The Effect of Performance Appraisal On Employee Performance

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The Effect of Performance Appraisal On Employee Performance

Transcript Of The Effect of Performance Appraisal On Employee Performance

IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X, p-ISSN: 2319-7668. Volume 18, Issue 3 .Ver. II (Mar. 2016), PP 36-44 www.iosrjournals.org

The Effect of Performance Appraisal On Employee Performance: A Survey On Administrative Staff Of Hawassa
Univesity
Tekalegn Girma (Ma)1, Solomon Lemma Lodesso (Phd)2, Gebre Sorsa(Ma)3
1Center for students with disabilities, Hawassa University 2School of Education and Training, Hawassa University Ethiopia 3School of management and accounting, Hawassa University, Ethiopia

Abstract: The study aims to explore the effect of Performance appraisal process on employee performance in
Hawassa university administrative staff. The data were collected through structured questionnaires from 320 permanent administrative staff. The findings revealed that there are positive and significant relationships between independent and dependent variables. That is establishing performance standards, Communicating established standards, measuring actual performance and compare with standards, discussing the appraisal and giving feedback and indicating corrective action with employee performance. Thus, for effective performance appraisal system the management of the university has to make some improvement in the appraisal system practice.
Key words: Performance appraisal process; employee performance, administrative staff

I. Introduction
One of the major concerns of any organization is to attain maximum performance. Employees’ performance is determined by a number of factors like managerial standards, Knowledge and Skill, Commitment and Performance appraisals effecting employee’s performance (Lillian & Sitati 2011). Performance appraisal is defined as a systematic process that helps to evaluate past and current employees’ performance and identifying employee’s potential for further growth and advancement within the organization’s career ladder (Igbojekwe and Ugo-Okoro, 2015). Performance Appraisal (PA) has been also defined by Byers and Rue, (2000) as the process of determining and communicating to employees how he or she is performing on the job and ideally establishing a plan of improvement. These definitions show that, if performance appraisal system(PAS) is successfully carried out in an organization, the employees would be able to know how well they are performing and what is expected of them in future in terms of effort and task direction through an established plan for performance improvement. In general performance appraisal is a useful tool for understanding and assessing employee skill and potential
The history of performance appraisal is quite brief. Its roots can be traced in the early 20th century to Taylor’s pioneering time and motion studies. The practice of performance appraisal system started mainly in the 1940s and with the help of this system, merit rating was used for the first time near the Second World War as a method of justifying an employee’s wages (Lillian & Sitati, 2011). During 1950’s, great interest developed in the performance appraisal of technical, professional & managerial personnel. It was recognized that appraisal, on systematic basis, was an integral part of a well-designed development programs. Even though the writers of this paper do not find when performance appraisal system was started in Ethiopian higher education, it was a common practice that every University employee in Ethiopia receives a written performance appraisal each semester which provides a feedback on performance and justifies personnel decision such as promotion and compensation.
Danielle (1998) indicated that performance appraisal system measures usually include both behaviors (what an employee does) and results (the outcomes of an employee’s behavior). In order to realize the purpose of performance appraisal, organizations should carefully design appraisal system and implement accordingly. According to Gomez-Mejia (2001), different steps are followed in appraisal process. The first step in the performance appraisal process is identifying what is to be measured. This process seems fairly simple at first glance, in practice, however, it can be quite complicated. If a significant dimension is missed, employee morale is likely to suffer because employee who do well on that dimension is missed, employee will not be recognized or rewarded. He goes on saying if an irrelevant or trivial dimension is included, employees may perceive the whole appraisal process as meaningless.
The Second step in performance appraisal process is measuring employees‟ performance. This process involves a number to reflect an employee’s performance on the identified characteristics or dimensions. The third step in performance appraisal is managing performance. The effective management of human performance

