Strategic planning, employee participation and firm performance in Kenya's insurance industry
Arasa, Robert A. M.
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Various writers have postulated that strategic planning enhances organizational performance. Findings from previous studies also indicate that there is a relationship between strategic planning and firm performance. However, certain gapsare observed in these studies, which if attended to, according to the author could provide more insight into the relationship being examined. It has been observed that the past studies focused on the direct relationship between strategic planning and performance without taking cognizance of the fact that there are other factors that could influence the relationship being examined. It is expected that strategic planning gives rise to some potential advantages and intrinsic values especially within the short term, whose attainment status is critical in facilitating the implementation and eventual realization of the strategic planning objectives and goals. Various writers have also argued that participation and involvement by management and other workers in the strategic planning process could influence the realization of the expected strategic planning outcomes. These dimensions were not given attention by the previous studies. Our study set out to examine the: relationship between strategic planning and firm performance, relationship between strategic planning and strategic planning intermediate outcomes, relationship between strategic planning intermediate outcomes and firm performance, influence of employee participation in the strategic planning process on the relationship between strategic planning and strategic planning intermediate outcomes, and the relationship between employee participation and firm performance. The initial intention was to carry out a survey of all the 43 insurance companies listed by Association of Kenya Insurers (2006) and operating in Kenya. However, ' only 31 companies participated in the study. The study involved collection of data from across the firms within the Kenya's insurance sector. A survey design was thus used as it was considered the" most appropriate for this kind of study. The interviewees consisted of staff designated manager levels and above. A structured questionnaire was used to gather the required data. To test the formulated hypothesis, correlation analysis technique was used. Findings indicate that strategic planning is practiced across the firms studied. However, the extent of embracement varied from firm to firm. Results of data analysis revealed the existence of a relationship between strategic planning and firm performance within the studied sector with a Pearson correlation coefficient of 0.616 implying the existence of a strong correlation between the two variables. The result of the analysis also reveals the existence of a strong correlation between strategic planning and strategic planning intermediate outcomes (r = 0.716). Further, there is a link between strategic planning intermediate outcomes and the subsequent company performance (r = 0.704). There appears to be a stronger liDk between strategic planning intermediate outcomes and non-financial performance (r = 0.777) compared to the one with the financial indicators (r = 0.644). Analysis results also indicate that employee participation indeed does influence the strength of the relationship between strategic planning and strategic planning intermediate outcomes. This is reflected by the falling Pearson correlation coefficient from 0.716 to 0.465 when controlling for employee participation. A further analysis reveals that there is a correlation between employee participation in the strategic planning process and overall firm performance (r = 0.750). All the correlations are statistically significant at the 1 percent level. From the study findings, it can be inferred that there is a relationship between strategic planning and firm performance regardless of context. It can also be said that indeed employee participation in the strategic planning process does moderate the relationship between strategic planning and strategic planning intermediate outcomes. This moderating effect is supported by the finding that there is a link between employee participation and firm performance. To the research community, this study opens a window for further studies towards gaining more insight into the subject area of strategic planning. These include: a study recognizing competence and skills of those driving the practice; examination of externally/internally driven strategic planning process in terms of effectiveness of the process against its expected deliverables; and a similar study to ours but incorporating other workers in addition to management as respondents. For policy makers and managers, this study is a pointer to the fact that the way the process of strategic planning is managed has a bearing on the realization of its expected outcomes. Participation and involvement of employees in the strategic planning process need be considered as crucial for an organization to effectively realize the strategic planning intentions. Top management involvement and commitment is key as the strategic leadership is required to drive the process. This study had its limitations and challenges. No similar studies had been carried out in this subject area in Kenya, implying inadequate relevant literature particularly on the new dimensions brought in. Secondly, there was a general tendency by some firms of not willing to particjpate. Thirdly, some of the information required were not either readily available or the respondents were unwilling to divulge the same. This is in particular to financial data on performance. The administration of questionnaires and interviews proved a very cumbersome and tiring exercise as this was undertaken by the researcher personally. There were also resource constraints particularly in terms of time and funding. Only the top management was targeted as respondents implying the rest of the employees' perceived perspectives were not captured or considered.
SponsorhipUniversity of Nairobi
University of NairobiSchool of Business, College of Humanities and Social Sciences