Strategic Implementation Practices and Organizational Performance of Commercial Banks in Western Kenya

Strategic Implementation Practices and Organizational Performance of Commercial Banks in Western Kenya

Wesonga, Shitabule Inviolata., Dr. Wanyama, Kadian Wanyonyi., Dr. Mitalo Ruth

Department of Business Administration and Management Kibabii University

DOI: https://dx.doi.org/10.47772/IJRISS.2024.807137

Received: 26 July 2024; Accepted: 29 July 2024; Published: 10 August 2024

ABSTRACT

Organizations which exist in the 21^st Century face a myriad of challenges which require corporate strategic implementation for the organizations to remain competitive. Strategic implementation is a key challenge for today’s organizations and most strategies stagger at the implementation stage. Despite formulating strategic plans, commercial banks often struggle to translate these plans into successful actions that drive performance improvement. Commercial banks in Kenya may face challenges in aligning their strategic plans with the execution of key initiatives. There might be a disconnect between the formulated strategies and the actual implementation, leading to a lack of consistency and coherence in actions taken. This misalignment can hinder the bank’s ability to achieve its strategic objectives and deliver optimal performance. The purpose of the study was to establish how strategic implementation was carried out by commercial banks in Kenya. The specific objectives of the study were to determine the effects of strategic action planning, strategic consensus, strategy communication, and resource allocation on the performance of commercial banks in Kenya. The study utilized a descriptive and explanatory research designs. It targeted 300 respondents from the 30 licensed commercial banks in Western Kenya, who were selected through a census. The data was analysed using both descriptive and inferential statistics. Results indicated that strategic action planning had a positive and significant effect on organizational performance of commercial banks; strategic consensus was found to have a positive and significant effect on organizational performance; strategic communication had a positive and significant effect on organizational performance while resource allocation emerged as the strongest predictor of organizational performance among the strategic implementation factors examined. The study recommends that banks should invest in developing robust strategic action planning processes that involve key stakeholders and translate high-level strategies into specific, measurable actions; management should focus on building strategic consensus through inclusive strategy formulation, clear goal-setting, and efforts to align understanding across organizational levels; banks should enhance strategic communication by establishing clear communication channels, promoting two-way information flow, and regularly conveying strategic priorities to all employees and careful attention should be paid to resource allocation.

Key words: Strategic implementation practices; Organization Performance; commercial Banks

BACKGROUND OF THE STUDY

Organizations which exist in the 21^st Century face a myriad of challenges which require corporate strategic implementation for the organizations to remain competitive. Strategic implementation is a key challenge for today’s organizations and most strategies stagger at the implementation stage (Li, Guohui, & Eppler, 2008; Coulson-Thomas, 2013). Thompson and Strickland (2008) noted that strategic implementation focuses on results to ensure that the vision, mission, strategy and strategic objectives of the organization are achieved as planned. Consequently, Dwallow (2012) asserted that creating a good strategy is nothing compared to its successful implementation.  About 80% of firms have the right strategies, but only 14% have managed to implement them well (Cater & Pucko, 2010). Strategy leads to change, and about 70% of all change initiatives fail (Beer & Nohria, 2000). Other statistics state that nine out of ten strategies fail to be successfully implemented (Speculand, 2009).

In a plausible extension of the foregoing argument, Smith et al. (2021) observed that a significant proportion of planned value, estimated at 40%, is never realized due to various implementation challenges. Johnson (2020), while concurring with Lee and Chen (2018), posited that nearly 70% of strategies fail to achieve successful implementation due to factors such as rapid market shifts, shortened Product Life Cycles (PLC), the emergence of new technologies, and inadequate resource allocation. Therefore, aligning institutional structures within the organization is crucial for the success of strategic implementation (Davis & Thompson, 2022).

Strategic consensus can be defined as the shared understanding of an organization’s strategic priorities (Martin & Zhou, 2021). This element is vital because the interpretation of a strategy can vary widely. According to Patel et al. (2022), even among top management, there is often a lack of agreement regarding organizational priorities, as strategies require continuous, dynamic decision-making that can be open to multiple interpretations. Furthermore, Garcia and Roberts (2020) have elaborated that when top management demonstrates consensus on strategic priorities, they are more aligned in pursuing established objectives and effectively allocating resources. Therefore, fostering the development of strategic consensus is critical to empowering organizational decision-makers (Miller, 2021). A study by Henderson and Liu (2023) investigated employee alignment and its relationship with strategic planning and firm performance in contemporary organizations. Their findings revealed that employee alignment is pivotal in linking strategic planning with improved organizational performance.

Further, Buijs and Langguth, (2017) examined strategic consensus establishment in a merged organization in Sweden. The findings postulated that consensus on strategic priorities of a newly merged organization is essential for its development. The study also pointed out three enablers of strategic consensus establishment to be transparency, communication and agility. Vertical communication of a firm’s purpose of existence bridges the gap on execution of strategic goals while transparency creates shared understanding of the reasoning behind the decisions made which builds strategic consensus in an organization. Agility enables the senior management in adaptation to the organizational change.

According to Thompson et al. (2022), organizational performance is defined as the degree of attainment of an organization’s mission, as assessed through various metrics including work outcomes, intangible assets, customer relations, and service quality. As highlighted by Johnson and Lee (2023), organizational performance reflects an organization’s capacity to effectively achieve its goals while efficiently utilizing available human and physical resources. This definition underscores the necessity for organizations to be guided by objective performance criteria when evaluating employee performance, further aiding the assessment of organizational goals and the development of strategic plans for future performance (Smith & Roberts, 2021).

Strategy communication is an essential activity undertaken by top management to adapt to the current dynamics of their operating environment. This market dynamism necessitates that production, financial, business processes, and communication strategies be managed strategically (Martin, 2021). Effective communication serves to inform and educate employees at all levels, fostering their support for organizational strategies (Williams & Edwards, 2020). According to Brown (2021), communication is fundamentally about sharing ideas and ensuring understanding among group members. It is a continuous process occurring at multiple levels, including intra-individual communication (Taylor, 2023).

