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INTRODUCTION
1.1 Overview
With the advent of science and technology, nearly all business domains have faced enormous
shifts from their traditional methods. Products and services areas have affected mainly because
of technological advancements. Apart from this social, political and environmental factors also
played vital role in modifying business processes. Companies have adopted such changes rapidly
to progress. All the internal and external factors triggered employee’s needs and wants. It turned
harder to satisfy employees than earlier. Generally, it is widely accepted that for company’s
growth and success, effective performance appraisals should be adopted. Due to increased
Logically, human resources are most important unit of any organization. High employee
satisfaction leads to high productivity which is ultimately beneficial for organizations. Therefore,
human resources management must be done at highest priority level. Organizations try to satisfy
and motivate employees to do their best through various methods and performance appraisal
stands among those. Performance evaluation varies from organization to organization. There are
William B & Keith Davis (1992) argued that Performance appraisal is the procedure by which
organization may able to assess individual’s job performance .Basically performance appraisal is
all about the evaluation of employee performance. Performance management (2007) states that
performance appraisal system is a top secret document which includes the expectation of
relative to his or her expectations. It ensures that an individual’s work is being gauged and
rewarded. If there are no appraisals given to employees based on performance, their motivation
level will eventually decrease. Such situation will affect overall productivity of an individual. It
is significant that employees must have idea about what is expected from them, and how their
performance will be evaluated. One cannot deny the importance of appraisal systems as they
In many organizations, mix of evaluation systems exists and they work concurrently such as: the
formal and the informal. Manager’s personal opinions and judgments are usually referred as
informal system. This may cause biased decisions based on manager’s experience with particular
Appraisal are usually least liked by managers as they are worse than terminations. After
termination, employees are no longer in company but after performance review they are still
ongoing process. Many organizations implement appraisals for making valid and sound
managerial decisions. In any case, primary purpose remains the same that is to provide
performance feedback.
Already researchers have worked in the area of employee reactions towards appraisal system
(Levy, 2004). However, there is lack of knowledge about the factors affecting the satisfaction of
banks employees towards performance appraisal system. Banking sector is the most imperative
money related domain which is assumed as a crucial part throughout the world's monetary
framework. As per Chambers English Dictionary the expression "Bank" implies a "Bench" or an
intermediary to make credits. Bank can likewise be characterized as the foundation for
accumulation of assets from the group of its clients. At the end of the day, bank is caretaker of
assets, wealth and individuals put their confidence in banks to invest their money and assets
shrewdly.
For our study, we selected bank Alfalah (BAF) for determining the effect of PA on employee’s
performance. Surveys reveal facts in year 2014, the collective assets of BAF are in excess of Rs.
600 billion. It shows the bank progress and its extensive network. Economic strength of any
country hinges around well-established financial systems. There may be many factors which can
affect employee’s satisfaction being in banking sector such as pay, promotion, boss, working
conditions, peers behavior etc. however, performance appraisal appears to be the most significant
yearly basis. Purang (2011) argues that, with the emergence of new variety of banks, public
Here in Pakistan, the first nationalization program initiated in 1974 and stopped in 1980 due to
government structural variations. Amir et. al (2010) states that banks were dealt as employment
exchanges opposed to financial institutions before. People were inducted purely on political basis
which resulted in less trained personnel induction. The top bureaucrats were involved in overall
process of induction and performance evaluation, so fair appraisal system was not even counted.
As the private banks started operations in the country, major change has happened to banking
sector. Same banking industry was suffering from multiple issues such as over-employment,
branching and non-performing loans with bad debts, started to reform. However, the major aim
and focus of this study is to analyze that Pakistani banking industry gains benefits from proper
performance system.
