BAHIR DAR UNIVERSITY

College of Business and Economics

Department of Management
Business Research
RESEARCH TITTLE :The role of performance appraisal for
employee performance(The case of Amhara Bank in Bahir Dar
branch )

Program: Undergraduate (Regular) Management (3rd year)

Name
ID. NO
1.shegaw wodaje ........................................................1407996
2.Shikur abay ........................................................1408251
3.Tadsual Adane ........................................................1407549
4Tsehaynesh Tesfaw ........................................................1408153
5.Tigist Tadele ........................................................1408343
6.Tirsit sisay .......................................................1408089
7.Tofik Abdu ........................................................1408023

Submitted to :Dr.Meselu
Submission date: July , 2016

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 ACKNOWLEDGEMENTS

First and for most we would like to giving our humble and great
thank to Creator for everything he has done for our throughout our
life.

Also we would like to thanks my deep heart for all our families
who assisted us starting from lower grade up to the university level
in that they paying us their uncountable resource and moral
support.

Last we would like to thanks our fourth year management friends

support us in different way to success this study.

Thanks for

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 ABSTRACT

The title of this research is the role of performance appraisal for

employee performance the case of Amhara bank in Bahir Dar
branch. Performance appraisal is a process of assessing or
evaluating the performance of employee on their job in order to
identify their strengths and weakness so as to improve upon their
performance. As a result performance appraisal plays an
important role in determining the performance of staff at Amhara
bank.The main objective of this study is to assess the role of
performance appraisal for employee , to find out the design and
implementation of performance appraisal at Amhara bank, and to
identify problem or challenges when conducting performance
appraisal. This study will be use both primary and secondary data.
Primary data will be collect from the employees through
questionnaire, interview. The secondary source of data will be
collect from the published source of data and books. After the
necessary data will be collect the activity of data analysis,
interpretation and presentation will be follow. Based on the data
collect as well as the information gather, summary, conclusions
and recommendations will be present..

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TABLE OF CONTENTS

Contents Pages

CHAPTER ONE
1.INTRODUCTION.....................................................................6

1.1 Back ground of the study....................................................6

1.2 Statement of the problem...................................................8

1.3 Research Question...........................................................9

1.4 Objective of the study......................................................9

1.4.1 General objective

1.4.2 Specific objective.

1.5 Significance of the study.................................................10

1.6 Scope of the study...........................................................10

1.7 organization of the study...............................................................10

CHAPTER TWO

2. Review Of Related Literature................................................12

2.1 Meaning and nature of performance appraisal...................12

2.2 Employee performance .............................................. ........13

2.3 Purpose of performance appraisal......................................13

2.3.1 For administrative purpose

2.4 Performance appraisal method...........................................14

2.5 performance appraisal processes.......................................16

2.6 Use of performance appraisal .............................................17

2.7 Problem of performance appraisal......................................18

2.7.1 System design and operating problem ............................19

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2.7.2 Problem with appraises................................................19

2.7.3 Problem with appraisers...............................................19

2.8 Requirements of effective appraisal system ..................19

CHAPTER THREE

3. Research Metrology.......................................................21

3.1 Research design.............................................................21

3.2 Target of population..........................................................21

3.3 Source of data....................................................................21

3.4 Method of data collection..................................................21

3.5 sample size and sampling technique................................22

3.6 Data analysis and interpretation.....................................22

CHAPTER FOUR

4 Time and Budget Schedule.........................................................23

4.1 Time Schedule....................................................................23

4.2 Budget Schedule..............................................................24

REFERENCE

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CHAPTER ONE

1.INTRODUCTION

1.1 Back ground of the study

There are certain positive features of this performance appraisal method; it

measures behaviors which are critical to the effective of the job.The most
challenging aspect of a performance appraisal is measuring the actual
performance of the employee.Performance appraisal is the identification,
measurement, and management of human performance in an organization
(Bohlander and Snell;2004).

Since the performance is measure by tasks performed ,there is a continuous

process that must be administered the performance throughout the appraisal
cycle.It is very important to choose the correct measuring techniques.It is
also important to focus on a desire performance and compare the desire
performance to the actual performance of the employ(Rue and Bayer;2004).