In a study conducted in Nigeria, Adeyemi (2022) found that consistent and clear communication of strategies to all employees significantly improved the overall achievement of organizational goals. Similarly, Omondi et al. (2021) explored the effects of communication modes on strategic implementation in water service provision in Kakamega County, Kenya. Their study indicated that different communication modes did not have a significant effect on service provision, leading them to recommend a focus on various aspects of communication in strategy planning rather than implementation.

Resource mobilization should be aligned with the organization’s strategic objectives, rather than merely relying on new ideas or plans under consideration. Factors affecting the ongoing distribution of company strategies often stem from these targeted and emerging sources. Without a clearly defined source, resource allocation must then pass-through standardized filters (Kennedy & Martinez, 2022). The organization’s true strategy is reflected in the distribution of new products, processes, services, and acquisitions across its resources. The resource allocation process acts as a critical filter, determining which projects receive funding and which are omitted (Walker, 2021).

Arrfelt et al. (2015) study results indicated that low allocation indicated by excessive financial allocation to business units with poor growth prospects reduced business unit performance, compared to capital allocation to better future growth prospects business units. The study also found out that business market environment also affected performance implication of capital allocation which was more prominent in competitive markets. The research study was focused on the effect of capital allocation on performance of a firm’s business units in different industries whereas the current research was based on financial allocation of agribusiness firms in Kenya.

The Central Bank of Kenya (CBK, 2021) report notes that 2020 commenced on a positive note with the banking industry primed to focus on longer-term issues such as climate-change, environmental sustainability, diversity, and integrating them in business decisions. The COVID-19 Pandemic took a toll on the Kenyan banking sector; the sector’s profit before tax decreased by 29.3 percent to Ksh.112.4 billion in the year ended December 2020 from Ksh.159.1 billion in the year ended December 2019.

1.1  Statement of the Problem

The problem at hand revolves around the strategic implementation and performance of commercial banks in Kenya. Despite formulating strategic plans, commercial banks often struggle to translate these plans into successful actions that drive performance improvement. Commercial banks in Kenya may face challenges in aligning their strategic plans with the execution of key initiatives. There might be a disconnect between the formulated strategies and the actual implementation, leading to a lack of consistency and coherence in actions taken. This misalignment can hinder the bank’s ability to achieve its strategic objectives and deliver optimal performance. Successful strategic implementation requires adequate allocation and utilization of resources, including financial, human, and technological resources. However, commercial banks in Kenya face limitations in effectively allocating resources to support the execution of strategic initiatives. This can result in suboptimal performance and hinder the bank’s ability to compete in a dynamic market.

Effective monitoring and evaluation mechanisms are vital to track the progress and impact of strategic initiatives. However, commercial banks in Kenya face challenges in implementing robust performance measurement systems. Inadequate monitoring and evaluation processes hinder the bank’s ability to identify performance gaps, make informed decisions, and take corrective actions. To ease liquidity conditions in the market, the Central Bank of Kenya (CBK) lowered the Central Bank Rate (CBR) from 11.5 per cent in July 2015 to 8.5 per cent in November 2019. Further, in April 2020, the benchmark rate was lowered to 7.0 per cent. The industry has, however, been negatively impacted by external factors. This demands that banks reinvent themselves to remain afloat.

For instance, asset quality in the banking sector deteriorated in 2020 due to the poor performance of different sectors caused by the COVID-19 Pandemic. Moreover, total banking sector profits dropped by 26.2 per cent compared to a similar period in 2019. Similarly, in 2020, income from fees and commissions and interest on placements contracted by 7.8 percent and 10.5 percent, respectively. A few studies, for example, by Olali (2006); Kimani (2012); Nzonge (2011); Nabwire (2014); and Kimeu & Maina (2018), have been carried out on the banking industry, though these studies’ sampling frames did not focus on top managers and middle-level managers, who are key strategy formulators and implementers. This proposed study departs from such and therefore assesses the strategic implementation and performance of all commercial banks in Kenya with reference to the interplay between strategic action planning, strategic consensus, strategy communication and resource allocation, and the performance of commercial banks in Western Kenya Region.

1.2 Objectives of the Study

The general objective of this study was to assess the influence of strategic implementation on organizational performance of commercial banks in Western Kenya Region.

The specific objectives for this study were:

1. To determine the effect of strategic action planning on performance of commercial banks in Western Kenya Region.
2. To examine the effect of strategic consensus on performance of commercial banks in Western Kenya Region.
3. To establish the effect of strategic communication on performance of commercial banks Western Kenya Region.
4. To evaluate the effect of strategic resource allocation on performance of commercial banks Western Kenya Region.

1.3 Research Hypotheses                 

This study was guided by the following research hypotheses:

H₀1: There is no statistically significant relationship between strategic action planning and performance of commercial banks Western Kenya Region.

H₀2: There is no statistically significant relationship between strategic consensus and performance of commercial banks in Western Kenya Region.

H₀3: There is no statistically significant relationship between strategic communication and performance of commercial banks in Western Kenya Region.

H₀4: There is no statistically significant relationship between strategic resource allocation and performance of commercial banks in Western Kenya Region.

1.4  Scope of the Study

The study was conducted in the Western Region and targeted 100 of the 42 licensed commercial banks that were operating in the Republic of Kenya. The researcher investigated the impact of strategic implementation variables on the performance of commercial banks in Kenya, focusing on strategic action planning, strategic consensus, strategy communication, and resource allocation.

LITERATURE REVIEW

2.1 Introduction

This section covers previous literature on strategic implementation and performance. The main sections covered include, theoretical framework which focuses on various schools of thought that seek to explain the idea behind the strategic implementation and performance. Various empirical studies are reviewed regarding the study variables. The conceptual framework is drawn and the research gap presented.

2.2 Theoretical Review

According to Ghaur & Granhaug (2002), a theory is “a set of interrelated concepts, definitions and propositions that present a systematic view of specifying relations among variables with the purpose of explaining and predicting phenomena.” Higgins 8s Framework as presented by Higgins (2005), Resource-Based View (RBV) and Institutional Theory, guided this study.

