Effect of Performance Appraisal on Organizational Performance: A Case Study of KPMG Kenya

Abstract

A Research Project Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirements for the Degree of Masters in Business Administration (MBA)The purpose of the survey was to investigate the extent of performance appraisals in measuring performance of an organization. The study will be guided by the following research questions; how does the objective- based appraisal influence organizational performance? What is the effect of 360 degree appraisal on organizational performance? And how does the numerical rating scale influence organizational performance. A descriptive research was used and the research used questionnaires to collect data. The target population was 50 respondents from KPMG. 50 questionnaires were distributed and only 42 were filled and returned. Data was analyzed using both descriptive and inferential statistics by using SPSS and the results were presented in figures and tables. Staff agreed to a large extent that objectives set to achieve organisational goals are clearly understood and also to a large extent, objectives set are aligned to organisational goals. It was also revealed that the performance appraisal system also helps identify the strengths and weaknesses of the employee. The respondents also agreed that evidence of performance is well documented and available for reference if needed. A regression analysis done between variables of objective based appraisal on organizational performance revealed that 91.6% of the variation in performance was caused by variations in objective based appraisal. From the findings, respondents agreed that objective based appraisals contribute to organizational performance. Majority agree that 360-degree feedback is objective and that 360 degrees review are aligned to achievement of organisational goals. It was also agreed that areas of improvement identified in a 360 degrees evaluation are applied for self-development only and not to assign ratings. A regression analysis was done and it was revealed that 89.4% of the variation in performance was caused by variations in 360 degrees Appraisal. It was established that the performance manager is impartial when assigning ratings. Staff also agreed to a small extent that the numerical rating scale is fairly assigned. It was agreed to a large extent that performance ratings contribute to a motivation to achieve organisation goals and job satisfaction, respondents agreed that accurate and specific feedback is received from the performance manager on past performance and that the consequences for receiving each numerical rating are clear. A regression analysis was done and the findings v revealed that 87.8% of the variation in performance was caused by variations in numerical rating. The study concluded that at KPMG objectives set to achieve organisational goals are clearly understood and such objectives are aligned to organisational goals and involves employee participation in the process of setting objectives.Objective based appraisal greatly affect performance although employee getting involved in the process of setting objectives does not impact on organization performance. It was also concluded that there is a lack of clear understanding about differentiation of the numerical scale 1-5. At KPMG numerical ratings has offered an atmosphere to motivate high achievers and also acts as a motivation for improvement of performance for a member of staff. Numerical rating affect organizational performance. The members who take part in 360 feedbacks are representative of the organisational stakeholders and the firm has an existing mechanism of capturing and storing evidence for future use. 360 degrees has a great impact on organizational performance. The study recommended that KPMG needs to continue reviewing goals to reflect the dynamic business environment. There is a need proper documentation to ensure area of reference if needed. KPMG should ensure objectivity of 360 degree feedback and the reviews need to be better aligned to the firm achievement of its goals. While using 360 identifies areas of evaluation, they should ensure that required follow up is done and the mechanism of capturing and storing evidence for future should be fully understood by all. KPMG has to ensure performance manager continue impartiality when assigning ratings and while performance ratings contribute to a motivation to achieve organisation goals and job satisfaction staff need to be encouraged that other factors also come into place when analysing the firm’s performance