CHAPTER ONE

INTRODUCTION

1.1 Background To The Study

Maximizing the performance of organisations is the main issue for an organisation Bob-cardy (1997). Good organisation performance refers to the employee’s productivity, the Satisfactory performance of employees does not happen automatically. Managerial, standards, Knowledge and Skill, Commitment and Performance appraisals effects employee’s productivity. Employee’s productivity is a critical aspect of organisational success. It refers to the degree to which employees achieve their goals and objectives (Kane & Kane 2013). Employee productivity is influenced by a range of factors, including individual characteristics, job characteristics, and organisational factors (Campbell, 1990).

In today’s fast-paced and competitive business environment, organisations are under increasing pressure to improve employee’s performance and productivity (Pulakos, 2009). This has led to a growing interest in understanding the factors that influences employee productivity and developing strategies to improve it. Despite the importance of employee productivity, it remains a major challenge for many organisations. One key factor that influences employee productivity is performance appraisal.

Performance appraisal is systematic process of evaluating an employee’s job performance and providing feedback to improve future performance (Kane & Kane, 2013). 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 performance appraisal system starts in practiced 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).

However, performance appraisal is a very important process but it deemed to be the “weak point” of managing human force (Pulakios, 2009). Therefore, performance appraisal is important to manage employee’s work effectively. (Armstrong, 2001) tells performance as behaviour the way in which organisation’s teams and individuals get work done. (Mooney, 2009) suggested that performance is not only related to results but it also relates with activities and behaviors of employees that they adopt to achieve their given goals. Performance appraisal serves several purposes in an organisation such as evaluating employee’s performance, providing feedback, and developing employees.

The relationship between performance appraisal and employee productivity is multifaceted. Also, research by Locke and Latham in 2002 indicates that, performance appraisal sets clear performance standards and provide feedback that significantly enhance employee motivation and performance. They emphasized the goal setting theory where clearly defined goals and feedback contributes to higher levels of performance. Again, according to Kluger and Denisi 1996, feedback provided during performance appraisal is critical for productivity enhancement.

Their meta-analysis suggests that, when delivered appropriately, feedback can lead to significant improvement in employee performance productivity Furthermore, effective appraisal can identify training and development needs ultimately supporting career growth and aligning individual goals with organisational objectives. Through performance appraisal, managers can identify skills gap and training needs. Providing developmental strategies that are directly linked to performance appraisal outcomes can lead to skills enhancement which in turn boost employee productivity.

In addition, performance appraisal has been recognized as an essential tool for improving employee productivity and organisational success. In today’s fast-paced and competitive business environment, organisations are constantly seeking ways to improve constructive employee’s productivity and achieve goals (Bersin, 2016).

One of the widely used tools for improving productivity is performance appraisals (Denisi & Pritchard, 2006). Additionally, the global workforce diversity necessitates culturally sensitive appraisal practices that account for different values and motivation. Organisations in the world are now moving towards more dynamic and flexible appraisal systems that incorporate continuous feedback rather than solely relying on the traditional annual reviews. This shift reflects a broader understanding of employee engagement and the importance of fostering a culture of open communication where feedback is timely and constructive.

Furthermore, the integrating of technology into performance appraisal is noteworthy; this approach allows more personalized feedback and development plans tailored to individual’s needs. Overall, the world’s approach to performance appraisal is evolving to a more holistic, integrated and continuous framework that prioritizes employee’s development.

Globally, in developed countries a comparative analysis for performance appraisal has been used for decades. These systems have evolved overtime adapting to changing organisational needs and employees expectation. For example, in the United Kingdoms (UK), they use the balanced scorecard approach which assesses performance from multiple perspectives including financial, customer, and internal processes. Also, they use the 360-degree feedback which gathers feedback from multiple sources and lastly, they focus on development.  In developed economies such as the United States, Canada and many European nations, performance appraisals have evolved which compass a range of methodologies, from the annual review to continuous feedback mechanisms.

In recent years, there has been a growing emphasis on transforming traditional appraisal systems into a more dynamic and inclusive process, reflecting the changing nature of work in developed countries. Many nations are adopting continues performance management practices that includes regular check-in and real time feedback, rather than relying solely on annual reviews (Agrawal, 2020)

Furthermore, Performance appraisals in developing countries face unique challenges and opportunities. They face opportunities such as adapting to technology, capacity building, partnership and collaboration and localization of performance appraisal systems. They also face challenges like; limited resources, cultural and social barriers, lack of infrastructures and brain drain. In India, performance appraisal was used by organisations to evaluate the performance of their employees. It was designed to provide fair and objective assessment of an employee’s performance identifying areas of improvement and providing feedback which helps employee grow.

They used appraisal methods such as the 360-degree feedback system, behavioral appraisal system, and result oriented system, with these practice, India’s performance greatly improved and also increased transparency and accountability and enhanced employee decision making. Research suggests that, the PAS available in developed countries may not be directly applicable in developing context, necessitating the adaptations to local conditions (Huaff et al., 2018)

In addition, Cameroon, performance appraisal is still in its developmental stages. Many organisations particularly in the public sector have yet to fully implemented performance appraisal systems. There are several factors hindering the effective application and implementation of performance appraisal in Cameroon. These factors include; ineffective performance appraisal system is particularly acute (Nji,2017)Many organisations in Cameroon lacks standardization, limited resources, and managerial competencies.

