ABSTRACT
Strategy implementation is an on-going, never-ending, integrated process requiring continuous reassessment and reformation. Strategic management is dynamic, it involves a complex pattern of actions and reactions. It is partially planned and partially unplanned. Particularly, strategy implementation includes designing the organization's structure, allocating resources, developing information and decision process, and managing human resources, including such areas as the reward system, approaches to leadership, and staffing. The purpose of this study was to investigate the influence of the selected determinants of strategy implementation on organisational performance in parastatals in the energy sector in Kenya. Specifically, this study sought to establish the influence of top management commitment, strategy communication process, resource availability and coordination of activities on organization performance. This study adopted a descriptive research design: the target population comprised of the 105 management staff from various departments in seven (7) organizations in the energy sector. A questionnaire was used to collect primary data. Descriptive statistics used included means, standard deviation, and percentages and presented in tables and graphs. Inferential statistics included both Pearsons correlation analysis and multiple regression analysis. The hypotheses were tested using the Pearson’s Correlation Coefficient to establish the significance of the relationships between the dependent and independent variables used in the study. The results of the hypotheses revealed that there is a significant positive correlation between the selected determinants of strategy implementation and organizational performance. The regression analysis further showed that all the independent variables accounted for 74.7% of the variance in organizational performance. The study therefore, concluded that strategy implementation is key in enabling an organization achieve set goals and recommends that top management should increase their commitment and effective communication of formulated strategies and also ensure adequate provision of resources. Further, the study recommended that parastatals should ensure that key tasks are well defined in enough detail and information systems for them to successfully implement strategies and improve organizational performance.
CHAPTER ONE
INTRODUCTION
Background of the Study
In order to thrive in the modern business environment and fast changing global economy businesses should have high demands, productivity speed and flexibility. Organizations must change their structure in order to achieve the required efficiency and effectiveness. Pears and Robinson (2011) assert that in order to attain competitiveness, it is important for organizations to retain the best of their traditional structures and embrace radically new structures that leverage the human capital and adds value to the customers.
All organizations exist in an environment that impacts on how they formulate and implement strategies. The structure of the organization is a strategic tool for executing business strategy. Implementing strategies successfully is vital for any organization, either public or private. Without implementation, even the most superior strategy is useless (Johnson et al., 2008). The notion of strategy implementation might at first seem quite straightforward: the strategy is formulated and then it is implemented. Implementing will thus be perceived as being about allocating resources and changing organizational structure.
Management ought to consider its role in designing structures that facilitate implementation of strategic goals in order to suit the market demand and satisfy customers. Most organizations have been compelled to review their business strategies as a result of increased competition, rapid technological advancement, shifting economic regulations and increased demand on non-price competitive. The magnitude speed and impact of change are greater than ever before, new production processes and services have emerged (Burnes, 2004).
Strategy Implementation Concept
Strategy is the balance of actions and choices between internal abilities of an organization and its external environment. Mintzberg et al (2009) perceives strategy as a plan, play, pattern, position and perspective. Bateman (2003) defines strategy as a pattern of actions and resource allocations aimed to attain organizational goals. Effective organizational strategy should be directed toward building strengths in areas that satisfy the wants and needs of consumers as well as other crucial actors in the organizations external environment. It therefore forms a comprehensive modern plan that states how the organization will achieve its mission and objectives, maximizes competitive advantage and minimizes competitive disadvantage (Johnson et al., 2008).
There are different types of strategy. Corporate level strategy covers the overall scope of an organization and entails how value will be added to the different business units of the organization. Issues in corporate level strategy include geographical coverage, diversity of products, services of business units and resource allocations between different parts of the organizations. Another strategy is the business level strategy which explains on how to compete successfully in particular markets or how to provide best value services in the public services. It concerns with the strategic development of products or services to suit the market (David, 2003). The third level strategy is the operational strategy which deals with how the component parts of an organization deliver effectively the corporate and business level strategies in terms of resources, processes and people. Finally, the political strategy is designed to accommodate new balance of power among the external forces and limit pressure for organizational change.
Strategy is the match between the resources and skills of organization and the environmental opportunities as well as the risks it faces and the purposes it wishes to accomplish (Thompson 2003). An effective strategy provides guidance and direction for organizational activities. It is important for a firm to make strategic decisions and define strategy in terms of its function to the environment. This is because strategic decisions influence the manner in which organizations respond to the environment. Pearce & Robinson (2007) posit that strategy provides cues to the organization that permit it to attain its goals while responding to the external opportunities and threats.