Performance appraisal is the process of determining and accomplishing to an

employee how he or she is performed in the job.Performance appraisal not
only let employees know how well they are perform but also influence their
level of effort and task direction. Effort should be enhance if employee
reinforce. Performance appraisal means evaluating employee current and
past performance relative to the person performance standard(Rue and
Bayer;2004).

Performance appraisal is the process of evaluating how well employee

perform their job when compare to asset of standard and the communicate
that information to asset of standard. It can be also term as employee
performance rating ,employee evaluation, performance review ,performance
evaluation and result appraisal (Mathis and Jackson; 2002).

Performance appraisal benefits both employee and employer. Employer

benefit from understand their employee weakness and strength.understand

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the employee help to make basic enforcement for weakly perform employee
by giving training and development in order to improve his/ her performance.
Employee benefit by getting feed back about their performance of certain
period in time to improve themself on their poor performance or to be
motivate for their good performance(Bacal;1999).

Performance appraisal is not only important to employee problem

identification, but also important to the organization for effective utilization
of human resource by identify strong employee from best for utilization of
man power,to bring effective and efficency.The ultimate objective of
performance appraisal is identify, measure,and manage of human
performance in an organization and to give feed back to employee who may
improve their performance on job and also organization or business firm
success(Bacal;1999).

performance appraisal is the systematic observation,evaluation and

description of work-related behavior.By this, an employee is observe from
time to time by critically consider what knowledge, ability an skills he uses to
accomplish the task.performance appraisal system usually include measures
both behaviors ( what an employee does) and result (the out comes of an
employee's behavior (Aguinis;2005).

Performance appraisal for the purpose of evaluating employees, providing

employee with valuable feed back. Performance appraisal have many roles for
employee performance. Some of the roles of performance appraisal are : it
encourage employee to perform better in the future, it present an opportunity
for employee positive performance for an increasing salary or promotion and
during the appraisal, employees can discuss strength and weakness with a
supervisor, in effect allow employee to discuss personal concerns,self and
staff esteem may be increase etc(Aguinis; 2005).

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 1.2 Statement of the Problem

The role of performance appraisal for employee performance is to achieve the

desire objective and to reduce weakness, inefficiency and inabilities of
employee.Performance appraisal have play significant role for employee
productivity.It improve man power require that performance appraisal become
an essential tool to assess the individual employee and should be based on
consistent feedback such that an appropriate reward system can be measure
for correction can be put in place ( Ingram; 2009).

Performance appraisal have an important role for employee performance,

profitability and also a great role in provide effective utilization of human
resources. It achieve employee objectives and goals. It creates performance
improvement, equal employment opportunity. But if their is lack of
information, negative attitude and other reasons make the application of
performance appraisal become difficult( Ingram;2009).

Performance appraisal is one of the most important activities of human

resource manager, employee performance and it is important to an
organization, if it is properly appraised , in bringing to handle employees
successfully to make effective and efficient on their job (Bacal;1999).

Lack of employee performance appraisal in the organization lead to

employees inefficiencies in their operation. It may also affect training and
need assessment for development management, programmers, transfer, and
demotion of employee. This proposal is motivate to study on the role of
performance appraisal for employee performance. It means to know the role
of performance appraisal for employee performance. To identify the factor
that lead to improper performance of employee.

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 1.3 Research questions

1. What are the major problems in the practice of performance

appraisal in in Amhara Bank Bahir Dar branch?

2. What are the objectives of employees performance appraisal in

Amhara Bank Bahir Dar branch?

3. What are alternative solutions for problems regarding the

practices of employees performance appraisal in Amhara bank?

4. What is the current performance appraisal system of Amhara

bank in Bahir Dar branch?

1.4 Objective of the Study

1.4.1 General objective

The overall objective of the study will be to assess and identify the role of
performance appraisal for employee performance in the case of Amhara Bank
in Bahir Dar branch?

1.4.2 Specific objectives

The specific objectives of the study:-

. To assess the major problems during performance appraisal practice

. To explain the objectives of performance appraisal in Amhara bank.

. To examine the alternative solution for the problem during the practice of

employees performance appraisal in Amhara bank.

