ABSTRACT

The study was carried out on the use of performance appraisal and reward system in enhancing employee performance. The study adopted a descriptive research design. The population of interest consists of all 300 employees of Nestlé Nigeria PLC. A sample size of 171 was selected using stratified sampling method. Data was collected using structured questionnaires. The data was analyzed using the Statistical Package for Social Sciences (SPSS) into frequency distribution, percentages and Pearson correlations. The data was presented using tables and charts.

On the effect of performance appraisal and reward systems process on employee performance, the study established that the system is important for employee motivation. Performance appraisal and reward systems have helped improve job performance at work. The regular assessment of performance leads to employee motivation. The performance standards are quantified and pegged against an individual's evaluation, which is essential for employee motivation. Performance appraisal and reward systems rating can be considered as a technique that has a positive effect on work performance and employee motivation. The performance appraisal and reward systems process identifies performance problems in order to improve employee productivity and motivation.

On the effect of performance appraisers on employee performance, the study established that different raters can increase the accuracy of performance evaluation (reducing bias) and increase employees' perceptions of fairness. Customers can recognize employees when they do a good job, and this recognition is important for employee motivation. Subordinate evaluations may give valuable information to improve employee motivation. The manager's ability to address skills gaps can have a significant impact on employee motivation.

The study concludes that the performance appraisal and reward systems process is important for employee motivation, that different raters can increase the accuracy of performance evaluation (reducing bias) and increase employees' perceptions of fairness, and that a manager's ability to address skills gaps can have a significant impact on employee motivation. The study recommends that organizations treat performance appraisal and reward systems as an important factor for employee motivation, that such systems be used to improve employee job performance and motivation at work, and that different raters be used to increase the accuracy of performance evaluation and increase employees' perceptions of fairness, which in turn can increase staff motivation.

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Study

The human resource department remains one of the most strategic units within any company or establishment. Organisations differ in how they structure their departments to suit their peculiar missions, but in nearly every structure, the human resource function ranks among the most important, often on a par with, or even above, functions such as public relations. This is because the wellbeing, competence, and commitment of employees are as central to an organisation's survival as any other strategic objective it pursues.

Managing employees and sustaining their working spirit goes well beyond the payment of salaries and the assignment of duties. Organisations depend on their employees to achieve whatever goals or targets have been set, which means that sustaining high performance and the willingness to go beyond the minimum requirements of a job description is itself a management responsibility. This requires creating a conducive working environment and providing the incentive for employees to exceed their basic obligations.

Recent scholarship continues to confirm that performance appraisal and reward systems are central to sustaining employee motivation. In a study examining the mediating role of motivation between intrinsic rewards and performance, Manzoor, Wei and Asif (2021) found that rewards such as recognition, developmental opportunities, and fair treatment significantly and positively influence employee performance, largely because they first strengthen employees' motivation. Performance appraisal, in turn, is broadly understood as the structured and periodic process through which an organisation evaluates an employee's job performance against set standards, typically to inform feedback, development planning, and reward decisions (Ambilichu, Akaighe & Pepple, 2024). Beyond being a once-a-year event, the entire appraisal process, from the setting of performance goals through to the delivery of feedback and follow-through on agreed actions, has been found to shape how committed an employee remains to the organisation (Ambilichu, Akaighe & Pepple, 2024).

How fairly this process is carried out matters just as much as the process itself. Lyu, Su, Qi and Xiao (2023) demonstrated that employees' perception of justice in the performance appraisal process, that is, whether the procedures, communication, and outcomes are considered fair, has a strong bearing on their subsequent work engagement and job performance. When employees perceive an appraisal exercise as fair, they are more likely to remain engaged, cope better with work demands, and sustain higher levels of performance; conversely, a perception of unfairness can quietly erode motivation even where the underlying appraisal method is technically sound.

Organisations rely on a range of techniques to appraise employee performance. These include graphic rating scales, management by objectives, key-performance-indicator (KPI)-based frameworks, and, increasingly, appraisal systems built around clearly defined objectives and measurable results. Recent empirical evidence continues to confirm that, when properly designed and consistently implemented, such systems meaningfully enhance employee performance. In a recent case study of organisations in Greece, Kalogiannidis, Kalfas, Chalaris, Spinthiropoulos and Chatzitheodoridis (2025) found that performance appraisal systems remain an effective tool for improving employee performance, provided that appraisal criteria are clearly communicated and that feedback is delivered constructively rather than punitively.

Who carries out the appraisal is equally important. Traditional appraisal relied almost exclusively on a single supervisor's judgement, but many organisations have since moved toward involving multiple sources of feedback, including peers, subordinates, and even customers, in evaluating an employee. Broadening the base of appraisers in this way is widely credited with improving the accuracy and perceived fairness of the exercise, since the input of several observers reduces the influence of any one rater's individual bias (Lyu, Su, Qi & Xiao, 2023).

