Employee performance appraisal is a key instrument for improving administrative efficiency and public service quality. Despite legal requirements under Iran’s Civil Service Management Act, evidence indicates that the current appraisal system suffers from considerable inefficiencies. This study aims to identify and prioritize the factors contributing to the inefficiency of employee performance appraisal in Iran’s public sector. An exploratory sequential mixed-methods design was adopted. In the qualitative phase, data were collected through document analysis and semi-structured interviews with 16 experts and analyzed using thematic analysis, resulting in the identification of 15 inefficiency factors. In the quantitative phase, the Full Consistency Method (FUCOM) was applied to determine their relative importance. Judgments from 14 experts were analyzed using an optimization model in LINGO software. The findings indicate that the five most important factors are: (1) linkage of appraisal outcomes to promotion, appointment, training, and contract renewal, (2) managerial complacency and conservatism, (3) weak managerial commitment to implementation, (4) lack of integration between employee and organizational performance assessment, and (5) weak linkage between appraisal results and employee livelihood. The results suggest that appraisal inefficiency is rooted primarily in institutional, managerial, and motivational factors rather than technical deficiencies. The findings provide evidence for reforming performance appraisal mechanisms and improving their effectiveness in Iran’s public sector.