EFFECT OF PERCEIVED HUMAN RESOURCE MANAGEMENT

PRACTICES ON PERFORMANCE OF PARASTATALS IN KENYA:

A CASE OF COMMERCIAL PARASTATALS IN KENYA

JULIUS OCHIENG OLAYO

DOCTOR OF PHILOSOPHY

(Human Resource Management)

JOMO KENYATTA UNIVERSITY OF

AGRICULTURE AND TECHNOLOGY

2018
 Effect of Perceived Human Resource Management Practices on
Performance of Parastatals in Kenya: A Case of Commercial
Parastatals in Kenya

Julius Ochieng Olayo

A thesis submitted in partial fulfillment for the degree of Doctor of

Philosophy in Human Resource Management in the Jomo Kenyatta
University of Agriculture and Technology

2018
 DECLARATION
This thesis is my original work and has not been presented for a degree in any other

University.

Signature________________________________Date________________________

Julius Ochieng Olayo

This thesis has been submitted for examination with our approval as University
Supervisors

Signature________________________________Date________________________

Dr. Alice N. Simiyu, PhD,

JKUAT, Kenya

Signature________________________________Date________________________

Prof. Elegwa Mukulu, PhD,

JKUAT, Kenya

ii
 DEDICATION

This research thesis is dedicated to my beloved wife Magdalene Wamuhu, daughter

Tracy Adhiambo and son Darren Kochele whose support and prayers inspires me to
undertake the research.

iii
 ACKNOWLEDGEMENT

This research thesis would not have been completed without valuable input from
many individuals. I would particularly like to thank my supervisors, Dr. Alice N.
Simiyu and Prof. Elegwa Mukulu for their support, patience, and professional
guidance throughout the development process of this research proposal.

iv
 TABLE OF CONTENT

DECLARATION........................................................................................................... ii

DEDICATION..............................................................................................................iii

ACKNOWLEDGEMENT ........................................................................................... iv

LIST OF FIGURES .................................................................................................... vii

LIST OF TABLES .....................................................................................................viii

LIST OF APPENDICES ............................................................................................ xii

ABBREVIATIONS AND ACRONYMS ..................................................................xiii

DEFINITION OF TERMS ........................................................................................ xiv

ABSTRACT ................................................................................................................ xvi

CHAPTER ONE ........................................................................................................... 1

INTRODUCTION......................................................................................................... 1

1.1 Background of the Study ................................................................................ 1

1.2 Statement of the Problem .............................................................................. 13

1.3 Objectives of the Study ................................................................................. 14

1.4 Research Hypotheses .................................................................................. 15

1.5 Significance of the Study ............................................................................. 16

1.6 Scope of the Study ........................................................................................ 17

1.7 Limitations of the Study................................................................................ 18

CHAPTER TWO ........................................................................................................ 19

LITERATURE REVIEW .......................................................................................... 19

2.1 Introduction ................................................................................................... 19

2.2 Theoretical Framework ................................................................................. 19

2.3 Conceptual Framework ................................................................................. 28

v
 2.4 Empirical Literature Review ......................................................................... 33

2.5 Critique of Existing Literature ...................................................................... 42

2.6 Research Gaps ............................................................................................... 44

2.7 Summary ....................................................................................................... 47

CHAPTER THREE .................................................................................................... 49

RESEARCH METHODOLOGY .............................................................................. 49

3.1 Introduction ................................................................................................... 49

3.2 Research Philosophy ..................................................................................... 49

3.3 Research Design ............................................................................................ 50

3.4 Target Population .......................................................................................... 51

3.5 Sampling Frame ............................................................................................ 52

3.6 Sampling Technique and Sample Size .......................................................... 52

3.7 Data Collection Instruments ......................................................................... 53

3.8 Data Collection Procedures ........................................................................... 55

3.9 Pilot Study ..................................................................................................... 55

3.10 Test for Multicollinearity and Normality of Data ......................................... 59

3.11 Data Analysis and Presentation .................................................................... 60

CHAPTER FOUR ....................................................................................................... 68

RESULTS AND DISCUSSION ................................................................................. 68

4.1 Introduction ................................................................................................... 68

4.2 Response Rate ............................................................................................... 68

4.4 Demographic Characteristics of Respondents .............................................. 69

4.5 Perceived Performance ................................................................................. 75

4.6 Perceived Recruitment and Selection ........................................................... 82

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 4.7 Perceived Decentralized Teams .................................................................... 93

4.8 Perceived Training ...................................................................................... 102

4.9 Perceived Reward ....................................................................................... 111

4.10 Perceived Corruption .................................................................................. 121

4.11 The Moderating effect of Perceived Corruption on the relationship

between HRM Practices and Performance.............................................................. 125

CHAPTER FIVE ...................................................................................................... 130

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS .......................... 130

5.1 Introduction ................................................................................................. 130

5.2 Summary of the Findings ............................................................................ 130

5.3 Conclusions ................................................................................................. 133

5.4 Recommendations ....................................................................................... 136

5.5 Areas for Further Research ......................................................................... 138

REFERENCES .......................................................................................................... 139

