This thesis is designed to assess the practices and challenges of performance management atrnCommercial Bank of Ethiopia, Bishoftu area. The study tried to address for what purposes the systemrnwas used, how performance management process was practiced and challenges faced whilernimplementing the system. The research used descriptive method of study. This research has usedrnstratified random sampling technique to select questionnaire respondents and purposive sampling tornselect interviewees. Both primary and secondary data were used. The primary data was collectedrnfrom 134 respondents through questionnaire and also semi-structured interview was conducted withrnmanagers to get information for the research. The analysis was done by the help of SPSS andrnpresented using descriptive statistics; frequency, mean, tables and percentages. The research hasrnoutlined that the major weaknesses of the employee performance management system of thernCommercial Bank of Ethiopia as limited awareness concerning the purpose and implications ofrnperformance management, lack of employee participation in planning, lack of regular feedback andrncoaching to improve performance. And also subjective supervisor assessment and no link betweenrnperformance and reward were revealed by the research. The research also indicated CBE has somerngood qualities in clearly defining the mission, vision and values and developing strategy map.rnRecommendations forwarded to address the issues were, improve employeeâ€™s participation in thernprocess, to avail adequate and timely trainings concerning all aspects of the EPMS, revisernperformance standards and measures to minimize subjectivity; enhance the involvement of employeesrnvia promoting transparency and equip them with the required resources, provide regular feedbackrnand Coaching. Finally to make the system effective, CBE needs to provide reward at the right timernand clearly show the implication of good as well as poor performance