In today’s competitive business world, it is understood that organizations can only compete with their rivals by innovating and organizations can be innovative by managing their human resources well. The human resource system can become more effective by having a valid and accurate appraisal system used for rating performances of the employees. Unfortunately, the number of the organizations using an effective performance appraisal system is limited. Organizations are run and steered by people. It is through people that goals are set and objectives are realized. The performance of an organization is thus dependent upon the sum total of performance of its members. The success of an organization will therefore depend on its ability to measure accurately the performance of its members and use it objectively to optimize them as a vital resource. In the present highly competitive environment, organizations have to ensure peak performance of their employees continuously is in order to compete and survive at the market place effectively. The objective of the study was to determine the performance appraisal practices among commercial banks in Kenya. The population of the study was all the forty two commercial banks operating in Kenya. The study used primary data which was collected using self-administered questionnaires. The data was analyzed using the Statistical Package for Social Sciences (SPSS) software. The findings of the study were that performance appraisal was carried out in the banks mostly on quarterly. The banks use performance appraisal for organizational development, employees’ performance, salary increment or distribution of rewards, has a motivational effect on workers’ performance, promotion, training, development and training needs identification and that performance appraisal is used in assessing employees’ commitment to organizational goals and objectives. The study found out that goal setting help to contribute to higher performance in the bank than only telling employees what to do and how to do and that the banks establishes goals that are perceived as challenging but realistic and to which there is higher level of commitment. Performance appraisal method used by the banks resulted in performance criteria/instruments used to measure employee performance being clearly defined, objective and employees in the bank undertake self reviews, graphic rating scale is used to appraise employees, merit/pay bonus allocations was a motivating and fair, behaviorally anchored rating scale method is undertaken in the bank and bank appraise employees using comparative ranking method.

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