1.

heChapter One: Introduction

1.1 Background of the study
Among other organizational resources, human are one of the most critical and valuable resource to
achieve organization objective. Human resource (HR) can be defined as the most important
resource to affect production performance in organizations (Stone, 2008). Effectiveness and
efficiency of an organization cannot be achieved without effective management of human
resource. Performance analysis is an examination of the knowledge, skill, abilities, and attitudes of
employees, their current and future career goals and objectives, and the match between
employees and organizational expectations. Such an analysis also helps determine how employee
performance helps the organization achieve its strategic goals and objectives (Gilley, 2009).
The main focus of Human resource management is the organizations interest in employees
performance. Human resource management (HRM) is a function performing by all managers to
deploy human skill, knowledge, experience, and maximizing their performance to achieve
organization objective (Armstrong, 2010).
Performance management is a one function performed by HR manager as well all managers which
about how people should be managed to achieve the performance that the organization needs to
succeed (Carter and Frank, 2005, pp 18-24). According to Bratton (2000) human resource
activities are designed to match individuals to organizational tasks, to motivate the workforce, and
to deal with conflicts and tensions at work. HRM practices, therefore, aim to achieve two sets of
objectives: improve employee performance and enhance organizational effectiveness.
Armstrong (Armstrong s handbook , 2009) noted that employee performance is a function of both
ability and motivation, it makes sense to have practices aimed at enhancing both. Thus there are
several ways in which employees can acquire needed skills (such as careful selection and training)
and multiple incentives to enhance motivation (different forms of financial and non-financial
rewards). In addition to these Job performance is viewed as a function of three factors and is
expressed with the equation. According to this equation, motivation, ability, and environment are
the major influences over employee performance. Performance standards are designed based on
information from job analysis which is systematic process of determining the characteristics of
job, skills and knowledge required to performing jobs, and evaluate employees performance based
1

on the standard (Kirkpatrick Donald L, 2006, pp 25-48). It indicated that there is no one type of
system or set of objectives that is best suited for all organizations. Organization must be design
and administer performance of employees in line with organization purpose and objective.
All organization needs employees performance in order to achieve per stated objective, and
employees accomplish their duties based on specific standard stated by their managers. There are
different factors that determine the performance of employees. Of these performance appraisals
system by itself and its application in an organization has its own impacts on the performance of
employees (DelPo Amy, 2007, pp 46-51).
Nickols (2003), and Fort and Voltero (2004), identify factors that are closely related and affect
providers performance in the workplace. They include: clear goals and job expectations, suitable
repertoire, immediate feedback, skills to perform, knowledge of the organizational structure,
functional feedback system, sound metal models, sufficient motivation through self satisfaction
and incentives.
Job performance problems often start small and develop slowly. In the early stages there may be
just a few isolated incidents and these may easily be overlooked. It is important to deal with a job
performance problem in the early stages while the issues are small. Performance issues can
deteriorate to the point of crisis if the early warning signals are not acknowledged and dealt with.
The performance of one employee can affect the productivity of other employees. Poor job
performance can place the employee, co-workers and the organization at risk.
As a matter of fact most managers in organizations face with a crucial question of what factors
influence employee performance and there is inadequate empirical information that might guide
their efforts in enhancing overall job performance among employees (Salleh et al., 2011).
The research will be try to identify the major factors affecting the effectiveness of the job
performance of the employees working at Wegagen Bank, through identifying the variables
include leadership, organizational culture, working environment, motivation and training.

1.2 Statement of the problem

Employees are the most valuable asset in any kind of organization which engaged in profit making
or non-profit or service giving or production. A successful and highly productive business can be
achieved by engaging them in improving their performance. Not all employees are equal in their
working and they have different modes of working in that some have the highest capability
regardless of the incentive while others may have an occasional jump-start. If they are handled
effectively, the result can be greater productivity and increased employee morale. Employees in a
firm are required to generate a total commitment to desired standards of performance to achieve a
competitive advantage and improved performance for sustaining that competitive advantage at
least for a prolonged period of time, if not forever.
Human resource can be defined as the most important resource to affect production performance in
organizations. Human resource is an important factor of production. A well trained, motivated
workforce makes it possible to achieve the organizations success. For this reason management has
to supply not only raw materials, facilities, and equipment, but it also has to motivate its
employees. Productivity, quality and customer relation are the key areas of success and these
depends on performance of the employees. Employees will perform well if they are motivated.
(Stone, 2008). Organization has many resources among these, employees are the most valuable assets
of any organization without whom no production activity can take place. The success of an
organization largely depends on the quality of its employees which is measured by their performance.