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The Effect Of Performance Appraisal On Employee Performance: A Survey On Administrative…
in organizations requires more than formal reporting and annual rating. A complete appraisal process includes informal day to day interaction between managers and workers as well as formal face to face interviews (Gomez-Mejia, 2001).
The latest growths of performance appraisal (PA) systems have tended to move away from being primarily control and maintenance based towards an approach that is more concerned with motivational and developmental issues (Kimiz, 2005). Hence, a favorable PA would positively affect employee attitudes, behaviors and the organizational efficiency. For example, higher employee performance and productivity attainment is derived through the PA capability in reflecting, measuring and evaluating an individual employee’s behavior. Over a specific period of time these positive outcomes are a function of the employees’ perception on the overall PA effectiveness.
As Coens and Jenkins (2000) state, performance appraisal is a mandated process, in which a group of employees’ work performance and personal traits over a specified period of time are individually judged, rated and described by the rater of the group and the results of the evaluation are kept by the organizations for future reference. Performance appraisal is normally a formal process and an important part of the human resource management practices in organizations.
The researchers also inspired by the low attention given to the practice of PA system and lack of sufficient empirical studies related to the practice of performance appraisal system in the Ethiopian HEIs. The current study tried to assess the practices of performance appraisal process and the processes which is mainly focus on performance standards were established, performance expectation to employees were communicated, how actual performance was measured, actual performance with standards was compared, how the appraisal result with the employee was discussed and how corrective actions (Decision making) were indicated.
II. Performance Appraisal Theories
Even though there are many theories related to performance appraisal, the researchers believe that equity and expectancy theories (Kellogg and Negros, 2002; Richer, 2002; Vroom, 1964) and goal theory (Armstrong, 2006) are appropriate for the current study. Equity simply means fairness. Workers are motivated when they discover that they are treated fairly in compensation, promotion and that there is transparency in their evaluations. Workers reduce their efforts if they feel that they are treated inequitably (Hyde, 2005). Expectancy theory (Vroom, 1964) indicates that employees will be motivated to exert high level of effort when they believe that their efforts will lead to higher performance (expectancy), higher performance will lead to rewards (instrumentality) and rewards are valuable to them (valence). This effort will lead to good performance appraisal and followed by organization rewards such as bonus, salary increment or promotion which later satisfy personal goals (Vroom, 1964). This theory is based on the hypothesis that individuals adjust their behavior in the organization on the basis of anticipated satisfaction of valued goals set by them. The individuals modify their behavior in such a way which is most likely to lead them to attain these goals. This theory underlies the concept of performance management as it is believed that performance is influenced by the expectations concerning future events (Salaman, 2005).
Goal-setting theory had been proposed by Edwin Locke in the year 1968. This theory suggests that the individual goals established by an employee play an important role in motivating him/her for superior performance. This is because the employees keep following their goals. If these goals are not achieved, they either improve their performance or modify the goals and make them more realistic (Salaman, 2005). The theory emphasizes the important relationship between goals and performance. Research supports predictions that the most effective performance seems to result when goals are specific and challenging, when they are used to evaluate performance and linked to feedback on results, and create commitment and acceptance. The motivational impact of goals may be affected by moderators such as ability and self-efficacy. Managers widely accept goal setting as a means to improve and sustain performance (DuBrin, 2012). Based on hundreds of studies, the major findings of goal setting is that individuals who are provided with specific, difficult but attainable goals perform better than those given easy, nonspecific, or no goals at all. At the same time, however, the individuals must have sufficient ability, accept the goals, and receive feedback related to performance (Latham, 2003).
III. Measuring Actual Performance Of Employee Based On Established Standards
The most difficult part of the performance appraisal process is measuring the actual performance of the employees. That is the work done by the employees during the specified period of time. most of the time the effectiveness of performance appraisal system is determined by the performance standards developed according to individual job description which should be tied to organizational goals and objectives. In most cases, these standards should be a written document which will make it legally binding and objective (Daley, 2002).

