AYELEGETNET.COM

ADDIS ABABA UNIVERSITY

SCHOOL OF GRADUATE STUDIES

ADVISOR:   ATO ABEBE YITAYEW

JULY, 2007

MBA PROGRAMME

FACULTY OF BUSSINESS AND ECONOMICS

ADDIS ABEBA UNIVERSITY

An Assessment of Employees’ Performance Appraisal, the case of Bank of Abyssinia

By Eniye Dargie

Approval of Board of Examiners

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Chairman, Department of graduate committee Signature

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Advisor Signature

____________________________________ ___________________

Examiner Signature

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Examiner Signature

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Examiner Signature

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Examiner Signature

Master’s of Business Administration [MBA] at Addis Ababa University, is an original work and not

submitted earlier for any degree either at this university or any other university.

__________________________

Ato Abebe Yitayew

Research advisor

used for the study have been duly acknowledged. I have produced it independently except for the

guidance and supervision of the research advisor.

This study has not been submitted for any degree in this university or any other university. It is offered

for the partial fulfillment of the MA degree in Business Administration [MBA].

Eniye Dargie

Researcher

My special thanks and appreciation goes to my beloved Husband Ato Mulugeta Yigzaw for his

unreserved material and moral support during my study. I am also pleased to thank my lovely little

baby Eskinder Mulugeta who shares his love and happiness while I feel exhausted and tired. My

deepest and warmest thanks go to Col. Wondwossen Teka and Col. Abduselam Ebrahim for their

material and brotherly support.

My next heart felt thank goes to my families my brothers [Samuel Dargie, Ato Ayalew Abebe and

Kibret Sisay] and my sisters [Felegush Dargie, Belaynesh Dargie] for their uninterrupted morale, love

and material support throughout my stay in the university.

My warmest gratitude and appreciation goes to my advisor Ato Abebe Yitayew for his unreserved

professional and technical assistance. Thank you so much for your helpful reviews, comments and

suggestions. Indeed without your unreserved dedication, the successful completion of this study would

have been difficult.

Last but not least deepest appreciation goes to my former stuff members to Ato Dereje Abie and Ato

shimelse Abebe who support me by sharing their experience and material support in completing the

paper.

I will like also to thank the staff of Bank of Abyssinia for making time available to fill out the

questionnaire survey. My appreciation also goes to all the persons who supported me during the

process of the study.

Finally, I would like to take this opportunity to thank all of my instructors who have been supporting

and teaching me to come to a success.

Eniye Dargie

August 1, 2007

1 .1 Background of the project…………………………………………………...1

1.2 Statement of the Problem…………………………………………………..3

1.3 Objective of the study…………………………………………………………4

1.4 Methodology ………………………………………………………………….5

1.5 Scope and limitation of the study……………………………………………...6

1.6 Significance of the study………………………………………………………6

1.7 Organization of the paper……………………………………………………...6

2.1. What is Performance Appraisal………………………………………………..8

2.2. Use of Performance Appraisal…………………………………………………8

2.3. The Performance Appraisal Process…………………………………………..10

2.4 Responsibilities for Appraisal………………………………………………….14

2.5 Performance Appraisal Methods…………………………………………….…16

2.6 Employee Placement and Termination…………………………………………21

2.7.How to manage Performance …………………………………………………..23

3.1 Over view of the Bank of Abyssinia………………………………………...….29

3.2 Objective of Performance Appraisal in BoA……………………………………30

3.3 The process of performance appraisal (PA) in BoA……………………… .31

3.2.1 Who evaluates performance?...............................................................31

3.3.2 Methods of Performance appraisal Used by BoA…………………....33

3.4 When and how often to Appraise? ………………………………………...36

3.5 Uses of Performance appraisal……………………………………………..37

3.6 Profile of Respondents……………………………………………………...37

3.6 Respondents opinion towards the PA system…………………………..…..41

3.7 Performance Appraisal Feed back and communication …………………...45

4.1 conclusions…………………………………………………………………51

4.2. Problems of PA is BOA……………………………………………………52

4.3 Recommendations…………………………………………………………..54

Interview ………………………………………………………………………..ii

Questionnaires…………………………………………………………………...iii

Table 3.6.1 Bibliography of the respondents…………………………………….38

Table 3.6.2 Academic background of the respondent…………………………....39

Table 3.6.3 Years of Experience of employees…………………………………..40

Table 3.6.4 about frequency of performance appraisal …………………………42

Table 3.6.5 about who evaluates employees……………………………………..43

Table 3.6.6 Purpose of performance appraisal……………………………………44

Table 3.6.7 about appeal to higher official………………………………………..46

Table 3.6.8 about fair examination of grievance………………………………….47

Table 3.6.9 about the criteria used to evaluate employees………………………..48

Table 3.6.10 about the weight assigned to evaluation criteria…………………….49

Picture 3.6.1 Employees service year in the organization………………………...39

Graph 3.6.1 Academic background of the respondent…………………………….41

Graph 3.6.2 about use of evaluation result…………………………………………44

1

Bank of Abyssinia was established in 1905 in Addis Ababa marking the introduction

of banking in the country. This bank was established with the request of the Ethiopian

government for British Government support in setting up the bank. The bank was

then established with the support of the British envoy through the National Bank of

Egypt and was given a 50-year concession with exclusive privileges in respect of

banking, coinage and issue of notes, bonded warehouses, custody of all moneys

belonging to the state and a preferential right to all state loans. Ethiopian subscribers

held only 6.2 percent of the bank's share while the rest belonged to an Anglo-Egypt

group, a French group, an Italian group, German, Austrian and American subscribers.

However, the bank later was found to be a purely profit-making institution rather than

promoting the banking habit as it was expected to. It was then needed to establish a

government bank when opposition to its monopolistic position was first manifested in

1928. With the willingness of the National Bank of Egypt to abandon its

concessionary rights in return for a sum of pound sterling, the transfer of ownership

took place smoothly in 1931.).

