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INFLUENCE OF STRATEGIC MANAGEMENT PRACTICESON

PERFORMANCE OF COMMERCIAL BANKS IN KENYA

BY

FATMA NDUNG’U MUIRURI

SUPERVISOR: PROFESSOR FRANCIS KIBERA

A RESEARCH PROJECT SUBMITTED IN PARTIAL

FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF

THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION,

SCHOOL OF BUSINESS, UNIVERSITY OF NAIROBI

2017

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DECLARATION

This Research Project is my original work and has not been submitted for a Degree in any other University.

Signed _______________________________ Date_________________________

Fatma Ndung’u Muiruri

D61/75514/2014

This Research Project has been submitted for examination with my approval as the Student’s

University Supervisor.

Signed______________________ Date______________________

Francis N. Kibera, PhD

Professor of Marketing

Department of Business Administration

School of Business

University of Nairobi

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ACKNOWLEDGEMENT

First, I thank the Almighty God, Allah (SWT) for the gift of life and for giving me the

ability, skills and energy to be able to complete this Project. As without Allah, I wouldn’t

have made it thus far.

Secondly, special thanks go to my supervisor, Professor Francis Kibera and my

moderator Professor Martin Ogutu, for providing unlimited, invaluable and active

guidance throughout the study. Their immense command and knowledge of the subject

matter enabled me to appropriately shape this project.

Thirdly, I also thank my mother; Zubeida Mohamed, my brother; Sameer Muiruri, My

Sister; Maryam Njeri together with Marle, Lj, Alune, not forgetting Keanu and my entire

family for their encouragement. Their unwavering support and prayers has finally bore

fruit.

Finally, I owe my immense gratitude to persons’ who in one way or another contributed

towards completion of this project especially Mrs. Mary Wamae; Equity Group Holdings

PLC, Company Secretary & Director Corporate Strategy, Mr. Godfrey Maingi and Mr.

Patrick Nthenge.

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DEDICATION

This work is dedicated to my late father, Paul Ndung’u Muiruri, who instilled in me the

significance and value of education.

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ABSTRACT

The practice of strategic management has gained significance over the years, especially in

the banking industry in Kenya. This is due to the change in both internal and external

environment, the result of which is witnessed through the mergers and acquisitions of

banks in Kenya. It is in light of the forgoing, that this research was undertaken to find out

whether, commercial banks in Kenya practice strategic management and whether, it has

an effect on financial institution. Primary data was collected through questionnaires. The

population was 42 banks out of which 33 banks gave a complete response which

amounted to a feedback per centum of 78%. The study revealed that strategy formulation

process was highly practiced in most banks in Kenya, however the performance of tier

one banks were impeccable due to the implementation process that formulates the full

circle of strategic management practice. The findings portrayed that the banking industry

had been affected in both internal and external environment. Most banks last year alone

have been vastly affected in the change of legal environment that has seen a number of

banks reporting low profitability in their annual financial report. This however, has not

deterred the tier one banks in reporting profits, as they invest in technology and system to

compete with the change in environment. This has shown that strategic management

practice has an influence in the organizational performance. The study has further shown

that there is a need to formulate strategy that would guide the banks to its objectives

based on its resources. In that regard there is need for further research on the influence of

strategic implementation and evaluation process on institutional performance.

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TABLE OF CONTENTS

DECLARATION................................................................................................................................ ii

ACKNOWLEDGEMENT.................................................................................................................. iii

DEDICATION .................................................................................................................................. iv

ABSTRACT ....................................................................................................................................... v

LIST OF TABLES .............................................................................................................................ix

ABBREVIATIONS AND ACRONYMS ............................................................................................... x

CHAPTER ONE: INTRODUCTION .................................................................................................. 1

1.1 Background of the Study ........................................................................................................ 1

1.1.1 Strategic Management Practices ................................................................................... 2

1.1.2 Organizational Performance ......................................................................................... 4

1.1.3 The Banking Industry in Kenya .................................................................................... 4

1.1.4 Commercial Banks in Kenya ........................................................................................ 5

1.2 Research Problem.................................................................................................................. 6

1.3 Research Objectives .............................................................................................................. 8

1.4 Value of Study ...................................................................................................................... 9

CHAPTER TWO: LITERATURE REVIEW ..................................................................................... 10

2.1 Introduction ........................................................................................................................ 10

2.2 Theoretical Foundation ........................................................................................................ 10

2.2.1 Resource-Based View (RBV) ................................................................................... 10

2.2.2 McKinsey 7S Model................................................................................................ 11

2.2.3 Porter's Theory of Competitive Advantage ................................................................. 11

2.3 Evolution of Strategic Management ....................................................................................... 12

2.4 Strategic Management Practices and Organizational Performance.............................................. 14

CHAPTER THREE: RESEARCH METHODOLOGY ...................................................................... 16

3.1 Introduction.............................................................................................................................. 16

3.2 Research Design ....................................................................................................................... 16

3.3 Population of the Study.............................................................................................................. 16

3.4 Data Collection ......................................................................................................................... 16

3.5 Data Analys is ........................................................................................................................... 17

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4.1 Introduction ........................................................................................................................ 18

4.2 Data Analys is ..................................................................................................................... 18

4.3 Findings on the Strategic Formulation Practices of Banks inKenya ............................................ 18

4.3.1 Vision Statement ...................................................................................................... 18

4.3.2 Mission Statement .................................................................................................... 19

4.3.3 Understanding Values ............................................................................................... 20

4.3.4 SWOT Analys is ....................................................................................................... 21

4.3.5 Understanding Issues that Influence the Bank ............................................................... 22

4.3.6 Establishing Long term Objectives ............................................................................. 23

4.3.7 General Strategies .................................................................................................... 24

4.3.8 Selecting Strategies to Pursue..................................................................................... 25

4.4 Strategic Implementation Practices of Banks inKenya .............................................................. 26

4.4.1 Policy Support ........................................................................................................ 26

4.4.2 Financial Capac ity................................................................................................... 27

4.4.3 Motivation and Ownership ....................................................................................... 29

4.4.4 Board Support ........................................................................................................ 30

4.4.5 Organization Structure ............................................................................................. 30

4.4.6 Open to Change ...................................................................................................... 31

4.4.7 Human Resources ................................................................................................... 32

4.5 Performance of Commercial Banks in Kenya .......................................................................... 33

4.6 Discussion of Results .......................................................................................................... 34

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS ................................ 36

5.1 Introduction ........................................................................................................................ 36

5.2 Summary ofFindings............................................................................................................ 36

5.3 Conclusion ......................................................................................................................... 37

5.4 Limitations of theStudy ........................................................................................................ 37

5.5 Recommendations ............................................................................................................... 38

5.6 Further Research ..................................................................................................................... 39

REFERENCES ................................................................................................................................ 40

APPENDICES.................................................................................................................................. 43

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Appendix A: Strategic Management Practices Questionnaire ................................................................... 43

Appendix B: List of Commercial Banks ................................................................................................ 51

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LIST OF TABLES

Table 4.1: Vision

Statement………………………………………………………………..….Error! Bookmark not

defined.9

Table 4.2: Mission Statement………………………………………………………………....29

Table 4.3: Understanding

Values……………………………………………………………...Error! Bookmark not

defined.