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 . To point out the current performance appraisal system in Amhara Bank.

.1.5 significance of the study

The study will help the researcher on partial fulfillment for the BA degree in
management. More over, the study will provide the following advantage for
employee and organization:-first, finding the employees to know the major
problems that influence to do good performance appraisal and to take
corrective action. Second, the study will be use as reference for
performance appraisal by bringing an initial insight for other researchers.

Performance appraisal helps employees of the organization by determining

who will be training needs, promotion and identify who should be transfer.
Moreover,it helps to improves employees job performance, encourage to
express their views, or clarification on job duties, capacity,placement,
facilitates selection for reward and promotion of the best qualified employee,
by evaluating their performance. Generally to know the role of performance
appraisal for employee performance.

1.6 Scope of the study

The study will be focus on Amhara bank in Bahir dar branch because it will be
difficult to cover all area , and it focus on the role of performance appraisal for
employee performance to know the role of performance appraisal for
employee performance.The study will use descriptive research design , to
describe characteristics of employees.

1.7Organizations of the study

The study will be five chapter .The first chapter contains the introduction

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that contains background of the study, Statement of problem, research
questions,objective of the study, significance of the study, scope of the study
and limitation.The second chapter contains review of related literature and to
get relevant information about the study. The third chapter deals with
research methodology that contains research design,source of data, method
of data collection, target of population,and sample size and sampling
technique.. The fourth chapter deals about data analyze and interpretation.
The last chapter contains summary, conclusion and recommendation of the
whole study.

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 CHAPTER 2

2. Review of Related Literature

2.1 Meaning and nature of performance appraisal

Performance appraisal means evaluating employees current or past

performance relative to his or her performance standards. That is employees
will be assess after a given period of time what they have been able to
achieve by a target set. This will also help supervisors to know how well their
subordinates are performing on their jobs(Dessler;2005).

Performance appraisal is the processes by which organizations evaluate

employees performance based on present standard. performance appraisal
as an evaluation and grading exercise undertaken by an organization on all its
employees either periodically or annually, on the outcomes of performance
based on the job content, job requirement and personal behavior in the
position (Armstrog and Baron; 2004).

Improper usage of the appraisal has an adverse effect on productivity and

employee performance. Organizations must adopt performance appraisal as
an important personal function to obtain important information concerning
employees performance and behavior to make different decisions based on
those information obtained to achieve this, personnel department in
collaboration with in manager and operations employee's must design and
undertake the appraisal program(Monday; 1999).

When supervisor think about how employee are doing they are evaluating
them in formally. The informal (unsystematic) appraisal can be undertaken at
any time and lacks precise record of employee's accomplishment it is often
hard and the evaluation solely relaying on the supervisor's opinion. Therefore,

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inaccurate and biased information can be obtain for layoff, promotion and
other important decision that affect employee's performance.(Monday;1999).

The formal appraisal is undertaken in a regular and systematic to evaluate

employee's performance. A systematic and periodic appraisal is seem
superior to a causal, intuitive and at advance of the time when it may be need
there by avoiding spot judgments when a decision must be made (Armstrong
and Baron; 2004).

It is important for managers and supervisors to get the best performance

from their workforce in terms of levels of production and quality of output. In
order to achieve this, certain system or programmes such as performance
appraisal need to be put in place (Foot and Hook;2005).

According to Foot and Hook,(2005) performance appraisal regularly records

an assessment of an employees performance, potential and developmental
needs.This is also means that appraisal is an opportunity to take an overall
view of work contents ,loads and volumes.

2.2 Employee performance

Employee performance is defined as whether a person executes their job

duties and responsibilities well.Many companies assess their employees
performance on an annually or quarterly basis in order to define certain areas
that need improvement.(Aguinis;2005)

To achieve strong employee performance ,managers conduct employee

performance,implement training and development programs, and decide
when to promote and reassign employees.(Lewis and Thomhill;2007).

2.3 Purpose of performance appraisal

Organization use performance appraisal indifferent ways for different purpose.

But its overall purpose is to lay a base for making personal related decisions.
The plan and method is to be used are highly depending up on its purpose.
The performance appraisal making is used for administrative and employee
development purpose(French;2007).