Currently banking industry comprises of four categories such as large banks, medium sized
banks, small banks and Islamic banks based on their total assets. As the industry has revived
from fall down state, so it required high attention. Due to banking sector’s nationalization in
Pakistan and high influence of bureaucrats, overall performance management system remained
ensure transparent appraisals. There are many obstacles while introducing and implementing new
systems in a developing country such as Pakistan. For this reason, it is required to analyze the
impacts of such performance appraisal systems. Our study will examine the impact of appraisal
Once such performance management systems are in right place, they will definitely create
effectiveness. Thus, banks will emerge as financial backbone for the country. In annual report,
BAF claims that they have encountered progress through manageable development, while
Preceding pre-partition of Indo-Pak, banking sector was overwhelmed by the Hindus. This made
an incredible banking sector vacuum when Muslims moved from India. Quaid-e-Azam
Muhammad Ali Jinnah, the leader of Pakistan, at that time, faced this test with high confidence
and faith on Almighty Allah. He moved on with the mission to re-establish banking industry with
great zeal. In order to proceed with his aims and objectives, he asked some of his faithful friends
and few Muslim business groups to share his responsibilities. These companions accordingly
indicated extraordinary patriotism and offered services ethically and morally as were required for
the economic reform of the new formed Muslim State. After that, over last few decades, banking
sector has progressed eminently in Pakistan. Many factors brought major loss for HR practices
Bashir and Khattak (2008) discuss that Pakistani business choices are laid upon previous
successful case studies. This is additionally one reason that HR practices in Pakistan are still at
immature level and are not much beneficial for business success. Throughout the world,
companies rely on modern HR techniques to get benefit but here this area is still underdeveloped.
reason these procedures can't accomplish the anticipated hypothetical goals. Hence, PA requires
The banking sector faced generally higher development in residential advances at 11 percent
when contrasted with 5.6 percent a year ago. This study has been readied by a prestigious
association, KPMG Taseer Hadi & Co.1: They summarized the execution of various business
1
http://www.kpmg.com
banks in Pakistan for most recent years. As specified before keeping money area in Pakistan is
II. Assets > Rs. 125 billion and < Rs. 600 billion = Medium size
Along these lines, take note of this overview has been gotten from distributed united money
related explanations of the banks, factual releases distributed by State Bank of Pakistan (SBP).
The report obviously expresses that the dangers to the execution of banks to a great extent radiate
This section additionally covers the credible data being distributed in magazines and daily
papers. Moreover, where solidified budgetary explanations were required and were not
accessible, standalone money related articulations have been utilized. For large banks, the details
of assets, liabilities and income statements for the year 2014 are listed as2:
Table 1. 1: Summarized financial information (assets) of large banks for the year 2014
2
http://www.kpmg.com/pk/en/issuesandinsights/articlespublications/pages/bankingsurvey2014.aspx
Source: “KPMG Taseer Hadi & Co. a Partnership firm registered in Pakistan (2014)”.
Source: “KPMG Taseer Hadi & Co. a Partnership firm registered in Pakistan (2014)”.
Source: “KPMG Taseer Hadi & Co. a Partnership firm registered in Pakistan (2014)”.
All large banks have reported significant increase in profits during year 2014.
Figure 1. 1: Profitability during year 2013 and 2014.
benefits, staff costs averaged approximately 51.4% of total operating expenses in 2014 (2013:
50.7%).
Table 1. 4: Staff costs for the year 2013 and year 2014.
Table 1. 5: Advances and loans for the year 2013 and year 2014
According to previously provided survey results, it is evident that Bank Alfalah Limited (BAF)
has progressed during last few years. It has also opened its branches in multiple cities. Our study
appraisal practices. Our research is based on BAF branches being operating in Khyber
Pakhtunkhwa (KPK) province. Research supports that already there is no such study has been
conducted in this geographical location. Yearly report (2014) claims that more than 580 ATMs
covering more than 150 urban areas nationwide, BAF's system is the fifth biggest in the country.
1.3 Problem Statement
As stated above, banking sector was not developed in Pakistan. Last few decades brought
limitless changes. Due to privatization of banks, corporate settings got affected hugely. It is
evident that banks are significant element for raising GDP of a country.
Although, performance appraisals in banking sector depends on the prevalent variables like
current appraisal system, appraisal tools, employees’ performance and other job-related
intricacies. With a major shift in conventional banking, employee’s responsibilities have also
changed.
advancement and evaluation, so as to guarantee that the right staff with suitable limits is
accessible at the ideal time and for the right places” (Kalyan, 1971). This is the primary reason
that appraisals have ended up a standout amongst the most broadly explored research areas
(Fletcher, 2002).