Table 4.4: SWOT

Analysis……………………………………………………………………Error! Bookmark not

defined.

Table 4.5: Understanding Issues that Influence the

Bank……………………………………..Error! Bookmark not defined.

Table 4.7: Generate

Strategies………………………………………………………………...Error! Bookmark not

defined.

Table 4.8: Selecting Strategies to Pursue………………………………………………...........34

Table 4.9: Policy Support…......................................................................................................35

Table 4.10: Financial Capacity………………………………………………………………..36

Table 4.11: Motivation and Ownership…………………………………………………….…37

Table 4.12: Board Support……………………………………………………………………38

Table 4.13: Organizational Structure…………………………………………………………39

Table 4.14: Open to Change……………………………………………………………….…40

Table 4.15: Human Resources………………………………………………………………..41

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ABBREVIATIONSAND ACRONYMS

CBK - Central Bank of Kenya

EBKL - Equity Bank (Kenya) Limited

KCB - Kenya Commercial Bank of Kenya

KShs. - Kenya Shillings

GDP - Gross Domestic Product

MFI - Micro Finance Institution

RBV - Resource-Based View

SWOT - Strength Weakness Opportunities and Threat

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CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

Strategic management procedure in an organization assists management in the classification of

immediate actions that must be taken in to consideration on implementation of the organization’s

strategy (Pearce & Robinson, 2008). Setting control process is an ambit of the strategy evaluation

which enables the Organization obtain response in respect to the strategy being implemented and

conclude whether the best results are achieved (Hill & Jones, 2001; Steiner, 1997). Strategy

evaluation and control separates the actual performance of a firm to a desired performance of a

firm.

Competitive market forces, is a double edge sword, it can work in favour of a firm or in its

detriment. Through competitive advantage approach, commercial banks would be able to defend

itself from the competitive forces (Porter, 1980).Numerous essential assumptions are contained in

the competitive forces framework on the basis of the origin of strategy process and competition

(Porter, 1980). The other theory is the resource based theory, this theory observes that

organizations are defined by its resources that enables it to gain strategic advantage over other

firms’ and its unique blend of its assets, skills, intangibles and capability as a firm (Wenefeldt,

1984).

Commercial Banks in Kenya must accentuate on to strategic assessment process with the same

enthusiasm as formulation and implementation as this is the backbone to effective strategic

management process. Banks are to espouse strategic management models that suit their overall

objectives and vision. Hence, the banks are required to use the tools of evaluation such as

Strength Weakness Opportunity and Threats and Political, Environmental, Social, Technological,

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Environmental and Legal analysis that is by incorporating the external and internal factors in its

evaluation.

Strategic management practice is an epitome of any organization successful performance. It is

evident and can be visibly comprehended in blue chip banks such as EBKL and KCB among

other Tier 1 banks that have still managed to report profits during its last financial year results of

2016. This notwithstanding the immense change in the external environment; during the last

financial year 2016 banks have been wavering in a storm of uncertainty in the external

environment. This has seen the collapse of three potent banks that is Chase bank, Dubai Bank

and Imperial Bank. Thus the strategy that EBKL and KCB are able to implement within its

organization has seen it rise above all odds to ensure that it maximizes its profits through

strategic management practices in setting up long-term goals for the organization.

Strategic management practice in every organization is guided by the strategy formulation,

implementation, evaluation and control (Wheelen& Hunger, 2008). Strategy formulation is

important for any organization as it effectively develops long-term plans for the efficient

management of the external or internal environmental opportunities and strength, in the wake of

the corporate strength and weakness (Wheelen& Hunger, 2008).

1.1.1 Strategic Management Practices

The concept of Strategic Management involves making decisions and taking action to envision

the organizations goals and vision (Bakar et al, 2011). Therefore this means that organizations

need to plan ahead taking into consideration the internal and external environmental changes that

may affect the organization’s long-term target. The combination of decisions and action brings

forth formulation and implementation of the organizations objectives (Pearce & Robinson, 2005).

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Competitive position of a firm is viewed through the key strategic management practices that is

planning, implementation, evaluation and control.

Strategy has different meanings in an array of organizations. Among the definitions of strategy as

presented by various authors and jurists of strategic management spanning the years 1962 to 1996

include. The determination of the organization’s long-term objective and goals as result of which

the organization structures an action plan and resource allocation is known as strategy (Chandler,

Jr 1962). Therefore from the definition, it can be deduced that every organization has its own

strategy, the strategy of any organization is intertwined with the enduring objective and goals of

the business. This further extends to the organization’s resource allocation to implement these

goals hence bringing out the means to an end.

The true meaning of strategy has been envisaged by the father of strategy, (Porter,1996), argued

that strategy is about competitive advantage through diversification, by being different and

unique in the organization’s products and services , having a clear and exactable view of how to

position yourself uniquely in your industry. An organization with a strategy is able to survive the

change in the environment whether external or internal. Different strategists have differing

opinion on how to effect a strategy. Kay (2000) argues that gone are the days where strategy is a

mode that depicts planning or visioning but now it is centered on examining its influence in an

organization.

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1.1.2 Organizational Performance

Organizational performance this is the transformation of inputs into output this brings about the

economy, efficiency and effectiveness (Chen &Barnes, 2006).Organization’s success is due to

its performance(Bass &Rigio, 2006; Drucker, 2007).There is lack of unison on the actions to be

used in evaluating the organizational performance (Scott& Davis, 2007).

Organizational performance is streamlined with the company’s objective and goals. It is said that

an organization performance on analysis would reflect its financial performance, market

performance and shareholder value performance. In this study we majorly concentrate on the

influence of strategic management practice on either financial or non-financial performance of

commercial banks in Kenya.

1.1.3 The Banking Industry in Kenya

According to the Central Bank of Kenya (July 2016 report), during the quarter ended 31st March

2016, Kenya’s banking industry currently consist of 42 commercial banks, which were broken

down as follows, 3 Islamic Banks, 1 Home finance company, 12MFI banks, eight foreign banks

representative offices, 86 foreign exchange bureaus, 14 money remittance providers and 3 credit

reference bureaus. In 2016, Real Value Foreign Exchange Bureau was converted to a Money

Remittance Provider leading to a reduction in the number of the Foreign Exchange Bureaus and

an increase in the number of Money Remittance Providers.

Digitization on access to financial services is the principal contributor to increase in financial

inclusion, with Mobile Financial Services (MFS) rising to be the preferred method to access

financial services in 2016. The percentage of the population living within 3 kilometers of a

financial services access point has risen to 77.0% in 2016 from 59.0% in 2013.

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As at 31st March 2016, The Kenyan Banking Sector’s has viewed growth in the asset and loss

of aggregate assets which is at Kenya Shillings 3.6 trillion, with total worth Kenya Shillings 2.4

trillion, while the deposit base was Kenya Shillings 2.6 trillion and profit before tax was Kenya

Shillings 38.4 billion. The period of 2016, customer deposit in bank accounts and loan accounts

stood at KShs. 37,455,795 and KShs. 7,163,560respectively (Central Bank of Kenya, Report for

the quarter ended 31st march 2016, and July 2016).

The figures have drastically varied due to the change of external environment. This has forced

banks to cost cut to stay afloat a volatile banking environment, where the fight of survival has

become imminent and threatens the very essence of subsistence of a bank in the market.