APPENDICES ........................................................................................................... 159

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 LIST OF TABLES

Table 3.1: Representative samples of different categories for the ten parastatals ......... 53

Table 3.2: Pilot Test Sample Size .................................................................................. 56

Table 3.3: Hypothesis Testing ....................................................................................... 66

Table 4.1: Response Rate ............................................................................................... 68

Table 4.2: Reliability Test Results ................................................................................. 69

Table 4.3: Length of Employment ................................................................................. 72

Table 4.4: Category of Parastatal ................................................................................... 74

Table 4.5: Number of Employees .................................................................................. 74

Table 4.6: Performance KMO Sampling Adequacy and Bartlett's Sphericity Tests ..... 75

Table 4.7: Perceived Performance Total Variance Explained ....................................... 76

Table 4.8: Perceived Performance Factor Analysis Component Matrix........................ 76

Table 4.9: Perceived Performance ................................................................................. 78

Table 4.10: Service Satisfaction .................................................................................... 79

Table 4.11: One-Sample Kolmogorov-Smirnov Test .................................................. 80

Table 4.12: Results of Collinearity Diagnostics ............................................................ 82

Table 4.13: Recruitment and Selection KMO Sampling Adequacy and Bartlett's
Sphericity Tests ......................................................................................... 83

Table 4.14: Recruitment and Selection Total Variance Explained ................................ 83

Table 4.15: Recruitment and Selection Factor Analysis Component Matrix ................ 85

Table 4.16: Recruitment and Selection Descriptive Statistics ....................................... 87

Table 4.17: Relationship between Recruitment and selection and Performance ........... 90

Table 4.18: Model Summary for Recruitment and Selection ........................................ 92

Table 4.19: ANOVA for Recruitment and Selection ..................................................... 92

Table 4.20: Coefficients of Recruitment and Selection ................................................. 93

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Table 4.21: Perceived Decentralized Teams KMO Sampling Adequacy and
Bartlett's Sphericity Tests .......................................................................... 93

Table 4.22: Perceived Decentralized Teams Total Variance Explained ........................ 94

Table 4.23: Perceived Decentralized Teams Factor Analysis Component Matrix ........ 95

Table 4.24: Perceived Decentralised Teams Descriptive Statistics ............................... 97

Table 4.25: Relationship between Perceived Decentralised Teams and Performance .. 99

Table 4.26: Model Summary for Perceived Decentralised Teams .............................. 101

Table 4.27: ANOVA for Perceived Decentralised Teams ........................................... 101

Table 4.28: Coefficients of Perceived Decentralized Teams ....................................... 102

Table 4.29: Perceived Training KMO Sampling Adequacy and Bartlett's Sphericity
Tests ......................................................................................................... 103

Table 4.30: Perceived Training Total Variance Explained .......................................... 103

Table 4.31: Perceived Training Factor Analysis Component Matrix .......................... 104

Table 4.32: Perceived Training Descriptive Statistics ................................................. 106

Table 4.33: Relationship between Perceived Training and Performance .................... 109

Table 4.34: Model Summary for Perceived Training .................................................. 110

Table 4.35: ANOVA for Perceived Training ............................................................... 111

Table 4.36: Coefficients of Perceived Training ........................................................... 111

Table 4.37: Perceived Reward KMO Sampling Adequacy and Bartlett's Sphericity
Tests ......................................................................................................... 112

Table 4.38: Perceived Reward Total Variance Explained ........................................... 113

Table 4.39: Perceived Reward Factor Analysis Component Matrix ........................... 114

Table 4.40: Perceived Reward Descriptive Statistics .................................................. 116

Table 4.41: Relationship between Perceived Reward and Performance...................... 118

Table 4.42: Model Summary for Perceived Reward .................................................... 120

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Table 4.43: ANOVA for Perceived Reward ................................................................ 120

Table 4.44: Coefficients of Perceived Reward ............................................................ 121

Table 4.45: Perceived Corruption KMO Sampling Adequacy and Bartlett's

Sphericity Tests ....................................................................................... 122

Table 4.46: Perceived Corruption Total Variance Explained ...................................... 122

Table 4.47: Perceived Corruption Factor Analysis Component Matrix ...................... 123

Table 4.48: Perceived Corruption Descriptive Statistics ............................................. 124

Table 4.49: Perceived Corruption Practices ................................................................ 125

Table 4.50: Moderation Tests Using R Square and Significance Change ................... 127

Table 4.51: ANOVA Test for HRM Practices with Moderating Variable .................. 128

Table 4.52: Overall Regression Coefficients ............................................................... 129

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 LIST OF FIGURES

Figure 2.1: Conceptual Framework ............................................................................... 29

Figure 4.1: Gender of the Respondents ......................................................................... 70

Figure 4.2: Age Bracket of the Respondents ................................................................. 71

