THE EFFECT OF PERFORMANCE APPRAISAL SYSTEM ON THE EMPLOYEES’ PERFORMANCE: -THE CASE OF MINSTRY OF WATER AND ENERGY OF ETHIOPIA

Abstract

This study investigates the effect of the performance appraisal system on employee performance within the Ethiopian Water and Energy Ministry (EWEM) in Addis Ababa. Recognizing the critical role of effective performance management in achieving organizational goals— particularly in essential sectors like water and energy—the research addresses a gap in understanding the current system’s efficacy. Drawing on established theories of performance management and appraisal, it examines how reward systems, evaluations, and promotions influence employee performance. Employing an explanatory research design with a mixedmethods approach, the study surveyed employees at EWEM’s head office, revealing a predominantly male, well-educated, and experienced workforce. Results indicate generally low to moderate satisfaction with the reward system, moderate perceptions of the promotion system, and overall positive views of the evaluation process, though concerns remain about its connection to tangible rewards. Correlation and regression analyses show strong positive relationships between reward, promotion, and performance, while evaluation shows a surprising negative association when other factors are controlled, pointing to a potential disconnect between evaluations and their perceived value. Based on these findings, the study recommends enhancing the promotion system through clear, fair, and merit-based criteria; overhauling the reward system to ensure clarity, fairness, and motivational impact; re-evaluating the performance evaluation process to strengthen its connection to rewards and personal development; and adopting an integrated performance management approach where reward, evaluation, and promotion are harmonized to support and motivate employees. Implementing these strategies is essential for creating a more effective and engaging work environment that drives employee performance and organizational success.