The impact of performance contracting on the performance of companies in the energy sector
Following the evolution of business environment over the past four decades, organization and management styles have had to change accordingly. Performance contracting has been used as part of the broader business reforms aimed at improving efficiency and effectiveness in the management of the private companies. In recent times, different governments have borrowed performance contracting ideology to improve performance of public sector institutions. Several countries, including United States of America, China, United Kingdom, India, Korea and Morocco had earlier implemented performance contracts in their public institutions. Though found to have obtained varied results, most countries reported improved performance compared with period before contracts. Kenya borrowed the concept in 2003 to mitigate against poor public governance, wastage and misuse of public resources in the public institutions. There was need to examine the extent to which these contracts have enabled improved performance in Kenya. Measuring organizational success is a continuous challenge for both managers and researchers. While financial measures were in wide use for many years, new frameworks have emerged in recent years that extend organizational perspectives beyond traditional financial measures. Among them the Balanced Scorecard is one of the most popular new frameworks. Balanced scorecard is a set of measures that consider both financial and non-financial perspectives in determining the overall performance of an institution. None of the earlier studies of performance contracting have used balance score card. This study was dedicated to assessing the impact of performance contracts in parastatals in the Kenyan Energy sector using BSC. Despite the limitations of BSC, the results of the study support improved performance. Additional studies are however needed to assess other sectors using BSC.