The Role of Performance Appraisal in Influencing Employee Productivity in Commercial Banks in Meru County, Kenya

Abstract

Despite the commencement of appraisal on employee performance in the banking industry, a decrease in business ventures, total revenue, and spread per staff in the banks can be blamed for low employee productivity. The general objective of the study was to examine the role of performance appraisal in influencing employee productivity in commercial banks in Meru County, Kenya. Specific objectives were to assess how target setting, reward systems, and feedback & communication influence employee productivity in commercial banks in Meru County. The study was guided by two theories which were goal setting and commitment trust theories. It used a descriptive survey research design in investigating the phenomena. Information was gathered from employees working permanently in the twenty banks located in Meru County. The study employed a census sampling technique and hence all the 213 employees were sampled. The technique was adopted because the target population was relatively small. Primary data was collected through questionnaires. After pretesting, content and criterion validity of instruments were verified while reliability was measured using Cronbach’s alpha coefficient. Descriptive statistics such as frequencies, percentages, means, and standard deviations were computed. Further, correlation and regression analysis were also used to assess the relationship between the independent and the dependent variables, and to also test the research hypothesis. The findings of the study were presented using tables and figures. The study noted that staff members in commercial banks in Meru Town are productive. This was mainly driven by the structured target setting and feedback and communication. However, the performance reward system in the banks did not indicate any predictive ability on employee productivity. The study established that target setting, performance reward setting, and feedback and communication when considered separately, each positively and significantly influence employee productivity. However, when combined, only the target setting could predict employee productivity in commercial banks in Meru Town. Thus, the study concluded that although reward systems and feedback & communication are critical in influencing employee productivity in commercial banks in Meru Town, it is the target setting that matters most. The recommendations done on the target settings were that commercial banks ought to ensure the staff was engaged through being involved in the target setting to improve employee productivity. Recommendation done on performance reward systems were, banks ought to ensure there was a structured performance reward system to ensure their personnel to remain motivated. While on feedback and communication, this study recommended that banks ought to put in place, proper communication channels that would ensure employees became more productive. This study was valuable as it contributed to the improvement of performance contracting practices and policy implementation on performance management.