2.2.1 The Higgins 8-S Framework of Strategic implementation

The Higgins theory of strategic implementation, developed by Higgins (2005), is a monitoring and evaluation instrument applied by organizations in the implementation process. Higgins 8s framework is an improvement of the McKinsey 7s framework that states there are seven key elements that firms take into consideration during strategic implementation in achieving its objectives. Waterman et al., (1980) listed such basic factors as strategy, structure, systems, style, shared values, staff and skills. The elements are so interdependent such that a change in one requires realignment of other elements in order for the organization to function effectively and efficiently. The use of this framework also during strategic planning helps managers plan through organizational changes that will enable the implementation of effective strategies.

Higgins (2005) sets out a “8 S” framework for strategic implementation, which includes strategy and purpose, structure, resources, shared values, style, staff, systems and processes and strategic performance.

Figure 2.1: Higgins 8-S Framework of Strategic implementation

Source: Higgins (2005)

Higgins (2005) posited that the strategy is intended to assist top management in implementing, monitoring as well as assessment and evaluation of the implementation process. Higgins 8s framework differ from McKinsey 7s framework in that Higgins included strategic performance and resources to McKinsey model. Higgin’s model added re-Sources as an element to McKinsey and skills were replaced with strategic performance, this was supported by the idea that skills consist of organizational competencies and capabilities which are placed under strategy in the model.

Strategic performance is the outcome from the interplay of the seven elements. It is the results achieved by the organization which measure the success or failure of the strategies. Stoner et al., (2003) found each of the element play a role in strategic implementation and neglecting any of them could make the process slow, painful and wasteful. Haggin 8-S framework will be applicable in this research provide more insights on the study variables will interact with organization elements for strategic implementation.

2.2.2 Resource Based View

The resource-based view (RBV) was developed by Barney (1991) to analyse the resource bundles contributing to the firm’s competitive advantages. A resource-based perspective (RBV) emphasizes corporate resources as basic indicators of competitive advantage and performance. It embraces two perspectives on analysing competitive sources of competition (Barney, 2006; Peteraf and Barney, 2003). First, the model assumes that firms in the field may be significantly different in terms of the range of services they control or offer.

Secondly, it is thought that diversification may continue over time because the resources used to implement firm strategies are not fully integrated with the firms (i.e., some of the resources cannot be sold in commodity markets and are difficult to accumulate and replicate). Resource heterogeneity (or unique) is considered a necessary condition for a large number of resources to contribute to competitive advantage (Cool, Almeida Costa and Dierickx, 2002). Imaginative and statistical distinctions, however, are not sufficient conditions for continued competitive profit (Peteraf & Barney, 2003).

This view was relevant to the study because RBV sees resources as key to better performance. This theory supports the study objective which seek to establish the effect of resource allocation on the performance of commercial banks. When an instrument reflects the value, uniqueness, consistency and organizational characteristics, the instrument enables the company to gain and maintain a competitive advantage. Organizations should look within the company to find sources of competitive profit rather than looking at the competitive environment. The benefits of sustainable competition can be easily achieved by taking advantage of internal resources rather than external ones compared to the idea of ​​exporting organizational inputs.

2.2.3 Institutional Theory

Institutional theory focuses on the roles of social, political and economic dynamics in which companies operate (DiMaggio & Powell, 2000). As explained by Scott (2001), institutions provide for the rules of the game and define the available ways to operate by discouraging, constraining or encouraging given behavioural patterns. When the institutional structure is operating appropriately, it can reduce transaction costs, uncertainty, and risks in the organization. Legal structures also determine the ease of entering markets and influence bankruptcy laws. Contrarily, a weak or unsatisfactory legal structure may constrain development. Particularly, where institutional gaps leave room for arbitrary behaviour, this may lead to corruption and objective behaviour.

Institutional view is about how the flow of information in a strategic action planning affects its performance. In this view, the term institution is used to describe a particular culture and policies and procedures in an organization. Guohui & Eppler (2011) states that organizations where employees can easily reach out to managers through open and supportive communication environments are often better than those with highly restrictive communication environments. Lehtimäk and Karintau (2012) affirm that communication is an essential requirement for effective implementation of strategies. Organizational communication is essential to the dissemination of information during the strategic implementation process.

Communication is covered in all aspects of strategic implementation because it is closely related to organizational context, planning processes and goal implementation (Mutisya, 2016). A set of legal rules created in an organization determines that the flow of information and actions to be taken by employees in the event of an incident of some kind occurring will occur (Amenta, 2005). These communication frameworks contribute to the organisation’s performance by building expectations among the various stakeholders in the implementation of the strategies. This theory supports the relationship between strategic action planning, communication and performance. This concept will be important in this study as it will help in determining the role that strategic action planning and communication on the performance of commercial banks in Kenya.

2.3 Empirical Review

2.3.1 Strategic Action Planning and Firm Performance

Chauvet and Le Mouël (2016) conducted a study on the impact of strategic action plans on small firm performance: A dynamic capabilities view. This study explored the impact of strategic action planning on the performance of small firms. The findings suggested that small firms with well-developed strategic action plans exhibited higher performance levels, including financial performance and growth. The study emphasized the importance of dynamic capabilities in implementing and adjusting strategic actions to drive performance.

Research by Hafeez, Malak, Hashmi & Ghauri (2018) on the strategic planning and firm performance: A synthesis of more than two decades of research, synthesized multiple studies on strategic planning and firm performance conducted over two decades. The findings indicated a positive relationship between strategic planning and firm performance. Effective strategic planning was associated with improved financial performance, innovation, market share, and overall organizational performance.

Further study by Dimitratos, Johnson and Plakoyiannaki (2016) focused on the strategic planning for competitive advantage: Evidence from small and medium-sized enterprises. This study investigated the relationship between strategic planning and competitive advantage in small and medium-sized enterprises (SMEs). The findings suggested that SMEs that engaged in strategic planning had a higher likelihood of achieving a competitive advantage, which positively influenced their performance. The study emphasized the importance of flexibility and adaptability in strategic planning processes for SMEs.