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The new bank, the Bank of Ethiopia, retained the offices and personnel of the old

bank. The new bank differed from its predecessor in ownership and functional

responsibility. The Ethiopian Government owned 60% of the shares, and all

transactions were subject to scrutiny by its Minister of Finance. The bank had

branches in Dire Dawa, Gore, Dessie, Harar and Gambella and was later liquidated in

1936 due to the Italian invasion.

A recent and important phase in the history of Ethiopian banking was started with the

introduction of monetary and banking proclamation of 1963. With the coming into

effect of this proclamation, the State Bank of Ethiopia was split into two separate

bodies: The National Bank of Ethiopia and the Commercial Bank of Ethiopia. The

former assumed central banking functions while the latter took up commercial

banking business of the old bank.

As part of the recently launched economic reform, different financial liberalization

measures and restructuring of financial institutions have been undertaken. All the

measures have the aim of promoting a competitive environment and efficient banking

services to the public. The Commercial Bank of Ethiopia was re-established in 1994

by proclamation No. 202 taking over the rights and obligations of the Commercial

Bank of Ethiopia which was established under proclamation No. 184/1980. The

bank's capital has been raised and is entrusted with engaging in all banking activities

as customarily carried out by commercial banks.

According to the web-site of National Bank of Ethiopia, Following the economic

reform in 1992, the number of banks in Ethiopia increased from three government

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owned to 10 Banks (i.e. three government owned namely: Commercial Bank of

Ethiopia (CBE), Construction and Business Bank (CBB) S.Co. and Development

Bank of Ethiopia (DBE) and Eight privately owned Banks namely: Awash

International Bank S.Co., Dashen Bank S.Co., Bank of Abyssinia (BOA) S.Co.,

Wegagen Bank S.Co., United Bank S.Co., NIB International Bank S.Co., and

Cooperatives Bank of Oromia S.Co., and Anbessa Global Bank S.Co. which

established its Branch recently) which is a radical change in Ethiopian banking

businesses. Although this leads the industry to more competitive situation, the

expansion of private companies in the country is encouraging which creates

opportunities for banking business.

People are most valuable assets of the organizations. The market for talented,

skilled people is compititve and expensive. Taking on new staff can be disruptive

to existing employees. As organizations vary in size, aim, functions, complexity,

and the physical nature of their product, so also the contribution of human

resource management. Ensure that all times the business is correctly staffed by the

right number of people with the skill relevant to business needs, which is neither

over staffed nor under staffed.

Performance appraisal is a formal system of periodic review and evaluation of an

individual’s job performance. It occurs constantly in both public and private

organizations. When it is properly done, performance appraisal provides

feedback to employees that will improve their performance and thus organizations

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also benefit by ensuring that employees' effort and ability make contribution to

organizational success.

Failure to have a care fully crafted performance appraisal, can probably lead to

failure in the business process it self.

Generally, the problems associated with performance appraisal are:-

disciplinary actions, etc.

equal employment opportunity requirements.

need to do to improve.

problem determining the accuracy of the appraisal

The main objective of this project paper is to assess the performance appraisal

system, process, method and the problems associated with the evaluation of

employees in service providing organization, Bank of Abyssinia. At last it will

recommend suggestions for the problems. The specific objectives include:-

subordinate,)

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appraisal.

judging performance.

employees.

The data to be used for the study was collected from both primary and secondary

sources.

The primary data is collected through questionnaires filled by employees of the

organization and structured interview was prepared to interview human resource

department personnel.

The secondary data was collected from relevant documents, organization reports,

newspapers and magazines. When necessary, material is downloaded from most

referred web sites.

To fulfill the objective stated, data collected from structured interview was analyzed

using description of facts. Those data collected from questionnaires were analyzed

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using descriptive statistical techniques which include tables, graphs, frequency

distribution and percentages.

The project paper is limited to the specific company which is found in Addis Abeba

city. It covers performance appraisal system, method and the problems associated

with the evaluation of employees. Due to limitation of time and resources, the report

may not be detail. In addition because of inaccessibility of the required data from the

company it may not cover explicitly all areas of performance appraisal. The other

limitation of this project is that the findings are based on sample and thus the sample

may not be representative of the total population.

The project paper tries to cover the performance appraisal of the organization. The

paper proposes important recommendations and suggestions for inappropriate

methods, if practiced. The study may serve as a spring board for researchers to

conduct further study in this area. Last but not least is it serving as a partial

fulfillment of the Masters Degree in Business Administration.

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This project has four chapters. The first chapter will deal with background

information, statement of the problem, objective of the study, significance of the

study, scope and limitation of the study. The second chapter will deal with review of

literature. The third chapter will discuss analysis of the data gathered. The fourth

chapter presents finding and analyze the data. The last chapter will make

recommend and conclusion.

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an individuals job performance (Mondy & Noe, 1990). It occurs constantly in

both public and private organizations. When it is properly done, performance

appraisal provides feedback to employees that will improve their performance

and thus organizations also benefit by ensuring that employees' effort and

ability make contribution to organizational success. Moreover, performance

appraisal data enables management:

The main reason for appraising performance is to enable employees to use their effort

and ability so that organizations achieve their goals and consequently their own goals.

Generally the following are the main uses of performance appraisal.

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Performance feedback allows the employee, the manager, and personnel specialists to

intervene with appropriate actions to improve performance.

Performance evaluation help decision-makers determine who should receive pay raises.

Many firms grant part or all of their pay increases and bonuses on the basis of merit,

which is determined mostly through performance appraisals.

Promotions transfer, and demotions are usually based on past or anticipated

performance. Often promotions are a reward for past performance.

indicate untapped potential that should be developed.

Performance feedback guide career decisions about specific career paths one should

investigate.

Good or bad performance implies strengths or weaknesses in the personnel

department's staffing procedures.