Thus, good employees performance is the part for the success of the organization. Nelson and
Quick (2003) argue that a job with high motivation and hygiene factors leads to high performance
and few complaints among employees. Employees performance like all other systems, they do not
function when their components do not work together smoothly and efficiently. Thus,
understanding relationship between the organization and its employees is the key to improve the
organizations ability to move through change effectively. Organizations need to understand the
factors that affect employees performance because such insight will help them make decisions
that will inculcate improved performance from the employees and to an extension the overall
performance of the organization (Mwangi, 2012).

Employee performance has been shown to have a significant effect on organizational performance
(Collis and Montgomery, 1995). This is due to the reason that individual performance is the
foundation of organizational performance (Ivancevich and Matteson, 1999). Identifying factors
that affect employees performance can help improve recruitment, retention and organization result
(Mohammed and Nimalathasan, 2011).
Many Literatures stated that there are numerous factors affecting employees performance.
Employee performance affects the overall performance of an organization and its bottom-line
(Purcell 2003). Different scholars try to point out the factors affecting employees performance in
case of different sectors throughout different countries. Most of them deal with determinant factors
and its impact on employees performance and their finding show that performance of the
employees has significantly affected by different factors including individual, organizational, and
job related factors.
The work nature of service industries is mostly dominantly faced by direct contact with customer.
As a result, selecting people who are properly suited to excel in customer service environment and
then improve the skill level of those workers to help meet the market demand and lead to
continuous improvement of a service organizations performance. As the banking industry is a
major service industry which plays a vital role in the economy development of the country.
Recently in our country the banking industry growth in a fast manner and aggressive competition
is observed since the demand of banking service not yet fulfilled and the government banking
policy which restricted the foreign banking companies these implies giving good opportunity for
local bank companies. Hence, one of the indicators in enhancing and improving the services
industry is job performance. Like other organizations engaged in the service sector Wegagen Bank
is one of those services providing organization which depend on the performance of its qualified
employees. As we discussed above there are numerous factors has its own impact on employees
performance which may hinder organization to utilize full capacity of their workers.
Therefore, it is indispensable to generate relevant evidence through a detail study to highlight
solution for improving the performance of employees. This research will try to describe the
4

determinants of employees performance in Wegagen Bank in Addis Ababa city. Specifically, it

tries to determine the effect of leadership, organizational culture, working environment, motivation
and training on individual performance. Secondly, this study will draw some recommendations and
indicate directions for further research. (ATTACH THE REFERENCE BOOK)

1.3 Research Questions

The above statement guide the researcher to builds up research questions regarding the
determinant factors which affect the performance of employees of the bank, the study tried to
answer the following main research questions:

What are the major factors that influence the performance of employees in Wegagen Bank?

What is the effect of those factors on the performance of employees in the study area?

Which valid solutions can be suggested to increase the performance of employees in

Wegagen Bank?

1.4 Objective of the Study

The overall general objective of this research is to investigate the determinants factors affecting
employees performance in Wegagen bank in Addis Ababa city branches. It will also highlight how
independent variables affect the employees performance either positive or negative.

Specific Objective of the Study

The aim and key specific objectives of this research are as follows:

To determine the major factors influencing the performance of employees in Wegagen

Bank Addis Ababa.

To investigate the effect of each factors on the performance of the individuals in the study
area.

To establish valid conclusions and recommendations with the identification of impacts,

both positive and negative factors on employees work performance which helps for the
concerned bodies to improve the staff job performance.

To provide and indicating directions for further research.

5

1.5 Hypothesis
The hypothesis assumes that employee performance is affected by and dependent on multiple
factors including leadership, organizational culture, working environment, motivation and training.
This study aims to figure out the effect of above-mentioned variables on the performance of
employee in which it based on and adopted from the literature (Le Tran, 2002) as depicted in
figure 1below.

Fig. 1 Conceptual Framework ( adopted from Le Tran, 2002

Significance of the study

The study will focuses on the implication of performance appraisal system of the company on
employees performance. So this research will indicate the exact aspects of the system on
employees performance, and it will provide insights for the improvement of the system. The result
of the study will help the company to re-examine the system, and to take appropriate action.
6

This research also will be helpful for other organization to reconsider their performance appraisal
system and to understand the implication of the system on employees performance.
In addition to this, the research will serve as a reference for researchers who are interesting to
conduct a research on the topic.

1.5. Scope and limitation of the study

1.5.1. Scope of the study
This research study is limited to the SINTEC ETHIOPIA PLC (Bole Subsite around Gerj
Menratyel). The researcher will also focus only on the implication of performance appraisal
system on employees performance of the named company. Therefore the scope of this research is
only delimited to the SINTEC ETHIOPIA PLC.

1.5.2. Limitation of the study

It is very difficult and beyond the scope of this paper to investigate the implication of all factors
that affect employees performance. The researcher will not consider those factors in this research.
The limitation will be directly related with time, budget and availability of resources for not
consider those factors.