Figure 4.3: Level of Education ...................................................................................... 72

Figure 4.4: Monthly Salary ............................................................................................ 73

Figure 4.5: Trend Analysis for Total Revenue, Total assets and Profit Before Tax...... 79

Figure 4.6: Trend Analysis of ROE and ROA ............................................................... 80

Figure 4.7: Normality Plot of Performance ................................................................... 81

Figure 4.8: Recruitment and Selection Policy ............................................................... 88

Figure 4.9: Scatter Plot on Relationship between Recruitment & Selection and
Performance............................................................................................. 89

Figure 4.10: Linear Relationship between Recruitment & Selection and

Performance............................................................................................. 91

Figure 4.11: Functional Decentralised Teams ............................................................... 98

Figure 4.12: Scatter Plot on Relationship between Perceived Decentralised Teams

and Performance ...................................................................................... 99

Figure 4.13: Linear Relationship between Perceived Decentralised Teams and

Performance........................................................................................... 100

Figure 4.14: Perceived Training and Development ..................................................... 107

Figure 4.15: Scatter Plot on Relationship between Perceived Training and

Performance........................................................................................... 108

Figure 4.16: Linear Relationship between Perceived Training and Performance ....... 109

Figure 4.17: Scatter Plot on Relationship between Perceived Reward and

Performance........................................................................................... 117

Figure 4.18: Linear Relationship between Perceived Reward and Performance........ 119
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 LIST OF APPENDICES

Appendix I: Questionnaire........................................................................................... 159

Appendix II: Interview Guide ..................................................................................... 170

Appendix III: Secondary Data Collection Sheet ......................................................... 174

Appendix IV: Document Analysis Guide .................................................................... 175

Appendix V: List of Purely Commercial Parastatals in Kenya ................................... 176

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 ABBREVIATIONS AND ACRONYMS

CEO Chief Executive Officer

FO Finance Officer

GOK Government of Kenya

GPHA Ghana Ports and Harbors Authority

HOD Head of Departments

HOS Head of Section

HRM Human Resources Management

HRO Human Resource Officer

KIM Kenya Institute of Management

OPI Organizational Performance Index

PO Procurement Officer

R&D Research and Development

SPSS Statistical Package for Social Sciences

xiii
 DEFINITION OF TERMS

Corruption Corruption is defined as the act of abuse of public

office for private gain by blood ties, tribal relation,
or bribe for favours (Treisman, 2007)

Human resource Sum total of all inherent abilities, knowledge and

skills represented by attitudes, amplitudes and
talents of an organizations workforce (Armstrong,
2009).

Human resource Is a strategic and coherent approach to the

management management of an organization’s most valued
assets or the employees who individually and
collectively contribute to the achievement of its
goals and objectives (Armstrong, 2009).

Nepotism Showing of special favour or unfair preference to a

relative in conferring a position, job or other
privileges (Jones, 2012).

Organization performance Performance refers to profitability, growth and

employee turnover (Bohlander & Snell, 2007).

Strategic human resource An approach to making decisions on the intentions

management and plans of the organization in the shape of
policies, programmes and practices concerning the
employment relationship, resourcing, learning and
development, performance management, reward
and employee relations (Cole,2004).

Strategy Strategy is defined as the fundamental pattern of

present and planned resource deployment and
environmental interactions that indicates how the

xiv
 organization will achieve its objectives (Noe,
2008).

Tribalism Tribalism is the attitude and practice of harboring

such a strong feeling of loyalty or bonds to one’s
tribe that one excludes or even demonizes those
‘others’ who do not belong to that group”
(Nothwehr, 2008).

xv
 ABSTRACT
As globalization and competition becomes a real phenomenon, there is more
emphasis to link strategy and organization performance. To compete effectively,
organizations must adopt ways of enhancing their competitive advantage and
profitability. This research assessed the effect of Perceived Human Resource
Management practices on parastatals performance. This study sought to determine
the relationship between HRM and performance of parastatals in Kenya. The
specific objectives involved examining the effect of recruitment and selection,
training and development, decentralized teams, employee reward on the performance
of parastatals in Kenya and determining the moderating effect of perceived
corruption on the relationship between HRM practices and performance of
parastatals in Kenya. The study adopted a descriptive survey design with both
quantitative and qualitative approaches. A population of 9600 was targeted in 32
purely commercial parastatals in Kenya. A sample of 240 respondents was selected
from 10 parastatals using cluster random sampling technique. The respondents
included CEOs, senior managers, supervisors and other staff in each of these
parastatals. Primary data was obtained from the respondents through self-
administered questionnaires and interviews. A document analysis guide and
secondary data collection sheet were used to collect secondary data from the
parastatal publications, reports, office of the inspectorate of state corporations and
websites. Data was analyzed using both descriptive and inferential statistics with the
use of Statistical Package for Social Science (SPSS version 23). Descriptive statistics
including mean scores, standard deviations, percentages and frequency distribution
were computed to describe the characteristics of the variables of interest in the study.
Inferential statistics like correlation, linear and multiple regression techniques were
used to establish the nature and magnitude of the relationships between the variables.
The results were presented in tables and figures. The study findings indicated that
the perceived performance of parastatals was deteriorating and facing much
competition from other industries. The study concluded that perceived human
resources management practices had a significant positive effect on the performance
of parastatals. When all these perceived practices (recruitment and selection,
training, decentralized teams and employee reward) were used, it was found that
there was improved performance in the parastatals. However when the moderating
variable was added into the model, the study found a perceived negative and
significant effect on performance. The study therefore concludes that perceived
corruption had a negative and statistically effect on the relationship between
management practices and performance of parastatals. On perceived corruption
which was found to moderate negatively the relationship between HRM practices
and performance, HR managers should recognize the contribution of the vices to
organizational success. The study recommends that change management should be
encouraged to wipe out corruption in the recruitment processes so as to have the
competent employees who will enhance organizational performance. The top
management should be in support of the changes so as to make the human resource
management practices effective in the organization if any success is to be achieved.