1.1.4 Commercial Banks in Kenya

A commercial bank is a bank that provides transactional, savings, and money market accounts

and that accepts time deposits (Sullivan & Sheffrin, 2003). According to the Central Bank of

Kenya, there are 42 licensed commercial banks in Kenya (see list in appendix B). The

Government and state corporations of Kenya has majority shareholding over 3 banks, private

financial institutions are the majority in the composition. There is an aggregate of 27 local and 13

foreign commercial banks in Kenya out of the private financial institution.

Banks, play a pivotal role in the country. They impact on financial deepening and economic

growth of the country through financial empowerment to investors and businesses. It can

therefore be said that commercial banks are key in its role in the economic sector. In the past two

decades, numerous strategic decisions have made in the financial sector industry. For instance,

there have been 33 mergers in the industry since 1989 with the recent one being the merger

between Equatorial Commercial Bank and Southern Credit Banking Corporation in June 2010

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(Central Bank of Kenya, 2012). There have also been numerous acquisitions since 2000 with the

acquisition of EABS Bank Ltd by Ecobank Kenya Ltd in June 2008 (Central Bank of Kenya,

2012), SBM Holdings acquired Fidelity Commercial Bank in November, 2016, Mwalimu

SACCO acquired Equatorial Commercial Bank in March 2015, Centum acquired K-Rep Bank in

July, 2014and GT Bank acquired Fina Bank Group in November, 2013 (Cytonn, 2017).

Reasons for strategic decisions are as follows: to meet the increased levels of share capital as

prescribed due to the change in the legal environment; expand distribution network and market

share to create market security; and to benefit from best global practices among others. This

study is done in the context of the banking industry in Kenya. Banks play a significant role in

Kenya’s economy. With intense competition in the industry, there’s always need for banks to be

strategically positioned to effectively compete in the market. This has seen several unifications

and acquisitions take place in the banking industry in Kenya as mode of positioning themselves

to compete in the industry.

1.2 Research Problem

Strategic management is the process of comprehending the organizations objectives and goals by

bring into line its internal capabilities with its external demands of its environment. An

organization’s strategy is said to be the stratagem to achievement of its objectives. Without a

strategy, an organization is like a ship without a rudder, going around in circles.

There are a number of influencers of strategic management practice in organizations, majorly the

change in the internal and external environment. The banking industry in Kenya has been the

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epicenter of the change in the external environment over the years; hence the strategic

management practice in banks has gained latitude in the recent years. Most organizations in the

last century dedicated on futuristic planning, wagering that the business environment remains

stable for a longer duration thereby paving way for organization to plan for the long whole.

Nowadays, such planning is deemed disastrous, as the internal and external environment changes

spontaneously; therefore the plans should be guided by a strategy that includes exigency planning

(Edirisinghe, 2008).

Strategic management is a vital concept to commercial banks. Branded by extreme struggle for

customers in the industry, it necessitated banks to be wary of the change in trends and prospects

in their external environment as shifts always occur. The banking industry has shown a

significant growth during the first half of 2012 (Central Bank of Kenya, 2012). The financial

sector in Kenya has experienced a transformation in the market, this is due to competition

through introduction of new products and services being a ripple effect from globalization and

adoption of new technologies. This has in turn brought about tremendous growth in the industry.

Therefore, exploring the current strategic management practices of commercial banks in Kenya

in relation to the internal and external factors that influence such practices was tremendously

important to determine the performance.

The banking industry has become volatile as a result of the changing external environment. It can

be noticed that banks are disheveled with compromises to keep up in the market. The financial

performance of tier three banks is quite unfortunate not to mention the first tier and second tear

has announced a colossal reduction of profit compared to previous years.

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A number of studies have been done on strategic management practices in other industries other

than the banking industry in Kenya (Kangoro, 1998; Ligare, 2010; Ngatia, 2011; Kariuki, 2011;

Riungu, 2008). A few examples of studies on commercial banks in Kenya include Njoroge

(2007), Mungai (2007), Wamalwa (2008), Wambugu (2008), Otieno (2010),Ondieki (2011),

Kakunu (2012), Abdi (2014). Despite the numerous studies on strategic management practices,

the banking industry has been largely neglected as only Riungu (2008), Kakunu (2012) and Abdi

(2014) attempted to study the same. Further, very few studies exist in the financial sector as there

is only one other study by Maina (2009) in insurance sector. This also suffers the same

shortcoming as that of Riungu (2008) as it was carried out as a case study. It is also worthy to

acknowledge the fact that most of the studies on the same in other industries have followed the

same methodology of case studies. There is therefore a need to carry out a survey of the banking

sector.

This study sought to find out whether strategic management is practiced in commercial Banks in

Kenya. Furthermore, it pursued to show whether the strategic management practices influence the

results of the commercial banks in Kenya.

1.3 Research Objectives

The objectives of the study are:

i. Identify the current strategic management practices among commercial banks in

Kenya; and

ii. Determine the influence of strategic management practices on performance of

commercial banks in Kenya.

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1.4 Value of Study

This study enlightens organizations the importance of strategic management in an organization. It

will provide the different strategic means that the Bank may engage in to be able to combat the

change in environment. Commercial banks can make improvement in their strategy as well as

increase their performance in an uncertain market; through combating the change internal and

external environment.

Researchers and academicians will find this study extensive and detailed guide for understanding

the significance of strategic management practice. This can offer informative process to

appreciate the significance of strategic management practice, due to the changing environment

this study is recommended in future.

This would benefit researchers and academician in understanding the value of strategic

management in organizations performance that is in both financial and non-financial.

Organization would benefit from this study in understanding what form of strategic management

practices that is adopted by banking institution in Kenya.

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CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction

This chapter assesses the literature on strategic management practice. First, theories related to

the concept of strategic management practices are reviewed. Thereafter, a review of the evolution

of strategic management and finally understanding the impact of strategic management practice

on performance of commercial banks in Kenya.

2.2 Theoretical Foundation

A number of theories have been used to define the development of strategic management. The

following theories expound the different stages of strategic management process that is from

strategy formulation to its implementation and thereafter to its evaluation. Brief literature will be

used to explain the theories, which has shaped this study.

2.2.1 Resource-Based View (RBV)

This theory, underpins that an organization or firm rise above the rest of the other firms due to its

unique attribute that makes it attractive in the market, that is an organization is known for its

resources.

Therefore a firm is defined by its resources that give it a competitive advantage above the rest in

the firms in the market (Pearce & Robinson, 2007).

Inordinately it follows that the firms resources, is a critical factor in strategy formulation and

implementation. In order for the firm to obtain direction it ought to have an appreciation on what

are its best resources that would enable them to compete with other industry player. The market

is always in search of firms that offer the highest quality product with an efficient service. Due to

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a firm’s investment in superior technology and finest structure enables the firm reach impeccable

heights of profitability.

Therefore for an organization to establish its strategy, it ought to put in mind the resources of the

organization that makes it unique and able to compete in the market.

2.2.2 McKinsey 7S Model

McKinsey’s 7S Model is a famous model used by organizations to give seven variables that all

start with letter “S” that is structure, strategy, staff, style, skills, system and shared values

(McKinsey &Company, 1980s). These combined enable the firm formulate strategy and

thereafter implement.

