Performance Contracting and Perfromance of Parastatals in the Minisrty of Transport, Kenya

Abstract

The use of performance contracts among government institutions has gained momentum in the recent past. Performance contracts have been popularized because of the perceived benefits in enhancing organisation performance. It is because of this reason that this study focused on influence of performance contracts and organisational performance in the ministry of transport in Kenya. The study particularly focused on establish how performance contracts terms and conditions, performance contracts goal setting and objectives and employees’ attitudes and perception on performance contracting affect organisational performance. The study was anchored on two theories including goal setting theory, and agency theory. This study population comprised of all employees working in parastatals under the ministry of transports and a sample of 384 derived using Fisher formulae was used. Data used in this study included primary data gathered using a structured questionnaire. Correlation and regression tested the association between study variables while regression ascertain the effect of performance contracts terms and conditions, performance contracts goal setting and objectives and employees’ attitudes and perception on performance contracting on the organisational performance. The results show that performance contracting terms and conditions, performance contracts goal setting and objectives and employees’ attitudes and perception on performance contracting had significant effects on organisational performance of parastatals. Based on these findings, the study concluded that effectiveness of the performance contracts used by government and other private entities rely on employees understanding of the performance contracts. Performance contracts that are clearly understood in terms of terms and conditions therein, goals/targets and expectations yield better organisational and employees’ performance. The study recommends that administrators of performance contract in government parastatals in collaborations with the human resources department in the specific organisation should create awareness among all the employees on terms and conditions contained in performance contracts. The employees must be informed on the nitty gritty of the performance contracts to increase their effectiveness in ensuring improved organisational performance.