1.6. Time frame and budget estimation

1.6.1. Work schedule
No.

Activities

Due Date

1.
2.
3.
4.
5.

Thesis proposal ( Chapter)

Literature review (chapter 2)
Methodology (chapter 3) and data collection instruments
Proposal Defense
Data collection, Analysis, Results, Interpretation and

December 7, 2015
December 31, 2015
January 29, 2016
February 15-20, 2016
March 31, 2016

6.
7.
8.
9.
10.

Discussion
Summary, Conclusion and Recommendations
Final Write up
Submission of final draft
Defense Period
Grade submission to the Registrar office

April 15, 2016

April 28, 2016
May 13, 2016
June 6-18, 2016
June 20, 2016

1.6.2. Budget estimation

S.No
1.
2.
3.
4.
5.
6.

Unit Price
Birr
Cent

Description
Duplication paper
Note Books
Pen
Pencil
Flash Disk
Internet Fee

120
20
3
1
150
Over all
Sub Total

00
00
00

75
00

Total Cost
Birr

Cent

400
20
30
7
150
500
1697

00
00
00
00
00

500
300
150
700
1850
3547

00
00
00
00
00
00

00
00

Miscellanies Expense
7.
8.
9.
10.

Transport Cost
Photocopy and printing of reference and first draft
Final report printing and binding
Other expenses
Sub total Cost
Total Cost

1.7. Organization of the study

The final report of this research will encompass a total of five chapters.
The first chapter of the research will include detail introduction of the research topic. The next
chapter of this research will be conceptual and theoretical aspects of extensive literature review on
the study area. The third chapter of the research will discuss about the methodology of the
research. The researcher may change same procedure of the research design through process due to
the nature of the topic. And the fourth chapter of the research will include the presentation,
analyses and interpretation of the data. The final chapter will be conclusions of the research based
on the finding, and valuable recommendation will be forwarded.
8

2. Review Literature
Organizations are undergoing a transformation for coping against the changing needs of the
environment and excelling in the business by building up their adaptive capabilities for managing
change proactively. Sustainability of business organization is depends on talent, skill, knowledge
and experience of employees and on their performance (Armsstrong Michael, 2009).

The main objective of the performance appraisal system was to exercise control over the activities
of the employees through disciplinary actions and management of rewards and promotions. The
supervisors were expected to rate their employees on certain traits ranging between a scale of
unsatisfactory to outstanding performance and these ratings were susceptible to various errors like
central tendency, bias, halo effect, etc (Armsstrong Michael, 2009).

2.1. Performance appraisal

The functions of HRM have become far more complicated as today the major focus of strategic
HRM practices is on the management of talent by implementing such performance appraisal
system which enhance the competencies of the employees (Agarwal Ankita , 2011).
Performance appraisals entail setting performance targets, reviewing the achievement of targets,
and devising ways to enable employees to meet targets. The systems establish clear expectations
on what an employee is expected to do, set the guidelines on what constitutes successful job
performance, and strive to identify barriers to effective performance (Agarwal Ankita , 2011).
Performance appraisals were mostly carried out annually for measuring the degree of
accomplishment of an individual and were implemented on a top down basis in which the
supervisors had a major role to play in judging the performance of an employee without soliciting
active involvement of the employee (Agarwal Ankita , 2011).
The performance appraisals were organized in a bureaucratic manner and suffered from
unnecessary delays in decisions and corruption. Performance appraisals were mostly narrowly
focused and functioned in isolation without bearing any linkage with the overall organizational
vision or goals. The side effects of the performance appraisal system was it generated skepticism
amongst the managers and the employees on any new initiative of the HR (Agarwal Ankita ,
2011).

2.2. Performance management system

The performance appraisal tends to be more formal and structured. Although most performance
appraisal systems allow customization of key performance areas or what constitutes performance
based on the employee, the system nevertheless remains rigid with laid down procedures and
rating parameters binding on all employees equally. Performance appraisal is usually standardized
10

based on the employee's designation, or at best on the employees job description rather than on
the employees actual work exigencies (Agarwal Ankita , 2011)

2.3. Employees performance and performance appraisal system

Performance is the accomplishment of a given task measured against preset known standards of
accuracy, completeness, cost, and speed. Employees performance is the contribution of employees
for the achievement of organization objective. Performance appraisal is a management tool that
managers can manage employees performance with specified set of rules. It is a means of getting
results by understanding and managing performance within an agreed framework of planned goals,
standards and competency requirements. Employees expected to perform acceptable level of the
standard and managers follow up, and evaluate the performance of employees to attain the stated
objective of an organization (Armsstrong Michael, 2009).

