Human capital management practices and firms performance: a survey of commercial banks in Kenya

Abstract

The objective of the study was to determine the relationship between human capital management practices and performance of commercial banks in Kenya. It was carried out using a cross-sectional survey design as well as a correlational research. The study population and sample was 45 commercial banks. A total of 23 banks took part in the final survey. The primary data was generated through questionnaires whose respondents were heads of human resource departments in banks while secondary data was sought from the financial statements of banks by means of content analysis. In order to test for the relationship between HeM practices and firm performance, the Ordinary Least Squares (OLS) method was used to perform a regression analysis.

The investigation established that the most used human capital management practices were in recruitment excellence (mean of 3.83), collegial and flexible workplace (mean of 3.49) and rewards and accountability (mean of 3.32). The least used practice was communications integrity (mean of 2.45). The study also found that with the exception of communication, other human capital management practices had a positive influence on turnover growth. It is concluded that most commercial banks practice human capital management practices to an average degree.

The study further concludes that human capital management practices generally have a positive influence on performance as measured by both turnover growth and return on assets. The study recommends that there is need for commercial banks in Kenya to take more measures by enhancing the human capital management practices as the scores for the practices are still low. There is also need for management to undertake serious measures that will help improve communication between top management and employees.