Poor performance may indicate errors in job analysis information, human resource

plans, or other parts of the personnel management information system. Reliance on

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inaccurate information may have led to inappropriate hiring, training, or counseling

decision.

Poor performance may be a symptom of ill-conceived job designs. Appraisals help

diagnose these errors.

Accurate performance appraisals that actually measure job-related performance ensure

that internal placement decisions are not discriminatory.

Good or bad performance throughout the organization indicates how well the human

resource function is performing (Werther & Davis, 1996).

The basic purpose of performance appraisal is to make sure that employees are

performing their jobs effectively. In order to realize the purpose of performance

appraisal organizations should carefully plan appraisal systems and follow a sequence

of steps as illustrated below:

1. Establish Performance Standard

2. Communicate Standards to Employees

3. Measure Actual Performance

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4. Compare Performance with Standard

5. Discuss Appraisal with Employees

6. Initiate Corrective Action

The first step in appraising performance is to identify performance standard. A

compared (Baird, et.al, 1990). Employee job performance standards are established

based on the job description. Employees are expected to effectively perform the duties

stated in the job description. Therefore, job descriptions form the broad criteria against

which employees performance is measured.

For the appraisal system to attain its purposes, the employees must understand the

criteria against which their performance is measured. As Werther and Davis (1996),

stated to hold employees accountable, a written record of the standards should exist and

employees should be advised of those standards before the evaluation occurs.

Providing the opportunity for employees to clearly understand the performance

Once employees have been hired their continued performance and progress should be

monitored in a systematic way. This is the responsibility of the immediate boss to

observe the work performance of subordinates and evaluate it against the already

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established job performance standards and requirement. The aim of performance

measure is to detect departure from expected performance level.

After evaluating and measuring employee's job performance it is necessary to compare

it with the set standard to know whether there is deviation or not. When one compare

performance with the standard either performance match standards or performance

does not match standards.

For the appraisal system to be effective, the employees must actively participate in the

design and development of performance standards. The participation will enhance

employee motivation, commitments towards their jobs, and support of the evaluation

feedback. In other words, employees must understand it, must feel it is fair, and must

be work oriented enough to care about the results (Glueck, 1978). After the evaluation,

the rater must describe work-related progress in a manner that is mutually

understandable. According to Baird et.al. (1990), feedback is the foundation upon

which learning and job improvement are based in an organization. The rater must

provide appraisal feedback on the results that the employee achieved that meet or

exceed performance expectations. As Glueck (1978) noted, reaction to positive and

negative feedback varied depending on a series of variables such as:

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- the importance of the task and the motivation to perform it

- how highly the employee rates the evaluator

- the extent to which the employee has a positive self-image, and

- the expectancies the employee had prior to the evaluation; for example, did the

employee expect a good evaluation or a bad one?

In sum, it is important that employees should be fully aware that the ultimate purpose

of performance appraisal system is to improve employee performance, so as to enhance

both organizational goal achievement and the employee's satisfaction.

The last step of the performance appraisal is taking corrective action. The management

has several alternatives after appraising performance and identifying causes of

deviation from job-related standards. The alternatives are 1) take no action, 2) correct

the deviation, or 3) review the standard. If problems identified are insignificant, it may

be wise for the management to do nothing. On the other hand, if there are significant

problems, the management must analyze and identify the reasons why standards were

not met. This would help to determine what corrective action should be taken. For

example, the cause for weak performance can range from the employee job

misplacement to poor pay. If the cause is poor pay, corrective action would mean

compensation policy reviews. If the cause is employee job misplacement, corrective

action would mean assign employee to a job related to his/her work experience and

qualification. Finally, it is also important to revise

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the performance standard. For example, the major duties stated in the job description

and the qualification required to do the job may not match. In this case corrective

performance standards that make explicit the quality and/or quantity of performance

expected in basic tasks indicated in the job description (Chatterjee, 1995).

Effective appraisals can be done by those who have:

This being the case, the following are responsible for employee's performance

appraisal.

An employee's immediate supervisor is a common alternative for appraising job

performance. There are several valid reasons for this approach. These are:

and influences, he/she is best able to relate the individual's performance to

departmental and organizational goals.

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department, it is logical for him to exercise control over personnel and administrative

decisions affecting his/he subordinates (Chatterjee,1995).

Moreover, since the supervisor is in a better position, he can link effective performance

with rewards such as pay and promotion.

In work place, peer is an individual working with and at the same level as the

employee. In this evaluation approach the co-workers must know the level of

performance of the employee being evaluated. For the approach to work effectively, it

is desirable for the peers to trust each other and evaluation should not be seen as means

for pay raises and promotions rather as a means to improve work performance. Peer

appraisal is reliable if work group is stable over a reasonably long period of time and

performs tasks that require considerable interaction (Mondy & Noe, 1990).

If employees understand the objectives they are expected to achieve and the standards

by which they are to be evaluated, they are in the best position to appraise their own

performance (Mondy & Noe, 1990). Since there is a tendency of over-exaggerating

work achievement, this evaluation approach acts as inputs into supervisory appraisals

or as employee development tools.

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In the subordinate evaluation system, it is believed that employees are in a good

position to view their immediate bosses' managerial effectiveness. In academic

environment:

- Students appraise the teaching performance of their instructors.

- Faculty members evaluate department heads, and deans.

Group appraisal involves the use of two or more managers who are familiar with the

employee's performance to evaluate it as a team (Mondy & Noe, 1990). For example,

if an individual regularly works with the administrative and financial managers, these

two managers might jointly make the evaluation.

The combination of the above appraisal approaches can provide greater insight into and

employee's job performance. The section head's employee appraisal can be

supplemented by peer and by the head of the department. For example, in order to

minimize subjectivity, Regional Presidents' maybe rated by Bureau Heads, Woreda and

Zone Administrators, and people in the regions.

A number of different appraisal methods are used to assess employees' job

performance. Some of the most commonly used methods are briefly discussed below.

