makes
recommendations that contribute to solve the raised problem, as well as a recommendation for future
use
 CHAPTER TWO
LITERATURE REVIEW
2.0 Introduction

In this chapter the researcher has reviewed literature that explores what has been done on
performance appraisal in relation to employee performance. Literature review comprises
documentation of information that relates to the subject under investigation. Moreover, it
helps determine new approaches and stimulates new ideas. The chapter further present
theories related to the study, empirical literature review, research gaps, conceptual framework,
operationalization of variables and chapter summary.

2.1 Theoretical Literature Review

The theoretical review is a logically described, developed and elaborated network of
associations among variables deemed relevant to the problem situation identified (Sekaran,
2010).

2.1.1 Expectancy Theory

This theory was proposed by Victor Vroom in 1964 and it stress and focuses on outcomes.
According to Lucas and Diener (2007) expectance theory is a set of decision theories of work
of motivation and performance. Perception plays a vital role in this theory because it
emphasizes on cognitive ability to anticipate likely consequences that result from behavioural
action (Krentner & Kinicki, 2011). As explained by Vroom (1964) the expectancy theory has
two major assumptions that is individuals have a perception about the concerns that result
from their interactive engagements and casual relations among the outcomes and second
assumption is individual has effective reactions to certain outcomes that is both positive and
negative value (Lucas & Diener, 2007).

According to this theory individual are motivated to perform by two expectations. Expectancy
is the probability that the effort will always lead to desired performance and second
expectancy is that particular performance will lead to preferred outcomes. While some efforts
will not be rewarded, the employee will not be motivated with to perform specific task.
Expectancy theory relies upon motivators to clarify the causes of behaviour at a work station,
external rewards are viewed as motivators that fuel behaviour as opposed to intrinsic
motivators when behaviour are driven from internal forces. The above theory facilitated
understanding that employee motivation and job performance.
2.1.2 Maslow’s Hierarchy of needs theory
Maslow’s Hierarchy of needs theory places employee’s needs into five categories which
include basic physical needs, needs for personal growth and career growth and development.
According Maslow employers should meet each level of employee’s needs, for the employee
to fully commit to organizational goals. Employers who fail to meet employees need at any
level of the hierarchy can easily create lack of fulfilment in staff professional lives which
cause them to eventually try to fill these needs on their own way which is possibly finding a
new employer who can provide better opportunities to satisfy their needs (Juan, 2010).

Maslow’s Hierarchy of needs theory was adopted in the model framework for development
purpose and it does not assume the decision making that is rational, but rather it incorporates
both unforced and thoughtful decision making. Human behaviour is assumed to follow a
consistent, reasonable and often automatic path which may be biased, irrational and
inaccurate (Folan & Browne, 2015). Human behaviour is based on various behavioral criteria
such as occurrence, extent and contradiction. Interest behaviour in this study applied the
underlying theory to launch and decide the dynamics under the current study. This theory
applies to this study because an individual growth is the key vehicle for organizational
success. Managers should attempt to identify individual employee needs and foster employee
satisfaction. If managers do so employees will progress toward self-actualization and
permitting the organisation to be all that it should be.

2.2 Empirical Literature Review

The empirical review highlights the past studies on the variables of the study. This includes
the studies conducted on employee performance among employees and performance appraisal
system. It reviews the aspects of job performance, employee motivation, staff training and
employee performance.

