METTU UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT (MBA PROGRAM)

Thesis report on

PERFORMANCE MANAGEMENT PRACTICES AND ITS

EFFECT ON EMPLOYEES MOTIVATION (The case in
Commercial Bank of Ethiopia Bedele Area Branches)

By:-Teshome Mekonnen

Advisor:- Sulaiman Abdelea(Asst .Prof)

AUGUST, 2021
METTU,ETHIOPIA 1
 Outline of The Presentation
The presentation covers the following main topics:
 Background of The Study
 Statement of The Problem
 Basic Research Questions
 Research Hypothesis
 Objectives of The Study
 Significance of The Study
 Conceptual Framework of The Study
 Research Gap
 Research Methodology
 Research Approach
 Research Design
 Sample Size Determination
 Sampling Technique
 Sources of Ddata
 Method of Data Analysis
 Validity and Reliability
 Data Analysis and Presentations 2

CHAPTER ONE: INTRODUCTION
Background of The Study
 In this competitive and changing environment, organizations compete
through their employees. 'To survive with dynamic environments, they
need to focus on continuous improvement, doing more with less, and
productivity. These developments have brought performance
management to center stage.(Gupta& Upadhyayn,2012)
 Performance management is one of the key Human Resource
Management function and it highly involves both the employee and
the manager to implement it.
 Performance management is concerned with satisfying the needs and
expectations of organizations, stakeholders-owners, management,
employees, customers, suppliers and the general public (Armstrong
2000). He further indicates that performance management practices
include extensive and relevant training and management development
activities, incentivized pay systems and performance management
3
Cont…
 Performance management practices are systematic ways of
communicating to employees on what performance and
productivity parameters are expected of them (Marsor, 2011).
 In CBE traditional performance management system
(subjective based) was placed by the result oriented
performance management .Initially team level performance
management system was designed and implemented following
the launce of balanced score card in 2010/11. (Seifu bogale,
2018).
 PMS in CBE was an experience of live work i.e. learning by
doing which had contributed significantly for the ground work
to shape up the current one Currently CBE uses technology
supported system for the organization PMS system (oracle
PMS). (Seifu bogale, 2018). Cognizant to this, the main aim of
the research is how PMS practiced at CBE and its effect on
employee’s motivation. 4
Statement of The Problem

 Performance management practices studies show that a firm’s

productivity is simply a function of human resource practices it
employs. Performance management has become a crucial firm
process and it has increased pressure to achieve high performance
levels, and raised the bar for various work practices.

 According to (Armstrong, 2009) When Peoples are motivated

they expect a certain course of action that will likely lead to
attainment of a goal and a valued reward – one that satisfies their
needs and wants. A motivated work force also assists in reduction
of turnover rate and improves the productivity in the firm.

5
 Cont…
 As it is explained by (Beardwell and Claydon, 2007) Only when
employees are motivated towards appropriate goals that there is
likelihood or organizational success is enhanced. Since
productivity is influenced by employee motivation level,
organizations and particularly their line managers have to realize
what inspires employees to reach the highest level of their
performance.
 Organizations with best PMS usually show higher growth, higher
return per employee, less attrition rate and stable platform for new
challenges (Debemitra, 2008)
 Commercial bank of Ethiopia implemented the practice of
performance management system (PMS) at 2010/11 following the
launce of balanced score card by placing subjective based
(traditional performance management system) to result oriented
performance management (seifu bogale, 2018).
6
Cont…
PMS in CBE was an experience of live work i.e. learning by doing which
had contributed significantly for the ground work to shape up the current
one. Currently CBE uses a system supported by technology (oracle PMS).

The aim of PMS at CBE to use as inputs for making administrative

decisions, to know the best performer employees and preparing them for
the next higher positions, using performance appraisal result for
promotion, salary increment, various incentive based prize as well as to
create a sense of competition among employees and for enlargement of
accomplishment and lastly to evaluate their own result(for employees) and
preparing training according to the employees result.(CBE 13th collective
agreement).