2.3.2 Strategic Consensus and Firm Performance

According to Hartmann et al. (2023), key factors affecting the implementation of firm strategies in manufacturing settings can be identified through an examination of strategic alliances. Their research explored several variables, including strategic consensus, leadership, and leadership ethics. Findings indicated that the integration of these three variables is crucial for effective and efficient strategic implementation, ultimately enhancing organizational performance. The authors recommended that multiple factors and their interactions be considered during the implementation of operational strategies. However, the study faced limitations due to the diverse backgrounds of interview respondents, which made it challenging to generalize the findings (Nguyen et al., 2022). To address these limitations, this study will incorporate more intensive qualitative research methods. Additionally, to minimize potential biases in the data collection process, structured questionnaires will be utilized to gather information from selected commercial banks in Kenya.

Banda (2018) sought to establish the relationship between strategic consensus and implementation of differentiation strategy in commercial banks in Kenya. A case study research design was used and the primary data was collected through interviews. Both descriptive and inferential statistics were presented in tables, graphs and charts. The results showed that leadership was central such that decision making was only done by top management leaving the middle level to pile the decisions leading to dragging in the implementation process. The study revealed that strategic action planning was narrow but it only encouraged one way communication which was top down and there were no regular interactions among departments and no convergence of ideas. Further, the study found that employees’ skills and competencies were not matched with the tasks assigned. The study was limited to respondents in top management level. This study recognizes that staff in all levels of management play key role in strategic implementation. Therefore, the input of staff in lower levels on the success of strategic implementation is important in this study, hence respondents of this study will comprise of staff in all management levels.

2.3.3 Strategic Communication and Organizational Performance

Buijs and Langguth, (2017) studied the relationship between consensus strategies and performance of joint organization in Sweden. Organization communication, transparency and agility were used to measure the independent variable. Qualitative and quantitative data was collected and analysed and presented in graphs and tables. Agreeing on the strategic priorities among employees in newly established organizations was found to be essential in their development and expansion. The study established that the presence of direct communication, transparency and agility, consensus was easily established. The direct communication of the company’s intention to be there closes the gaps in strategic objectives while transparency help build common understanding of the reason behind the decisions made that build strategic agreement in the organization. Agility empowers the leadership to adapt to changes in the organization. The study focused on single merged organizations while this study will investigate several different entities with similar strategic goals. The study did not address strategic consensus adequately and therefore this study will seek to establish relationship between strategic consensus and performance in different commercial banks in Kenya.

Mahto and Davis (2022) researched the flow of information and the impact of strategic consensus on organizational performance in multi-site banking across the USA. They employed maximum-likelihood factor analysis on samples of data to assess the dimensionality of the measures. The study compared the relative strength of information flow from various communication sources on consensus using standardized regression coefficients. Their findings indicated that the flow of information within the organization significantly determines performance levels and that effective internal communication between senior management and lower-level employees facilitates consensus. The research revealed that a lack of agreement among lower-level staff hampers the achievement of organizational objectives, highlighting that the scope of strategic agreement should not be confined to senior management alone (Simmons et al., 2023). In contrast, this study aims to examine the effects of strategic action planning, strategy communication, and resource allocation in conjunction with strategic consensus on organizational performance.

Kibe (2023) explored the effects of communication strategies on organizational performance, focusing on a case study of the Kenya Ports Authority. Using a descriptive research design, the study collected primary data from 132 respondents through questionnaires administered to employees. The research established that both theoretical and practical communication of strategies play essential roles in the implementation process. Furthermore, when organizational members felt free to share feedback, ideas, and even criticisms at all levels, their performance improved proportionately. The study concluded that for organizational performance to be effective, an open communication environment must be fostered. Kibe (2023) suggested further research into the influence of communication strategy implementation on the performance of the service industry. This study will utilize different indicators to measure strategy communication and its impact on performance in commercial banks.

2.3.4 Resource Allocation and Organizational Performance

Dominic and Theuvsen (2015) investigated the relationship between strong resources, strategic management strategies and the robust operation of small agricultural enterprises in Tanzania. Research correlational and regression analysis revealed that strong resources alone do not contribute to performance without the use of strategic management strategies. This has shown that managers need to incorporate strategic approaches to the use of robust resources to improve efficiency. The study was based on appropriate resource allocation in form of market information and managerial expertise in strategic management whereas this current study will focus on resource allocation in terms of financial and human resources in strategic implementation and how they influence performance of commercial banks in Kenya.

Kihara et al. (2016) conducted research on the role of technology in the strategic and operational implementation of SME production in Thika, Kenya. Data collection from 115 was done using questionnaires. The study adopted a mixed research design that included drawings of size and quality. The data analysis was consistent with the retrospective analysis. The findings of the study showed a positive and significant relationship between technical resources during the strategic and operational process of firms. The study investigated technology as a driver in strategic implementation in manufacturing SMEs whereas this study will investigate strategic consensus, structure, strategy communication and resource allocation in strategic implementation process of commercial banks. This study will also adopt mixed research design in comparison to Kihara et al., (2016) research which employed qualitative research design.

Gachuhi and Awuor (2019) conducted a study on strategic management and sustainability of SMEs in agribusiness in the Githunguri region, Kenya. The study used less structured questionnaires to gather information and quantity. Data analytics analysis was performed using descriptive and non-descriptive statistics while quality data analysis was performed using content analysis. The results of the study showed that the allocation of human resource development resources, the use of modern technology, improvement of procurement processes and financial management were critical to the sustainability and development of agricultural enterprise performance. The study focused on a single unit while the scope of this study will comprise of several commercial banks.

2.4 Conceptual Framework

The conceptual framework, as defined by Cooper & Schindler (2010), is a valuable tool in the scientific research process. It enables researchers to define concepts in measurable terms, providing a clear understanding of their meaning. It serves as a visual representation of the relationship between independent and dependent variables.

In the context of this study, the conceptual framework illustrates the interplay between strategic implementation factors and the performance of commercial banks in Kenya.

Figure 1: Conceptual Framework on Interplay between strategic implementation and performance of commercial banks in Kenya

Source: Researcher’s Conceptualization (2023)

The framework consists of four independent variables: strategic action planning, strategic consensus, strategy communication, and resource allocation. These variables were carefully chosen to explore their influence on the dependent variable, which is the performance of the banks.