2.2.1 Performance Appraisal Feedback and Employee Performance

In 2017 Emerald publishing limited conducted a study on positive outcomes of negative
feedback: succeeding with performance appraisals, the main objective of the paper was to
review the latest trends and management development across the globe and pinpoint the
practical implications from cutting edge case studies and research studies. The methodology
approach was a preparation by independent writers who added their own impartial comments
and placed the articles in context. The findings indicate that organizations which endeavour to
constantly improve are best placed to gain competitive edge over their competition and
performance appraisal and performance appraisal feedback are critically important because
the process offers organizations a valuable opportunity to measure how each staff in relations
to previously established standards and expectations. But until appraisal feedback becomes a
reality some staff will always underperform therefore organizations must be able to address
the issues to avoid alienating those employees who are willing to pull their weight. And
negative feedback remains an important part of appraisal mix (Emerald Publishing Limited,
2017). The methodology used for this study was biased because the approach was a
preparation by independent writers who added their own impartial comments and placed the
articles in context.
Kuvaas (2011) carried a research on the interactive role of performance appraisal reactions
and regular feedback and his intentions were to test the relationship between performance
appraisal reactions and staff outcomes in terms of affective organizational commitment and
workplace performance. The study adopted a cross sectional survey of 803 from three
organizations located in Norway. His study established that perceived helpfulness of
performance appraisal was directly related to affective commitment and the relations between
performance appraisal and work performance was significant only for employees reporting
higher levels of perceived regular feedback. At the same time the relationship between
performance appraisal reactions and work performance was moderated by regular feedback
that’s suggest formal performance appraisal cannot compensate for low levels of regular
feedback (Kuvaas, 2011).
Robinson and Fink (2009) established that there are a number of flaws in the evaluation
process. However, formal performance appraisal programmes have often yielded
disappointing and unsatisfactory results. According to Robinson and Fink (2009) performance
appraisal should be abandoned as the last hope as they outline pitfalls and problems as
evidence and at the same time consider the potentials of performance appraisal programes.
The issues should not dwell on whether to scrap but rather it should be to make them better.
The irony is that time becomes an enemy when performance appraisal feedback are not dealt
with openly. In order to prevent the larger problem continuous feedback and documentation
are very important. One reason for failure is that firms often select extensively from the wide
battery of available performance appraisal techniques without really thinking about which
particular technique is best suited to a particular appraisal objective.
2.2.2 Performance Appraisal Process and Employee Performance
Longenecker, Frink and Caldwell (2014) conducted a study on current US trends in formal
performance appraisal process in a cross section of manufacturing firms and service firms in
their study the authors identifiend the current trends that have emerged from improved
opportunities that exists for companies that are currently engage in the practice of formally
apprasing their employess. Their study targeted 183 firms in the US that were reviewed by a
panel of three people and their contents were analyzed to indentify the formal performance
apprisal process, rating and procedure to opportunity for improvement. That data that was
collected was analyzed using qualitative analysis that revealed the average rating procudure
that had been in place for more than five years, the purpose of the performance appraisal
process and indentification trainings and development. The study also established that
organizations employ a wide variety of performance criteria in assessing their employees. The
data obtained to form the actual formal performamce appraisal process of organizations were
rather limited and the researchers provided critical insights into the current practice limiting
pontential generalizability. The social implication of the study suggest that companies can do
a much better job of equiping their staff to more effectively reap the organizational benefits of
this key practice (Longenecker, Frink, & Caldwell, 2014).