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Performance appraisal helps to assess performance strength and weakness
and it can be use as basis of determining training needs.Identifying area
where training is need can be facilitate by acquiring information from the
appraisal . It is advantageous to train employees of poor performance rather
than fringes demoting them because acquiring new components
employee to fill the position may be cost and time consuming (French;2007).

2.3.1. For Administrative Purpose

Appraisal is used for administrative purpose, when a manager wants to
determine the performance of employees for salary administration, promotion,
transfer, layoff, termination, demotion and making other administrative human
resource planning. The result help to estimate the quality and number of
personnel required to replace poor performances that are expected to be fired
or demoted. It also helps to full fill those position that are left empty when
employees are promoted or transferred, (Mathis and Jackson; 2004).

2.4 Performance Appraisal Methods

This section looks at how management can actually establish performance
standards and devise instruments that can be use to measure and appraise
an employees performance. A number of methods are now available to
assess the performance of the employees. (Rue and Bayer, 2004).

1) Critical Incident Method

Critical incident appraisal focuses the raters attention on those critical or key
behaviors that make the difference between doing a job effectively and doing
it ineffectively. What the appraiser does is write down little stories that
describe what the employee did that was especially effective or ineffective. In
this approach to appraisal, specific behaviors are cited, not vaguely defined
personality traits.

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2) Checklist

In the checklist, the evaluator uses a bit of behavioral descriptions and checks
of those behaviors that apply to the employee. The evaluator merely goes
down the list and gives yes or no responses. Once the checklist is complete, it
is usually evaluated by the staff of personnel department, not the rater his self.
Therefore the rater does not actually evaluate the employees performance;
he/she merely records it. An analyst in the personnel department then scores
the checklist, often weighting the factors in relationship to their importance.
The final evaluation can then be returned to the rating manager for discussion
with the subordinate.

3) Graphic Rating Scale

One of the oldest and most popular methods of appraisal is the graphic rating
scale. They are used to assess factors such as quantity and quality of work,
job knowledge, cooperation, loyalty, dependability, attendance, honesty,
integrity, attitudes, and initiative etc. However, this method is most valid when
abstract traits like loyalty or integrity are avoided unless they can be defined in
more specific behavioral terms.

4) Ranking Methods

Method of performance appraisal in which the performance of an employee is ranked

relative to the performance of others.

5) Management by Objectives or Goal setting

Management by objectives (MBO) is a process that converts organizational

objectives into individual objectives.Consists of establishing clear and
precisely defined statements,objectives for the work to be done by an
employees; establishing an action plan indicating how these objectives are to
be achieve ,allowing the employee to implement the action plan measuring
objectives achievement, take corrective action when necessary and establish
new objective for the future.

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6) 360 degree appraisal

The 360 degree feedback process involves collecting perceptions about a

persons behavior and the impact of that behavior from the persons boss or
bosses, direct reports, colleagues, fellow members of project teams, internal
and external customers, and suppliers. Other names for 360 degree feedback
are,multi- source feedback, full-circle appraisal, and group performance review.
360 degree feedback is a method and a tool that provides each employee the
opportunity to receive performance feedback from his or her supervisor and
four to eight peers, subordinates and customers. 360 degree feedback allows
each individual to understand how his effectiveness as an employee,
co-worker, or staff member is viewed by others. (Rue and Byer, 2004)

2.5 Performance appraisal processes

According to Desenzo and Robins (1996) performance appraisal may vary

from one organization to another.For a performance appraisal scheme to be
workable , it should follow a process. It has identify six steps that need to be
follow when using an appraisal system. These are :-

Establishing performance appraisal; identification of specific goals is the

starting point of performance appraisal processes. For any appraisal system
to serve all its purpose the management should select performance appraisal
goal that believed to be most important and can be realistically achieved .

Communicating the standard to employees; after specific appraisal goal has

been established, workers must understand what are expected from them in
their job. One possibility to foster his understanding is for supervisors to
review with employees the major duties determined through job analysis and
described in a job distribution .

Discussing the appraisal with the employees: this is a very challenging step

in appraisal processes as it involves presenting accurate appraisal to the

employees and has the person accept the appraisal is in the constructive

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manner.