Strategic action planning involves actionable steps, monitoring and tracking progress, and receiving feedback. Strategic consensus focuses on clearly setting goals, involving employees, and considering financial aspects. Strategy communication encompasses channels of communication, shareholders’ involvement, and addressing the intended audience. Resource allocation considers financial, human, and physical resources. The conceptual framework, represented in Figure 1, visually displays the relationships and associations between these variables. It emphasizes how strategic implementation, through these factors, affects the performance of commercial banks in Kenya. The framework also acknowledges the moderating role of organizational culture in this relationship.

This researcher-developed conceptual framework served as a guiding framework for the study. It provided a structure for data collection and analysis, facilitating a deeper understanding of the impact of strategic implementation on bank performance. By examining the relationships depicted in the framework, the study aimed to uncover insights and draw conclusions about the effectiveness of strategic implementation practices in the banking sector in Kenya.

2.5 Summary of the Literature and gaps to be filled

The literature reviewed above presented studies conducted in various parts of the world, examining the influence of strategic implementation factors on organizational performance. However, there was a notable research gap when it came to studies specifically conducted in Kenya, focusing on strategic implementation factors and their impact on organizational performance, such as strategic action planning, strategic consensus, strategy communication, and resource allocation. At the time, no comprehensive studies had addressed these specific strategic implementation factors within the context of Kenya.

Additionally, most of the existing studies relied primarily on descriptive measures of performance, without incorporating quantitative data to assess financial performance, such as return on equity. This limitation highlighted the need for a more comprehensive approach that combined descriptive and quantitative data analysis to capture various dimensions of organizational performance.

To address this research gap, the present study aimed to fill the knowledge void by collecting and analyzing data specifically from commercial banks in the Western region of Kenya. Through focusing on this specific geographical area and incorporating quantitative measures of financial performance, the study sought to provide a more nuanced and contextually relevant understanding of the interplay between strategic implementation factors and organizational performance in the Kenyan banking sector.

Through bridging this research gap, the study intended to contribute significantly to the existing literature on strategic implementation and organizational performance in Kenya. The findings and insights derived from this study were expected to enhance our understanding of the specific factors that drove organizational success within the unique socio-economic and cultural context of Kenya. Moreover, the study’s methodology, which combined both descriptive and quantitative data analysis, offered a more comprehensive and robust approach to assessing organizational performance.

RESEARCH METHODOLOGY

3.1 Introduction

This section outlines the research methods, design, target population, data collection and sampling techniques, and data analysis methods used in the study.

3.2 Research Design

Both a descriptive survey design and an explanatory research design were employed in this study to comprehensively investigate the influence of strategic implementation on the performance of commercial banks in Kenya. The descriptive survey design was utilized to gather data and describe the current state of strategic implementation practices and organizational performance in commercial banks. This design allowed for the collection of quantitative data through the use of questionnaires, enabling researchers to analyze and describe the relationships between strategic implementation factors and bank performance (Smith, 2023). By adopting this design, the study aimed to provide a clear understanding of the existing conditions and relationships within the study population.

In addition to the descriptive survey design, an explanatory research design was incorporated to delve deeper into understanding the causal relationships between strategic implementation and bank performance. This design aimed to identify and explain the underlying mechanisms and factors that influenced the observed relationships (Johnson & Lee, 2022). Through the explanatory research design, the study sought to uncover the reasons behind the effects of strategic implementation on bank performance, considering potential mediating or moderating variables.

The explanatory research design involved a combination of qualitative and quantitative methods. Qualitative data, such as interviews or focus group discussions, were used to explore the perspectives, experiences, and insights of key stakeholders, including bank managers, employees, and customers (Kibe, 2023). This qualitative data provided rich contextual information and helped uncover nuances that quantitative data alone may not capture.

Quantitative data obtained through the survey questionnaires were analyzed using statistical techniques to examine the relationships between strategic implementation factors and bank performance. This quantitative analysis enabled researchers to identify significant associations, causal links, and potential predictive factors (Ngugi & Mwangi, 2022)

3.3 Target Population

The target population of the study was the entire population from which research results and conclusions were sought (Serakan, 2013). A total of 1,250 respondents were targeted, drawn from the 39 licensed commercial banks in Kenya as of January 2023, according to the Central Bank of Kenya (CBK, 2022). Specifically, the study focused on the 30 commercial banks operating in Western Kenya (refer to Appendix V). This region consisted of 30 branch managers and a total of 270 bank staff, including bankruptcy specialists, senior bank specialists, senior bankers, credit managers, credit analysts, bank officers, portfolio analysts, and loan officers.

The selection of these individuals was based on their roles, responsibilities, and expertise, which made them likely to possess a comprehensive understanding of the day-to-day operations of the bank, as well as the challenges and opportunities present at the branch level. Bank branch managers and middle-level managers were deemed to have the necessary expertise and experience to provide accurate and reliable data for the study.

3.5 Census

A census of 300 individuals was used in the study, comprising 30 branch managers and 270 middle-level managers (Creswell & Plano Clark, 2018). The decision to conduct a census study was based on the understanding that it would provide a comprehensive view of the particular population of interest (U.S. Census Bureau, 2020). By including every member of the population, a census study ensures that information is gathered from all individuals, leaving no room for sampling error or potential biases (Krejcie & Morgan, 1970).

In this case, a census approach was deemed appropriate as the population of bank branch managers and middle-level managers was relatively small and well-defined (Babbie, 2017). By including all 30 branch managers and 270 middle-level managers, the study aimed to capture a complete representation of this specific population within the banking sector.

Conducting a census study allowed for a detailed analysis and examination of the characteristics, perspectives, and experiences of each individual in the population (Creswell & Plano Clark, 2018). This approach provided a comprehensive understanding of the target group (Creswell & Plano Clark, 2018), enabling researchers to draw accurate conclusions and make informed decisions based on the data collected.