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A widely used appraisal method, which rates employees according to defined factors, is

evaluator to record his/her subjective assessment of the employee's on a scale as shown

below.

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The rating factors include job-related and employee's personal characteristics. Factors

related to job performance are the quantity and the quality of work, whereas employee's

personal factors include cooperation, initiative, and the like. The evaluator is expected

to complete the appraisal form by indicating the degree of each factor that is most

appropriate descriptive of employee performance.

and unfavorable work actions. When such an action affects the department's

effectiveness significantly either positively or negatively the manager writes it down.

It is called a critical incident (Mondy & Noe, 1990). To be effective supervisors are

required to record incidents as they occur on their logs. At the end of the valuation

period, the evaluator used the log alongwith other data to assess employee job

performance

performance and characteristics. To do a thorough job, the supervisor has to devote

considerable time and thought to writing his analysis. This is so because essays

generally have to be constructed from diaries/logs of observed critical incidents kept by

the evaluator during the performance assessment period (Chatterjee, 1975)

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overall performance. Hence, if an employee performance is better than the others in a

department, that particular employee are ranked highest, the employee with poor

performance is ranked lowest.

standard or expected level of output (Mondy & Noe, 1990). This approach can be used

in all types of jobs, mainly applied to production related jobs. Here since standards are

used as evaluation criteria, there is no room for subjectivity

For organization to be effective, employees must clearly understand the objective of

his/her organization. Management must provide opportunities for every employee to

make contribution in the attainment of objectives. This is possible through a system of

establishing objectives known as management by objectives (MBO). MBO, therefore,

is defined as follows:

A process whereby the superior and subordinate managers of an organization jointly

identify its common goals, define each individual's major areas of responsibility in

terms of the results expected of him, and use these measures as guides for operating the

unit and assessing the contributions of each of its members (Baird & et.al., 1990).

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In the MBO technique of appraisal, objectives are set by the management and

communicate it to the employees. It is a measurement of job performance in terms of

objectives. If objectives are achieved, the employees are assessed to be a success.

MBO is conducive to elicit employee involvement and commitment (Agarwal, 1997 ).

According to Beach (1980), the major features of MBO are as follows:

1. Superior and subordinate get together and jointly agree upon and list the principal

duties and areas of responsibility of the individual's job.

2. The person sets his own short-term performance goals or targets in cooperation with his

superior. The superior guides the goal-setting process to insure that it relates to the

realities and needs of the organization.

3. They agree upon criteria for measuring and evaluating performance.

4. From time to time, more often than once per year, the superior and subordinate get

together to evaluate progress toward the agreed-upon goals. At these meetings, new or

modified goals are set for the ensuring period.

5. The superior plays a supportive role. He tries, on day-to-day basis, to help the man

reach the agreed-upon goads. He counsels and coaches.

6. In the appraisal process the superior plays less the role of a judge and more the role of

one who helps the person attain the goals or targets.

7. The process focuses upon results accomplished and not upon personal traits.

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Staffing needs of an organization are met when new employees are hired from outside

refers to the assignment or reassignment of an employee to a new job. To attain

organizational objectives, organizations must harness the efforts of its employees. To

this effect, employees must be placed in a position related to their academic

qualifications and/or work experiences. Employee placement is mainly decided jointly

by both the employee's immediate supervisor and the top management. In this case, the

human resource department should provide advice and counseling services regarding

employee assignment or reassignment.

higher in pay, responsibility, and/or organizational level (Werther & Davis, 1996). It is

mechanism in which organization recognizes employee's past job performance and its

effort to aid the organization in furthering its objectives. Promotions usually are based

on merit and/or Seniority.

Transfers refer to reassignment of an employee from one job to another position with

similar status, equal pay and/or responsibility. Demotions on the other hand, refer to

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the downward movement of an employee to a position that is lower in responsibility,

status, and perhaps lower pay. Transfers are beneficial to both the organization and to

the employees. In this regard, transfers:

changing work location.

Demotions may occur due to discipline; poor performance or inappropriate behavior

such as absenteeism. It can be used as an alternative to firing an employee because of

inefficiency. In this case, the reason for the demotion should be beyond the control of

the employee.

occur when employees are fired, laid off, resign, retire or die. The are many reasons

for employee terminations. Some of the major ones are:

personal behavior.

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Terminations may even be beneficial to employees, since retirement benefits are

provided for those who have served a long period of time in an organization.

retired employee may shift to another work that best suit his capability.

“Performance management is all about people, communication, dialogue and working

together; not about forms or forcing employees to produce.”

“It is not just about performance appraisal. In fact, performance appraisal is only a small part

of it. Performance management is about preventing and solving problems. Performance

management is an ongoing process throughout the year.

Employees need to play an active role in defining and redefining their jobs.

Since performance management helps employees understand what they should be doing and

why, it gives them the ability to make day to day decisions

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If you believe that performance appraisal is performance management, it’s just not going to

work.

If managers look at performance management as something they do TO employees,

confrontation is inevitable. If they view it as a partnership, they reduce confrontation.

Manager and employee need to agree on what objectives are most important and less

important.

Many managers find it useful to set aside one day a year to meet with staff and identify what

their unit needs to accomplish in the coming year.

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Aim all communication at identifying problems and solving them – not blaming people.

Forms don’t improve performance. People working together improve performance. (Most

appraisal forms are so bad they make employees resentful and are too general to generate real

benefits.)

Always clarify the meaning of each rating item before doing the rating. Discuss your

understanding of its meaning and ask the employee how s/he understands it.

Arrange not to be interrupted. Have your phone calls held. This time belongs to the

employee. Make it quality time.

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Keep in mind that most employees have had unpleasant experiences with performance

appraisals…and might see appraisals as a conflict situation. Keep sending the message about

what the meeting is for.

The real benefit comes from identifying why performance succeeds when it does, and why

performance fails when it fails. You can then work out how to do more of the right things and

less of the wrong things.

