EFFECT OF PERFORMANCE MANAGEMENT SYSTEM ON EMPLOYEES MOTIVATION: THE CASE OF BUNA BANK IN HEAD OFFICE

Abstract

The study was designed with a general objective of assessing the impact of performance management systems’ effectiveness on employees’ motivation. It was conducted in Buna bank head office in Addis Ababa, Ethiopia – with permanent employees. The research approach was explanatory with a quantitative design. Quantitative type of data was collected as a primary and related literature and documents as a secondary source. Closed-ended questionnaire was distributed to a stratified sample of employees from faculty maintenance departments. A total of 218 questionnaires were collected and processed for analysis using descriptive and inferential statistics with the help of SPSS. Mean scores and standard deviation were used to assess the level agreeableness of the respondents. Relationship of the independent and dependent variables were analyzed using the correlation and regression methods. The results were then presented in the form of tables followed by discussions for further interpretation on the findings. The major findings of the research indicated that the clarity and continuous feedback variables of the PMS to have been perceived as high effective. The other four variables in clarity, inclusiveness, rewarding performance, and acceptability, factors were considered to be relatively satisfactory by the employees. While the view of the employees towards the determinant factors varies, the overall perception of the employees towards the PMS was positive, as 97.8% have agreed to the questions on the system. Similarly, the employees’ level of motivation has a score of 97% of the employees who felt that they are motivated. The study has found out that there was a positive but weak relationship between the independent variables (the PMS) and motivation. The study has also shown that employees at different division view the PMS differently, despite their level of motivation being unaffected. Therefore, it was concluded that, the PMS requires improvement to make it more effective. In addition, it was concluded that the impact of the PMS on the level of employees’ motivation was minimal. Finally, the researcher has recommended that the company strives to improve the system to make it effective in all its aspects. In addition, it was recommended that the features of the PMS to be revised so that it becomes strong in influencing the employees’ level of motivation. The researcher has also recommended that the system needed to be implemented systematically in order to be equally understood by all employees regardless of their demographic background.

Key Words: employees motivation , performance management system and Buna bank head office.

Table of Contents

DECLARATION i

Acknowledgments ii

List of Figures iii

List of tables iv

Acronyms and Abbreviations v

Abstract ix

CHAPTER ONE 1

1. INTRODUCTION 1

1.1. Background of the Study 1

1.2. Statement of the Problem 2

1.3. Research hypothesis 5

1.4. Research Objectives 5

1.4.1. General Objective 5

1.4.2. Specific objective 5

1.5. Significance of the Study 6

1.7 Scope of the Study 6

1.7. Limitation of the Study 6

1.8. Organization of the Study 7

1.9. Definition of terms 7

CHAPTER TWO 9

2. LITERATURE REVIEW 9

2.1. Theoretical Review 9

2.1.1. Performance Management System 10

2.1.2. Process of Performance Management System 12

2.1.3. Determinant Factors of Performance Management System’s Effectiveness 15

2.1.4. Motivation 22

2.1.5. Relationship of Motivation and Performance Management System 28

2.2. Empirical Studies 29

2.3. Conceptual Framework 30

CHAPTER THREE 32

3. METHODOLOGY 32

3.1. Research design 32

3.2. Research Approach 32

3.3. Study Population 33

3.4. Sampling Technique and Sample Size 33

3.5. Data Source 34

3.6. Data Collection tools and methods 34

3.7. Validity and Reliability 34

3.7. Methods of Data Analysis 36

Table 3.2. Range of agreeableness 36

Table 3.3: Strength of the correlation reference. 37

3.9. Ethical Considerations 37

CHAPTER FOUR 39

DATA ANALYSIS AND INTERPRETATION 39

4.1. Characteristics of the Respondents 39

4.2. Analysis of the Independent Variables 41

4.2.1. Clarity in the Performance Management System 42

4.2.2. Inclusiveness in the Performance Management System 43

4.2.3. Communication in the performance management system 44

4.2.4. Acceptability and Fairness 45

4.2.5. Rewarding Performance in the Performance Management System 46

4.2.6. Continuous Feedback in the Performance Management System 47

4.3. Analysis of the Dependent Variable 48

4.4. Correlation Analysis between the Independent and Dependent Variables 49

4.5. Regression analysis 51

4.6. Discussions on the Result 54

CHAPTER FIVE 56

CONCLUSION AND RECOMMENDATION 56

5.1. Conclusion 56

5.2. Recommendations 57

REFERENCE 59

Appendix 63