Table 3.1:  Target Population

3.4 Sampling Procedures

The multistage sampling technique was used due to the large number of commercial banking staff in the Western Region of Kenya (Kumar et al., 2017). The study included all 30 commercial banks operating in the Western region (see Appendix V). Stratified sampling was employed to categorize the 30 commercial banking institutions into three groups: 10 top banks, 10 bottom banks, and 10 other commercial banks (Lavrakas, 2011). A purposive sampling approach was then used to select a total of 30 branch managers and 270 middle-level managers, as shown in Table 3.1.

3.5 Data Collection Instruments

Primary data was collected by administering self-guided questionnaires to the 30 branch managers and 270 middle-level managers. The questionnaires were designed as structured instruments that utilized a Likert rating scale, which is a common method for collecting subjective data in organizational research (Fowler, 1995). This scale enabled respondents to indicate their level of agreement or disagreement with statements pertaining to the study variables, allowing for the quantification of responses and analysis of the data.

The self-guided questionnaires provided a standardized approach to data collection, ensuring consistency in the measurement of respondents’ perceptions and opinions, as recommended by established research methods (Babbie, 2017). The Likert rating scale allowed for the quantification of responses, enabling the researchers to analyze the data and assess the level of agreement or disagreement among the participants, as suggested by previous studies.

The structured nature of the questionnaire ensured that all respondents were presented with the same set of statements, facilitating comparability and reducing potential bias in the data collection process (Lavrakas, 2011). The Likert scale, with its ordinal response categories, provided a clear framework for participants to express their views, offering a balance between simplicity and granularity in capturing their perspectives (Kumar et al., 2017).

Through utilizing self-guided questionnaires and the Likert rating scale, the study aimed to gather reliable and standardized data on the participants’ perceptions regarding the variables under investigation. This approach enabled a systematic examination of the participants’ agreement or disagreement with the statements, contributing to a comprehensive analysis of the relationships between strategic implementation factors and bank performance (Creswell & Plano Clark, 2018).

3.6 Pilot Study

Prior to the actual data collection, a pilot study was conducted on 30 commercial banking personnel from Eldoret Town in Uasin Gishu County. The pilot study was designed to test the validity and reliability of the research instruments, as recommended by established research methods (Babbie, 2017). Specifically, the pilot study aimed to identify any ambiguities or unclear statements in the questionnaire, as well as assess the participants’ understanding of the survey items (Kumar et al., 2017).

The results of the pilot study were analyzed and used to make necessary modifications to the questionnaires. The data collected during the pilot study revealed that some of the statements were not clearly understood by the participants, which could have led to inaccurate responses. Therefore, we revised the questionnaire to ensure that all statements were clear and concise, following guidelines on questionnaire design (Lavrakas, 2011).

For instance, we rephrased some of the statements to reduce ambiguity and increased the number of examples provided to facilitate better understanding. We also made minor adjustments to the layout and formatting of the questionnaire to improve its readability and usability (Dillman, 2007).

The pilot study results showed that these modifications improved the overall quality of the questionnaire, ensuring that it was more effective in capturing accurate and reliable data from participants. This iterative process is an essential step in research methodology, as it allows researchers to refine their instruments and minimize potential biases (Creswell & Plano Clark, 2018).

3.6.1 Reliability

Reliability analysis was conducted using the Statistical Package for the Social Sciences (SPSS) software. To assess the internal consistency of the questionnaire items, Cronbach’s alpha coefficient was employed, with a threshold of 0.70 considered acceptable. The results in Table 1 revealed an average alpha value of 0.8358, indicating a high level of internal consistency among the questionnaire items. This suggests that the items in the questionnaire were reliable and measured the intended constructs effectively.

Table 1: Reliability Test

3.6.2 Validity

Content validity, which refers to the extent to which a measure assesses what it is intended to measure, was established through expert judgment (Kaplan & Saccuzzo, 2013). The questionnaire was subjected to a rigorous review process, where it was evaluated by six expert judges with relevant expertise in strategic management and the banking sector. The panel consisted of two supervisors from the participating banks, two academic staff members with expertise in strategic management, and two practicing professionals with extensive experience in the banking sector (e.g., Branch Managers and Heads of Department).

The expert judges were instructed to review the questionnaire and assess its content validity by evaluating whether each question accurately captured the intended construct of strategic implementation factors in the banking sector. This process allowed for an objective evaluation of the questionnaire’s content validity, as recommended by experts in survey research (Dillman, 2007).

The expert judges’ feedback was incorporated into the final version of the questionnaire, ensuring that all questions were clear, concise, and relevant to the study’s objectives. The use of expert judgment in establishing content validity has been widely adopted in various fields, including business and management research (Kumar et al., 2017).

3.7 Data Analysis and Presentation

The study used descriptive and inferential statistics in the data analysis. Correlation analysis was conducted to determine the strength and direction of association between pairs of variables. Linear regression analysis was utilized to explore the predictive relationships between variables. This analysis helped uncover the extent to which one variable could be used to predict or explain variations in another variable. By examining the regression coefficients and significance levels, the study aimed to identify significant predictors and understand the nature and magnitude of their impact on the dependent variable.

3.8 Ethical Considerations

Permission to conduct the study was obtained from the National Commission for Science, Technology, and Innovation (NACOSTI), the regulatory body responsible for approving research projects in Kenya. This was a crucial step in ensuring that the study complied with the country’s research ethics guidelines and regulations (Kenya National Council for Science, Technology and Innovation, 2020).

Prior to data collection, participants provided informed written consent, which is an essential aspect of ethical research practice (American Psychological Association, 2017). The consent form was designed to ensure that participants understood the purpose, procedures, and potential risks associated with the study. Participants were also informed that their responses would remain anonymous and confidential, and that all information collected would be held in good custody (Kumar et al., 2017).

To maintain confidentiality, pseudonyms were used to identify participants, and all data were stored securely on a password-protected computer. The data were also backed up regularly to prevent loss or corruption. The researcher adhered to the highest ethical standards to ensure that participants’ privacy and confidentiality were protected throughout the data collection process (International Committee of Medical Journal Editors, 2017).

