The Impact of Performance Appraisal on Employee Job Satisfaction: The Case of the Ethiopian Insurance Corporation
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Date
2023-06
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Addis Ababa University
Abstract
An effective performance appraisal process may help an organisation move in the right direc-tion, while an ineffective performance evaluation system can trouble it by causing uncertainty and confusion from top management to the lowest levels of the organisation. Without deter-mining whether the performance appraisal method affects employee job satisfaction, organi-sations have continued to use it. The Ethiopian Insurance Corporation conducts performance appraisal for its employees using the objective approach, which focuses on individual goals and objectives but does not assess the skills and abilities required of the employee to perform their duties. However, this is not an appropriate use of performance appraisal system, be-cause the main outcome of this system is the determination of the appropriateness of the pay increase. The objective of this study was to investigate the impact of performance appraisal process on employee job satisfaction at the Ethiopian Insurance Corporation. The study focused on EIC staff based in Head office. Explanatory research design was used to interpret the findings and use quantitative methods to test hypotheses. Both primary data was used and collected from 205 employees who were selected through stratified sampling approach. Data was collected through a structured questionnaire consisting of multiple-choice and Likert-scale questions. The data was analyzed using both descriptive and inferential specifically the mean score, standard deviation, Pearson correlation, and linear regression analysis tests were used. The findings were presented using charts and tables. The findings indicated that majority of the employees are not satisfied with current performance appraisal process, how-ever there is a lack of job satisfaction. Employees were found to be more satisfied with their jobs when the appraisal system was perceived to be fair and transparent, provided constructive feedback, and provided opportunities for growth and development. The study found that 53.2%, of variation in employee job satisfaction is explained by performance appraisal pro-cess where as 46.8% of variance is explained by other factors. The staffs are not satisfied be-cause the management does not use the performance appraisal to determine salary increments, rewards, promotions, fringe benefits, training needs and career growth opportunities. In conclusion the findings have indicated a positive and significant relationship between per-formance appraisals and job satisfaction. Based on the study result, it is recommended that organizations adopt an effective appraisal process that focuses on employee development and growth to improve job satisfaction