Threfore,this study investigate perforance management practices and its

effect on employees motivation by endeavouring to provide an answer to
this research questions
7
Research Questions
 To achieve the purpose of the study, the researcher formulated
the following basic research questions:-
1) What is the perception of employees towards the
performance management practice of the Bank?
2) What is the impact of performance management appraisal of
the bank being supported by technology?
3) What are the benefits gained from the implementation of
employee performance management system in CBE?
4) How the outcome of performance management contributed
for decision making in CBE in line with motivation, and
employees benefit package?

8
Research Hypothesis
This study hypothesized the following hypothesis based on extensive
literature review. In this study it is assumed that there is a relationship
between performance management practices and employees
motivation, so it tries to use an alternative hypothesis approach.
H1= performance pre-requisites has significant effect on employees
motivation
H2= Performance planning has significant effect on employees
motivation.
H3= performance execution has significant effect on employees
motivation.
H4=Performance evaluation has a significant effect on employees
motivation
H5=Performance review, and renewal & re-contracting has
significant effect on employees motivation
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Objectives of The Study
5.1 General Objectives of the Study
The general objective of this study is performance management practices
and its effect on employee’s motivation at Commercial Bank of Ethiopia
Bedele area branches and to suggest possible solutions for the actual
problems
5.2 Specific Objectives of the Study
The study tried to address the following specific objectives:-
1) To examine employees perception toward employee performance
management practice of the bank.
2) To identify the benefit of technology supported performance appraisal at
CBE.
3) To identify the benefits gained from implementing performance
management system within the bank.
4) To identify the outcome of performance management contributed for
decision making in CBE in line with motivation, and employees benefit
package
10
Significance of The Study

 From this study Commercial Bank of Ethiopia can

obtain the necessary feedback and take corrective
measure to ensure the successful implementation of
performance management practices.
 The study enables to broaden the knowledge of the
researcher about the subject matter.
 In addition the study could help other researchers who
want to conduct further study on the subject in the future
 The study may also add something on the literature
regarding the performance management practices.

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Conceptual Framework of the study

• According to (Anshual 2013) this major performance

management practices outcomes have significant impact on
employee’s motivation.
• Based on the literature review the researcher develops the
research frame work that is concerning the variables of the
research topic. In this study the dependent variable is
employee’s motivation and the independent variables were
performance management process.
• The research hypothesized that the employee’s motivation is
affected by the effective performance management practices or
not.

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PERFORAMNCE - PAY
-PRE REQUISITIES - TRAINING AND
DEVELOPMENT
-PLANNING
- CAREER -EXTRINSIC
DEVELOPMENT MOTIVATION
-EXECUTION – FEEDBACK  
- INTRINSIC
EMPOWERMENT MOTIVATION
-EVALUATION
-KNOWLEDGE
-REVIEW MANAGEMENT

-TQM
-RENEWAL AND RE-
CONTRACTING -ProMES

13
Research Gap
 Several studies have been done in relation to the effect of PMS (practice)
on employee motivation. A descriptive research study on “Assessment of
Performance Management Practices in Commercial Bank of Ethiopia”
conducted by Alehegn Ayanaw (2017) shows that PMS lacks alignment
with bank’s business strategy, PMS is not integrated with other HR
functions, appropriate policies and procedures are not developed, and
outcomes of PM have no significance contribution for decision making.
 On the other hand study conducted by Temesgen Bahre(2018) on
“assessing the impact of performance management systems effectiveness
on employees motivation’. A case study of Ethiopian Airlines. The
findings of the study shows that the clarity and continuous feedback
variables of the PMS to have been perceived as less effective and the
overall perception of the employees towards the PMS was positive.
 Many of these studies have failed to explain how PMS Practice affect
employees Motivation and This study therefore aims at bridging the
existing knowledge gaps by endeavouring to provide an answer to this
study basic research questions.
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CHAPTER THREE: RESEARCH METHODOLOGY

Research Design
 The research design for this study was explanatory research design
because it tried to figure out a causal relationship between the
performance management practices and employees motivation. According
to (Saunders et al. 1997) an explanatory research emphasizes on studying
a situation or a problem in order to explain the relationship between
variables.
Research Approach
This study used both qualitative and quantitative approach (mixed
method approach). The core argument for a mixed methods approach is
that the combination of both forms of data provides a better
understanding of a research problem than either quantitative or
qualitative data by itself.