xvi
 CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The significance of Human Resource Management (HRM) practices on organizational

performance is still a major debate among academics and practitioners today. The
question as to whether there exists a HRM system that is always positively related to
organizational performance, or if this relationship depends on organizational factors and
employee outcomes has not been fully answered with respect to public institutions.
Previous studies on other parts of the world have mainly focused on the private sector
firms (Rodriquez & Ventura, 2013; Bae & Lawler, 2011). It has been argued further that
HRM practices can convert human resources into a strategic asset, given the potential
for complementarities between practices and organization resources (Khatoon, Amin &
Hossain, 2013; Pfeffer, 2005; Irefin & Mechanic, 2014). It is argued that how HRM
practices are engaged can determine significantly the organizational success.

Kenya Institute of Management (KIM) developed a model called the Organizational

Performance Index (OPI) which is a tool that drives organizations in Africa towards
excellent performance and competitiveness (Kenya Law Report, 2012). The
performance of organizations is measured against global standards and benchmarks. The
key parameters include systems thinking, competitiveness, standards and continuous
improvement. The OPI model rates participating organizations using a scale of 1-10
using both its internal and external processes. It uses seven global determinants which
are Leadership and Management, Human Resource, Customer focus and marketing,
financial aspects, Innovation and technology, Corporate Social Responsibility,
environmental focus productivity and quality. Organizations are then assessed according
to specific indicators to their particular industry. Parastatals are therefore some of the
organizations which must be assessed because they play a key role in the economy of
Kenya. This therefore poses another challenge on parastatals to improve their

1
performance rating. Waiganjo, Mukulu, and Kahiri, (2012) noted that performance
measurement is important for organization as a means of continuous improvement and
also as a means of determining whether or not an organization is achieving its
objectives. The traditional management approaches and models are no longer adequate
to award a parastatal a sustainable competitive advantage. This study therefore wishes to
bridge the knowledge gap in the area of perceived human resource management on
perceived performance of parastatals in Kenyan.

Human Resource Management practices represent a distinctive approach for shaping

employee behaviours and work attitudes, which in turn impacts on organization
performance (Huselid, 2015; Fombrum,Tichy, & Devanna, 2014). Job satisfaction and
organizational commitment are key employee work attitudes and behaviours that
constitute immediate outcomes of HRM practices (Guthrie, 2011). Satisfied and
committed employees are more likely to have a strong desire to retain membership and
exert considerable effort on behalf of the firm, thereby enhancing firm performance.
However, employees do not bring these key work attitudes and behaviors on entry;
rather, they acquire them in the workplace, from a process of the exchange relationship,
via relevant HRM policies, programmes, processes and practices (Luthans, 2013; Lin &
Chang, 2015; Rodriquez & Ventura, 2013).

Efforts have been made by human resources management theorists to try to establish a
causal link between human resource management and performance (Cook, 2012).
However, little has been reported on the effect of HRM parastatal performance in the
public service. Cook (2012) argues that there is a symbiotic relationship between human
resources strategy and performance. While there is a growing body of theory and
empirical research demonstrating positive relationships between HRM policies and
organization outcomes, additional studies in this area are needed (Purcell & Kinnie,
2007). There is need for a theoretical link on exactly how perceived human resources
management and perceived performance are related. Furthermore, there is a great need

2
for additional evidence to support the HRM-performance relationship. The present study
therefore attempted to fill part of this gap using the Kenyan parastatals.