Strategy is defined as a plan of action that gives direction to the firm. The structure on the other

hand is organogram of a firm; this is to enable the firm to acknowledge the hierarchy in a firm.it

is pertinent to involve strategy formulation top down. To ensure that the staff are involved the

strategy formulation process.

This would enable the strategy to be implemented, noting that the sense of involvement in the

formulation process. The way the Managers use strategy to achieve their goals this demonstrates

the style, this encompasses the cultural style of an organization.

If an organization instils the 7S model in its strategy formulation process, this will have a great

influence on the performance of any organization or firm.

2.2.3 Porter's Theory of Competitive Advantage

The well renowned theory of competitive advantage that is used significantly in most

organizations’ strategy formulation was incepted by Porter (1980). The theory of competitive

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advantage, allow an organization to compete with the other industries. This is noting that the

organization has acquired a set of unique attributes that allows it to gain advantage over and

above other organization that offer the same services or product in the market.

An organization can gain competitive advantage through its technological advancement, which

enhances its attractiveness in the market. Noting that there is a number of competitive market

sources that would block an organization to compete.

The industry structure determines the market and where the organization can compete. The

competitive forces model, that is five forces, entry barriers, bargaining power of suppliers, threat

of substitution, bargaining power of buyers and enmity among industry players this define the

profitability of an industry.

2.3 Evolution of Strategic Management

Business operations and planning lacked foresight in the early 1800s (Bourgeois, 1996). In

Kenya prior to Kenya’s independence in 1963, there was a central currency board for the East

African countries that is the East African Currency Board proposed the establishment of an East

African Central Bank which its main function was to act to as the banker to the governments.

Since then the Banking industry in Kenya has flourished, with extensive competition and

innovation to enable Banks ensure its survival in the market.

Strategic Management principles were incepted between the 1950s and 1960s. Initial to the

1950s, strategy was only synonymous in matters of war and politics not organizations

business. Many Banks initiated strategic planning in the 1960s. Different authors had their own

definition of strategic management.

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Pearce II and Robinson (2002) viewed strategic management as decision and actions of an

organization that results in preparation and application of strategies that are structured to

accomplish the goals and objective of the organization.

Strategy is the determination of the organizations long term and short term goals (Chandler,

1962).The rule for decision making, that is brought about by a market scope, competitive

advantage and growth trajectory is Strategy (Ansoff, 1965).

In 1980s Porter’s model of competitive analysis and set of generic strategies and the concept of

value chain dominated the area of strategic management. This brought about introduction of the

model of five competitive forces in a company’s environment that influence competition such as

threat of new entrants, bargaining power of firm’s suppliers and customers, threats of substitute’s

products and intensity of rivalry among competing firms. Furthermore, Porter (1985) brought

about the value chain model in the operation of organization, which introduce competitive

advantage in an organization.

Therefore, commercial banks should understand that there is more to strategy than positioning the

firm against its competitors.

Prahalad and Hamel (1990) define the core competences as “the collective learning in the

organization, especially how to coordinate diverse production skills and integrate multiple

streams of technologies”. Both the industry analysis and the resource based view analysis only

provide static analysis of the organization’s current position and do not concentrate much on the

future external environmental trends (Hubbard, 2000). In the late 1980’s Globalization and

technological developments has led to changing business environments for the organization in the

globe and hence organizations had to think on their feet to combat the change.

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Mintzberg (1987) always a big fan of organizational learning asserts that strategy is cautious and

embryonic, and cautious strategy focuses on control while embryonic strategy focuses on

learning. Mintzberg praises the value of embryonic strategy because it paves way for strategic

learning of the company and it also puts the organization’s ability to test (Mintzberg et al, 1998,

p189). Nonaka and Takeuchi (1995) define organizational learning as knowledge creation and

propose four modes of knowledge conversions in a company. The major purpose of

organizational learning is to successfully face future environmental changes and therefore, most

of the strategists view of the strategic management practice as a thought made process rather than

a planning process (Mintzberg, 1987).

In 1990’s prominent writers in the strategic management literature field comprised of two focal

classifications of what was perceived as strategy, specifically the “strategic planning” and the

“strategic thinking” approaches. However, (Heracleous, 1998) identifies the number of different

ways that the various authors use the terms of strategic development or planning and strategic

thinking. Liedtka (1998) highlights the importance of strategic planning systems for a company

to provide a corset for personnel to undertake strategic thinking. Companies are known to have

strategic planning systems further fortified the strategic thinking competence inside it.

2.4 Strategic Management Practices and Organizational Performance

Strategic management practice is a mode of examining the current and future environments and

formulating and implementing and controlling decisions absorbed on achieving the

organization’s goals and objective in the changing environment (Adeleke et al. 2008).Strategic

management practice is the procedure where the management establish performance objectives

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and future direction of the organization in the wake of internal and external change in the

environment and execute the selected action plans(Thompson &Strickland, 2003).

Environmental scanning is depicted as a procedure of accumulating, analyzing and furnishing the

results with the aim of formulation of strategy (Thompson &Strickland, 2003).

Strategy formulation is method of selecting the paramount direction in realizing the

organization’s goals and objective (Thompson & Strickland, 2003).

Environmental scanning is tracked by formulation of corporate and operational strategy.

Thompson and Strickland, (2003), viewed strategy implementation, denotes putting the

formulated strategy into action. Lastly the vital step of strategy evaluation activities comprises of

reviewing internal and external factors that are the source of present strategies, determining

performance, and putting in consideration the counter active action(Thompson & Strickland,

2003). Evaluation ensures that the organization strategy is well implemented and attains the

organizational objective.

Abu-Bakar, Tufail, Yusof, and Virgiyanti (2011) pursued a study on practice of strategic

management in companies. The study’s findings brought out the connection between the strategic

practice and the financial performance indicators.

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CHAPTER THREE: RESEARCH METHODOLOGY

3.1Introduction

This chapter will highlight and define the approaches that are applied in the collection of data

vital in ascertaining the research questions. It is outlined as below.

3.2Research Design

The study used a descriptive survey. This design is preferred to other research designs since it is

the most commonly used form of survey design when data is to be collected at one point in time

across many firms. During the surveys a group of respondents was asked a set of questions at one

point in time.

3.3Population of the Study

The population of this study will comprised the analysis of all the 42 licensed commercial banks

in Kenya.

These commercial banks are licensed and regulated by the Central Bank of Kenya. Moreover the

stated commercial banks conduct banking business as prescribed under the banking Act cap. 488

of the laws of Kenya and guided by the central bank prudential guidelines 2013.

3.4Data Collection

Primary data was collected through questionnaires. The respondents’ are Directors of corporate

strategy in each of the 42 commercial banks in Kenya. The questionnaires were administered

using email method to the bank General Managers. This method was considered appropriate

because it was less time consuming and less costly too on the part of the researcher and it had

been used by other scholars to administer questionnaires to respondent. Given that all the banks

have email addresses, it was easier to email them the questionnaires. Late responder’s were called

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by phone to ensure that they respond within appropriate times. The questionnaires are checked

for reliability using split half method.

A structured questionnaire was use for data collection. According to Mugenda and Mugenda

(2006), questionnaires give detailed answer to complex problems. Additionally, questionnaires

are also a popular method for data collection in deduction because of the relative ease and cost-

effectiveness with which they are constructed and administered. While Secondary data was

obtained mainly from audited and unaudited financial statements, library books, journals, and

magazines, the internet and appropriate literature of previous studies.

