EFFECT OF PERFORMANCE MANAGEMENT SYSTEM ON THE EMPLOYEE PERCEPTION: -THE CASE OF COMMERCIAL BANK OF ETHIOPIA

Abstract

This study aims to examine the effect of the performance management system (PMS) on employee perception within the Commercial Bank of Ethiopia. By exploring how various components of PMSsuch as goal setting, feedback, rewards, appraisal, and evaluation affect employee productivity, the research seeks to provide insights into the effectiveness of current performance management practices. The primary purpose is to identify whether these variables significantly influence employee performance, thereby offering recommendations for enhancing overall organizational effectiveness. The findings reveal a strong positive relationship between the components of PMS and employee performance, with all variables—setting objectives, feedback, rewards, appraisal, and evaluation— showing significant influence (p < 0.05). The analysis indicates that approximately 82% of the variation in employee performance can be explained by these independent variables, highlighting their substantial role in performance outcomes. This underscores the importance of an integrated and well-structured PMS in fostering employee motivation and productivity within the organization. Based on these results, the study recommends that the Commercial Bank of Ethiopia involve employees more actively in the planning phase of the PMS to increase their commitment and understanding of performance expectations. Additionally, implementing regular and constructive feedback sessions is crucial to ensure employees are aware of their progress and areas for improvement. These measures are essential for optimizing the effectiveness of the performance management system and ultimately enhancing employee performance and organizational success.