Alongside appraisal, organisations continue to depend on reward systems to sustain employee motivation. Evidence from the Nigerian banking sector shows that the core dimensions of a reward system, namely remuneration, promotion, and recognition, are positively associated with employees' willingness to remain committed and productive (Amadi, Zeb-Obipi, Lebura & Poi, 2021). One key strategy for organisational success therefore remains the ability to attract, motivate, and retain a committed and productive workforce in an increasingly competitive marketplace.

Not all forms of motivation, however, operate in the same way. Drawing on self-determination theory, Van den Broeck, Howard, Van Vaerenbergh, Leroy and Gagné (2021) show, in a large-scale meta-analysis, that employees who find personal meaning in their work often sustain higher performance than employees who are driven only by external incentives such as pay or the threat of sanctions, even though such externally driven motivation still has a place. This finding is instructive for organisations such as Nestlé Nigeria PLC, since it suggests that reward systems built solely around monetary incentives may not, on their own, be sufficient to sustain long-term employee performance; they need to be paired with appraisal and feedback practices that help employees see meaning and progress in their work.

Despite these established benefits, performance appraisal systems are not without difficulty. Murphy and DeNisi (2023) observe that appraisal systems in organisations worldwide continue to face persistent challenges linked to unclear goals, rater bias, and unnecessary administrative complexity; they argue, however, that such challenges call for improving the design of appraisal systems rather than abandoning them altogether. In a related study, Hassan, Mubeen, Ali and Sajjid (2022) found that the extent to which an appraisal exercise improves an employee's job satisfaction is partly conditioned by the employee's locus of control, indicating that personal and contextual factors need to be considered by managers when administering appraisals. These findings underscore the need for continuous research into how appraisal and reward systems can be more effectively designed and administered, particularly within a Nigerian corporate setting such as Nestlé Nigeria PLC, a leading player in the country's fast-moving consumer goods industry, where sustaining a motivated and high-performing workforce is central to competitiveness.

1.2 Statement of the Problem

Between creating an enabling working environment and handing out incentives lies a whole range of measures needed to sustain the spirit of employees. Without this extra push, the typical outcome is apathy and an unwillingness on the part of employees to exert effort beyond what is minimally required by their job description. Employers, however, frequently find that it is precisely this extra effort, the willingness to go beyond the agreed minimum, that makes the difference between an average and an outstanding organisation. To secure this extra effort, employers design what are broadly termed reward systems: structured mechanisms that typically address compensation, benefits, recognition, and appreciation.

Yet, as recent research shows, simply having a performance appraisal and reward system in place does not automatically guarantee improved employee performance. Murphy and DeNisi (2023) note that many organisations continue to struggle with unclear appraisal goals, inconsistent rater judgement, and processes that employees perceive as burdensome rather than developmental. Where employees perceive the appraisal process to be unfair, whether because of biased raters, unclear criteria, or poor communication of results, the intended motivational benefits of the exercise can be undermined rather than reinforced (Lyu, Su, Qi & Xiao, 2023). Similarly, reward systems that rely too heavily on monetary compensation, without regard for recognition, meaningful work, and fair evaluation, may fail to sustain the kind of committed, high-performing workforce that organisations need (Van den Broeck, Howard, Van Vaerenbergh, Leroy & Gagné, 2021).

It is against this backdrop that the present study investigates the use of performance appraisal and reward systems in enhancing employee performance in an organisation such as Nestlé Nigeria PLC. Specifically, the study interrogates how the appraisal process itself, the individuals or groups responsible for carrying it out, and the challenges inherent in appraising employee performance combine to shape employee motivation and, ultimately, employee performance.

1.3 General Objective

The general objective of the study was to determine the use of performance appraisal and reward systems in enhancing employee performance.

1.4 Specific Objectives

The study was guided by the following specific objectives:

1.4.1 To establish the extent to which the performance appraisal and reward systems process affects employee motivation.

1.4.2 To determine the extent to which appraisers affect employee motivation.

1.4.3 To determine the challenges in appraising employee performance.

1.5 Significance of the Study

The significance of this study extends beyond its immediate objective of examining performance appraisal and reward systems at Nestlé Nigeria PLC. First, it contributes to the growing body of contemporary literature that links appraisal justice, appraisal process design, and reward systems to employee motivation and performance (Lyu, Su, Qi & Xiao, 2023; Ambilichu, Akaighe & Pepple, 2024), extending this literature specifically to the Nigerian fast-moving consumer goods sector. Second, the study sheds light on human resource practices that have grown outdated or taken for granted, and proposes feasible, evidence-based approaches to incentivising employees. Third, it deepens understanding of what drives Nigerian corporate and public-sector employees, highlighting the factors that most strongly influence their motivation and performance. Finally, the findings of this study are expected to be useful to human resource practitioners, managers, and policymakers seeking to design or refine performance appraisal and reward systems that genuinely enhance employee performance, as well as to future researchers and students interested in extending this line of enquiry.

