Effect of strategic planning and strategic planning intensity on financial performance of national sports federations in Kenya

Abstract

Sports is globally recognized as a means for social and economic development. National Sports Federations (NSFs) managements therefore have to raise substantial financial resources to sustain its growth. In developed countries, NSFs have exhibited sound financial performance (FP) following adoption of strategic planning (SP) leading to enormous development of sport. SP is a systematic process used to improve performance by identifying and resolving constraints faced that hinder realization of long-term goals. When commitment is placed on SP components then effectiveness is achieved leading to improved performance. Commitment to the implementation of SP constitutes Strategic Planning Intensity (SPI). NSFs in Kenya have over the years faced constrained FP. This compelled the government in 2002 to enact a policy that requires NSFs to integrate SP in sports management with the hope of improving their financial capacity. The policy notwithstanding, in 2008-2013 NSFs still fell below their annual budgets by 50-60% raising concern among stakeholders. Whereas, studies on commercial firms positively link SP to FP, the situation in NSFs with different goals remains unknown. The purpose of this study was to establish effect of SP and SPI on FP of NSFs in Kenya, specifically to: establish effect of SP on annual income; investigate effect of SP on financial Stability; analyze effect of SP on revenue diversification capacity; and determine moderating effect of SPI on the relationship between SP and financial performance. Variables were conceptualized from Industrial Organization, Resource Based and Strategy Process theories. Correlation design was used. Target population was 156 NSFs officials from which a purposive sample of 111 officials was determined. Both primary and secondary data were collected. Instruments were tested for content and construct validity and piloting conducted using 12 respondents. Cronbach alpha measurement showed high reliability at 0.781. To take care of non-responses anticipated after piloting 144 questionnaires were administered; realizing a response rate of 112 (77.80%). Financial statements for 2009-2013 provided secondary data on FP. Data analysis was aided by means, frequencies, standard deviations and multiple regressions. SP and SPI had average rating of =2.77 and 3.04 respectively implying weak integration. All components of SP had significant effect on annual income (p =.012; .027; .002; .000); R2 =0.626, meaning approximately 62.6% of variation in annual income could be explained by variation in SP. SP had significant effect on Financial Stability (p =.001; .001; .000; .000 for all components); R2=0.387, implying 38.7% of variation in financial stability arose from variation in SP. Revenue diversification capacity was insignificantly affected by SP (p = 0.544); R2 = 0.012), meaning 1.20% variation in revenue diversification capacity was attributed to SP. SPI moderated effect of SP on financial performance (R2 = 0. 644, p = 0.000) with interaction coefficient (B= 0.201, p = 0.000) implying a unit change in SPI significantly changes the relationship between SP and financial performance. In conclusion, SP has a positive effect on financial performance of NSFs in Kenya. Specifically, SP had a positive effect on annual income and financial stability of NSFs in Kenya. Also, SP had a positive but insignificant effect on revenue diversification capacity of NSFs in Kenya. On SPI, it significantly moderates the relationship between SP and financial performance. However, weak application of SPI in NSFs in Kenya could be responsible for their constrained financial performance. The study recommends that officials of NSFs in Kenya should strengthen integration of SP to improve overall financial performance. Specifically, be more committed to SP in order to improve their annual income, financial stability and revenue diversification capacity; further, NSFs should strengthen SPI by enhancing planning expertise, commit adequate resources to planning effort, improve planning-performance belief and align strategies to structures that suit their sizes. This study provides evidence that NSFs often ignore SPI, thus fail to realize full potential of SP. The study was limited to audited financial records which did not capture non monetary services of volunteers. Future studies should focus on how non-monetary services of volunteers could be accounted for in assessing financial performance of NSFs in Kenya.