Zhang, Zheng and Li (2012), conducted a study on performance appraisal process and
organizational citizenship behaviour. The objective of their study was examine how
performance appraisal process is associated with organizational citizenship behaviour, the
study was anchored on two theories namely impression management theory and social
exchange theory, the study used commitment as mediator and rating reward as moderator. The
researchers used a multi source sample of 777 and examined the mediating role of affective
commitment with structural equation modeling and Sobel tests and the moderating role of
rating – reward linkage with ordinary least squares regression model. The study found out that
there is a relationship between performance appraisal process and organizational citizenship
behaviour mediated by affective commitment and perceived rating reward linkage
strengthened the direct association between organizational citizenship and performance
appraisal process where as it weakened the relationship between affective commitment and
appraisal process (Zhang, Zheng, & Li, 2012).
2.2.3 Performance Appraisal Goals and Employee Performance
Empirical studies show that effective performance appraisal lead to important outcomes such
as job satisfaction, employee productivity, quality work and employee trust and commitment.
A study conducted by Pettijohn and Taylor (2009)examined the relationship between
performance appraisal and sales performance and they established that if performance
appraisal are properly conducted the outcome have positive impacts a similar study was
conducted by Daley (2003) conducted an investigation on general performance appraisal
practices focussing on the use of explicit performance standards and the study established
that there is a strong relationship between performance appraisal system that have been
adopted as means of implementing pay for performance schemes and the productivity
incentives that these system provided. In another study by Omusebe, Gabriel and Douglas
(2013) found out that there was a positive and significant effect between employee efficiency
and performance appraisal in mumias sugar company. Walsh (2003) conducted a study on
perceived satisfaction and fairness of performance appraisal in the United States. The study
was investigating the employee’s reaction to satisfaction and fairness with the existing
performance appraisal tools. The data obtained from four hundred and forty respondents from
two organizations and the findings of the study established that respondents perceived that the
performance appraisal tools to be fair as nine out of ten scales used for measuring reaction.

Yang (2008) conducted a study on individual performance and his findings were that
individuals performance are had to verify, he asserts that organization can use rewards based
on rewards and direct bonuses on individual performance if employee performance is
noticeable. With agreement with Yang (2008) Bishop (2011) carried an investigation of
employee performance and he revealed that recognition, acknowledgment and reward of
performance of employees direct discrimination between employee productivity. Asim (2013)
also carried a study on effects of employee motivation on employee performance, and the
findings and conclusion were if staff are more motivated their performace will definately
increase.
In developed nations studies have shown that there is a shift from a micro analytical approach
to a macro strategic approach perspective that is organizational performance. This is
explained by a study by Delaney and Huselid (2006) in their studies of profit and non profit
firms in the United States the study established that there is a positive associations between
human resources management practices such as staff training, staff sellections and job
performance to perceptual organization performance measure. Conversely micro analytical
research to determine the relationship of employee attitudes and behaviour with performance
has also created interest in the field of performance management particulary in developed
world. Studies have shown that there is a strong relationship between performance and
personal factors such as motivations, commitments, competency and job satisfaction as well
as the introduction of performance related pay (Elorza, Aritzeta, & Ayestaran, 2011).

2.2.4 Performance Appraisal Methods and Employee Performance

A study conducted by Evans and Bae (2018) on Simulation based analysis of forced
distribution performance appraisal system in identification of best performing employees
within their organization, the objective of the study was to quantify the limitations of a
performance appraisal system in the identification of the best qualified individuals to future
requirements of the organization. The methodology adopted by their study was an exploratory
study using discrete event simulation based on the assignment, promotion and evaluation of
2,500 officers in the US army. The data that was obtained provided a basis for estimating
simulation with the inputs that included system structures, policy constrains, human behaviour
and system dynamics. They found out that effect of system dynamics and system structures
on the outcome of employees and suggested that decreasing the number of a rater’s
subordinates has a significant effect on the accuracy of the performance appraisal method,
however the researchers allowed organization leadership to evaluate the possible
consequences associated with evaluation policy prior to policy implementation. This study
advances a framework in assessing effect of system dynamics and system structures and the
extent to which it enhances the accuracy of organization performance appraisal system (Evans
& Bae, 2018). Mutunge (2013) conducted a study to investigate staff perception on the
effectiveness of performance appraisal system at Teachers service commission in Nairobi
Kenya, the study adopted a descriptive research survey method, the research used stratified
random sampling technique was used to arrive at 49 staff out of the possible 3000. That the
researcher collected data from, the study established that the performance appraisal system
used at teachers service commission is simple and has been consistence of time and all staff
members are subjected to the same standards as far as the performance appraisal system is
concerned. However, the study also established that the performance appraisal system does
not seem to involve all the
staff during the process of development. It also had a number of loopholes that encourage
subjective evaluation of the staff some of the loopholes includes lack of clarity on the
parameters used, lack of knowledge of the appraise, personal differences between appraise
and appraiser among others. She recommends that the performance appraisal system at
teachers service commission needs a total overhaul since it has quite a number of loop holes
that should be addressed and also needs to be reviewed in order to ensure that it’s based on
ideals that are more realistic (Mutunge, 2013).
Another study conducted by Nyaoga (2010) on the effectiveness of performance appraisal
system in private universities in Kenya with reference to Kabarak University. He established
that performance appraisal tool that performance appraisal is the only tangible metric way an
organization can know the level of staff performance of its diverse employees. The
respondents indicated that they were aware that the type of performance appraisal system used
in the organizations was not based on any serious formal purpose for which they were
designed for. According to Nyaoga (2010) the effectiveness of performance appraisal in
private universities were only based on training on the staff involved in the rating process and
are multi rating system. He concluded by saying that because the performance appraisal
system in this universities were not effective and they exist just as a matter of formalities, the
organizations could not measure employees performance hence making it difficult to achieve
the organization objective. Awori (2007) conducted a research on performance appraisal in
state corporations in Kenya, his findings indicated that the corporations use performance
appraisal tools and the preferred choice was management by objectives as opposed to the
balance scorecard; self-reviews, upward and peer review.

