The Impact of Performance Appraisal on

productivity: Case of Hamaressa Edible Oil

S.C

A Research Project Proposal

Submitted to
IGNOU

In partial fulfilment of
the requirements for the degree
Master in Business Administration (MBA)
in HUMAN RESOURCE

By: Dereje Abebe

January 2014

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1. Introduction

1.1 Background of the study

Productivity in all organization is determined by how human resources interact and combine
to use all other management System resources. Human resources are often said to be the most
valuable assets of an organization; and the organization successes or failure are greatly
influenced by the quality of these resources. The other resources cannot be utilized
effectively and efficiently for the achievement of desired organization objectively without
having motivated and qualified employees.

The human resources of an organization have a lot to contribute to the organization

performance. It must be built with trained, encouraged prompted and satisfied. The human
resources department is responsible to undertake these tasks. In order to do those functions,
the performance of employees should be evaluated based on certain criteria from time to time
to see whether the employee’s effort yields up the expected result.

Performance appraisal is a systematic assessment or evaluation of performance of an

employee’s periodically; and it is the process of evaluating how well employees do their jobs
compared with a set of standards. It also involves communicating to employees how he/she is
performing the job.

The information obtained from the appraisal can be used as input for managerial decision
making regarding salary, promotion, transfer, termination layoff, training and so on. Other
terms for performance appraisal include performance review, personnel rating merit rating
performance evaluation employee appraisal, or employee evaluation.

Employee performance evaluation is one of the most important of human resource systems
because it provides feedback to individuals and groups. Job feedback is a strong predictor of
work behaviours and has the potential to increase work productivity and satisfaction.
Performance evaluation can be a very powerful communication and management, delimiting
performance levels among the employee population to send distinctive messages. Managers
can make meaningful business decisions relative to rewards allocation, retention of high
performers, and consequences for poor performers.

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Rater evaluation effectiveness is critically important to the performance evaluation process
and performance feedback needs to be accurate. However, rater willingness to accurately
evaluate performance and identify employees as high and low performers is different than
rater ability to rate performance. Raters will be motivated to differentiate when it becomes an
attractive option for them and when they understand the compelling reasons to do so. The
values, norms, and assumptions that make up the organization’s culture may play a role in
both motivations. Organizational culture influences the manager-employee relationship, the
overall performance evaluation process, and the rater’s judgment.

In this regard, HEOSC has been using traditional methods which are relatively older
methods of performance appraisals. This method is based on studying the personal qualities
of the employees. It includes knowledge, initiative, loyalty, leadership and judgment, work
load, creativity.

The timing of performance appraisal in HEOSC is twice a year, that is from July 1 up to
December 30 and from January 1 up to June 30 according to Ethiopian calendar. The process
of appraisal in this company is not a such clear but the process is like first the immediate boss
fill the format according to the trait and then show to the employee if he agree he will accept
and sign if not he express his idea, they discuss the issue. Finally if both side agreed they will
sign otherwise the boss write on the format and sign.

Based on the above premises, this research had examined the impact of appraisal on workers’
productivity in HEOSC located Harar, Ethiopia.

1.2 Statement of the problem

Performance appraisal is one of the basic functions of human resource management. It is a
complex process that deals with human behavior. The best possible method must be utilized
to uncover, examine resolve workers and organization problems; if appraisal used
appropriately it can contribute to the productivity and efficiency of the workers as well as the
organization. (Thomson: 1997: pp: 129).

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However, at HEOSC performance appraisal has accompanied by several problem which
hinder the organization to properly utilize the process. In most of the cases, the company uses
non-data-based assessment. Performance appraisal processes rely 100% on the memory of
those completing the assessment because pre-populating the forms with data to inform
decisions would be too difficult (cynicism). In addition, most assessment criteria are “fuzzy”
and subjective.
In addition, there is lack of effectiveness metrics which refers to many accept that the goals
of the process are to recognize results, provide feedback to address weaknesses, determine
training needs, and to identify poor performers. Unfortunately, none of the rater does ever
measure their processes’ contribution to attaining any of these goals. Instead, the most
common measure relating to performance appraisal is the percentage completed.

Furthermore, managers are not measured or held accountable for providing accurate
feedback. While they may be chastised for completing them late, there is no penalty for doing
a half-assed job or making mistakes on them, which is incredibly common. One firm
attempting to remove a troublesome employee found that the manager had rated the
individual the highest within the department and awarded as the employee of the year.

Finally, in this organization, getting a merit raise, bonus, or promotion is completely

disconnected from an employee’s performance appraisal scores. When there is a weak link,
employees and managers are not likely to take the process seriously. And it is done by a
single manager. If there is a second review, it may be cursory, and therefore not ensure
accuracy or fairness.

To this end, this research has addressed the following questions:

 What performance enhancement policies and incentives are put in place to encourage
efficiency at HEOSC?
 Does the evaluation system have an impact on employee’s performance and linked to
motivational mechanisms?
 What is the major problem that faced by the existing appraisal system? And what
measures were taken by the organization to tackle the problem?
 What variables are critically considered by raters in performance evaluation?

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1.3 Objective of the study
General Objective:
The main objective of the study is to analyze the impact of performances appraisal on
workers efficiency in HEOSC.
The Specific Objectives are:
 To examine policies and procedures of the factory on performance appraisals.
 To assess whether the system help workers to improve their efficiency, or not.
 To identify the strength and weaknesses of the appraisal system.
 To analyze performance feedback systems in the factory.
 To assess the critical variables raters’ consider in performance evaluation.

1.4 Significance of the study

The study creates awareness among employees, managers and other member of the factory
about the need of effective performance appraisal system. It has a key role on the workers as
well as the company’s performance. One the basis of research findings, the study forward
some constructive suggestion to reduce the harms arising from poor performance appraisal
system. Finally this research may also serve as a reference for further study.