Also, this limited resources happen because of lack of funds, the was little or no capital to fund the business, but machine, equipment to improve the well-being of their employees in the organisation. (Gargouri,2015)  Here, lack of standardization, the is no time limit or organisational orientated hence causing low productivity in an organisation. To improve the effectiveness of performance appraisal in Cameroon, organisations should; develop clear performance standards, link productivity to reward and provide adequate training.

Performance appraisal is a critical concept of HRM particularly in the context of MFI, which plays a crucial role in promoting financial inclusion and supporting small enterprise in developing regions. In Buea, the unique socio-economic landscape demands a tailored approach to performance appraisal that accommodates local and cultural nuances and operational challenges.

Despite the importance of performance appraisal in enhancing employee productivity many MFI in Buea face significant challenges. This includes; inadequate appraisal framework, limited resources for training and evaluation, lack of alignment between appraisal goals and organisational objective. Furthermore, the informal nature of much small business served by MFI complicate the appraisal process requiring flexible and adaptive evaluation criteria

However, although performance appraisal is a good practice and it improves employee productivity, there are also some controversies that exist between performance appraisal and employee productivity. They include; Firstly, motivation and demotivation, performance appraisal can be a powerful motivator for employees as thy provide feedback and recognition for their achievements, however, poorly conducted appraisals can be demotivating and lead to decreased employee satisfaction and productivity. Furthermore, Bias and subjectivity Performance appraisals are often categorized to be bias and subjective. Managers may bring their own biases and prejudices to the appraisal process which can lead to inaccurate and unfair evaluations (Kane and Kane 2013).

Again, Fear and anxiety is another controversy, Fletcher in 2008 performance appraisal can lead to fear and anxiety among employees which can lead to decreased motivation and performance. Also, Lack of transparency performance appraisals are often shrouded in secrecy, with employees not knowing how their performance is being evaluate or what criteria are being used. Lastly, Lack of follow up, Performance appraisals are often not followed up with regular check-ins and feedback, which can make it difficult for employees to know if they are meeting expectations (London 2003)

1.2  Statement Of The Problem

The problem of inconsistency and unimproved employee productivity in many organisations has been attributed to the ineffectiveness of performance appraisal systems, which are meant to evaluate, increase productivity and build skills, but instead leads to No control of training, it is expensive, decreased productivity, there by hindering organisational growth and success AL-Hunaiyyan et al., 2024. Globally, organisations are facing challenges in improving employee productivity which is critical for achieving organisational goals and objectives. low productivity is the lack of clear expectations and goals. Employees may not understand what is expected of them or may not have a clear understanding of how their work contributes to the organisation’s overall objectives. This can lead to confusion, frustration, and a lack of motivation, which can further reduce productivity.

In developed countries like the United States and the United Kingdom, where the labour markets characterized by advanced performance management systems, studies in indicate that, well-structured performance appraisal can significantly enhance employee productivity. However, there are concerns about the potential negative effect of subjective biases (Eisenberge et, al, 1986). and the implementation of appraisal systems that do not account for individual differences and employee feedback. This raises questions of how performance appraisal can be optimized in developed economies. Another strategy is to implement effective performance management systems, providing regular feedback and evaluations to help employees understand their strengths and areas for improvement. This can help employees set realistic goals and develop action plans to improve their productivity

In developing countries, such as Asia, performance appraisal is not widely used as it is in developed countries (Agarwal, 2014). However, there is a growing recognition of the importance of performance appraisal in improving employee performance and organisational success (Kuvaas, 2006). However, even with this recognition, they still face many challenges like, limited resources, lack of training for managers on conducting appraisals, cultural factors that may affect the acceptance of feedback. In this context, the effect of performance appraisal on employee productivity is not understood, necessitating research to identify best practices that could lead to improved employee outcomes. Some of the practice that can improve employee productivity is providing training, effective training is a motivational factor for your employees that enhance their knowledge and make them proficient. Additionally, Encourage Team collaboration, better team collaboration leads to higher productivity. This is because partnership allows employees to share knowledge and leverage the skills to each team’s members

In Cameroon, the problem of employee productivity is a, major challenge facing many organisations (Nji, 2017). Performance appraisal is not widely used in many organisations in Cameroon, and there is need for research to investigate the impact of performance appraisal on employee performance in the country

Despite the critical role that micro finance institutions play in promoting financial inclusion and promoting poverty in Cameroon, many MFI in Buea are facing a lot of challenges in improving employee productivity One key factor used to improve this is performance appraisals. However, the effectiveness of these systems in driving employee productivity is often debated. This study aims to analyze the extent to which appraisal systems impact employee performance in MFI in Buea.

Despite the crucial role of performance appraisals in enhancing employee productivity controversies surrounding the effectiveness of performance appraisal systems in MFI in Buea have raised concern about their impact on employee’s productivity Due to controversies that exist such as biases and subjectivity, fear and anxiety, lack of follow up, motivation and demotivation, this research seeks to answer the following questions

1.3 Research Questions

1.3.1    Main Research Question

What is the effect of performance appraisals on employee productivity in MFI in Buea?

1.3.2 Specific Research Question

Due to the diversity of performance appraisal techniques, this work will be broken down into three specific questions.

1. What is the effect of 360-degree feedback appraisal on employee productivity in MFI in Buea?
2. To what extent does management by objective influence employee productivity in MFI in Buea?
3. What are the effects of behavioural rating on employee productivity in MFI in Buea?

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