Effect of Staff Involvement in Strategic Management Processes on Performance of Microfinance Institutions in Kenya

Abstract

The key purpose of this study was to establish the effect of staff involvement in strategic management processes on performance of microfinance institutions in Kenya. The main objectives were to; assess the extent to which staff are involved in process of strategic management, barriers facing staff involvement in strategic management processes, and establish the effect of staff involvement in strategic management against MFI performance. Primary data collected through self-administered questionnaires while secondary data was collected from the institution’s financial statements. For the first objective; the findings were that the area of strategic planning where staff feel they are most involved is that of communicating performance targets to staff. The overall rating of staff involvement in strategic planning is average. The overall rating for staff involvement in strategy implementation is significant. The overall rating for staff involvement in strategy evaluation is also significant. For the second objective; Barriers to staff engagement is that were rated as very significant were; Lack of workforce diversity and Lack of or Poor quality of downward communication. For the last objective, the study established that while the highest sample proportion felt that staff involvement in strategic planning has positive effect on MFI profitability, a comparison of actual performance against level of staff involvement reveals that growth in the portfolio yield was highest in organizations that least involves their staff in planning. Like the case of strategic planning, the highest sample proportion felt that staff involvement in strategic implementation has positive effect on MFI profitability. On the other hand, Growth in net assets, loan portfolio and portfolio yield all tend to consistently decline with increase in level of staff involvement in strategic implementation. In conclusion, The MFIs significantly involve their staff in strategy implementation and evaluation but minimal in strategic planning. Although staff feel that staff involvement in strategic planning has positive effect on MFI profitability; the truth is, for an organization to increase its portfolio yield, it’s should minimize staff involvement in strategic planning. The key recommendation of this study is that for performance of MFIs to improve they need to involve their staff in strategic implementation and evaluation and not in planning