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According to Condrey (2012) cited in Igbojekwe, et al (2015) failure to align performance standards with organizational goals and objectives leads to misunderstandings, poor morale, and lack of job satisfaction, ineffectiveness, and confusion. When the actual performance is compared with the desired or the standard performance, the comparison should tell the deviations in the performance of employees from the standards set. The result can show the actual performance being more than the desired performance or the actual performance being less than the desired performance depicting a negative deviation in the organizational performance (Caruth & John, 2008).
IV. Importance Of Discussion On Feedback
Taylor, Fisher and Ilgen (1984) suggest that feedback is essential for organizational effectiveness and that a lack of feedback can lead to anxiety, inaccurate self-evaluations, and a diversion of effort toward feedback gathering activities. Moreover, effective performance feedback has the potential to enhance employee engagement, motivation, and job satisfaction (Aguinis, Gottfredson, Joo, 2011). Performance feedback is a critical component of all performance management systems. Effective performance feedback is timely, specific, behavioral in nature, and presented by a credible source.
The goals of performance feedback are to improve individual and team performance, as well as employee engagement, motivation, and job satisfaction (Aguinis, 2009). Performance feedback is effective in changing employee work behavior and enhances employee job satisfaction and performance. The feedback should be given with a positive attitude as this can have an effect on the employees’ future performance. The result, the problems and the possible solutions are discussed with the aim of problem solving and reaching consensus (Caruth & John 2008).
One of the most critical parts of the appraisal process is the direct communication between supervisor and individual. In the ideal situation the employee receives information about how they are performing and where they could improve. According to Zachary and Dacha, (2010) managers identify the weaknesses of the employees and together they make a plan for the employee’s development. The success of the feedback depends on the acceptance of the process. The satisfaction with the performance appraisal is an indication of the degree to which subordinates are satisfied with the process and the feedback they have received. It serves as a report of the accuracy and fair evaluations of the performance. The outcome is that satisfied individuals after the performance appraisal will improve further working relationships with supervisors and colleagues. The feedback can also bring negative reactions from employees. If perceived unfair, the feedback can cause behavioral changes such as absenteeism, lack of cooperation, lack of focus on priorities, unhealthy competition and even can cause staff turnover.
Macky and Johnson (2000) pressed that the importance of performance management system is on continuously improving organizational performance, and this is achieved by improved individual employee performance. Therefore, improving employee performance by using performance management system is a way to improve organizational performance. Whereas, researchers observed that much attention is not given concerning performance appraisal process in Ethiopian HEIs. Different local research support this point for example (Nigatu’s (2007; Ayaz’s, 2009; Teketel’s, 2013) findings indicated that there was not opportunity for employees to participate in setting the standard of appraisal. In addition to that the appraisal process is not well known, the standards and results are not communicate to the employee, the requirement of measuring the performance of the employee is sometime depends on the behavior of the employee rather than the standards
V. Conceptual Frame Work
This study integrates different organizational literature related to performance management and the more narrowly focused upon performance appraisal in organizations. The conceptual framework was adopted from different local studies (Teshome, 2014; Gethanu, 2013; and Nigatu, 2007). The conceptual framework is based on Performance Appraisal Procedure process developed by different researchers and includes: establishing performance standard, communicating performance expectation to employees, measuring actual performance, comparing actual performance with standards and discussing the appraisal with the employee, if necessary, indicate corrective action.

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Source: Adopted from Teshome (2014), Nigatu, (2007), Gethanu (2013);

VI. Objectives of the study
In the light of the above introduction the specific objectives reported on are to:  Evaluate whether established performance standards in organization will lead to better employee
performance of administrative staff or not.  Assess how communicating performance expectation to employee within organization has effect on better
employee performance  Identify how measuring actual performance of employee based on established standards has effect on
employee performance of administrative staff  Assess discussion on appraisal result and giving feedback has relation to better employee performance.  Identify relationship between indicating corrective actions (Decision making) and employee performance.

Hypothesis of the study  H1:- Have establishing performance standards in organization will lead to better employee performance of
administrative staff.  H2:- communicate performance expectation to employee within organization has impact on better
employee performance.  H3:-Measuring actual performance of employee based on established standards has effect on employee
performance of administrative staff.  H4:- Discussing the appraisal and giving feedback will lead to better employee performance.  H5:-There is positive relationship between indicating corrective actions (Decision making) and employee
performance.

VII. Methodology
Descriptive research design was employed. Hawassa University (HU) was selected purposively for this study and the primary data were gathered from permanent administrative workers and Human resource personnel’s of four campuses of HU. From the total of two thousand eight hundred twenty one (2821) administrative staff using Kothari’s formula (Kothari, 2004), 338 staff were selected and distributed to four campuses using proportional allocation method. Then the participants from each campus were selected using simple random sampling technique. Structured questionnaires were used to collect data. Reliability of the instrument was checked using Cronbach Alpha and it was found 0.809 which is mostly considered as the highest reliability (Lewis and Thornhill, 2009).