3.5Data Analysis

Once feedback had been received, the completed questionnaires were sorted to select the properly

filled forms. This ensures completeness and consistency, in order to fulfil objectives, a

descriptive analysis was employed.

Descriptive statistics such as mean, standard deviation and coefficient variance was used in

analysis of data to identify the existence and relationship between strategic management practices

among financial institutions in Kenya and its influence.

The feedback from the questionnaires were sorted into sets and entered in the Statistical Package

for the Social Sciences software to facilitate analysis using descriptive statistics.

18

CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSION

4.1 Introduction

This chapter represents the analysis, interpretation and results of the study. The data was

collected through primary and secondary sources on a population of 42 banks. The data was

analysed through quantitative and descriptive analysis based on the performance of the 42 banks.

4.2 Data Analysis

Questionnaires were used to collect the primary data which were disseminated to all the 42

commercial banks in Kenya. The respondents were bank General Managers administered using

email method. Out of the 42 commercial banks, the successful responses obtained were from 33

which represents 78 % response rate. It is stated above 70% response rate was more than

sufficient to proceed with data analysis (Mugenda & Mugenda, 2003).

The secondary data was collected through the 42 bank’s financial statements exhibiting the

performance of the banks in relation to their strategy. The collected data from the 33 banks was

then coded and entered into the SPSS version20. The descriptive stat istics especially mean and

standard deviations were then used to perform the analysis. The results are presented and

interpreted here below.

4.3 Findings on the Strategic Formulation Practices of Banks in Kenya

4.3.1 Vision Statement

The respondents had been asked to indicate the extent of the Strategic Formulation Practices

of Banks in Kenya in terms of Vision statement by using a Likert scale ranging from 1-10.

19

The relevant responses are summarized in Table 4.1

Table 4.1: Vision Statement

Vision Statement

Mean SD

Coefficient

of variation

Your bank have a vision statement 10.0 0.000 0.0000

Last updating of the vision statement 5.32 1.012 0.1902

Relevance of the vision statement to the bank’s activities

and mandate 8.63 0.145 0.0168

Source: Primary Data (2017)

The findings in Table 4.1 revealed that all the banks surveyed had articulated vision

statements. Most of the banks had also updated their vision statements in the last 5 years.

Most of the respondents also agreed that the vision statements were relevant to the core

activities and mandates of the banks as shown by the mean of 8.63.

4.3.2 Mission Statement

Further, the respondents were asked to indicate the extent of the Strategic Formulation Practices

of banks in Kenya with Mission statement. Their responses are summarized in Table 4.2

Table 4.2: Mission Statement

Mission Statement

Mean SD

Coefficient of

variation

Development of bank mission statement 10.0 0.000 0.0000

When mission statement was last updated 5.48 0.415 0.0757

Rate your Banks’ mission statement correlates with 8.95 0.152 0.0170

20

the institution’s business

Participation rating in developing the mission

statement by the employees 6.15 1.253 0.2037


statement by the managers 8.94 1.115 0.1247


statement by the board of directors 7.14 1.632 0.2286


The results in Table 4.2 indicate that all the banks had developed mission statements as shown

by the mean of 10. The mission statements were last updated in the last 5 years. The

respondents agreed that the mission statements were compatible with the activities carried out

by the banks as shown by the mean of 8.95. On the level of participation in the development

of mission statements, it was noted that managers were the most involved (mean of 8.94)

followed by the board of directors (mean of 7.14) and lastly the employees (mean of 6.15).

4.3.3 Understanding Values

With regard to understanding values, 93.2% (mean score=9.66) of the respondents agreed that the

bank’s value statements are well understood by the employees. Table 4.3 presents the results.

Table 4.3: Understanding Values

Understanding Values

Mean SD

Coefficient

of variation

Definition of the bank’s set of value statements 9.56 0.032 0.0033

21

When were they last updated of discussed formally? 4.25 1.260 0.2965

Rating of understanding of the bank’s value statements

by the employees 9.66 0.011 0.0011


by the managers 9.47 0.214 0.0226


by the board of directors 8.52 0.415 0.0487


The results in Table 4.3 show that the respondents agreed that the banks had defined set of

value statements as shown by the mean of 9.56. These value statements were last updated in

the last 4.25 years. The respondents were of the opinion that the employees understood the

bank value statements better (mean of 9.66) followed by the managers (mean of 9.47) and

finally the board of directors (mean of 8.52).

4.3.4 SWOT Analysis

Further, the study pursued to examine the extent to which their bank used each of the following

ways to respond to SWOT Analysis. The relevant responses are summarized in Table 4.4.

Table 4.4: SWOT Analysis

SWOT

Mean SD

Coefficient

of variation

Conducting of the SWOT analysis bank 10.0 0.000 0.0000

Competencies rating of your bank to conduct a SWOT 8.45 1.224 0.1449

22

analysis

Priority rating of your bank places on the SWOT analysis

process 8.15 1.785 0.2190

Importance rating of the SWOT analysis process to the

effective operation of your bank 8.81 1.286 0.1460

Is a SWOT analysis employed when dealing with

significant issues outside of strategic planning 6.41 2.145 0.3346


The results in Table 4.4 revealed that all the banks surveyed had conducted a SWOT analysis

(mean score=10). The results further show that most of the respondents regarded their banks as

being very competent in conducting SWOT analysis (mean score= 8.45). When the respondents

were asked to indicate their agreement that banks placed a higher priority on the SWOT analysis

process, majority answered in the affirmative (mean score=8.15). Further, the results revealed

that the SWOT analysis process was important in effective operation of the banks (mean

score=8.81).

4.3.5 Understanding Issues that Influence the Bank

On understanding issues that influence the Bank, the respondents had been requested to indicate

the extent at which their banks embraces factors that influence them. The results are contained in

Table 4.5.

23

Table 4.5: Understanding Issues that Influence the Bank

Understanding Issues that Influence the Bank

Mean SD

Coefficient of

variation

Employees’ articulation of issues that influence the

bank? 7.15 1.152 0.1611

Board of directors’ articulation of issues that influence

the bank?

8.56 0.0045 0.0005

Executive directors’ articulation of issues that influence

the bank?

9.12 0.045 0.0049

Managers’ articulation of issues that influence the

bank?

9.04 0.051 0.0056

Bank’s action/ decision to issues that influence it? 7.12 1.612 0.2264


As shown in Table 4.5 the study found that the executive directors were rated as having the

highest understanding (mean of 9.12) followed by the managers (mean of 9.04) then the board

of directors (mean of 8.56) and finally the employees (mean of 7.15). Further the study

established that the banks had a higher attention to issues that influence them (mean score=

7.12).

4.3.6 Establishing Long term Objectives

The respondents were also requested to indicate the extent of the establishment of long term

objectives in the bank. The relevant results are presented in Table 4.6.

24

Table 4.6: Establishing Long-Term Objectives

Establishing Long-Term Objectives

Mean SD

Coefficient of

variation

Establishment of the Bank’s long term objectives? 10.0 0.000 0.0000

What is the degree of importance for your bank in instituting

long-term objectives? 9.47 0.031 0.0033


The findings in Table 4.6 revealed that all the banks had established long-term (mean

score=10). The study also found out that it was very important for banks to establish long-

term objectives (mean score= 9.47).