Celebrate successes as they occur – salary alone is not enough.

Fear is not a good motivator – are their things that I do or say that make you feel

uncomfortable when talking to me?

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Distinguish between what you observe and what you infer.

Employees need regular, specific feedback on job performance. They need to know where

they are excelling and where they might improve. If they don’t know how can they get better?

When confrontation happens it is often because managers have avoided dealing with a

problem until it is severe. Early identification of problems helps make them easier to resolve

and people who are upset do not solve problems well.

Whilst appraisal forms should not become the focus, documentation ensures that important

information does not get lost. It is important for legal reasons

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You took time and money to hire them and get them up to speed. In a constantly changing

workplace, the skills they need also change.

A poor performance management system undermines the credibility of your management.

sit, but may seem like a disaster from where the employee sits.

www.silvermandakin.com

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The experience of banking system in Ethiopia began when the first bank was

established in 1905(Bank of Abyssinia). However, the environment was not smooth

for more than half of a century (invasion of Italy, the feudal system and the command

economy) for banking business. According to the web-site of National Bank of

Ethiopia, Following the economic reform in 1992, the number of banks in Ethiopia

increased from three governments owned to 11 Banks. One of these banks was Bank

of Abyssinia (BoA).

Bank of Abyssinia was established on February 15, 1996 (90 years to the day after the

first bank was established) with a subscribed capital of Birr 25 million, an authorized

capital of Birr 50 million and paid up capital of Birr 25 million. The bank has since

registered tremendous growth. For instance, as of June 2006, its total asset reached

Birr 3.0 billion, where as its subscribed, authorized and paid up capital has gone up to

Birr 265 million, 530 million and 265 million, respectively. The bank now boasts 25

branches and over 900 employees and, most importantly 150,000 customers through

out the country, considering the fact that it is only 10 years old.

This performance, of course, is indicative of the public confidence it enjoys and of the

fact that its customers are fully satisfied with the service it is providing them with.

The performance of the bank as explained above is the result of the employees.

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Thus human resources are among the fundamental resources available to any

organization which is critical for success of the organization. Performance appraisal is

part of human resource management which a formal system of periodic review and

evaluation of an individual’s (employees) job performance. Performance Appraisal

(PA) helps in measuring and evaluating performance of the employees in an

organization. Effective performance appraisal helps the organization to meet its goals.

Thus employees are the most valuable assets of the organization.

The primary objective of staff appraisal is to show how staff may be effectively

managed and encouraged, to show enthusiasm and efficiency at work assigned. The

appraisal result may also be used to identify employee needs, ultimately creating a

satisfied employee which is major determinant of the organizational success. The

main objectives of performance appraisal at the BoA are:-

the BoA’s objective.

assignments made by both the lower levels (employees under the supervisor)

and by them selves.

motivate them to prepare for future eventualities.

promotion, salary increments, training, bonus and etc.

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PA is a common practice in the life of any organization. Although there is no written

policy as to the system of performance evaluation, according to the response obtained

through the questionnaire and the interview from concerned personnel in BoA

employees are evaluated based on the job analysis and job description described to

them. An employee is evaluated and appraised by the following participant.

1. Employee him/her self

2. Immediate super visor

3. Next in- line supervise

4. Review committee

5. Senior managers

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explain the major activities and tasks he/she has performed during the appraisal

period. In this regard employees are also given the opportunity to describe about

if there is any impediment faced in discharging their responsibility. There is a

space prepared to list out the impediments clearly in the first page of the

performance appraisal format. Employees are free to describe any opinion

regarding their needs, requirement, problems and any technical aid or material

required to properly perform their task.

immediate supervisor how well they accomplish a specific set of objectives that

have been determined critical for the successful completion of their job. The

immediate supervisor is the most common choice for evaluating performance

because she/he is in a good position to observe employees' performance as

mentioned by HRM department, knowledge & proximity also make access to

evaluate the subordinate by its immediate supervisor

The evaluation criteria for the immediate supervisor are divided in to nine

categories which will be explained in the appraisal technique used by BoA section

The immediate supervisor rates the employee based on the given criteria form one

to five. Besides rating the employees he/she gives suggestion regarding the

employees’ strength and weakness in the space provided from the appraisal

format. It is given next to the employee her/him self explanation. The supervisor

includes recommendation about salary increment, grade promotion the training

requirement, or about if the employee contributes more in other position if

33

transferred, which is called promotion. The appraisee is allowed to see the

suggestion given by his/her immediate supervisor. Thus appraisee will express

his/her idea whether he/she has agreed or disagreed about the performance

evaluation result.

next to the immediate supervisor to in-line-supervisor. This invites the next inline

supervisor to express his or her suggestion about the information filled by the

immediate supervisor and the employee him/her self.

and recommendations give by all raters from one to three above. The review

committee will descried its suggestion and lead it to the senior management for

final approval.

that will approve or disprove by signing the performance evaluation format and

kept it as a complete document.

The graphic rating method is used by the immediate supervisor. The evaluating criteria

are categorized in to nine classes each evaluating the employee performance from

different perspectives. The nine criteria described to evaluate the appraise are

34

of job requirement, capability to meet objective and commitment. The weight

assigned to this evaluation criterion is 15%.

full range of the job , and how far the employees get the work done under normal

supervision. The weight assigned is 15%

instructions including the employees’ ability to search for new ideas, resource full

in solving problems. weight given is 15%

Judgment. The weight is 10%

persuasively & to write precisely. The coefficient to this evaluation criteria is

10 %.

minimum time given. The weight is 10%

employees are rated based on customer service. The relation ship with colleagues

is also included under this section. The weight assigned is 10%.

presenting at working area during working hours. The weight assigned is 10%.

35

traits which enable to express the individual's status with the organization. The

weight assigned is 5%.

The given nine criteria are rated from one to five as explained below. All measurement

criterions will be calculated from 100 %.