1.5 Scope and limitation of the study

The scope this study includes the impact of performance appraisal on workers efficiency in
HEOSC. Even though HEOSC has one branch in Addis Ababa, the study is concentrated on
both the factory & its branch which is found in Addis Ababa.

The following are some of the limitation of study

 Lack of access to some information in the organization may affect the study.
 Conducting this research without having a free time to be spent on the study affects
the quality of the paper. In addition to this there is also a financial constraint.
 Due to financial and time constraint the number of questionnaires that will be
distributed to the employees will be very limited.

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2. Methodology
2.1 Description of the study area
HEOSC was found in 1987 E.C and established as share company/public Enterprise in 1992
E.C. with initial capital worth of 81,490,000 Birr. The Company has a vision to be
worldwide competitive edible oil producer and seller by fulfilling quality standards of edible
oil in 2020 and it uses peanut, ground nut, rapeseed, and Niger seed, cotton seed and so on to
produce and refine edible oil. The Company is located 510 km away from the capital city
Addis Ababa to the Eastern part of the country and more specifically, it is located in Harar
city. Currently, the Company has a total of 137 permanent employees in its six different
departments among which 31 employees are female and majority of the employees are under
the department of production and technique. In addition, it employs 36 contact and daily
labourers.
2.2 Sampling technique and Sample Size
Sampling technique to be used in order to select employees in this study will be simple
random sampling method. One of the best things about simple random sampling is the ease of
assembling the sample. It is also considered as a fair way of selecting a sample from a given
population since every member is given equal opportunities of being selected. Another key
feature of simple random sampling is its representativeness of the population. Due to the
representativeness of a sample obtained by simple random sampling, it is reasonable to make
generalizations from the results of the sample back to the population.

For simplicity and representativeness of the sample, first employees have been be categorized
in to six major departments, and then proportional number of employees have been selected
using simple random sampling technique. In this case the total number of size for employees
is 49 and the following table summarizes the calculation.

Number Number of
No. Department of Proportion sample
employees respondents
1 Manager Office 7 7/137 2
2 Administration 39 39/137 11
3 Finance 7 7/137 2
4 Production and Techniques 64 64/137 29
5 Commercial 16 16/137 4
6 Quality Control 4 4/137 1
Total 137 49

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2.3 Method of data collection
The study has used both primary and secondary sources of data. To collect primary data with
regard to accomplishing the research's objectives, this research has used structured
questionnaire, key informant interview, and focus group discussion. The structured
questionnaire was used to collect data from operating level employees, trade unions, and line
managers with regard to variables used in performance appraisal, the feedback system,
weaknesses and strength of the current performance appraisal systems and so on. In addition,
key informant interview was made with trade union managers, employee representatives, unit
heads, and higher level manager. Moreover, to cross check and justify the validity and
reliability of respondents' response a focus group discussion was conducted. The focus
groups include operating level employee from different departments, line managers, trade
union representatives, and top level managers.

On the other hand, secondary data has been collected from different literatures. Literature
explaining performance appraisal definition, concept, methods, and issues; performance
appraisal policy; efficiency: definition, concept, organization and efficiency, performance
factors determining efficiency; relationship between performance appraisal and efficiency;
variables to be considered in performance appraisal and how they affect efficiency; methods
of performance appraisal and efficiency; performance appraisal and feedback system
amongst others was collected from broachers, books, journals, company profile, websites and
any other published and unpublished documents.

2.4 Method of Data analysis

The data collected using questionnaire has been coded and entered into the appropriate
statistical software and analyzed using simple descriptive statistics specifically, means,
percentages, frequency distribution, range and standard deviation. The qualitative data
collected using group discussion and key informant interviews have been analyzed using
SWOT analysis, narrative explanation and argument.

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3. Financial Budget and time schedule
3.1 Financial Requirement (in Ethiopian birr)

No Description of cost items unit Quantity Unit cost Total cost Remark
1. Material
Stationeries 400
Sub total cost 400
2. Labor cost
Data Collector person 3 400 1200
Sub total cost 1200
3. Perdiem
Researchers Days 30 500 15,000
Evaluator Days 12 500 6000
Sub total cost 21,000
Transportation Cost Trips 6 265 1590
Sub total cost 1590
Total cost 24190
Contingency (5%) 1209.5
Grand Total 25399.5

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3.2 Work plan (Gantt Chart)

Activities Year 2015/16

Dec Jan Feb Mar April May

Prepare project proposal

Library reading
Preparation of questionnaire &
checklists
Submission of questionnaire &
checklists to supervisor
Collection of comments from
supervisor
Preparation for field
Field work & field stay
Cleaning, designing and
entering data into SPSS
Software
Analyses of the quantitative
data and summarizing the
qualitative data
Write up of dissertation
Submission of first draft to the
Supervisor
Incorporation of comments
from the supervisor and
submission of final draft

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References:

1) MS-23
2) www.hbr.org
3) Adam.M.G,, Elizabeth. MT.C,, Grace. C. Keenan, Davic,L,, Karen.L. Impact
and the art of motivation maintenance. The effects of contact with
beneficiaries on Persistence behavior. Organizational Behavior and Human
Decision Processes 2007, 10:53-67
4) “Assessing the role of work Motivation on Employee Performance” by peter
Ebong Ajang.

5) Nelson, B. (2001). “Motivate Employees with intangible benefits”. Available at:

http:/ www.findarticle.com
6) Young B.C (2000). “Methods of Motivating Yesterday and Today” Available at:
http:/ academic empire.edu.

7) Hamaressa Edible oil S.C documents (such as organizational chart,

performance appraisal formats)

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