Mackenzie (2008) also investigated the performance appraisal system for organization
success. The objective of his study was to examine the issues associated with performance
appraisal and to identify proven and suitable methodologies that will result to a process that is
suitable, equitable, and credible and the one that reinforces the desired organization
directions. This was attained by evaluating the need for performance appraisal, problems
associated with various methodologies and examining the qualities that need to be measured
in both terms of organization and individual and finally identifies the means of improving
organization performance. The study established that current process within the study
organization focused on dealing with diminished performance issues and subsequently the
efforts of the individual are not necessarily aligned with the desired organizational direction
and little incentive exists amongst managers to challenge the current process and encourage
risk taking to improve service delivery.

2.3 Summary and Research Gaps

Performance appraisal offers a value opportunity to focus on goals and work activities; to
identify and correct existing problems and to encourage better performance in the future.
Leading organizations therefore strive to put the right performance measurement system
which is value based, that help them set agree upon performance goals and give the desired
outcomes. Performance measurements generates data that is used to gauge the direction in
which organization is headed and it allow organization to design, control and account for staff
performance as laid out in the organization strategy.

2.4 Conceptual Framework

A theoretical framework introduces and describes the theories that attempt to explain the
research problem under study with a keen focus on the specific variables being sought in the
study, the conceptual framework comprises of independent variables that are four in number
and one dependent variable.

Independent Variable Dependent Variable

Perfo

Perfo

Perfo

Perfo
 mance Appraisal Feedback
mance Appraisal Methods

mance Appraisal Goals

mance Appraisal Process

Employee Performance

Figure 2.1: Diagram showing the relationship between, Independent variables and Dependent
Variables

2.5 Operationalization of variables

Table 2.1: Table showing operationalization of variables

Indicators Independent Type of Data

Variable Analysis

 Evaluating Feedback Performance Appraisal Descriptive statistics

Feedback
 Measuring Feedback

 Critical incident review

 Workshops trainings
 Seminars Trainings Performance Appraisal Descriptive statistics
 Mentoring Goals
 Coaching

 Based Anchored Rating Scales Performance Appraisal Descriptive statistics

 Trait Scale Methods
 Management by Objectives
 360 Degrees Appraisal method

 Providing information to staff

 Peer review
Performance Appraisal Descriptive statistics
 Self-review
Process
 Forced choice rating
 3. Chapter Three: Research Methodology
a. Description of the study area
The history of banking in Ethiopia dates back to the turn of 20the century when the back of Abyssinia was
established in 1905 in Addis Ababa marking the introduction of banking in the century. This bank was
established with the request of the Ethiopian government for British government support in setting up the ban.
Thus, the bank of Abyssinia (BOA) was open for business in 1996 with enthused initiation and determination.