The rater has to encircle one out the five grades given that best measures the employee

performance. The levels of the grades have the following meanings;

5- Outstanding performance

4- Exceeds requirement

3- Meets requirement

2- Fair performance

1- Poor performance

The performance evaluation format is three type with slight difference one from the

other. Each format is prepared to include activities of the respective divisions of

employees. The first division comprises the non clericals which include drivers,

messengers, janitors, guards, reception workers and lower class of employees. These

groups of employees are with no direct contact with paper works at office. The second

class of appraisee are the clericals who perform activities and tasks that have direct

relations with customers and paper works in the office. These are secretaries,

subordinates, lower level managers. The last class of appraise are supervisor who are

higher rank than clericals and are immediate or next in-line supervisor of the clericals.

This composes of middle manager, department heads and supervisors. As the interview

36

conducted to the concerned HRM personnel's the president and the upper top manages

are not evaluated.

Since the HRM personnel are not volunteer to give the copy of each PA format I can't

attach it at the back of the project paper.

Performance evaluation is prepared at specific interval while there is nothing magic about

the interval. In Bank of Abyssinia evaluations are made annually. Individuals are often

evaluated, just before the end of the probation period. Evaluating new employees several

times during their first year of employment is common practice in BoA.

According to the interview held with the HRM department personnel and the information

from the questionnaire, employee performance appraisal is done once every year. Since

there is no written document as to when and how to conduct performance appraisal, it is

difficult to believe that a standardized and uniform performance appraisal will be conduct

in the organization. The period an employee appraisal conducted is at the end of the fiscal

year. All parties involved should conduct appraisal from May to June 30. The company’s

fiscal year is from July 1 to June 30 according to the Ethiopian calendar. June 30 is the

last date for submission of the appraisal result.

37

Employees are evaluated by how well they accomplish a specific set of objectives that

have been determined to be critical in the successful completion of their job. Thus the

primary goal of an appraisal system is to improve performance. How ever other goals

may be sought as mentioned in the literature review.

The performance appraisal result is used for different HRM activities. As explicitly

written in the performance appraisal format BoA uses the PA result for:-

As the interview held with concerned personnel besides the PA result employees should

fulfill the service year’s requirement set by the organization to get the above mentioned

advantages or rewards.

In order to get a representative data 60 questionnaires were prepared and distributed to

employees of the company for those who are found in Addis Ababa city. Out of these 51

questionnaires were collected back. From these only 48 were properly filled. Thus the

analysis is based on the valid 48 questionnaire responses.

38

3.6.1 The respondents’ profile

M 34 70.83%

F 14 29.1%

Less than 25 10 20.83%

35-45 24 50%

Greater than 45 12 25%

From the above information about 70.83% employees are male the least amount

29.17% are females. The age majority of the employees are less than 35 years old

This is an important potential that, majority of which are young employees.

Employees who are greater than 45 years old account for 25%.

Academic background of the respondent is presented as below

39

Below 12 Grade 4 8.33%

High school/graduate 8 16.67%

Diploma 14 29.17%

First degree above 22 45.83%

Graphically the academic background of the employees will be presented as below.

Below 12 grade

High school

graduate

Diploma

BA and above

total

Number

0 percentage

10

20

30

40

50

Number

percentage

40

From the above table given 45.83% of employees are with BA degree and above. This

gives the organizations a competitive advantage having qualified and skilled employee.

Since the banking industry is in the competitive market. Diploma holders are 29.17%

The following data shows the number of years the employees has served the company.

Less than 2 years 10 20.83

2.5-4 Years 10 20.83

4.5-6 Year 16 33.33%

Greater than 6.5 years 12 25%

Longer years of experience shows that there is relatively lower employee turn over. This

benefits the organization, by keeping employees loyal to the company and reduces cost of

hiring new employees. 58.33% of the employees serve the organization for greater than

4.5 years .This is a satisfactory figure as the company is only 10 years old.

It is presented below; the following picture

41

number

Less than 2 years

2.5 to 4 years

4.5 to 6 years

greater than 6.5

years

Total

The respondent response and answers are presented below based on the sequence of the

questions written in the questionnaire. It is prepared in English & Amharic with the same

content to collect the necessary data from all levels of employees.

1. The first question asked to them was how often the organization evaluate

performance since this is the fact of the reorganization practice all employees

respondent that it is conducted annually.

2. Employee's answer as follows for the questions that says: In your opinion how

often do you think appraisal should be conducted?

42

How often should PA

conducted

Annually 4 8.33%

Semiannually 44 91.67%

About 8.33% respond it showed be once annually. The majority of the respondents

(about 91.67%) respond that is should be conducted semiannually. The reasons why it

should be conducted semiannually is that a year is long period to remember and measure

an employee’s performance for the past period.

3. Different employees have different attitude as to who has to evaluate employee’s

performance. For this employees are given five choices: - Immediate supervisor,

Collogue, Sub ordinate, Employees him/her self. The results from the respondents

are as follows.

43

Immediate supervisor 8 16.63%

Majority of employees (56.25%) agree that evaluation should be conducted by both

immediate supervisor & Collogue together. The others present their idea as given in the

above table. The others who respond that evaluation should be conducted by immediate

supervisor are 16.63%.The rest of the employees response is insignificant amount as

given in the Table 3.6.5 above.

Management activities, as it is explained in the literature review organizations

may use performance appraisal result for different purpose. Regarding BoA the

questionnaire requests employees for what purpose performance appraisal result

is used in their company. The response is given below

44

Purpose of performance appraisal number percentage

salary increment 16 33.33%

bonus 14 29.17

training and development 6 12.5%

Promotion 10 20.83%

do not known 2 4.17%

Total 48 100%

Graphically it is presented below for the above table 3.6.6

0

10

20

30

40

50

60

number

Salary increamrnt

Bonus

promotion

training

&development

don't known

total

45

The employees’ response was 33.33% or about sixteen employees describe that it is used

for salary increment. Fourteen employees or 29.17% respond that it is used for bonus.

