Influence of Strategic Management Practices on Performance of Industrial Development Bank Ltd, Kenya
Abstract/ Overview
Improving organizational performance and efficiency in service delivery of public institutions
has seen the implementation of performance management system through performance
contracting throughout the public sector. Based on this framework, public institutions are
subjected to annual performance evaluation. However, the evaluation tool used does not
isolate or attribute the performance of these institutions to any specific management
practices. Although there exists studies on the relationship between strategic management
practices and organizational performance, most of these studies focus on private sector
organizations whose characteristics differ from those of state owned institutions and thus
their findings may not be applicable to the state owned entities. The study sought to examine
the influence of strategic management practices on performance of state owned banks in
Kenya, with specific reference to Industrial Development Bank Limited. The specific
objectives of the study were to examine the influence of strategy formulation on profitability
of Industrial Development Bank Limited; to establish the influence of strategy
implementation on profitability of Industrial Development Bank Limited; and to examine the
influence of strategy evaluation and control on profitability of Industrial Development Bank
Limited. The study employed the use of both descriptive and correlation research design to
establish the nature of the relationships. A sample of 35 employees from the target institution
was taken. Primary data was collected using closed and open ended questionnaires.
Regression analysis was used to establish the influence of strategic management practices on
organizational performance as measured by profitability. The reliability of the questionnaire
was tested using a pilot often questionnaires administered to individuals working in banking
institutions other than Industrial Development Bank Limited. Reliability was computed using
Cronbach's alpha with the value of alpha being 0.73 for performance, 0.78 for strategy
formulation, 0.76 for strategy implementation and 0.90 for strategy monitoring and control
which is regarded as good. The regression output based on the strategic management
practices as regressors and organizational performance as the dependent variable had a
correlation coefficient of 0.74 meaning that there was a positive relationship between the
variables. The coefficient of determination R
2
was equal to 0.56 meaning that 56% of the
variations in organizational performance can be explained by the strategic management
practices. The regression coefficients were -4.66 for strategy formulation, 17.42 for
implementation and 8.85 for monitoring and control. The P values for the three variables
were less than the critical value of alpha. The findings show that strategy implementation is
critical for improvement of organizational performance. Hence the study recommends further
analysis of the elements of strategy implementation and their relationship to organizational
performance in Development Finance Institutions.