1.6 Scope of the Study

This study is limited to Nestlé Nigeria PLC and focuses specifically on the performance appraisal and reward systems the organisation has adopted, and how these systems have, over time, come to influence employee performance. The study covers the effect of the performance appraisal process itself, the role of appraisers (raters), and the general challenges associated with appraising employee performance. It draws on the perceptions and experiences of employees of Nestlé Nigeria PLC as at the time of the study and does not extend to other organisations within or outside the Nigerian fast-moving consumer goods industry, although the findings may hold relevance for organisations with broadly similar human resource structures.

1.7 Limitations of the Study

Time and space constraints, in the course of this research, combined to limit the depth to which certain aspects of the study could be explored. The timeframe allocated for a study of this nature proved insufficient relative to the volume of relevant literature to be reviewed and the fieldwork required. In addition, as with most studies relying on structured questionnaires, the findings are shaped by the honesty and self-awareness of respondents in reporting their own perceptions of performance appraisal and reward systems, which may introduce an element of subjectivity. Finally, because the study is confined to Nestlé Nigeria PLC, the extent to which its findings can be generalised to other organisations, sectors, or regions should be approached with caution.

1.8 Definition of Terms

Motivation

Motivation can be defined as the psychological force that energises, directs, and sustains the intensity and persistence of an employee's behaviour over time (Van den Broeck, Howard, Van Vaerenbergh, Leroy & Gagné, 2021).

Performance Appraisal

Performance appraisal is the structured, periodic process by which an organisation formally evaluates an employee's job performance against set standards, typically to inform feedback, development planning, and reward decisions (Ambilichu, Akaighe & Pepple, 2024).

Reward System

A reward system refers to the deliberate set of remuneration, promotion, recognition, and other benefits that an organisation offers to acknowledge employees' contributions and to encourage continued high performance (Amadi, Zeb-Obipi, Lebura & Poi, 2021).

Employee Performance

Employee performance refers to the measurable extent to which an employee fulfils the tasks, responsibilities, and targets assigned by the organisation within a given period, and is widely used as the outcome measure against which the effectiveness of appraisal and reward systems is judged (Kalogiannidis, Kalfas, Chalaris, Spinthiropoulos & Chatzitheodoridis, 2025).

Performance Appraisal Justice (Fairness)

This refers to employees' perception of fairness in the process, procedures, and outcomes of a performance appraisal exercise, a perception that research links closely to work engagement and subsequent job performance (Lyu, Su, Qi & Xiao, 2023).

REFERENCES

Amadi, O., Zeb-Obipi, I., Lebura, S., & Poi, G. (2021). Reward system: A tool for employee retention as observed from the banking sector in Port Harcourt. Journal of Human Resource Management, 9(2), 50–57. https://doi.org/10.11648/j.jhrm.20210902.14

Ambilichu, C. A., Akaighe, G. O., & Pepple, D. G. (2024). Performance appraisal process as a determinant of employee commitment: A serial mediation analysis. Journal of Organizational Effectiveness: People and Performance, 11(4), 987–1004.

Hassan, Q., Mubeen, N., Ali, S., & Sajjid, N. (2022). Job satisfaction through performance appraisal: Moderating role of locus of control. International Journal of Management Research and Emerging Sciences, 12(3). https://doi.org/10.56536/ijmres.v12i3.242

Kalogiannidis, S., Kalfas, D., Chalaris, M., Spinthiropoulos, K., & Chatzitheodoridis, F. (2025). Evaluating the effectiveness of performance appraisal systems in enhancing employee performance: A case study of Greece. WSEAS Transactions on Business and Economics, 22, 234–252. https://doi.org/10.37394/23207.2025.22.23

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Manzoor, F., Wei, L., & Asif, M. (2021). Intrinsic rewards and employee's performance with the mediating mechanism of employee's motivation. Frontiers in Psychology, 12, Article 563070. https://doi.org/10.3389/fpsyg.2021.563070

Murphy, K., & DeNisi, A. (2023). New approaches to dealing with performance management: Getting rid of performance appraisals is not the answer. IIM Ranchi Journal of Management Studies, 2(2), 143–158. https://doi.org/10.1108/IRJMS-09-2023-0074

Van den Broeck, A., Howard, J. L., Van Vaerenbergh, Y., Leroy, H., & Gagné, M. (2021). Beyond intrinsic and extrinsic motivation: A meta-analysis on self-determination theory's multidimensional conceptualization of work motivation. Organizational Psychology Review, 11(3), 240–273. https://doi.org/10.1177/20413866211006173