A bank of Abyssinia, serves over 9.3 million customers through its 818 branches in the country, BOA’s well-
structured financial service system is connected through the T-24 core banking system. This coupled with the
1271 ATM machines, 16 virtual banking centers, and more than 1256 POS placed in different locations to afford
customers to access their accounts from anywhere at any time. This also allowed BOA to increase its capital a
hundreds-fold from ETB 50 million to ETB 5.5 billion.

Research Approach

Research Design

Population of the study

b. Sampling technique and Sample Size

Sampling technique to be used in order to select employees in this study will be simple random sampling
method. One of the best things about simple random sampling is the ease of assembling the sample. It is
also considered as a fair way of selecting a sample from a given population since every member is given
equal opportunities of being selected. Another key feature of simple random sampling is its
representativeness of the population. Due to the representativeness of a sample obtained by simple random
sampling, it is reasonable to make generalizations from the results of the sample back to the population.

For simplicity and representativeness of the sample, first employees have been be categorized in to three
major departments, and then proportional number of employees have been selected using simple random
sampling technique. In this case the total number of size for employees is 49 and the following table
summarizes the calculation.,

Number
No. Department of Proportion
employees
 1 Manager Office 13 14%
2 senior officer 11 12%
3 Junior officer 68 74%
Total 92 100%

c. Method of data collection

The study has used both primary and secondary sources of data. To collect primary data with regard to
accomplishing the research's objectives, this research has used structured questionnaire, key informant
interview, and focus group discussion. The structured questionnaire was used to collect data from operating
level employees, and line managers with regard to variables used in performance appraisal, the feedback
system, weaknesses and strength of the current performance appraisal systems and so on. In addition, key
informant interview was made with trade union managers, employee representatives, unit heads, and higher
level manager. Moreover, to cross check and justify the validity and reliability of respondents' response a
focus group discussion was conducted. The focus groups include operating level employee from different
departments, line managers, representatives, and top level managers.

On the other hand, secondary data has been collected from different literatures. Literature explaining
performance appraisal definition, concept, methods, and issues; performance appraisal policy; efficiency:
definition, concept, organization and efficiency, performance factors determining efficiency; relationship
between performance appraisal and efficiency; variables to be considered in performance appraisal and
how they affect efficiency; methods of performance appraisal and efficiency; performance appraisal and
feedback system amongst others was collected from broachers, books, journals, company profile, websites
and any other published and unpublished documents.

d. Method of Data analysis

The data collected using questionnaire has been coded and entered into the appropriate statistical software
and analyzed using simple descriptive statistics specifically, means, percentages, frequency distribution,
range and standard deviation. The qualitative data collected using group discussion and key informant
interviews have been analyzed using SWOT analysis, narrative explanation and argument.

Validity

Reliability
 4. Financial Budget and time schedule

4.1.1 Time schedule

Time plan or time budget is a time table explaining how the researcher expected to carry out his project. It is a
plan of in terms of months and expected compilation. Dates, it is presented in the table form or chart in the
following schedule.

NO Activity march April May June July

1 Submission Xx
and approval
of title
2 Proposal Xx
writing and
submission.
3 Questionnaire Xx
development
4 Data collection Xx
5 Data analysis Xx
and
interpretation
6 Preparing the Xx
final draft of
the research
7 Presentation Xx
 1.5 Cost budget

There will be different going to incur to undertake this study. The researcher estimated the following minimum
cost per item.

Item Quantity Per unit (Birr) Total Cost (Birr)

Equipment and Questionnaires’ 92 5 460
stationary Paper
Pens 5 15 75
Flash disk 1 250 250
Binder 2 100 200
Total cost 985
Personal cost Transportation 5 100 500
Internet 2gb. Wifi for one 499
month
Typist 1 120 120
Total cost - - 695
Contingency - - 500
Overall total cost - - 3,299
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