The relationship between HRM practices and parastatal performance may be influenced
by perceived corruption, nepotism and tribalism. The word “corruption” has social,
moral, political, economic meanings that can all be expressed in definitions. In that
sense all definitions of corruption can be regarded as working definitions since they vary
according to the purpose for which they are used (UNDP, 2012). For example, in order
to enforce an anti-corruption law, a precise definition is needed to ensure that procedural
fairness is observed in operational activities of detecting and prosecuting corruption.
Consequently legal instruments for prosecution have typically defined specific conducts
such as bribery or nepotism with the term corruption retaining a more general meaning
or an ‘umbrella’ definition (Anechiarico & Jacobs, 2013). In current international use,
it’s defined as the misuse of entrusted power for private gain. This definition
acknowledges that “corruption” cannot be prevented as a single behaviour or offence.
Instead it is more a convenient term for many types (Gorta, 2008) or even
syndromes(Johnston, 2005) of behaviour that have in common a breach of a relationship
of trust that undermine a specific historical or social institution, in this case government
(Miller, Roberts & Spence, 2005).

Nepotism and tribalism involves favoritism based on kinship or ethnicity (Bellow,

2013). Padgett and Morris (2015) showed that favouritism may play a role during the
hiring process an organization. Simon, Clark and Tifft (2012) indicated that favouritism
may be prevalent in organizations and is based on relationship regardless of merit.
Nepotism and tribalism has to do with a wide range of practices relating to favoritism.
In this sense, it implies to hire and engage a non-qualified or less qualified person as a
result of family or tribal union. For the purpose of this study, corruption in terms of
nepotism and tribalism is the showing of special favour or unfair preference to a relative
or tribesman in conferring a position, job or other privileges (Jones, 2012).

3
1.1.1 Global Outlook of Human Resource Management Practices

According to a United Nations report on a study carried out in 14 countries; Australia,

Brazil, Canada, Chile, China, Finland, Germany, Hungary, The Netherlands, New
Zealand, Poland, Republic of Korea, UK, and US, there were four broad reform
concerns that were publicly stated by governments: to improve policy responsiveness
and implementation by overcoming resistance from vested interest to the
implementation of legitimate policies or reduction of some programs; to reduce public
expenditure, maintaining the attractiveness of the investment climate and the
competitiveness of national firms; to improve government as an employer by making it
responsible to attracting sufficient numbers of appropriately skilled employees while
restraining aggregate employment costs and to improve service delivery and build
public and private sector confidence by enhancing the degree of respect and trust
accorded to government by private sector and by the public (United Nations, 2011).

In USA, According to Debrah and Budhwar (2014) the retention of valuable employees
is a challenge. Managers and top-level authorities are constantly met with the issue of
retaining employees, and there is a wealth of evidence that worldwide, retention of
skilled employees has been of serious concern to managers in the face of ever increasing
the high rate of employee turnover. Similarly, in Germany, there are major challenges in
attempting to retain employees which become an increasingly important aspect of
building organisational capabilities to ensure sustained competitiveness (Holland,
Sheehan & De Cieri, 2012).

These challenges, among other things, are essentially linked with the infrastructural,
remuneration support, support, remuneration packages, leadership styles and cultures
within an organisation. Such challenges are further complicated as employees tend to
change jobs for better financial rewards and improved working conditions. In addition
highly skilled employees are often poached by large-scale international organisations
that can provide them with better remunerations and other benefits (Zheng & Lamond,
2010).
4
Training and development is a main important element of human resource management
(HRM) (Vlachos, 2009). Studies by Dimba (2010), suggested that there is a significant
impact of training and development on organizational performance. Niazi (2011)
mentioned that training and development could influence organisational performance
because employees’ skills, knowledge and abilities can be enhanced and up to date.
Jackson (2002) opined that the type of approach adopted by an organization affects its
outcomes. As parastatals continue to perform poorly in Kenya, the role of training and
development on their performance need to be investigated.

As organizations expand, more employees are needed. Hence new levels of management
are required in order to meet the objectives of the organization. Decision-making
becomes a key issue, as decentralized, middle managers gain authority and self-
managed teams proliferate as the firm adds more and more projects and customers
(Flamholtz & Randle, 2010; Miller & Friesen, 1984).Teamwork and decentralization of
decision making promotes employee commitment participation and create a sense of
attachment, thus indirectly affecting organization performance (Tata &Prasad,
2014).Several studies have identified self-managed teams and decentralization as
important high-performance HRM practices. Jayaram, Droge and Vickery (2009) found
that decentralised teams have a positive effect on two dimensions of the performance,
time and flexibility. Collins and Clark (2013) found that management teams mediated
the relationship between HR practices and firm performance. Haleblian and Finkelstein
(2013) found out that that firms with large teams performed better and firms with
dominant CEOs performed worse in a turbulent environment than in a stable one. The
major effect of decentralized teams on organizations performance notwithstanding, data
on its impact on parastatal performance in Kenya is unavailable.

1.1.2 Regional Outlook of Human Resource Management Practices

In a research conducted on Sri Lanka and Botswana (Bratton & Gold, 2017), it was
surprising to note how HR planning has contributed greatly in the reduction of the
unemployment rate. Botswana for instance with about 40% of its population being HIV
5
positive and being reliant on expatriates even in its public sector, had introduced a
strategic means by which the indigenes were being trained to take over from the
expatriates. Sri Lanka on the other hand, had introduced flexible working time as part of
its plan to gradually replace the aging workforce without losing out on their experience.
Either of these strategies is largely devoid of partisan politics and maintaining the
organizational knowledge and memory.

