Determination Of The Extent Of The Practice Of Value Based Management Within Commercial Banks In Kenya
The purpose of this study was to find out the extent of Value Based Management (VBM) practice among commercial banks in Kenya and also the extent of awareness and appreciation of the benefits of VBM among them. The study focused on all the 42 commercial banks that were operational at the time of the study. A questionnaire was sent to the chief executive and finance officers of the banks. The questionnaire had open-ended and closed questions, and questions requiring answers on a 5 point scale. The response was not high as 57 percent returned the filled questionnaire. The data was then coded, fed into a computer program and analyzed. The results were presented in the form of tables, frequency tables and cross tabulations. The study revealed that the main goals of banks in Kenya are maximizing shareholder value, corporate social responsibility, attaining market leadership and profitability. Several factors affected formulation and implementation of goals. The main ones are the chief executive officer, available resources, management, competition and market forces. Most banks revised their goals within five years and investment in information technology, prevailing economic climate, leadership commitment and improved customer service were the main factors affecting company performance. Most banks had policies on employee compensation, link employee compensation to performance and have their training needs affected by changing management practices. Among respondents, 71 percent practiced VBM, but with only 42 percent doing so formally. The concentration of those who practiced was highest among the quoted banks (86 percent). The study reveals that VBM was a much admired practice especially with all those who practiced saying it was desirable. For most banks, YBM was not the main management focus and most also had practiced VBM for less than six years. The main performance measure was found to be EVAlEP which is consistent with the practice of VBM. The main benefits of VBM was found to be that it led to improved investment decisions, increased profits, enhanced strategy formulation, improved decision making and increased organization value. The main problems experienced in implementing VBM were found to be inadequate training, difficulty in changing culture, lack of commitment, no available benchmarks and resistance to change. In conclusion, it was found that VBM was practiced by Kenyan banks, with a majority finding it desirable. However, it seems that some of the banks had not implemented VBM fully but only partially. It can thus be concluded that VBM is well appreciated and the extent of awareness and practice is quite high.