Quite a number of challenges have been identified as confronting the effective and efficient practice of the performance appraisal system which includes the effect of managerial decisions, reward and its turnout in commitment and loyalty of employees which triggers productivity within the organization. Therefore, this study concentrates on ‘what’, ‘why’ and ‘how’ as the factors generate extreme dissatisfaction among employees and employers. Descriptive survey design method was adopted with the use of questionnaire distributed to the management and staff of some selected public sectors in Lagos State, South-West, Nigeria out of which 254 representing 85% were valid for the research. The questionnaire was structured into four sections. The study pointed that if managerial decisions are fair and just with equitable reward and promotion for job done, it will increase employees’ commitment and loyalty in the organization. In the same vein, if employees were properly motivated with the necessary and adequate training needs, innovation would increase rapidly on the job and this will thereby lead to competitive positioning. In addition to this, employees agreed that if they got regular feedbacks about their performance on the jobs, it could secure competitive positioning for the organization. As this will help them to identify their strengths and weaknesses which could invariably produce opportunities to the organization they are working with and threat to their competitors .