THE EFFECT OF PERFORMANCE MANAGEMENT SYSTEM ON EMPLOYEE MOTIVATION: THE CASE OF HIBRET BANK SHARE COMPANY

Abstract

The purpose of this study was to investigate the effect of performance management system on employee job motivation in case of Hibret Bank S.C. The study used both explanatory and descriptive research designs. A total of 210 employees participated in the study with response rate of 97.22%. The researcher drew on both primary and secondary data sources. The researcher used simple random sampling techniques. The data was analyzed using descriptive and inferential statistics. The results show that Employee motivation has been found to be more affected by performance management process. The findings show that there is a clear relationship between employee motivation and performance management process. The study also found out that performance management system of Hibret Bank have a negative effect on employee motivation due to ineffective goal alignment, poor planning, biased practices, lack of feedback, and dissatisfaction with recognition and measurement. These challenges need to be addressed to enhance the motivational aspects of the performance management system. On top of that, performance assessment is the most affecting variable in employee motivation with beta value 0.475.According to the regression analysis result, performance assessment, performance renewal, pre-requisition, performance execution and performance review has significant effect on employee motivation (p<0.05). On the other hand, performance planning have no significant effect on employee motivation due to the fact that p>0.05. Based on the research findings and conclusions the major recommendations are to establish clear performance standards, addressing hindering factors, ensuring fairness in the evaluation process and fostering open communication channels for feedback and concern.