Ansoff (2009) views strategy as the common thread among an organization’s activities and the external market. Scholes (2009) perceives strategy as the direction and scope of an organization that theoretically matches the results of its dynamic market environment and customers so as to meet the expectations of the stakeholders. An effective strategy unifies and integrates the organization plans that relate to strategic advantages of the external environment. A strategy is designed to ensure that the basic objectives of the enterprise are achieved through proper execution by the organization.
Strategy implementation entails organization of the firm's resources and motivation of the staff to attain objectives. There are rapid environmental conditions facing many modern firms. Today's global competitive environment is complex, dynamic, and largely unpredictable. To deal with this unprecedented level of change, a lot of thinking has gone into the issue of how strategies are best formulated. Strategic management is about managing the future, and effective strategy formulation is crucial, as it directs the attention and actions of an organization, even if in some cases actual implemented strategy can be very different from what was initially intended, planned or thought. According to Olson (2005), the assessment of strategy formulation processes becomes crucial for practitioners and researchers alike in order to conduct and evaluate different formulation processes.
Azhar (2008) states that strategy implementation is the amplification and understanding of a new strategy within an organization. Such an explanation involves the development of new structures, processes and other organizational alignments. Implementation is a key stage of the strategy process, but one which has been relatively neglected. Despite this it is generally perceived as a highly significant determinant of performance. Robin (2014) suggests that well formulated strategies only produce superior performance for the firm when they are successfully implemented. There seems to be widespread agreement in the literature regarding the nature of strategic planning, which includes strategy implementation. It includes presentations of various models showing the organizational characteristics suggested as significant factors for effective strategy implementation. It is also portrayed as a lively process by which companies identify future opportunities (Chiang, Kocabasoglu-Hillmer & Suresh, 2012).
Additionally, the existence of a strategy is an essential condition or precondition for strategy implementation. Implementation is focused by nature and by definition. It cannot be directionless. It is a process defined by its purpose – in this case, the realization of a strategy. Thus, to implement a strategy, there must be a strategy. The strategy may be more or less well- formed, more or less in the process of formation, or even emergent. Unless it is suitably formed to represent a direction or goal, there is nothing to implement; and organizational members will be unable to work towards its realization (Ansoff, 2009). As a result, strategic intentions are inextricably linked with, and enable the existence of, strategy implementation. As well, organizations that focus their energy on harvesting the fluid relationship between strategy and implementation will create satisfied customers, employees, and greater profits (Naranjo-Gil & Hartmann, 2006).
Many organization encounter difficulties in implementing their strategies. Some of the challenges that are encountered in strategy implementation include: weak management roles in implementation, lack of communication, lacking a commitment to the strategy, unawareness or misunderstanding of the strategy, unaligned organizational systems and resources, poor coordination and sharing of responsibilities, inadequate capabilities, competing activities and uncontrollable environmental factors (Beer & Einsenstat, 2010)
Organizational Performance
Organizational performance is defined as the measure of standard or prescribed indicators of effectiveness efficiency, and environmental responsibility such as, cycle time, productivity, waste reduction, and regulatory compliance. Performance is the outcome of all of the organization’s operations and strategies (Aaltonen & Ikåvalko, 2002). It is also the extent to which an individual meets the expectations regarding how he should function or behave in a particular context, situation or job.
Organizational performance has four measures namely; human resource, organizational outcome, financial accounting outcome and capital market outcome. Human resource outcomes related to change in employee behaviour which included employee satisfaction, turn over and absenteeism. Organizational outcomes contain labour productivity, customer satisfaction, and quality of product services. Financial accounting outcomes included three measures such as returns on assets, return on equity and profitability. Capital market outcomes reflect how market evaluates an organization which consists of the three indicators which is stock price, growth rate of stock price and market returns (Dyer & Reeves, 2005).
Khandekar & Sharma (2006) define organizational performance as the outcome that indicate or reflect the organization efficiencies or inefficiencies in term of corporate image, competencies and financial performance. Work performance is the way employee perform their duties. An employee’s performance is determined during job performance review, with an employer taking into account factor such as leadership skills and productivity to analyse each employee on an individual basis. According to Rowold (2011), job performance reviews are often done annually and can determine raise eligibility, whether an employee is right for promotion or even if an employee should be fired.