4.3.7 General Strategies

In terms of the General Strategies of the bank’s success, the respondents gave out the responses

as indicated in Table 4.7.

Table 4.7: Generate Strategies

Generate Strategies

Mean SD

Coefficient of

variation

Rate your bank’s success/practice of generating

strategies to deal with issues.

7.14 1.521 0.2130

How important is it to generate strategies to deal with 9.62 0.112 0.0116

25

issues for your bank?


The results in Table 4.7 indicate that most of the banks were successful in generating

strategies to deal with the issues that affect the banks (mean score=7.14). It was also noted

that it was very important for the banks to generate strategies that deal with issues.

4.3.8 Selecting Strategies to Pursue

Further, the study established the following ways banks use to select strategies to pursue. The

relevant responses are summarized in Table 4.8.

Table 4.8: Selecting Strategies to Pursue

Selecting Strategies to Pursue

Mean SD

Coefficient

of

variation

Are strategies selected by your bank to address issues that

confront it? 8.94 1.081 0.1209

What is the rate of significance of selection of strategic

solutions to address your bank’s issues?

7.65 1.184 0.1548

What is the rate of the managers’ articulation of issues that

affect the bank?

9.04 0.051 0.0056

Relative to the decision making process, how would you

rate your bank’s attention to issues that influence the

bank?

7.12 1.612 0.2264


The study results in Table 4.8 indicate that most of the banks selected strategies to address

issues that confront the banks (mean score=8.94. The study further found that the banks

considered selecting strategies to address issues that confront the bank as important (mean

26

score=7.65).

4.4 Strategic Implementation Practices of Banks in Kenya

The researcher sought to investigate the extent of the strategic implementation practices of banks

in Kenya by using a Likert scale between 1 and 10. The results are presented in the Sections 4.4.1

to 4.4.7 below.

4.4.1 Policy Support

The study sought to investigate the implementation of the policies in the Kenyan banks. The

results are presented in Table 4.9.

Table 4.9: Policy Support

Policy Support Mean SD

Coefficient

of variation

Maintenance of the policy manual by the bank 10.0 0.000 0.0000

Are bank policies updated on a regular basis? 5.82 2.453 0.4215

Relevance of your bank’s policies to current bank activities? 7.41 2.164 0.2920

Understanding and support to formal policy development and

implementation by the employees

3.14 1.152 0.3669

What is the rate of board of directors’ articulation and

acceptance to formal policy development and implementation? 5.10 2.145 0.4206

What is the rate of executive directors’ articulation and

acceptance to formal policy development and implementation? 6.45 2.154 0.3340


27

The findings in Table 4.9 show that all the banks maintained policy manuals (mean score=10)

and that the banks updated last their policies 5 years ago (mean score=5.82). Further, the results

indicated the bank policies to their activities as relevant (mean score=7.41). In terms of the rating

on the understanding and support to formal policy development and implementation was ranked

the lowest (mean score=3.14).

4.4.2 Financial Capacity

On the strategic implementation of the financial capacities in the Kenyan banks, the respondents

gave the results as abridged in Table 4.10.

Table 4.10: Financial Capacity

Financial Capacity Mean SD

Coefficient

of variation

Bank’s financial capacity to implement strategies. 8.12 0.141 0.0174

Commitment of the bank to provide financial resources to

support the implementation of strategic initiatives by the board of

directors

7.69 0.331 0.0430


The results in Table 4.10 found that most of the banks had the financial capacity to implement

strategies as indicated by the mean of 8.12. The results also showed that there was a high

commitment by the board of directors of various commercial banks to provide financial resources

to support the implementation of strategic initiatives.

29

4.4.3 Motivation and Ownership

With regard to motivation and ownership as a strategic implementation practice in the Kenyan

banks, the rated their opinions as indicated in Table 4.11.

Table 4.11: Motivation and Ownership

Motivation and Ownership Mean SD

Coefficient

of variation

What is the rate of board of directors’ motivation to maintain and

support the implementation of strategic initiatives?

6.31 1.451 0.2300

Rate the motivation to maintain and support the implementation

of strategic initiatives by the staff 7.12 2.115 0.2971

Rate the “ownership” taken to the implement strategic initiatives

by the staff

4.62 1.745 0.3777

What is the Rate of “ownership” the board of directors’ take to

implement strategic initiatives? 5.41 2.312 0.4274

What is the Rate of “ownership” the executive directors’ take to

implement strategic initiatives?

6.33 2.201 0.3477


The results in Table 4.11 reveal that the board and the staff were highly motivated to maintain

and support the implementation of strategic initiatives (mean of 6.31 and 7.12 respectively). On

the ownership to implement strategic initiatives, executive directors were rated high (6.33)

followed by the board (5.41) and finally the staff (4.62).

30

4.4.4 Board Support

In terms of board support the respondents indicated that the board in most banks was highly

committed in implementing strategic initiatives (8.71). Further, the board performed well in

terms of delivery of support to implementation of strategic initiatives. Table 4.12 summarizes the

results.

Table 4.12: Board Support

Board Support Mean SD

Coefficient

of variation

What is the rate of board’s pledge and sustenance to the

application of strategic initiatives? 8.71 1.951 0.2240

What is the rate of your Board performance to the delivery of

support of strategic initiatives?

8.94 1.012 0.1132


4.4.5 Organization Structure

Respondents were further requested to rate the implementation of the organization structure. The

results are tabulated in Table 4.13.

31

Table 4.13: Organizational Structure

Organizational Structure Mean SD

Coefficient

of variation

What is the rate of suitability of bank’s current structure in the

sustenance of operation of strategic initiatives? 6.95 2.115 0.3043

What is the rate the efficiency of your bank’s current governance

model in the operation of the strategic initiatives? 6.02 1.045 0.1736


The findings in Table 4.13 indicate that the current structure of banks was moderately appropriate

(6.95) to support the implementation of strategic initiatives.

4.4.6 Open to Change

The respondents were also requested the rate the extent of “open to change” as a strategic

implementation practice in the Kenyan Banks. Their relevant results are presented in Table 4.14.

Table 4.14: Open to Change

Open to Change Mean SD

Coefficient

of variation

Bank’s readiness for organizational change. 7.44 1.302 0.1750

Willingness to accept and implement change by the staff 6.12 1.331 0.2175

Willingness to accept and implement change by the board 7.66 1.512 0.1974

Willingness to accept and implement change by the executive

Directors

8.46 1.452 0.1716


32

As discernible in Table 4.14, the respondents rated to a great extent “willingness to accept and

implement change by the executive Directors” (mean score=8.46), followed by “willingness to

accept and implement change by the board” (mean score=7.66). The results further reveal that all

the mean scores were over 6.00 on a scale of 1 to 10. This meant that the banks embraced open to

change factors that improve effectiveness.

4.4.7 Human Resources

The respondents were finally asked rate the extent of how human resources as a strategic

implementation practice was been implemented in their banks. The pertinent results are

summarized in Table 4.15.

Table 4.15: Human Resources

Human Resources Mean SD

Coefficient

of variation

What is the rate of the bank’s human resource ability to manage

and put to operation variation? 7.41 1.365 0.1842

Rate the competencies of your bank staff to plan, manage and

implement strategic initiatives?