Bonus is made at BoA once every year end, when the organization makes better profit.

Six respondents that account for about 12.54% answer it is for training and development

while the remaining two employees respond they don't know for what purpose PA is

conducted. This is major problem in PA system

6. After the appraiser has completed the appraisal, it should be communicated to the

employee. Feedback helps employees realize their potentials. In addition providing feed

back is believed to be the subordinate rights to know. Even though employees of BoA are

not made clear about conducting of performance appraisal in their organization they are

allowed of look in to their PA result. By doing so, they will express their opinion towards

the suggestion and recommendation given by different raters. Their opinion is to show

their agreement or disagreement towards the given result. Thus the response from the

questionnaire shows that 100% of the respondents answered they are allowed to see their

performance appraisal result. The problem as employee mentioned is that the results can

not be altered even if they have complaints made.

7. The other part of the questionnaire was asking whether employees’ discus about the

performance appraisal result with their appraisers or not.

46

For this questions 40 out of 48 employees said yes we discuss the result with our

appraises, while the remaining eight said no we don't discuss it with our appraisers. The

figure shows about 83% say yes and the rest 16.71% say no.

8. The following questions asked to the respondents whether they can appeal to a higher

official in case when they perceive that the performance appraisal result is not fair.The

response is presented in the following table.

Do you appeal to higher officials when

you feel the PA result is unfair

Yes No I don’t

know

Total

Number of respondents 32 10 6 48

Percentage of respondents 66.7% 20.83% 12.5% 100%

About 12.5% employees answered they don’t know the existence of such opportunity so

far. When appraisee feels that performance appraisal result is unfair. The other 32

employees who accounted about 67.7% of the total respondents said they can appeal to

the designated higher official .The other groups which account about 20.83% or ten

respondents answered that they felt impossible to appeal for the higher officials.

As it is explained from the interview Bank of Abyssinia has no written policy regarding

the performance appraisal process. This create information gap between employees who

47

are responding differently to the same question. There is no common understanding

among employees about the same issue of appealing.

10. Employees who respond that I can appeal to higher official were requested to

answer whether their grievance will be fairly examined by higher authority. The

response is presented as follows:

Do you believe that your grievance

will be fairly examined

Yes No I don’t

know

Total

Number of respondents 13 17 2 32

Percentage of respondents 40.6% 53.15% 6.25% 100%

40.6% of them describe that it will be properly examined and adjusted accordingly. The

other 53.15% which is a greater number of employees say that even though we appeal to

the higher officials we don’t expect it will be fairly examined. 6.25% of the respondents’

response that they don’t know what will happen after appealing the grievance.

Employees have doubt as to the examination of the grievance. 53.15% of the respondents

explained they don’t believe their grievance will be fairly examined once the result has

been set. But about significant amount which accounts 40.6% respond that their

grievance will be fairly examined and get fair response if they appeal to the higher

officials.

48

Insignificant number of respondents doesn’t know what will happen to their grievance

ones they appealed to the officials assigned. The probability of getting negative response

is higher than the probability of getting positive result.

11. The other question employees were asked was about the content of the

performance appraisal format. It says do you think that the criteria used to

evaluate your performance appraisal are appropriate. The response are organized

and presented in the following table.

Do you think that the criteria used to evaluate

your performance appraisal are appropriate

yes No Total

Number of respondents 36 12 48

Percentage of respondents 75% 255 100%

75% of the respondents answered the criteria used are appropriate to measure employee

performances, but 25% respond that it is not appropriate to measure their performance.

Those respondents who disagree about the appropriateness of the evaluation criteria are

asked to describe those criteria that should be included and that requires to be adjusted or

removed from the format of evaluation.

Employees extend their opinion regarding the criteria that must be include in the

appraisal evaluation are mentioned as follows

49

because conducting performance appraisal ones a year is too long to evaluate and

measure all employees actual past performance. The raters may suffer from the

regency error, the error that is affected by the recent performance.

respective departments.

As employees suggestion the evaluating criteria that should be removed from the

performance format is “generalization”.

12. Regarding the weights assigned to measurement criteria employees propose their

ideas in the following table.

About 77% of the respondents agree with the weights assigned to evaluation criteria

while the remaining 23% suggest that the weight assigned is not fair.

13. The last but not least question forwarded to employees was to express their view

regarding the problem that applies to the appraisal system of their organization.

Do you think that the weights assigned to

the evaluation criteria are fair

Yes No Total

number 37 11 48

percentages 77% 23% 100%

50

This information is collected from employees who suggest that there is problem in

their organization with performance appraisal. The problem they believe it is

apparent to their organization

1. There is no link between some valuation criteria and employees tasks. The

percentage of employees who suggest this idea are about 20.8%

2. The percentage of respondents who response that the performance appraisal

system doesn’t allow participation of employees in setting performance

evaluation criteria are about 20.8%

3. Those employees who answered that there is biases in evaluating

performance was about 20.8%.

4. The other 37.5%respondents answer that there is lack of ability to evaluate

performance.

Individual performance is the foundation of organizational performance. Improving

individual performance there fore is critical for the success of every organization.

Performance evaluation is a common practice in the life of the organization. Failure to

51

have a proper employee performance appraisal system may lead to failure of the business

organization itself.

The aim of performance appraisal is to evaluate the job performance of employees so as

to improve their performance and consequently the organization’s performance. In order

to do so performance appraisal system should use job related criteria, appropriate method

of appraisal for each purpose, qualified and well trained appraiser and participation of

employees in one way or the other.