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Target population
• Commercial Bank of Ethiopia has more than 1,700 branches
opened and giving service stretched all over Ethiopia. It will be
unrealistic to even consider that this study would have to
embrace all these branches. The target populations in this study
included were staffs of seven branches around Bedele area.
There are around 124 employees in the branches altogether.
Sample Size determination
• This sample determining formula in this study is developed by
Taro Yamane (1967). The reason for selecting and using this
formula is that the sample size determined and acquired is
somewhat bigger or larger than the results acquired using other
recent formulas and also it is the most wildly used formula
both in academic and social science research. Therefore, to get
the representative sample for the population under study, the
following sample formula is adopted:-
16
Cont…
n= 𝑁 /1+ N (𝑒) 2
Where n is the sample size
N is the population size and
e is the level of precision error = (5%)
N= 124 seven branch staffs
n= 124/1+124(0.05)2
n=94
Sampling technique
The researcher used stratified random sampling method to select
samples from the target population. According to Saunders, Lewis
and Thornhill (2009), dividing the population into a series of
relevant strata means that the sample is more likely to be
representative, which can ensure that each of the strata is
represented proportionally within the sample.
17
Cont…
• Each of the seven branches used as strata to collect data. Simple random
sampling technique was implemented once the seven strata are
identified. A purposive sampling technique applied to select
interviewees who were directly responsible with performance
management system (managers of the branches). Using this method
enable to have in depth knowledge from those who were in a position to
give about the practice of performance management system at the bank.
sources of data
In this study both primary and secondary sources of data were used.Data
collected from primary sources using questionnaires and interview. And,
Books, Research findings, internet sources and articles & journal will be
reviewed as secondary Sources to get various concepts and ideas related
with study. Specifically, Primary sources used to acquire the employee’s
response.

18
method of data analysis
• The questionnaires were distributed to the employees at the
branches based on the sample size from each population
group.The questionnaire has closed-ended questions that
include a five-point likert scale and some open ended
questions.
• After the questionnaires distributed, the researcher collected
and arranged the completed questionnaires, compiled the data
for discussion and analysis. Finally, the collected data inserted
into data set and made ready for data analysis by using
statistical package for social sciences (SPSS) 2020 version.

19
Sampling Frame

There are two sampling frame set that are included in the sample size,
i.e., managerial permanent staff who are working at CBE Bedele area
branches , and non-managerial staff who are working CBE Bedele area
branches.
• Validity
To make the research valid, the researcher used reliable sources such as
published books and recent articles written by well-known authors in the
field of performance management and employee’s motivation, research
method books and other related topics.
Reliability
In order to insure the reliability, the research used an internal consistency
type of reliability. The research used this internal consistency reliability
because the researcher uses to measure each variable of the study using
different type of question but they are related to each other to measure
the identified variables. From the internal consistency sub categories the
research used Cronbach‟s Alpha reliability test.
20
Cont…
• According to ,Lombard (2010) strengthen this concept that
Coefficients of .90 or greater are nearly always acceptable, .80
or greater is acceptable in most situations, and .70 may be
appropriate in some exploratory studies for some cases
• The reliability test of the data for this study tested by using a
Cronbach’s alpha to check the internal consistency it was
0.821

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CHAPTER FOUR: DATA ANALYSIS AND
INTERPRETATIONS

4.1 Number of Distributed and Returned Questionnaires

Questionnaires prepared for this study being suitable and out of 124
populations in the study 94 sample respondents filled and returned the
questionnaire
4.2 Demographic Characteristics of Respondents
Under this topic of the analysis the personal information of the
respondents, as filled by the respondents on the questionnaire are compiled
and presented.Then each of personal information’s i.e. gender, age,
educational level, educational status and work experience are analysed
 from total 94 respondents of the questioner majority of respondents were
male in number 65(69.1%)
 the remaining were female a total of 29(30.9%).