Like many other organizations, they measure performance of employees through rating
procedure. The employee’s performance is measured from both angles; such as his/her personal ,
individual and overall branch performance. The research study will add meaningful literature in
research domain. Moreover, “studying the impact of performance appraisals on employees will
have invested in human capital by putting in place an experienced leadership team and keep on
concentrating on drawing in and adding to the best ability. Throughout the years, the said bank
has effectively attracted rich talented human resources. Proceeded with spotlight on recognizing
individuals with high aptitudes and on making learning and improvement chances to cultivate
ability has helped the bank in building an expert and drew in group that works in accordance
with the bank's strategies. Leadership team have built up an examination framework that
establishes target, execution based measures, and expects to reward performance at all levels.
This study will stress on concentrating on its endeavors for realignment of better administration
The current study is not only an effort to succeed for PhD degree in Business Administration but
also takes account of other underlying objectives. The major objectives behind our study are:
performance.
4. To find out what appraisal styles are being adopted by the appraisers in evaluating job
performance.
5. To determine whether the employees of bank Alfalah are satisfied with the current appraisal
system or not?
6. To decide the decency of the performance appraisal framework from employee’s perspective.
9. To distinguish the natural lacunas in the current appraisal system of Bank Alfalah with the point
Every stakeholder investigates the current financial position of a company in order to seek out
the profitable areas for future. For this reason, the analysis of banks should be carried out by
utilizing the appropriate elucidation of available ratios. It is trusted that findings of the study will
enhance the performance of BAF. Other banks may also take advantage from this study. The
effective fulfillment of this study will be more useful in comprehension the understanding the
comparison of both public and private areas. The research significance of this study will
primarily be confirmed by the research objectives, cited above however, implication of this can
be described as under:
1. It is exceptional as far as area. There has not been any investigation of the kind about bank
2. The research findings will uncover the relative significance of performance related issues
3. The study will help to reveal the inherent flaws of the stereo typed performance appraisals
currently in practice.
4. Emphasis has been laid investigate the impact on banking sector employees. So, efforts will
be made to find out the correlation of independent variables (length of service, age, gender)
and dependent variables (performance appraisals/ employee performance) of the employees
The research hypothesis is basically a specific declaration which is planned for exploratory
testing. Many researchers stated that there is positive relationship between performance appraisal
and employee performance. Already a research done by Moses and Wanyama Wanjala (2015)
clearly states that there is relationship between performance appraisal and employees’
performance. Also Nadeem et. al (2013) states, “there is relationship between performance
appraisal and employees performance”. We will test our hypothesis in later sections with the
Null Hypothesis
H0: p = 0
Alternative Hypothesis
H1: p ≠ 0
HYPOTHESIS-II
Performance appraisal system rating has a relation with employee’s satisfaction with appraisal
system.
Null Hypothesis
H0: p = 0
Performance appraisal system rating and employee’s satisfaction are not related.
Alternative Hypothesis
H1: p ≠ 0
appropriately.
Null Hypothesis
H0: p = 0
effectiveness.
Alternative Hypothesis
H1: p ≠ 0
There is a strong relationship between current performance appraisal system and employee’s
effectiveness.
HYPOTHESIS-IV
Null Hypothesis
H0: p = 0
Alternative Hypothesis
H1: p ≠ 0
Null Hypothesis
H0: p = 0
Alternative Hypothesis
H1: p ≠ 0
HYPOTHESIS-VI
Null Hypothesis
H0: p = 0
Alternative Hypothesis
H1: p ≠ 0
HYPOTHESIS-VII
Null Hypothesis
H0: p = 0
Alternative Hypothesis
H1: p ≠ 0
Null Hypothesis
H0: p = 0
Alternative Hypothesis
H1: p ≠ 0
HYPOTHESIS-IX
Null Hypothesis
H0: p = 0
Alternative Hypothesis
H1: p ≠ 0
HYPOTHESIS-X
Null Hypothesis
H0: p = 0
Alternative Hypothesis
H1: p ≠ 0
Chapter-1 Introduces the literature of banks in Pakistan with problem identification, primary
Chapter-2 Covers existing research and literature review. It includes the empirical literature
Chapter-I: Introduction
Chapter-V: Conclusion