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Purpose The main purpose of this paper is to investigate the effect of performance appraisal mechanisms on employee productivity in public hospitals in Mbeya – Tanzania, when mediated by working environment and management style. Design/methodology/approach Using a sample of 338 employees, a cross-sectional design was adopted; questionnaires and interviews were used to collect primary data. Partial least squares structural equation modelling (PLS-SEM) was used to determine the relationship between the variables, and Sobel’s test was performed to test the mediation effects. Findings Astudy found a strong association between performance appraisal mechanisms and employee productivity (p < 0.05). Goal setting significantly enhanced employee productivity (p < 0.05). Performance planning negatively impacted employee productivity, especially when combined with the working environment (p < 0.05). Assessment criteria had a significant positive effect on employee productivity when mediated by working environment and management style (p < 0.001). Originality/value This is the first study to examine how a performance appraisal system influences the productivity of public hospital employees in Tanzania. The study further explores the potential mediating effects of the work environment and management style on this relationship. By analysing the interplay between these variables and their impact on productivity, organizations can develop targeted strategies to boost employee performance and achieve superior results.