Business Process Outsourcing and Operational Performance of Commercial Banks in Kenya

Abstract

The general purpose of the research was to establish the impact of business process outsourcing on the operational performance of1commercial banks in1Kenya. The specific objectives were to establish the level of business process outsourcing adoption in commercial banks in Kenya and to determine1the relationship between business process outsourcing and operational performance of commercial1banks in Kenya. The study was underpinned by resource-based view, transaction cost1theory, and agency theory. The research used a descriptive1cross-sectional study. The target populace of the research was all the commercial banks1in Kenya. The research was a census survey and thus the 42 commercial banks were used. A questionnaire was the designated instrument or tool for the collection of data for the research. To examine the level of business process outsourcing adoption quantitative data collected from the closed-ended questions was examined by the use of descriptive statistics. This involved the use of averages, standard deviations, percentages and frequencies. The data was presented by the use of tables and in prose-form. A multiple linear regression analysis was used to assess the association amid business process outsourcing and operational performance. The study concludes that information technology services outsourcing positively and significantly increases operational performance of commercial banks in Kenya. The commercial banks have engaged external specialists for activities such as data security management, system maintenance services and ATM management. Human resource management services outsourcing positively and significantly increases operational performance of commercial banks in Kenya. The banks contracts recruitment agencies in the hiring process, their employee training services and also for team building services. Security services outsourcing positively and significantly increases operational performance in commercial banks in Kenya. The banks premises are guarded by guards from external security companies. Marketing services outsourcing positively and significantly increases operational performance of commercial banks in Kenya. The banks contracts marketing consultants for marketing and advertising services such as video content campaigns and for their product branding. The research suggests that banks take steps to ensure that outsourced services are well-documented and that expertise is transferred to internal IT workers, in order to prevent over-reliance on service providers and a loss of control. The study recommends that commercial banks to outsource more human resources management services so as to facilitate concentration on their core activities. There should be an effective mechanism to determine the security services that can be outsourced, those that require internal control and those that can be done in collaboration with the external providers. The banks continue to outsource their marketing services for better operational performances.