Measuring actual employee performance; as per evaluation method used in

organization and instruction given for appraisal employees actual
performance is evaluated through observation, interview and records then
compares actual performance with standard set and find out if there is any
deviation. Deviation may be positive and negative. If employee performance is
more than standard there is positive, and vice versa.

Taking the corrective action; this includes guiding counseling and coaching
the employee or making arrangement for training and developing for the
employee in order to ensure improved performance. If the actual performance
is very poor and beyond the scope of improvement, it may be necessary to
take steps for demotion or retrenchment or any other suitable measurer it
also involves making suggestions for some changes to be made on the
standard job analysis or other factors to facilitate effective performance of
employee.

2.6 Uses of performance appraisal

According to Monday (1999), for many organizations the primary goal of an

appraisal system is improved performance. However other goals may be
sought as well. Potential problem and possibly primary cause of much
dissatisfaction with appraisal may result from expecting too much from one
appraisal plan.

According to (Lewisand Thomill;2007), performance appraisal is used to identify the

dimension of performance, and also to set standards of contribution for each
performance dimension step and performance appraisal is two roles in
organization. One role is to measure performance for rewarding or making
administrative decisions about employees, and other role is development of
individual potential.

The major function of performance appraisal are to give employees feedback on

performance, to identify the employees' developmental needs to make promotion
and reward decisions ,to make demotion and termination decision and to develop
information about the organization selection and placement decision (Mathis and

17
Jackson ;2004).

Performance appraisal uses;

According to Noe and Premeaux(1999) discuss the performance appraisal purpose

as performance appraisal data are potentially valuable for use in virtually every
human resource functional areas such that:-

Human resource planning:-A well designed appraisal system provides profile

of the organizations human resource strength and weakness to support this
effort.

Recruitment and selection:-performance evaluation rating maybe help full in

predicting the performance of job applications. The determination of selection
tests validity would depend on accuracy of appraisal results.

Training and development:-A performance appraisal should pin out an

employee's specific needs for training and development.

Career planning and development:-Career planning and development may be

viewed from either individual or organizations view point. In either cases
performance appraisal data are essential in assessing an employees strength
and weakness and in determining the persons potential.

Compensation programs:-performance appraisal results provide basis for

rational decisions regarding pay judgments to encourage good performance,
firm should design and implement a fair performance appraisal system and
then reward the most productive workers and team accordingly.

Internal employee relations: - Performance appraisal data are also frequently

used for decision in several areas of internal employee relations including
motivation, promotion, demotion, termination, layoff and transfer.

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2.7 Problem of performance appraisal
Any system can fail or mal functions, performance appraisal are no exception.
The system of performance appraisal may fail for much reason including the
problem related to the designed and the operation of the system, skill and
competence of appraisers and perception of employees, about appraisal. The
following are discussions on major appraisal problems.

2.7.1 System design and operating problem

The performance appraisal system breakdown because if they are poorly
designed. The can be blamed if the creation for evaluation one poor, the
technique used is cumber so I or the system is more from than substance.
(Bohlander and Snell;2004).

2.7.2 Problem with appraises

For the appraisal system to work well the employee must understand it, tell it
is fair, and be work oriented enough to care about the result.Performance
evaluation may also be less effective than desired it the employee is not work
oriented and sees work only as a means to an end sough of the job. Generally
employees do not understand the system or its purpose employees are not
work oriented and appraisal may be below the expectation.(Bohlander and
Snell;2004)

2.7.3 Problem with appraisers

An evaluation system can hampered or destroyed often because raters are
not been adequately trained. It should be clear therefore that even if the
system is well designed little knowledge and skill on the side of raters can
lead to a serious of problem and error in competing appraisal (Bohlander and
Snell;2004).

2.8 Requirements of effective appraisal system

The key requirements of any appraisal system are relevancy, sensitivity,
reliability, acceptability and practicality. Here under we will look all the above
listed in deep.(Desenzo;1996).

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Relevancy:-This implies that there are clean links between the performance
standards for a particular job and organizational goal and between the critical
job element identity through a job analysis and the dimension for rated on
appraisal form.