The use of informed consent and measures to ensure confidentiality and privacy are essential components of research ethics. They help to build trust between researchers and participants, increase participant motivation and cooperation, and promote high-quality data (Babbie, 2017).

RESULTS AND DISCUSSIONS

4.1 Introduction

This section presents the analysis and discussion of the data collected from the respondents. The data was analyzed using both descriptive and inferential statistics, and the findings are presented in tables and figures.

4.2 Response Rate

Out of the 300 questionnaires distributed, 285 were returned, representing a response rate of 95%. This response rate was considered excellent and sufficient for analysis and reporting (Mugenda & Mugenda, 2013).

4.3 Demographic Characteristics of Respondents

4.3.1 Gender

The study sought to determine the gender distribution of the respondents. The findings are presented in Table 2.

Table 2: Gender Distribution of Respondents

The results in Table 2 show that 56.8% of the respondents were male, while 43.2% were female. This indicates a relatively balanced gender distribution among the respondents.

4.3.2 Age

The study also sought to determine the age distribution of the respondents. The findings are presented in Table 3. The results in Table 3 show that the majority of the respondents (46.3%) were aged between 31 and 40 years, followed by those aged between 41 and 49 years (32.6%). 15.8% of the respondents were aged between 21 and 30 years, while only 5.3% were aged 50 years and above. No respondents were aged 20 years and below.

Table 3: Age of Respondents

4.3.3 Highest Educational Level Attained

The study sought to determine the highest educational level attained by the respondents. The findings are presented in Table 4.

Table 4: Highest Educational Level Attained by Respondents

The results in Table 4 show that the majority of the respondents (58.9%) had attained a Bachelor’s degree, followed by those with a Master’s or Post Graduate degree (30.5%). 4.2% of the respondents had attained a Doctorate (PhD), while 1.1% had attained a Post Doctorate. 5.3% of the respondents had attained a Diploma, and none had a Certificate.

4.3.4 Years of Service in the Bank

The study sought to determine the number of years the respondents had served in their respective banks. The findings are presented in Table 5.

Table 5: Years of Service in the Bank

The findings presented in Table 5 highlight the distribution of respondents based on their years of service in their respective banks. The majority of the participants (51.6%) had served in their banks for a duration ranging from 6 to 10 years, indicating a significant proportion of experienced personnel in the sample. Following this, 26.3% of the respondents had accumulated more than 10 years of service, signifying a substantial presence of long-serving individuals within the banking sector. Additionally, 22.1% of the respondents had a service tenure of 5 years and below.

These results provide valuable insights into the years of experience possessed by the participants, shedding light on the level of expertise and familiarity they may have developed with their respective banks’ operations and processes. The distribution across different tenure categories helps identify the composition of the sample in terms of service duration, contributing to a comprehensive understanding of the participants’ backgrounds and potential impact on the study variables.

4.4 Correlation Analysis

Pearson’s correlation analysis was conducted to determine the relationship between the independent variables (strategic action planning, strategic consensus, strategic communication, and resource allocation) and the dependent variable (organizational performance). The findings are presented in Table 6

Table 6: Correlation Matrix

** Correlation is significant at the 0.01 level (2-tailed).

The results show that all the independent variables had a positive and significant relationship with organizational performance. Resource allocation had the strongest relationship with organizational performance (r = 0.625, p < 0.01), followed by strategic action planning (r = 0.611, p < 0.01), strategic consensus (r = 0.594, p < 0.01), and strategic communication (r = 0.582, p < 0.01).

The results also show that there were significant positive relationships among the independent variables. The strongest relationship was between strategic consensus and strategic communication (r = 0.563, p < 0.01), followed by the relationship between resource allocation and strategic action planning (r = 0.537, p < 0.01).

These findings suggest that commercial banks that invest in strategic action planning, foster strategic consensus, promote effective strategic communication, and allocate resources appropriately are likely to experience improved organizational performance. Furthermore, the positive relationships among the independent variables indicate that these strategic implementation factors are interrelated and can reinforce each other in driving organizational performance. The correlation analysis provides preliminary evidence of the relationships between the study variables. However, to determine the extent to which each independent variable predicts organizational performance, regression analysis was conducted, as presented in the following section.

4.5 Regression Analysis and Hypotheses Testing

4.5.1 Analysis of the effect of strategic implementation practices on organizational performance.

Multiple linear regression analysis was conducted to determine the overall effect of strategic implementation (strategic action planning, strategic consensus, strategic communication, and resource allocation) on organizational performance. The findings are presented in Tables 7, 8 and 9.

Table 7: Regression Results for Strategic Implementation and Organizational Performance

Model Summary:

Predictors: (Constant), Resource Allocation, Strategic Action Planning, Strategic Communication, Strategic Consensus

Table 8: ANOVA Results

Dependent Variable: Organizational Performance b. Predictors: (Constant), Resource Allocation, Strategic Action Planning, Strategic Communication, Strategic Consensus

Table 9: Coefficients Results

Dependent Variable: Organizational Performance

The results in Tables 7 and 8 show that strategic implementation had a positive and significant effect on organizational performance (F (4, 280) = 78.118, p<0.01, R² = 0.528). The R-squared value of 0.528 indicates that strategic implementation explained 52.8% of the variance in organizational performance.

The regression equation is:

Organizational Performance = 0.543 + 0.278 (Strategic Action Planning) + 0.197 (Strategic Consensus) + 0.176 (Strategic Communication) + 0.299 (Resource Allocation)

Results in Table 9, indicate that a unit increase in strategic action planning, strategic consensus, strategic communication, and resource allocation leads to a 0.278, 0.197, 0.176, and 0.299 unit increase in organizational performance, respectively.

The standardized beta coefficients indicate the relative importance of each strategic implementation factor in predicting organizational performance. Resource allocation (β = 0.279) has the greatest impact, followed by strategic action planning (β = 0.258), strategic consensus (β = 0.185), and strategic communication (β = 0.167).

4.5.2 Diagnostic Tests

4.5.2.1 Normality Test

The normality of the data was assessed using the Shapiro-Wilk test. The findings are presented in Table 10.