VIII. Results And Discussion
Demographic characteristics The following table presents the profile of the respondents

Table 1 Demographic characteristic of the respondents

No Items

Count (%)

1

Gender

Male

188(58.8)

Female

132(41.2)

2

Age

18-25 years

94(29.4)

26-35 years

156(48.8)

36-45 years

64(20.0)

46-55 years

6(1.9)

3

Educational status

elementary education

15(4.7)

secondary education

22(6.9)

Certificate

43(13.4)

Diploma

68(21.3)

BSC/BA

151(47.2)

Msc and above

21(6.6)

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The Effect Of Performance Appraisal On Employee Performance: A Survey On Administrative…

4

Work experience

below 1 year

1-2 year

2-3 years

3-4 years

above 5 years

9(2.8) 16(4.7) 68(21.3) 141(12.8) 186(58.1)

From the above table 1, the majority of respondents are male, aged between 26-35 years, has BSC/BA degree and served for more than five years. This implies that administrative staff in HU are male dominated, youngsters, has first degree and well experienced.

4.2. Correlation analysis The relationship between performance appraisal processes (established performance standards,
communicate established standards, measure actual performance and compare with standards, discuss the appraisal with the employee and giving feedback and indicate corrective action) and employee performance were tested by using a correlation analysis.

Table 2 Correlations between independent variables (Performance appraisal process) and dependent

variable (employee performance).

Correlations

Pearson Correlation

Employee performance .829**

establishing

performance Sig. (2-tailed)

.000

standards

N Pearson Correlation

320 .746**

communicating

established Sig. (2-tailed)

.000

standards measure actual performance and

N Pearson Correlation

320 .896**

compare with standards

Sig. (2-tailed)

.000

discuss the appraisal with the

N Pearson Correlation

320 .868**

employee and giving feedback

Sig. (2-tailed)

.000

indicate corrective action

N Pearson Correlation

320 .757**

Sig. (2-tailed)

.000

N

320

** Correlation is significant at the 0.01 level (2-tailed).

 H1:- Have establishing performance standards in organization will lead to better employee performance of administrative staff. The study revealed that there was positive and strong relationship between establishing performance standards and employee performance, r=0.829 and P =0.000. The finding was supported by Goal-setting theory which suggests that the individual goals established by an employee play an important role in motivating him for superior performance. This is because the employees keep following their goals. If these goals are not achieved, they either improve their performance or modify the goals and make them more realistic (Salaman, 2005).
 H2:- communicating performance expectation to employee within organization has impact on better employee performance. The finding also discovered that there was positive and strong relationship between communicating established standards and employee performance, r=0.746; P= 000. The study was supported by Expectancy theory. This theory is based on the hypothesis that individuals adjust their behavior in the organization on the basis of anticipated satisfaction of valued goals set by them. The individuals modify their behavior in such a way which is most likely to lead them to attain these goals. This theory underlies the concept of performance management as it is believed that performance is influenced by the expectations concerning future events (Salaman, 2005). In addition Costello, (1994) stated that the performance goals should be clearly communicated, and the expectations of each employee clearly conveyed. This must be followed up by gaining agreement on these goals and expectations (Costello, 1994).
 H3:-Measuring actual performance of employee based on established standards has impact on employee performance of administrative staff. The finding discovered that there was positive and strong relationship between measuring actual performance and compare with standards and employee performance, (r=0.896; P =0.000). The finding was supported by (Caruth & John’s 2008) findings. The most difficult part of the performance appraisal process is measuring the actual performance of the employees that is the work done by the employees