7.12 2.144 0.3011

(Primary data, 2017)

The results in Table 4.15 revealed that most of the banks had prepared for organizational change

(mean score=7.44) and that the executive directors were most willing to accept and implement

change (mean score=8.46) followed by the board (mean core=7.66), and lastly the staff (mean

score=6.12).

33

4.5 Performance of Commercial Banks in Kenya

The results of the coefficient variation in Table 4.1 and 4.15, it indicate a relationship between

strategic management practice and performance of the organization.

The study found that most of the banks’ human resources were capable of managing and

implementing change process to achieve performance. It was also revealed that most of the bank

staff was competent in planning, managing, and implementing strategic initiatives.

The study found that the respondents highly rated their banks practices on evaluation of strategic

initiatives. The banks’ performance in communicating assessment results to the board was ranked

very high followed by communication to the shareholders and finally to the

auditors/public/others. The study found that the banks were moderately successful at identifying

corrective action when strategic initiatives are failing or could be improved.

The banks were also moderately effective at evaluating the impact of changes subsequent to

initial strategy formulation. The level of participation in strategy evaluation was highest for the

executive directors followed by the management and lowest for the board.

The study found that the level of attention paid to abandoning, adjusting or developing new

strategies subsequent to evaluation of the initial strategies was highest for the executive directors

followed by the management and lowest for the board.

The study found that most of the banks considered the strategic management model relevant and

suitable. The respondents considered their boards were moderately committed to strategic

management as the model of choice while the management of banks were highly committed to

the models. The performance of banks with effective strategic management practice was

34

exemplary especially if there is a lot of commitment from the board.

4.6 Discussion of Results

This study intended to determine whether strategic management practice has an influence in

the commercial bank’s performance.

The results show that there was more emphasis on strategy formulation in commercial banks

in Kenya. Literature confirms that strategy formulation in firms are pertinent in the bank’s

performance.

Greatest number of firms practicing strategic management, had an objective, a watertight

strategy that was established to achieve the objective and a comprehensive vision statement to

lead the firms’ accomplishment of its objective Abu-Bakar et al (2011).

Most organization have a vision and mission statement which formulated as the epitome of

any organization performance towards its objective Ogolla (2007).

As recent as 2016 and 2017 two regulations have been introduced to banks, this has utmost

effect in the financial results of commercial banks in Kenya. The change in the legal

environment has been introduced that through the introduction of interest capping which has

seen bank’s lending rate not above 4% of the Central Bank Rate which is determined by the

monetary policy committee. Furthermore the institution of IFRS9 as a reporting standard for

bank, has caused a stir in the market that would eventually see bank’s merging as the cost of

financing has shot upwards, this has an effect on the economy of the country.

The study also noted that a number of factors influenced the practice of strategic management

in commercial banks in Kenya.

Through the questionnaires and the review of the bank’s financial statements has shown that

35

most of the well performing banks have a strategy in place, mission, vision and values that stir

the organization to success. There is however need of implementation and evaluation of the

strategy to obtain greater results in organization.

36

CHAPTER FIVE: SUMMARY, CONCLUSION AND

RECOMMENDATIONS

5.1 Introduction

This chapter presents a synopsis of the data collected and analysis. This will depict the

summary of the analysis of the data collected, the limitation found in the study, conclusion of

the data collected and recommendation of the study.

5.2 Summary of Findings

The population of the study was 42 banks out of the said number of banks, 33 banks gave a

complete response. Questionnaires were used to collect data, this was administered to General

Managers in strategy, through emails which gave a response rate of 78%, which is depicted as

a good response to proceed with the study. This gave the descriptive, correlation and

regression analysis.

The study pursued to achieve two objectives: to identify the current strategic management

practices; and to identify factors that influence the banks strategic management practices in

Kenya. This was a descriptive study. The population was 43 banks and the response was from

33 banks giving a response rate of 77%. Primary data was co llected in the study using

questionnaires administered to general managers using email. Descriptive analysis through

mean, standard deviation and coefficient variation method was used to analyses the data

collected.

The study established that strategy formulation had a mean of 8.26 which was the highest this

37

being an analysis for 33 banks in Kenya. This finding shows that most commercial banks, rely

heavily on strategy formulation. This translated well in the financial performance of

commercial banks with a proper strategy formulation. Most tier one banks, had revealed they

have very strong strategy formulation that guide them to a successful financial results for the

banks. That is evident in the return on asset and return on equity, thereby maximizing the

profit of the banks.

5.3 Conclusion

The study concludes that strategic management practice has an influence in the bank’s

performance. Most commercial banks in Kenya were in the forefront of strategy formulation,

this is due to the change in environment of commercial banks in Kenya. The strategy,

provides commercial banks with direction and guides them to its objective. However strategy

formulation is not the end, rather implementation and evaluation to ensure that the firm gives

its highest performance.

It was noted that the tier one banks, with advanced strategy formulation had a high profitable

performance.

In light of the changing environment, most banks are open to strategy formulation to enable it

survive in the competitive environment. Therefore strategic management practice is an

important tool for organizational subsistence, to ensure stability in the firms’ performance.

5.4 Limitations of the Study

The research was solely based on commercial banks in Kenya. Therefore the results are

limited to banks rather than other financial institutions such as SME’s, MFI’s among other,

38

hence one is unable to obtain the impact of the strategic management practice on financial

institutions as a whole. It is pertinent to note that this study should not be used to give the

overview of all other financial institution.

The results of the study were administered from a questionnaire with a set of structured

questions. This form of data collection has a likelihood of obtaining a biased response from

the respondents. Hence, the response to the questionnaire is not absolute.

The research was specifically on strategic management practice and its effect in the

performance of commercial banks in Kenya. Therefore the results of the study are limited to

the strategic management practice and its performance in commercial banks in Kenya and not

any other concept.

5.5 Recommendations

The study recommends that commercial banks in Kenya should ensure to have a strong and

water tight strategy formulation to drive the objective of the bank.

The financial statements of the banks in Kenya depict tier one banks with better financial

performance than other tier 2 and 3 banks. It was viewed from the analysis that the tier one

banks had advanced strategy formulation compared to the tier 2 and tier 3 banks. Commercial

banks in Kenya need to adopt strategy formulation that is in line with the objective of the

bank that will offer direction to the bank to achieve its goals. Thereafter the Banks will

achieve high financial performance. The need to put up policies that shall be par t of the

strategy formulation provides an essential component in the results of banks.

There is need for commercial banks to understand and adopt model of strategy formulation

39

that would drive it implement the strategy in the event of change in both internal and external

environment.

5.6 Further Research

Based on the study, it is recommended that further research should be explored on the

influence of strategic implementation and evaluation process on performance of commercial

banks in Kenya. Implementation and evaluation being a vital process in strategic management

practice, as most banks have neglected implementation and evaluation process.

40

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43

APPENDICES

Appendix A: Strategic Management Practices Questionnaire

1.1 Vision Statement

Does your bank have a vision statement?

(10 -if YES 1 -if NO)

1

2

3

4

5

6

7

8

9

10

Last update of the vision statement? (10 - if in the

last year, 9 - if in the last 2 years, etc.)