3. Research Design and Methodology

This research is qualitative research design because the researcher only wants to describe the
implication of performance appraisal system on employees performance. The researcher believes
that this kind of research design are provides plentiful data about the research topic, and supportive

11

to meet the research objective. As stated above in the scope of the study, the research will be
conducted in SINTEC ETHIOPIA PLC.
The researcher will use probability random sampling technique to select the sample from the
population. The data will be collected through questionnaire and interview, and different analytical
tools are undertaken in this research.

3.1. Sample size

The company has a total of 151 employees, and 91 of them are permanent employees. The
researcher will categories the total population (91) based on employees position (department
directors and subordinates), and take 50% sample based on the proportion of each stratum. The
classification and numbers of sample truly represent the total population and will help to get
adequate data.
This sample includes both the department director (supervisors) and other members of each
department (subordinates) who will take part in filing the questionnaire.
However, Human resource director will be included in the 50% sample, but they will be treated
separately and they are subjected to an extended personal interview regarding the issue.

3.2. Sampling techniques

To conduct this research the researcher will use proportionate stratified sampling technique to
select samples from the total population, and distribute questionnaire and conduct interview to
collect the required information from the samples determined.
The researcher will classify the total population based on their position in terms of department
directors (supervisors) and other members of the department (subordinates). The position of
employees is very supportive to collect relevant and accurate data about the application of the
system
However, to respond precisely about the implication of performance appraisal system an employee
should become permanent employees in the organization. The reason behind this criterion is the
system conducted annually and permanent employees have more experience about performance
appraisal system of the company. The criteria will help researcher to get adequate date about the
12

system. To determine this, researcher will collect data from HR department of SINTEC
ETHIOPIA PLC regarding to employees contract status.
Accordingly, 6 department director (supervisors) and 40 other members of the department
(subordinates) who fulfill the above stated requirement will be selected. The HR director will take
interview separately. Department directors and HR director are very familiar with the performance
appraisal system of the company and they will give adequate information about the system.

Sampling technique modeling

3.3. Method of Data Collection

To collecting adequate data about the topic from the defined sample, the researcher will use
questionnaire and interview. Documents about performance appraisal system of the company will
be used as secondary sources.
Primary data will be collected through the use of personal interview and questionnaires. In the
personal interview part structured interview will be used. Interview data will be collected from the
13

HR directors. Questionnaires (includes both closed-ended and open-ended) will also be distributed
to department director (supervisors) and other department member of employees (subordinates)
excluding HR directors. The secondary data will be gathered from relevant documents related with
the topic.
In order to check the validity of questionnaires, the researcher will be distributing sample
questionnaire for few selected respondent from both categories before distributing the final.
3.4. Data Analysis Method
The researcher will apply qualitative analysis technique due to the nature of the data to be
collected and use simple quantitative analysis techniques. The data from interview will be
analyzed through descriptive analysis. Data from questionnaires will be analyzed through both
descriptive and statistical analysis and using tables, and simple percentages.

4. Bibliography
1. Armstrong Michael, (2010), Human Resource Management Practice, Replika Press Pvt Ltd
India.
2. Taylor Stephen,( 2008), Human Resource Management, 7th edition, Matev Croms Artes
Graficas, Spain
14

3. Aguinis, Herman, (2009), Performance Management, 2nd Edition, Dorling Kindersley Pvt. Ltd
India.
4. Carter Earl M A And Frank,( 2005), Improving Employee Performance Through Workplace
Coaching, in Great Britain.
5. DelPo Amy, (2007), The performance handbook legal and practical rules for manager, 2nd
edition, consolidated Printers, inc.
6. Pulakos Elaine, (2004), Performance Management, United States of America.
7. Dick Grote, (2002), The Performance Appraisal Question And Answer Book, United States of
America.
8. Jones Pam, (2000), Performance Management, Management Pocketbooks Ltd.
9. Kirkpatrick Donald L,(2006), Improving Employee Performance Through Appraisal And
Coaching, 2nd edition, United States of America.
11.

10. Stone, R.J. (2008). Human Resource Management (6th edition). John

Wiley & Sons, Australia.

12. John Bratton and Jeffrey Gold , (2000) second edition ,Human Resource
ManagementTheory and practice, Lawrence Erlbaum Associates, Mahwah,
New Jersey 07430
13.

http://www.saylor.org/books

14.

Salleh, F., Yaakub, N., &Dzulkifli, Z. (2011). The influence of skill levels

on job performance of public service employees.Journal of Business and

Management Review, 1(1), 31-40.
15.

Boxall, P., & Purcell, J. 2003, Strategy and human resource management.

New York:Palgrave Macmillan.

16. Le Tran,( 2002) FACTORS AFFECTING EMPLOYEE PERFORMANCEEVIDENCE

FROM PETROVIETNAM ENGINEERING CONSULTANCY J.S.C

15