An employee performance can be evaluated in many ways. High performance work system and practices have need identified as playing a key role in the achievement of business goals and improved organizational effectiveness (Rowold, 2011). While there is no agreement on an ideal configuration or bundle of such systems and practices, the logic is that high performance work systems influence and align employee’s attitude and behaviours with strategic objectives of the organization and they increase employee commitment and subsequently organizational performance.
According to Peter (2005), organization performance is traditionally related to increasing shareholder value. Indicators of performance include reduction environmental footprint, improved occupational health and safety performance, increase customer satisfaction. Sriwan (2004) posits that organization performance should be judged against a specific objective to see whether the objective is attained. Objectives give the organization a criterion for selecting among the alternative investment strategies and projects. For instance, if the objective of the organization is to maximize its return on investment, it would try to achieve by adopting investments with return on investment ratios gather than the company’s current average return on investment ratio. However, if the objective of the organization were to maximize its accounting profits, the company would adopt any investment, which would provide a positive accounting profit, even though the company might lower its current average return on investment ratio. Performance measurement is important for keeping an organization on track in achieving its objectives.
Chiou (2011) did a study and found that some factors that enhance government’s administrative efficiency include organizational structure, management mechanism, resources and ability as well as partnerships. Chiou also found that some factors that will enhance organization performance include compatibility, complementarity, collaboration, knowledge sharing, information technology and effective governance. Chiou (2011) does not however explain the extent to which each of the factors affects organizational performance. Equally, this study was conducted in Taiwan which is a different context from Kenya. A study focusing on the effect of strategy implementation on organizational performance in Kenya would therefore be more meaningful given variations in the environment of governance between the two nations.
Sorooshian, Norzima, Yusof & Rosna (2010) examined the structural relationships between strategy implementation performance within the small and medium manufacturing firms in Malaysia. They identified three fundamental factors in strategy implementation namely the structure, leadership style and resources. Sorooshian et al. (2010) then came up with a structural equation model on the relationship among drivers of strategy implementation and organization performance and also sensitivity analysis on the drivers. The main focus of this study was in private sector and small as well as medium manufacturing firms in particular. The results of the study cannot therefore be generalized to cover all the other sectors. Since the strategy implementation is believed to be a dynamic activity within the strategic management process, it is imperative that its effect on organizational performance should be measured across all sectors and at different levels.
Energy sector in Kenya
The Energy sector was formed in 1979 upon Kenya Government’s realization that energy was a major component in the country’s development process. This realization was mainly due to two oil price escalations of 1973/74 and 1979 which resulted in the country spending relatively more foreign exchange to import oil. Prior to formation, energy sector issues were scattered over several ministries. The Ministry of Power and Communications was responsible for electricity development including the Rural Electrification Programme, Tana River Development Company, Kenya Power Company and pricing of power jointly with Ministry of Finance. The Ministry of Finance was in charge of petroleum pricing and representation of government interests in the Kenya Petroleum Refineries Limited. The Ministry of Environment and Natural Resources was responsible for wood fuel development and management. In addition, the National Council for Science and Technology set up a Committee for Energy Policy and Resources in 1975 whose role was to advise the government on energy policy problems, draft policy proposals and in general acted as the focal point for energy policy related issues.
In 1983, the Ministry of Energy and Petroleum was merged with the Department of Regional Development of the Ministry of Regional Development, Science and Technology to form the Ministry of Energy and Regional Development. Its mandate was expanded to include regional development authorities whose portfolio covered a wide range of activities including agriculture, fishing, hydro power. In 1988 there was a further re-organization that saw the Ministry being split into the Ministry of Energy and Ministry of Regional Development: The Ministry of Energy is particularly charged with the following responsibilities: Energy policy development; Hydropower development; Geothermal exploration and development; Thermal power development; Petroleum products import/export/marketing policy; Renewable energy development; Energy regulation, security and conservation; Fossil fuels exploration and development; Rural electrification Programme. The Ministry of Energy in Kenya comprises of various parastatals / state corporations in the energy sector. These include: Kenya Power and Lighting Company Limited (KPLC); Kenya Petroleum Refineries Limited (KPRL);Kenya Electricity Generating Company Limited (Kengen); National Oil Corporation of Kenya (NOCK);Kenya Pipeline Company Limited (KPC); Energy Regulatory Commission (ERC); Rural Electrification Authority (REA); Kenya Nuclear Electricity Board (KNEB); Geothermal Development Company (GDC) and Kenya Electricity Transmitting Company (KETRACO) (www.energy.go.ke, 2015).
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Item Type: Kenyan Topic | Size: 72 pages | Chapters: 1-5
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