In Nigeria according to Fajana (2014) is one of the African countries troubled by

abundant labour and scare talent. Attracting, developing, deploying and retaining best
talents had become a challenge. That is why Fajana and Ige (2010) argued that the
desire for top performance has driven the need for effective management. HRM in
Nigeria can be said to be ‘still in Infancy’ and lot of academic research is still required
in this area (Fajana, Owoyemi, Elegbede & Gbajumo, 2014). Lack of indigenous and
comprehensive HRM models is one of the challenges facing HRM practices in Nigeria,
which is why the majority of principles and practices evidence in workplaces in Nigeria
are all adopted from other countries.

Singh, Sharma and Cheema (2011) conducted a study of effect of performance appraisal
on the organization and the employee. Performance appraisal has been considered as the
most significant an indispensable tool for an organization, for an organization, for the
information it provides is highly useful in making decisions regarding various personnel
aspects such as promotion and merit increases. Performance measures also link
information gathering and decision making processes which provide a basis for judging
the effectiveness of personnel sub-divisions such as recruiting, selection, training and
compensation. This research will concentrate on examine the effect of the performance
appraisal on an individual as well as on the organizations. The sample size of 100 has
been chosen from the north Indian states. The data used for the study is primary data
collected through the help of questionnaire filled by the samples. The data was
evaluated with the help of statistical tools i.e., descriptive statistics, regression,
correlation, residual analysis and chi square test. The findings of the research show that

6
there is a noticeable effect of the performance appraisal on the organization as well as
on the individual.

Pay systems have long been known to influence employee’s levels of job performance,
satisfaction, and withdrawal behavior (Lawler, 2010). A highly appropriate research
agenda for students of organizations is the identification of those working conditions
that may adversely affect the psychological well-being of employees expose d to them
(Brief & Atieh, 2011). Our theoretical premise was that pay systems have a unique
impact on employees emotional distress. We hypothesized that the more variable (i.e
contingent upon employees performance) the pay system, the higher its deleterious
impact on employees’ emotional distress. We further hypothesized that these effects
were partially mediate d by the extent to which their jobs were perceived or objective
assessed to be monotonous. In work organizations, pay systems have traditionally been
themost extensive manipulated organizational reward. They have been manipulated
primarily to increase employees’ motivation to achieve higher levels of individual and
group performance. Performance -contingent pay systems, such as piece-rate incentive
plans, have been used for this purpose (Lawler, 2010).

Grant (2011) sought to determine the impact of training and development on public
sector organizations using Ghana Ports and Harbors Authority (GPHA) as a case study.
The study assessed the training and development process of GPHA and whether training
has improved employee performance. He designed a structured questionnaire to collect
primary data from employees of GPHA. Personal interviews were also held with some
management staff of the organization. The results indicated that GPHA’s employees
were not well informed about training and development programmes in the
organization. Most of the employees were of the view that training and development
were effective tools for both personal and organizational success.

7
1.1.3 Human Resource Management Practices in Kenya

As a country, Kenya has recognized that a modern performance-focused public service

is a prerequisite for the country’s socio-economic transformation. Various strategic
measures have been initiated since 2004 to enhance service delivery. These include
embracing modern business management practices, providing transformative leadership
and promoting a corporate culture that enhances ethical practices and good citizenship
behaviour. The ultimate objective is to transform work attitude and behaviour, and to
create a citizen-focused and performance-oriented public service, which can contribute
to national growth and development.

The concept of organizational performance is important. Iravo, Ongori and Munene

(2013) evaluated the questions why some organizations succeed while others fail. The
good performance of parastatals is important for Kenyan economy. Njuguna (2008)
highlighted performance measurement as one of the tools which helps organizations in
monitoring performance, identifying the areas that need attention, enhancing motivation,
improving communication and strengthening accountability. Parastatal managers, like
any other managers, can use the feedback on performance to make adjustments to
policies and other modes of organizational operations. Fwaya (2006) views performance
as a formula for the assessment of the functioning of an organization under certain
parameters such as productivity, employee’ morale and effectiveness.

Performance management and improvement is at the heart of strategic management

because a lot of strategic thinking is geared towards defining and measuring
performance (Nzuve & Nyaega, 2012). Odhiambo (2009) identified three approaches to
performance in an organization, which are the goal, systems resource, and process
perspective approaches. The goal approach states that an organization pursues definite
identifiable goals. This approach describes performance in terms of the attainment of
these goals. The second approach is the systems resource approach which defines
performance as a relationship between an organization and its environment. This
concept defines performance according to an organization’s ability to secure the limited
8
and valued resources in the environment. The third approach is the process perspective
which defines performance in terms of the behaviour of the human resource of an
organization (Waiganjo, Mukulu & Kahiri, 2012).