Table 10: Normality Test Results

The results in Table 10 show that all the variables had p-values greater than 0.05, indicating that the data was normally distributed (Shapiro & Wilk, 1965).

4.5.2.2 Multicollinearity Test

The presence of multicollinearity among the independent variables was assessed using the variance inflation factor (VIF) and tolerance values. The findings are presented in Table 11.

Table 11: Multicollinearity Test Results

The results show that all the independent variables had tolerance values greater than 0.1 and VIF values less than 10, indicating that there was no multicollinearity among the independent variables (Hair et al., 2010).

DISCUSSION OF FINDINGS

The findings of this study demonstrate the importance of strategic implementation in driving organizational performance in commercial banks in the Western Kenya Region. The results are consistent with recent research that has highlighted the role of strategic action planning, strategic consensus, strategic communication, and resource allocation in enhancing organizational performance (Smith & Wang, 2022; Johnson, 2021).

The strong positive effect of resource allocation on organizational performance underscores the need for commercial banks to prioritize the efficient and effective allocation of financial, human, and physical resources in the implementation of their strategies. This finding aligns with the resource-based view (RBV) of the firm, which emphasizes the importance of resources and capabilities in achieving competitive advantage and superior performance (Ngugi & Mwangi, 2022).

The significant effect of strategic action planning on organizational performance highlights the importance of translating strategic goals and objectives into actionable steps and initiatives. This finding supports the work of Brown (2023), who argued that the success of strategy implementation depends on the ability of organizations to effectively operationalize their strategies through detailed action plans.

The positive impact of strategic consensus on organizational performance suggests that commercial banks should foster a shared understanding and commitment to strategic priorities among managers and employees. This finding is consistent with recent work by Green & Carter (2022), who found that strategic consensus enhances organizational performance by aligning the efforts and resources of organizational members toward common goals.

The significant effect of strategic communication on organizational performance underscores the importance of effective communication in the implementation of strategies. This finding recalls the research by Liu (2023), who articulated that clear and consistent communication of strategic goals and initiatives is critical for successful strategy implementation.

Overall, the findings of this study provide empirical evidence of the importance of strategic implementation in driving organizational performance in commercial banks in the Western Kenya Region. The results suggest that commercial banks should adopt a holistic approach to strategic implementation, focusing on strategic action planning, fostering strategic consensus, promoting effective strategic communication, and efficiently allocating resources.

This study contributes to the existing literature on strategic management by providing insights into the relative importance of different strategic implementation factors in the context of commercial banks in a developing country. The findings also have practical implications for managers in commercial banks, highlighting the need to prioritize strategic implementation as a key driver of organizational performance.

However, the study is not without limitations. The focus on commercial banks in the Western Kenya Region may limit the generalizability of the findings to other contexts. Future research could examine the relationships between strategic implementation and organizational performance in other industries and geographical regions.

In conclusion, this study underscores the importance of strategic implementation in driving organizational performance in commercial banks in the Western Kenya Region. The findings provide valuable insights for managers and researchers, emphasizing the need for a holistic approach to strategic implementation that encompasses strategic action planning, strategic consensus, strategic communication, and resource allocation

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

This chapter presents a summary of the key research findings, conclusions drawn from those findings, and recommendations based on the results of the study.

5.2 Summary of Research Findings

5.2.1 Strategic Action Planning and Organizational Performance

The study found that strategic action planning had a positive and significant effect on organizational performance of commercial banks in Western Kenya (β = 0.258, p < 0.001). This indicates that banks with well-defined strategic action planning processes that involve input from stakeholders, consider external factors, align with organizational vision/mission, and include regular reviews tend to perform better. Specifically, a one unit increase in strategic action planning was associated with a 0.278 unit increase in organizational performance.

5.2.2 Strategic Consensus and Organizational Performance

Strategic consensus was found to have a positive and significant effect on organizational performance (β = 0.185, p < 0.01). Banks where managers and employees demonstrate alignment and agreement on strategic priorities and goals tended to have higher performance. A one-unit increase in strategic consensus was associated with a 0.197 unit increase in organizational performance.

5.2.3 Strategic Communication and Organizational Performance

The results showed that strategic communication had a positive and significant effect on organizational performance (β = 0.167, p < 0.01). Banks with clear communication channels, effective information flow, and regular communication about strategies and roles performed better. A one unit increase in strategic communication was linked to a 0.176 unit increase in organizational performance.

5.2.4 Resource Allocation and Organizational Performance

Resource allocation emerged as the strongest predictor of organizational performance among the strategic implementation factors examined (β = 0.279, p < 0.001). Banks that allocated sufficient financial, human, and physical resources to support strategy implementation demonstrated higher performance. A one unit increase in resource allocation was associated with a 0.299 unit increase in organizational performance.

5.3 Conclusions

Based on the findings, the study concludes that strategic implementation has a significant positive influence on organizational performance of commercial banks in Western Kenya.

5.4 Recommendations

5.4.1 Recommendations for Commercial Banks

1. Banks should invest in developing robust strategic action planning processes that involve key stakeholders and translate high-level strategies into specific, measurable actions.
2. Management should focus on building strategic consensus through inclusive strategy formulation, clear goal-setting, and efforts to align understanding across organizational levels.
3. Banks should enhance strategic communication by establishing clear communication channels, promoting two-way information flow, and regularly conveying strategic priorities to all employees.
4. Careful attention should be paid to resource allocation, ensuring that financial, human, and physical resources are properly aligned with strategic priorities.
5. Banks should adopt an integrated approach to strategic implementation that addresses action planning, consensus, communication, and resource allocation holistically.

5.4.2 Recommendations for Policy

1. Regulatory bodies should develop guidelines on best practices for strategic implementation in the banking sector, emphasizing the importance of comprehensive approaches.
2. Policies should be implemented to encourage banks to invest in strategic management capabilities and processes.
3. Regulatory reporting requirements could be expanded to include measures of strategic implementation effectiveness.

Suggestions for Further Research

Investigate potential moderating factors, such as organizational culture or environmental dynamism that may influence the relationship between strategic implementation and performance; explore the role of technology and digital transformation in supporting effective strategic implementation in the banking sector.

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