1

2

3

4

5

6

7

8

9

10

Relevance of the vision statement to the bank’s

activities and mandate? (10 -for very relevant 1

-not relevant at all)

1

2

3

4

5

6

7

8

9

10

44

1.2 Mission Statement

Rate development of bank mission statement? (10

-if YES 1 - if NO)

1

2

3

4

5

6

7

8

9

10

Last update of the mission statement was last

updated? (10 - if in the last year, 9 - if in the last 2

years, etc.)

1

2

3

4

5

6

7

8

9

10

Rate your Banks’ mission statement if it

correlates with the institution’s business? (10 - if

YES 1 - if NO)

1

2

3

4

5

6

7

8

9

10


statement by the:

(10 -very involved 1 -not involved at all)

1

2

3

4

5

6

7

8

9

10

Employees

1

2

3

4

5

6

7

8

9

10

Managers 1 2 3 4 5 6 7 8 9 10

Board of Directors 1 2 3 4 5 6 7 8 9 10

45

1.3Understanding Values

Definition of the bank’s set of value statements

When were they last updated of discussed

formally? (10 -if YES 1 - if NO)

1

2

3

4

5

6

7

8

9

10

Last update of the vision statement? (10 - if in the

last year, 9 - if in the last 2 years,etc.)

1

2

3

4

5

6

7

8

9

10

Rating of articulation of the bank’s value

statements by the:

Employees

1

2

3

4

5

6

7

8

9

10

Managers 1 2 3 4 5 6 7 8 9 10


1.3 Strengths, Weaknesses, Opportunities and Threats Analysis(SWOT)

Conducting of the SWOT analysis bank? (10

-if YES 1 - if NO)

1

2

3

4

5

6

7

8

9

10

Efficiency rating of your bank to conduct a

SWOT analysis?

1

2

3

4

5

6

7

8

9

10

Priority rating of your bank places on the SWOT

analysis process?

1

2

3

4

5

6

7

8

9

10

Importance rating of the SWOT analysis process to the effective operation of your bank?

1

2

3

4

5

6

7

8

9

10

Is a SWOT analysis employed when dealing with

significant issues outside of strategic planning?

1

2

3

4

5

6

7

8

9

10

46

1.5 Understanding Issues that Influence the Bank

1.5.1 Establish long-term objectives

Establishment of the Bank’s long term objectives?

(10 -if YES 1 -if NO)

1

2

3

4

5

6

7

8

9

10

What is the degree of importance for your bank in

instituting long-term objectives? (10 -very important 1-not important at all)

1

2

3

4

5

6

7

8

9

10

1.5.2 Generate Strategies

Establishing Long-Term Objectives

Establishment of the Bank’s long term objectives?

1

2

3

4

5

6

7

8

9

10

What is the degree of importance for your bank in

instituting long-term objectives?

Rate articulation of issues that influence the

bank by the:

Employees

1

2

3

4

5

6

7

8

9

10


Executive Director 1 2 3 4 5 6 7 8 9 10

Managers 1 2 3 4 5 6 7 8 9 10

Relative to the decision making process, how would you rate your bank’s attention to issues that influence

the bank?

1 2 3 4 5 6 7 8 9 10

47

1

2

3

4

5

6

7

8

9

10

1.5.3

Selecting Strategies to Pursue

Are strategies selected by your bank to

address issues that confront it?

1

2

3

4

5

6

7

8

9

10

What is the rate of significance of

selection of strategic solutions to address

your bank’s issues?

1

2

3

4

5

6

7

8

9

10

What is the rate of the managers’

articulation of issues that affect the

bank?

1

2

3

4

5

6

7

8

9

10

Relative to the decision making process,

how would you rate your bank’s

attention to issues that influence the

bank?

1

2

3

4

5

6

7

8

9

10

1.5.4

Policy Support

Maintenance of the policy manual by the

bank

1

2

3

4

5

6

7

8

9

10

Are bank policies updated on a regular

48

basis?

1

2

3

4

5

6

7

8

9

10

Relevance of your bank’s policies to current

bank activities?

1

2

3

4

5

6

7

8

9

10

What is the rate of executive directors’

articulation and acceptance to formal policy

development and implementation?

1

2

3

4

5

6

7

8

9

10

1.5.5

Financial Capacity

Bank’s financial capacity to implement

strategies.

1

2

3

4

5

6

7

8

9

10 Commitment of the bank to provide financial

resources to support the implementation of

strategic initiatives by the board of directors

1

2

3

4

5

6

7

8

9

10

1.5.6

49

Motivation and Ownership

What is the rate of board of directors’

motivation to maintain and support the

implementation of strategic initiatives?

1

2

3

4

5

6

7

8

9

10 Rate the motivation to maintain and

support the implementation of strategic

initiatives by the staff

1

2

3

4

5

6

7

8

9

10 Rate the “ownership” taken to the

implement strategic initiatives by the staff

1

2

3

4

5

6

7

8

9

10 What is the Rate of “ownership” the board

of directors’ take to implement strategic

initiatives?

1

2

3

4

5

6

7

8

9

10

1.5.7

Board Support

What is the rate of board’s pledge and

sustenance to the application of strategic

initiatives?

1

2

3

4

5

6

7

8

9

10

What is the rate of your Board

performance to the delivery of support of

strategic initiatives?

1

2

3

4

5

6

7

8

9

10

Open to Change

50

Bank’s readiness for organizational

change.

1

2

3

4

5

6

7

8

9

10

Willingness to accept and implement

change by the staff

1

2

3

4

5

6

7

8

9

10


change by the board

1

2

3

4

5

6

7

8

9

10


change by the executive Directors

1

2

3

4

5

6

7

8

9

10

Human Resources

What is the rate of the bank’s human

resource ability to manage and put to

operation the change process or new

strategic direction issued by the board of

directors?

1

2

3

4

5

6

7

8

9

10

Rate the competencies of your bank staff

to plan, manage and implement strategic

initiatives

1

2

3

4

5

6

7

8

9

10

Thank you for taking part in the survey.

51

Appendix B: List of Commercial Banks

Source: Central Bank of Kenya website

1. ABC Bank (Kenya)

2. Bank of Africa

3. Bank of Baroda

4. Bank of India

5. Barclays Bank of Kenya

6. Chase Bank Kenya (In Receivership)

7. Citibank

8. Commercial Bank of Africa

9. Consolidated Bank of Kenya

10. Cooperative Bank of Kenya

11. Credit Bank

12. Development Bank of Kenya

13. Diamond Trust Bank

14. Dubai Islamic Bank

15. Ecobank Kenya

16. Equity Bank (Kenya) Limited

17. Family Bank

18. First Community Bank

19. Guaranty Trust Bank Kenya

20. Guardian Bank

21. Gulf African Bank

22. Habib Bank AG Zurich

23. Housing Finance Company of Kenya

24. I&M Bank

25. Imperial Bank Kenya (In receivership)

26. Jamii Bora Bank

27. Kenya Commercial Bank

28. Mayfair Bank

29. Middle East Bank Kenya

30. National Bank of Kenya

31. NIC Bank

32. Oriental Commercial Bank

33. Paramount Universal Bank

34. Prime Bank (Kenya)

35. SBM Bank Kenya Limited

36. Sidian Bank

37. Spire Bank

38. Stanbic Bank Kenya

39. Standard Chartered Kenya

40. Trans National Bank Kenya

41. United Bank for Africa

42. Victoria Commercial

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