HRM strategies can improve productivity by; increasing employee skills and abilities;
promoting positive attitudes and increasing motivation, and providing employees with
expanded responsibilities so that they can make full use of their skills and abilities
(Mahoney & Watson, 1993). Performance indicators include: financial (profits), market
share, efficiency, reliability, flexibility among others (Kiragu, 2005). The aim of human
resource strategy is to devise ways of managing people in order to assist in achievement
of organizational objectives. Participation of individuals and team transforms exchanges
from economic to social. According to Mahoney and Watson (1993), employee
involvement has a beneficial impact on performance.

Kiragu (2005) highlights performance in terms of four perspectives which are the
financial, customer, internal processes and innovativeness. The financial perspective
identifies the key financial drivers of enhancing performance which are profit margin,
asset turnover, leverage, cash flow, and working capital (Omondi,Magutu, Onsongo, &
Abong’o, 2011).This study focused on returns on assets and returns on sales ratios as
indicators of financial performance. The customer focus described performance in terms
of brand image, customer satisfaction, customer retention and customer profitability.
This study used employee and customer satisfaction indices to measure performance of
parastatals. Internal processes involve the efficiency of all the systems in the
organization while innovativeness is concerned with the ease with which a firm is able
to adapt to changing conditions. Human resource management combines financial,
strategic and operating principles to gauge how an institution is able to meet its targets.

Organization’s performance is positively impacted by the presence of Human Resource

Management (HRM) practices which tend to create a significant contribution on
organizational competencies, and this in turn becomes a great boost for further

9
enhancing innovativeness (Noe Hollenbeck, Gehart & Wright,2003; Youndt,
Subramaniam, & Snell,2004; Waiganjo, Mukulu & Kahiri, 2012). According to
Horngren (2000), organizations link the maximization of performance with SHRM
practices. As a result of intensive competition, and need to meet society needs,
organizations constantly search for newer sources of effectiveness, one of the most
important being HRM, that has the potential to improve and determine an organization’s
fate (Kelliher & Perrett,2001). Organizations today have increasingly become aware of
the importance of HRM in sustaining growth and effectiveness unless there are
strategies that complement its operations.

The changing society needs, is a recurring theme examined by academicians,

consultants and practitioners. The frequent and uncertain changes, greater competition
between institutions, the need for continuous innovations, quality enhancement and cost
reduction force institutions to face the challenge of improving their competitiveness and
consequently their performance. This realization has propelled HRM as a major field of
study and Wright, Gardner, Moynihan and Allen (2005) asserts that the renewed interest
has facilitated the development of newer approaches in managing organizations and
Human Resource (HR). According to Armstrong (2009), Human Resource Management
(HRM) emphasizes the need for the HR plans and strategies to be formulated within the
context of overall organizational strategies and objectives and to be responsive to the
changing nature of the organization’s external environment. There are a number of
studies focusing on the main competitive factors of organizations because of their
contribution in the global economy (Huselid, 2015; Wright et al. 2015). The quest for
competitive advantage has long been a central tenet of the field of strategic management
(Armstrong, 2009).

The HRM practices of parastatals have received little specific attention from
researchers. As in many other areas of scholarly inquiry, empirical research in strategic
human resource management has tended to focus on large private sector (Guest, Michie,
Conway & Sheehan, 2013; Miller & Cardinal, 2011). In recent years while much

10
attention has been given to private sector by policy makers, politicians, practitioners and
academics, little research has been done on strategic management practices within the
government parastatals. This is surprising in view of the importance of parastatals as
critical engines of economic growth, public service and employment creation. The under
representation of parastatals in terms of strategic management research data seems
inappropriate when the scale of this sector is considered. This fact, together with the key
role parastatals inevitability plays in economic prosperity, strongly suggests the
importance of increasing our understanding of the management of strategy in these
organizations in Kenya.

According to Kenya Economic Development report (2004), parastatals in Kenya are

among the largest employers in Kenya, in addition to the tax opportunities they present.
These organizations have great potential in driving Kenyan economy. These
organizations need to respond to greater global and national imperatives and challenges
to compete effectively in local and global markets. This study focused on the fitness of
perceived HRM strategies of Kenya’s parastatals. There is need to understand the effect
of perceived HRM strategies on parastatal performance since currently there is a lot of
interest in this area. In particular there is need to have documented information on the
effect of recruitment and selection, training and development strategies, decentralized
teams strategies and reward strategies on the perceived performance of parastatals in
Kenya.

The relationship between HRM practices and parastatal performance may be moderated
by various variables including corruption. Corruption may take various forms including
bribery, nepotism and tribalism. Bribery is the act of paying or receiving undue
inducement to acquire certain services. Nepotism and tribalism in parastatals describes
situations in which an appointed public official exploits his or her position to favour
relatives or tribesmen in obtaining jobs, advancement, or other preferential treatment
(Below, 2013). Public officials may hire or promote their relatives or tribesmen over
better-qualified candidates (Farahmand, 2013). Nepotism and tribalism in Kenya is

11
indeed a real phenomenon in organizations (Gommans and Musumbu, 2014). It persists
since it provides an avenue via which goodies and favours trickle down from those in
power to their kin and tribesmen. There may be no meritocracy as people are given jobs
based on relationship regardless of their qualifications (Jones, 2012). There is need to
understand the influence of perceived corruption on the relationship between perceived
HRM practices adopted by the parastatal and its performance.