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during the specified period of time. It requires a continuous process which involves monitoring throughout the year. This stage requires the careful selection of the appropriate techniques of measurement, taking care that personal bias does not affect the outcome of the process and providing assistance rather than interfering in an employees work (Caruth & John 2008).  H4:- Discussing the appraisal and giving feedback will lead to better employee performance. As shown in table 2 above there was positive relationship between communicating performance expectation and employee performance (r=0.896; P =0.000). The finding indicated the importance of communicating and discussion of performance result and feedbacks with employees. Thus, the discussion should focus on the result, the problems and the possible solutions with the aim of problem solving and reaching consensus .According to Caruth & John (2008) the feedback should be given with a positive attitude as this can have an effect on the employees’ future performance. Effective performance feedback has the potential to enhance employee engagement, motivation, and job satisfaction (Aguinis, Gottfredson and Joo, 2011). Moreover, Performance feedback is a critical component of all performance management systems. Performance feedback is effective in changing employee work behavior and enhances employee job satisfaction and performance.  H5:-There is positive relationship between indicating corrective actions (Decision making) and employee performance.The finding revealed that there was positive and strong relationship between indicating corrective action and employee performance, (r=0.746; p =0.000. The last steps of the process of performance appraisal is to take decisions which can be taken either to improve the performance of the employees, take the required corrective actions, or the related human resource decisions like rewards, promotions, demotions, training, transfers etc.(Caruth & John 2008). In general, the findings of this analysis indicated that all independent variables were positively and strongly correlated with employee performance (dependent variable).

IX. Regression Analysis
 Multiple regression analysis Five hypotheses were tested using multiple regression analysis, because the correlation analysis on table 2
shows only the relationship between the variables, but it does not show the exact percentage changes of the dependent and independent variables and the strength and degree of the relationship between variables.

Table 3. Result of regression analysis of dependent and independent variables.

Model Summary

Model

R

R2

Adjusted R2

Std. Error of the Estimate

1

.926a

.857

.855

.37345

a. Predictors: (Constant), established performance standards, communicate established standards, measure actual

performance and compare with standards , discuss the appraisal with the employee and giving feedback and indicate

corrective action.

Table 3 provides the value of R, R2 and adjusted R2 for the model that has been derived. R represents
the value of the multiple correlation coefficients between the predictors and the outcome (Field, 2005). Here, R
has a value 0.926, this value represents the simple correlation between established performance standards,
communicate established standards, measure actual performance and compare with standards , discuss the
appraisal with the employee and giving feedback. R2 on the other hands is a measure of how much of the variability in the outcome is accounted for by
the predictors (Field, 2005). The value of R2 is 0.857 which tells that these five variables of performance
appraisal process can account for 85.7% of the variation in the overall employee performance. This means
established performance standards, communicate established standards, measure actual performance and
compare with standards , discuss the appraisal with the employee and giving feedback and indicate corrective
action are the factors that created 85.7 % of the variance on employee performance. This means that 14.3% of
the variation in overall employee performance cannot be explained by these five variables of performance appraisal process. So, there must be other variables too that have an influence. The adjusted R2‟ gives an idea of how well the model generalizes and ideally its value is likely to be the same or very close to, the value of R2 (Field, 2005). Here, the difference between R2 and adjusted R2 is 0.2% (0.857 – 0.855= 0.002). This means that
if the model were derived from the population rather than a sample it would account for approximately 0.002%
less variance in outcome.

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ANOVAa Table 4: ANOVA table analysis between independent and dependent variables

Model

Sum

of Df

Mean Square F

Sig.

Squares

1

Regression 262.167

5

52.433

375.961 .000b

Residual

43.792

314

.139

Total

305.959

319

a. Dependent Variable: employee performance

b. Predictors: (Constant), indicate corrective action, communicate established standards,

establishing performance standards, discussing the appraisal with the employee and giving feedback,

measure actual performance and compare with standards

From table 4 we can see, F is 375.961, which is significant at p value <.001, i.e. 0.000< 0.001. This result tells that there is less than a 0.1% chance of F-ratio being this large. Therefore, the regression model significantly improved our ability to predict overall employee performance (outcome, or dependent variable).

This ANOVA table indicated the regression model predicts the outcome variable significantly well and also indicated the statistical significance of the regression model that was applied. As shows in the table 4.1.5 p< 0.01 which indicated the applied statistical regression model significantly predicted the outcome variable.

Table 5 Result of regression analysis of performance appraisal process

Unstandardized Coefficients

Standardized

T

Sig.