22
 Cont…
• Majority of the respondents were inside the age range of 21 up
to 29 years which is 62 respondents having 66%.
• majority of respondents 86.2% are first degree holders. The
remaining 13 employees of respondents (13.9%) are post
graduated level of respondents.
• From 94 respondents that are accounted for 42.6% of the
respondents has served the bank between 2-5 years and 30.9%
of respondents served the bank more than 5 years. 12, 9% of
respondents had greater than 10 years’ experience .only 12.8%
served below 2 years. .

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Multiple Regression Assumptions
 Prior to regression analysis different diagnostic test of assumption
has been tested like
• Normality
• Reliability
• Multicoliniarity
Test of Reliability
In order to insure the reliability, the research used an internal
consistency type of reliability. According to Robert S. (Y520 strategies
for educational inquiry), Cronbach‟s alpha indicates the degree of
internal consistency. Coefficients of .90 or greater are nearly always
acceptable, .80 or greater is acceptable in most situations, and .70 may
be appropriate in some exploratory studies for some cases.The
reliability statics for Cronbach's Alpha is 0.821 which is higly reliable.

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 The Effect of Performance Management
Practices at Employees Motvation
• A regression analysis was conducted in order to understand and
analyze the effect of the independent variables of the model on
the dependent variable.
• According to Kothari (2004), the objective of this analysis is to
make a prediction about the dependent variable based on its
covariance with all the concerned independent variables.
Therefore, the relationship between the independent variables
of the performance management practices and the dependent
variable (employee’s motivation) hypothesis testing was
performed and the result of of individual independent variables
for regression analysis against motivation prsented as follows

25
cont…

• Regression analysis of individual independent variables against

motivation
• H1= performance pre-requisites has significant effect on employees
motivation
The results of regression as presented in above table indicate that performance
Pre-requisition of the performance management practice has no significant
effect on level of employees’ motivation with a beta value of β1 = -0.464 (sig
= 1.04 which is greater than α = 0.05). Therefore, the researcher rejects this
hypothesis and considers this variable as irrelevant in affecting the dependent
variable
• H2= Performance planning has significant effect on employees motivation.

• The results of regression presented in above table has also indicated that
performance planning has an effect on level of employees’ motivation with
a beta value of β1 = 0.214 (sig = 0.011 which is lesser than α = 0.05).
Therefore, the researcher accepts this hypothesis and it is accepted that for
each unit increase in performance planning factor of the performance
management practice, there is 0.214 unit improvement in level of
26
employees’ motivation.
Cont…
• H3= performance execution has significant effect on
employees motivation.
• The results of regression presented in above table has also
indicated that performance execution has an effect on level of
employees’ motivation with a beta value of β1 = 0.286 (sig =
0.044 which is lesser than α = 0.05). Therefore, the researcher
accepts this hypothesis and it is accepted that for each unit
increase in performance execution factor of the performance
management practice, there is 0.286 unit improvement in level
of employees’ motivation.

27
Cont…
• H4=Performance Evaluation has a significant effect on
employees motivation
• The results of regression presented in above table has also
indicated that performance evaluation has an effect on
level of employees’ motivation with a beta value of β1 =
0.969 (sig = 0.000 which is lesser than α = 0.05).
Therefore, the researcher accepts this hypothesis and it is
accepted that for each unit increase in performance
evaluation factor of the performance management
practice, there is 0.969 unit improvement in level of
employees’ motivation.
28
Cont…
• H5=Performance Review, and Renewal & Re-contracting has
significant effect on employees motivation
• The results of regression presented in above table has also
indicated that Performance Review, and Renewal & Re-
contracting has an effect on level of employees’ motivation
with a beta value of β1 = 0.827 (sig = 0.000 which is lesser
than α = 0.05). Therefore, the researcher accepts this
hypothesis and it is accepted that for each unit increase in
Performance Review, and Renewal & Re-contracting factor of
the performance management practice, there is 0.827 unit
improvement in level of employees’ motivation