Sensitivity:-This also implies that a performance appraisal system is

capable of distinguishing effective from ineffective performance. It is not and
the best employee are rated differently from the worse employees that the
appraisal system cannot be used for an administrative purpose, it certainly
will not help employees to develop and it will undermine the motivation of
both supervisors and subordinates.

Reliability:-A third requirement of sound appraisal system is reliability in this

context it refers to consistency of judgments for any given employee
appraisal made by a rates working independently of one on other should
agree closely. In practice risings made by supervisors tend to be more reliable
than those made by peers.

Acceptability:-In practice acceptability is the most important of all human

resource programs must them. Unfortunately many organizations have not
put much effort in to garnering the truant end support and participation of
those who will use the appraisal system.

Practicality:-Implies that the appraisal instruments are easy for man power
and employee to understand and use. Those that are not or that impose in
coordinate time demands on all parties simply are not practical and managers
will resist using them.

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 CHAPTER 3

3.RESEARCH METHODOLOGY

3.1 Research design.

The study will be use descriptive type of research design. In this study both
qualitative and quantitative approach will use, because to identify or describe
the role of performance appraisal for employee performance the case of
Amhara Bank in bahir dar branch.Descriptive survey research study are those
studies which concern with the characteristics of particular individual or group.

3.2 Target population

The target population of the study will be the employee of Amhara bank ,
because to know about the role of performance appraisal and employee
performance.

3.3Source of Data

The study will be use both primary and secondary data in order to get
available information. The primary data will be directly from the permanent
employee and manager gather through questionnaires,and interview .
Secondary data will be the written documents such as books, magazine,
newspaper, internet ,research finding record document and and broacher of
the organizations.

3.4 Method of Data Collection

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The data will be gather from both primary and secondary data. Primary data
will collect from :-Questionnaire:- use to make study with in the given time
adequate questionnaire will be distribute to the permanent employee found in
Amhara bank in Bahir Dar branch.Both open ended and close ended question
will be used.Because open ended helps respondent to express their idea in
unlimited way and close ended provide actualize question to the respondent.

Interview:-will conduct with the manager of Amhara Bank to get precise and
clear information by using structured interview. Secondary data collect from
books, internet,document of the organization.

3.5 Sample size and sampling technique

Due to the manageability or smaller number of employees existing in the

organization, the researcher will be use involving all target population in the
study with the use of census method. This is because the total population of
the organization is 26 so, it is better to use census survey and the
population in the study area is small. In addition to this, census survey was
eliminating sampling errors.

3.6 Data analysis and interpretation

After the data will be collect the data will be identify how data will process
and analysis.So after all data will be collect,the researcher will be use to
quantitative and qualitative methods of data process,which means data from
the questionnaires will change in to tabulation from using number and
percentage use on the activity, which involves editing, and classifying data to
make it suitable for further analysis.

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 CHAPTER 4

Time and Budget Schedule

4.1 Time Schedule

NO ACTIVITY NOV DEC JAN FEB MAR APRIL MAY JUN

1 Title
selection

2 Formation of
proposal

3 Prepare
questionnair
e & data
collection

4 Data analysis
& processing

5 Writing the
proposal
paper

6 Proposal
submission

7 Paper
presentation

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4.2 Budget Schedule
NO Item(stationary materials) Unit Unit price Total

1 PEN 3 20 60

2 PAPER 100 2 200

3 TRANSPORTATION COST 6 10 60

4 WRITING & PRINTING 50 5 250

5 BINDING 2 18.5 36

TOTAL 161 55.5 606

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 REFERENCE

Aguinis,H,(2005),Performance management , 2nd ed,Upper Saddle

River ,NJ;person prentice Hall.

Armstrong.M. and Baron (2004),Performance management action.

Bacal,R,,(1999), Performance management, New

york,MCGRAW-HIill.

Bohlander,G.and Snell,S.(2004),Managing Human resource ,13rd

ed,Lachina Cascio, publishing service INC,USA.

David Ingram,(2009),Small business performance appraisal,Walsh

university,Houston printing company.

Decenzo,D.A, and Robbins,S,P,(1996), Human resource

management,5th ed, John Wiley and Sons INC, U.S.A.

Dessler, G.(2005), Human resource person education INC.NJ.

25