Model

Coefficients

B

Std. Error

Beta

(Constant)

-.214

.069

-3.108

.002

established performance .117

.042

.121

2.806

.005

standards

communicate established .124

.034

.118

3.621

.000

standards

measure actual performance .426

.057

.387

7.499

.000

and compare with standards

discuss the appraisal with .275

.053

.250

5.152

.000

the employee and giving

feedback

indicate corrective action

.149

.036

.137

4.147

.000

a. Dependent Variable: employee performance

The b-values in the table 5 represent the relationship between overall employee performance and each

predictor (i.e. variables of performance appraisal process). All five variables of performance appraisal process

have positive b-values; which indicates the positive relationships between the performance appraisal process

and overall employee performance. Using the results of the above multiple regression table the following

regression equation is formulated and it shows the exact percentage change between predictors and criterion.

Equation formulation

y= b0 + b1x1+b2x2+…bnxn + E

Where, y= Dependent variable b0, b1, b2,…bn= coefficients

x1, x2,…xn = Independent Variable

E= error terms

Taking in to consideration the results from table 4.10 the regression equation for the Study becomes.

y= -.214 + 0.117x1 + 0.121x2 + 0.387x3 + 0.250x4 + 0.137 x5

Where, y= Employee performance

x1= establishing performance standards

x2= Communicating established standards

x3= measuring actual performance and compare with standards

x4 = discuss the appraisal with the employee

x5= indicate corrective action

As it is shown in the above equation the degree of influence exerted on performance appraisal process differs from variable to variable. The result indicate that establishing performance standards increases employee performance; communicating established standards increases employee performance; likewise measuring actual performance and compare with standards, discuss the appraisal with the employee and giving feedback, indicate corrective action, so do increases employee performance. Here, for example, if establishing performance standards increases by one unit, employee performance by 0.121, other variables held constant.
The higher beta value signifies stronger correlation with the dependent variable. In table 6 measuring actual performance and compare with standards have the highest beta (0.387), followed by discussing the

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appraisal with the employee and giving feedback (0.250), indicate corrective action (0.137), establishing performance standards increases (0.121) and communicating established standards (0.117). This represents as if measuring actual performance and compare with standards increases by one standard deviation, overall employee performance standard deviation increases by 0.387, if discussing the appraisal with the employee and giving feedback increases by one standard deviation, overall employee performance standard deviation increases by 0.250, if indicating corrective action increases by one standard deviation, overall employee performance standard deviation increases by 0.137 and so on. But the interpretation is true only if the other variables are held constant while measuring the relationship between dependent variables and one of the independent variables. So, from the results of multiple regressions we can infer that measuring actual performance and compare with standards influences employee performance the most followed by discussing the appraisal with the employee and giving feedback, indicating corrective action, establishing performance standards and communicating established standards.

Table 6: Hypothesis testing result

No Hypothesis

Beta Sig.

Accepted

or

value

Rejected

1

Have establishing performance standards in organization will lead to .121 .005

better employee performance of administrative staff.

Accepted

2

Communicate performance expectation to employee within .118 .000

organization has impact on better employee performance.

Accepted

3

Measuring actual performance of employee based on established

standards has impact on employee performance of administrative .387 .000 Accepted

staff.

4

Discussing the appraisal and giving feedback will lead to better .250 .000

employee performance.

Accepted

5

There is positive relationship between indicating corrective actions

(Decision making) and employee performance

.137 .000 Accepted

X. Conclusions
The findings of the descriptive and inferential analysis revealed that there is a wide gaps in the application of all the components of performance appraisal process such as, performance standards, communicating established standards, measuring actual performance and compare with standards , discussing the appraisal with the employee and giving feedback and indicating corrective action, are well correlated with employee performance. In addition the result of regression analysis shows that variables such as performance standards, communicating established standards, measuring actual performance and compare with standards , discussing the appraisal with the employee and giving feedback and indicating corrective action, have significant effect on employees performance.
Therefore, there is a need for the improvement of employee performance appraisal process in higher education institution of Ethiopia through training, communicating the appraisal process to the stakeholder, provision of proper feedback, standardizing the instrument and through different ways of indicating corrective actions (Decision making).

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PerformanceEmployee PerformanceStandardsEmployeeFeedback