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Pearson Corelation between the
Independent and Dependent Variables
• According to (Alwadael, 2010) values of coefficient
value in relation between variables indicate that value
0.70-1.00 Very strong association, 0.50-0.69 Substantial
association, 0.30-0.49 Moderate association, 0.10- 0.29
Low association, and 0.01-0.09 negligible association.
• Based on the result performance planning (0,607) has
substantial association, performance execution,(0,766)
evaluation(0,995) and Review, and Renewal & Re-
contracting(0,971) have strong association with
employees motivation

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 Summarized Response of Employees for the General
Opinion Questions

 Factors that motivate employees to achieve their work goals

and targets set by the performance management system of the
bank is summarized as follows.
• Some of their responses are related to tangible and intangible
reward.
• The other stated factors are related to the relationship between
management and employees. They are availability of skilled or
professional management and good governance, collaborative
team work, a clear communication of information, a good
social relationship, supervisor’s positive feedback, and
transparency of the management

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The advantage of technology supported pms system

Employees mentioned various benefit of technology supporter performance appraisal

amongst them
• To record data at oracle
• Avoid bias
• Fairness
• Encourage paperless work
• Goal setting and tracking
• Appeal process if one employee may have grievance at the result employee has the right to
appeals
Major benefits gained for the bank and for employee’s performance management
system implementation
• Transparent communication and collaboration
• Employee recognition
• Employee development
• Honest and regular feedback and review

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SUMMARY OF MAJOR FINDINGS, CONCLUSIONS
AND RECOMMENDATIONS

• SUMMARY OF MAJOR FINDINGS

• 52.1% respondents responded there is no need based training
given for employees.
• 79.8% from total target population has the knowledge of the
organization vision, mission and strategic goals. 85.1% of
employees are also having a good knowledge of their job
duties and responsibilities.
• 39.74% of response indicate that there is no a two way
communication between subordinate and supervisors during
the performance review meeting.

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CONCLUSIONS
• A well-performed performance management process gives a powerful tool for
addressing or improving poor performance issues, when they identified. But
this research reveals that there is no means of need based training for
performers
• With the nearest to say all employees of the organization have a clear
understanding of the organization reason of existence, its strategic goals. And
also they have clear understanding of their duties and responsibilities. This is
one of the strength part of the organization to make employee work, directed to
the organization goals and objectives
• From this study, it has been noted that Commercial Bank of Ethiopia has neglected
the importance of the involvement of employees in the goal setting process of
Performance Management System. Based on the evidences obtained from the
analysis, employees claimed that they are not participating in performance planning.
In addition all respondents did not have chance to jointly agree on the standards of
performance measures with their supervisors and in setting an individual
development plan the response of participants is not that much enough or there is
high level of response that indicate employees didn‟t reached an agreement about
their development plan to enhance their performance with their supervisor.
34
Recommendations
• CBE have to Use pms result for significant decisions making process
such as prioritizing best performer employees for lateral transfer,
promotion, scholarship opportunity, covering full tuition fees
payment, linking performance appraisal result with individual
performance instead of branch performance etc…to motivate
employees instead of formalities.
• CBE should prepare guideline that enable to standardize pms
practices to minimize rotating employees out of specific target when
employees are transferred to another branch due to transfer, promotion
or demotion
• The study has revealed that there is low opportunity growth within
CBE. So, the researcher recommends that to find solution for growth
opportunity in order to retain and motivate its employees.

35
Cont…
• CBE Should Prepare need based training for employees in
collaboration with the line managers to fill skill gap, to
increase productivity, reduce wastage, to boost morale, to
reduce supervision.
• Goals that is given for employees should be designed like a
good workout. It should stretch slightly, feel challenged, but
not cause stress for employees.
• In order to motivate the employees, also to encourage good
performance the bank must integrate performance
management system with reward (benefit packages) and also
ensure that rewards are distributed on a fair and credible basis.
This also leads to improved interpersonal relationships and
enhanced supervisor–subordinate trust 36
Cont…
• The bank has to be implement fair job rotation and
provision of equal resources for all employees and units
in order to creating similar rating mechanism among
branches and employees to the system will have
uniformity.
• In general, it is advisable for bank to sustain all its current
strengths, and improve its limitations mentioned above to
achieve better performance so that the bank can realize its
vision to become a world class commercial bank by the
year 2025.

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THANK
YOU
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