The objective of the study is to find out the process and system of performance appraisal

on improving employee moral and performance by making a through assessment of

performance appraisal system in BoA. In doing so the study tries to analyze data that

have been gathered through primary and secondary sources. In investigating the

performance appraisal system of Bank of Abyssinia, it has been found that rating scale

method is used by the immediate supervisors. While the other raters including the

employee themselves, the next in-line supervisor, review committee and the senior

managers uses an essay method of evaluation. In this respect they write a brief narrative

description of employee’s performance and characteristics. This includes the major task

he or she has performed, weakness and strength of the appraisee, transfer to another post,

promotion and other personal traits are described here.

Bank of Abyssinia performance appraisal format explicitly describe the following

objectives:-

52

Although almost all of the respondents suggest that evaluation be conducted semi

annually, performance evaluation is conducted ones every year.

Problems in performance appraisal may arise from the improper design of the system,

process of conducting and implementing the performance appraisal, problems from the

appraiser and the appraisee and difficulty of the job to evaluate….Organizational culture

also affects the performance evaluation process through employees attitude and

perception, working atmosphere and group and individual behaviors of employees with in

the company.

Based on the information gathered through the questionnaire & interview conducted in

BoA the problems of the performance appraisal system in general include:-

objective of performance appraisal.

compared with.

and evaluate employee’s one full year past performance.

53

performance appraisal results in case if they have grievance, it may not be fairly

examined and given solution.

system which is influenced by subjective judgments rather than by guided by

written policy and principle.

timing of performance appraisal.

performance appraisal and its objective.

assigned to performance measurement criteria.

include the major tasks and activities of each department. The format of

performance appraisal of the company is prepared in to three divisions each with

minor difference one from the other. One for clerical the other for non clericals

and the rest for supervisors.

is a systematic process of determining the skill and knowledge required for

job, the outcomes that are expected and working conditions.

54

advance.

If all the above mentioned problems are corrected the appraisal system of the Bank will

contribute to the success of the organization. There fore based on the problems the

following recommendations are suggested as helpful to improve the system.

In view of the findings and the problems mentioned above coupled with the review of

related literature the following recommendations are suggested

responsibility of appraisals frequency of appraisal in general guide lines used in

performance appraisal process and system.

criteria of evaluation are related to the job analysis the more it will be objective.

Thus, developing the criteria from job analysis and evaluating is far better.

takes place and employees should accept it.

evaluation and the purpose of evaluation.

55

evaluation is improving employees' performance. But employees could not

perform better with out feed back given to them on time.

judgment that comes from generalization.

weight assigned to the criteria should be revised based on the participants’ idea.

favorable and unfavorable deeds of workers to lessen recent behavior bias.

prevailed in the past years with the current system and make sure that if past

problems are avoided currently.

appraisers and appraise to have a clear understanding of the nature, purpose,

methods and problems of the appraisal. Thus employees must be informed of such

things before appraisal so that they will not develop a negative attitude towards it.

Discussion after the appraisal and acquiring information concerning the process

helps appraises to identify problem areas in both the employee performance as

well as the system.

effectively. Different weights as per employees’ agreement should be given to

measuring criteria in the evaluation form of BoA. It is better also to include

56

explanation of those criteria in the evaluation form so that employees and

appraisers will be in a position to understand them without considerable effort.

In general the over-all view of management should advocate the accuracy of

measurement and take corrective action in case of unfair ratings. With this context the

management effort to the betterment of the appraisal system will result in reliable

performance measurement. This in turn enables BoA to attach high value to the system.

The final result is there fore the enhancement of employee performance and the

advancement of the organizational objectives and goals.

57

Bibliography

1. Behind the Mask: The Politics of Employee Appraisal," Longnecker, Sims and

York: Harper & Row Publishers Inc., 1990).

Macmillan Publishing Co. Inc., 1980).

Publishers Private Limited Inc., 1990).

Publications Inc., 1978).

Hall, Englewood Clifts, 1993).

Guernsey Press Co. Ltd., 1995).

(Massachusetts: Simon & Schuster, Inc., 1981).

11. www.silvermandakin.com

58

This questionnaire is prepared to employees of Abyssinia Bank. The objective of the questionnaire is to

collect information about to effectiveness of the Bank of Abyssinia performance appraisal system. The

information you provide will be valuable for the successes of the research project. Please be honest and

objective while filling the questionnaire. The information you give is used only for academic purpose and

will be kept confidential.

1. Sex Male Female

2. Age Below 25 25-35 35-45 45-55 Above 55

3. Academic qualification

12 grade complete high school graduate

Diploma first degree and above

4. Title of your job _______________

5. Years of experience ______________

1. How often is your performance evaluated is a year _____________

2. How often do you think performance appraisal should be conducted ______________

3. In your opinion who should evaluate employees performance (you may thick more than one)

a) immediate supervisor b) college c) subordinate

d) employee themselves e) others (specify) __________________________

4. For what purpose is performance evaluation result used in your company (you may thick more than

one.

a) salary increment b) bonus c) promotion

d) training and development e) others (specify) _______________ f) don’t known

5. For what other purposes do you think the evaluation result should be used

__________________________________________________________________________________

________________________________________________________

6. Are you allowed to see your performance appraisal result

Yes No I don’t know

7. Do you discuss performance appraisal results with the appraiser

Yes No

8. Can you appeal to a higher officer of your organization when you perceive your performance appraisal

result is un fair

Yes No I don’t know

59

9. If your answer to question no 8 is yes do you think the grievance will be fairly examined

Yes No I don’t know

10. Do you time the criteria used to evaluate your performance appraisal are appropriate

Yes No I don’t know

11. If your answer is “No” answer the following questions.

a) mention any criteria that should be included

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

______________

b) mention any criteria that must be removed

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

______________

12. Do you think that the weights assigned to the evaluation criteria are fair?

Yes No I don’t know

13. Which of the following problems apply to the appraisal system of your organization (Tick)

a) No link between same evaluation criteria and employee job

b) Lack of ability to evaluate performance

c) Bias in evaluating performance

d) Non participation is setting performance evaluation criteria

e) Others (mention) ____________________________________________