1.1.4 Parastatals in Kenya

A parastatal is a public sector or state corporation which is that part of the economy that
is controlled by the government for the purpose of providing basic government services.
Kenya has 185 parastatals as outlined by the report of the presidential taskforce on
parastatal reforms of 2013. These parastatals are categorized into five categories
according to their mandate; Purely Commercial State Corporations (32), State
Corporations with Strategic Functions(21), State Agencies - Executive Agencies (62),
State Agencies - Independent Regulatory Agencies (25), State Agencies - Research
Institutions, Public Universities, Tertiary Education and Training Institutions (45). For
the purpose of this study, 10 parastatals were studied in the purely commercial state
corporations category. These parastatals are facing several challenges which have been
affecting their performance. These challenges include shortage of skilled staff, poor
infrastructure, insecurity, lack of strategic plans and poor organizational processes
among other challenges (GOK, 2013). In 2011/12, eleven commercial State
Corporations made losses, compared to twelve in 2010/11 and sixteen in 2009/10
(GOK, 2013). This represents 21%, 23% and 31% respectively of all commercial
oriented Government Owned Entities (GOK, 2013).Kenya has been experiencing
turbulent times with regard to its organizational practices in the last two decades
especially in the public sector. This has resulted in generally low profits across the
economy and this picture is fairly well replicated in most purely commercial parastatals
(Namusonge, Kabare & Mutua, 2012).

12
1.2 Statement of the Problem

According to the report by a taskforce on parastatal reforms in Kenya 2013, the

performance of parastatals has been poor in an environment where resources are scarce
and needs have been mounting. Key among the policy issues and challenges facing
parastatals in Kenya, include: poor governance leading to embezzlement of funds; a
large number of officially authorized and institutional frameworks that produce
numerous reporting and answerability lines; ambiguity on the task that parastatals ought
to play in the economy, which heightens the weaknesses of boards and chief managers;
majority of the boards running parastatals been weak and/or ineffective, leading to their
inability to offer direction that is strategic; weak institutional and human resource ability
to draw and maintain the skillfulness that is required to propel performance also
included is an insufficient structure on performance management that fails to rightly
relate the performance of parastatals to countrywide development objectives (Republic
of Kenya, 2013).

The parastatals are still using the traditional approach to manage people which have an
emphasis on administrative procedures associated with hierarchical model of public
services, where administrative rules are determined by national government and
implemented by public organizations. This approach is seen as undermining
performance and demotivating individuals (Kamoche, 2013). According to Lankeu and
Maket (2012), modern HRM involves putting in place strategies that will ensure the
maximum utilization of people in an organization. This is done in a systematic and
planned method by ensuring that there is a shift in the way employees of parastatals are
managed to ensure that they deliver results as required, to achieve these changes the
leaders should be equipped with knowledge and experience on modern or advanced
human resource management.

Most studies examining the relationship between HRM practices and organization’s
performance have been conducted mostly in developed countries like United States and
United Kingdom (Grant, 2018). The theories of HRM have been generated relying on
13
western organizations but not from all parts of the world (Grant, 2018). Besides, most
studies conducted in Kenya mainly focused on private sector players (Dimba &
K’Obonyo, 2009; Njuguna, 2008; Kidombo, 2007). Kidombo (2007) studied effects of
HRM on performance of private manufacturing firms in Kenya. More importantly,
considering that the research findings obtained in the private sector locally and globally
have limited generalizability to the Kenyan parastatals, lead to the support to the current
study, which sought to fill the existing knowledge gaps. Most reviewed studies focused
on direct relationship between HRM practices and organizational performance, studies
on the moderating effect of perceived corruption on the relationship between HRM
practices and parastatals performance is lacking. It is against this background that this
study was undertaken in order to address the research gap, by determining the
moderating effect of perceived corruption on the relationship between perceived HRM
Practices on performance parastatals in Kenya.

1.3 Objectives of the Study

This section presents the objectives of the study both general and specific objectives.

1.3.1 General Objective

This study investigated the perceived effect of Human Resource Management (HRM)
practices on the performance of parastatals in Kenya.

1.3.2 Specific Objectives

i. To determine the perceived effect of recruitment and selection on the

performance of commercial parastatals in Kenya.
ii. To investigate the perceived effect of decentralized teams on the performance of
commercial parastatals in Kenya.
iii. To assess the perceived effect of training on the performance of commercial
parastatals in Kenya.
iv. To examine the effect of perceived reward on the performance of commercial
parastatals in Kenya.
14
 v. To determine the moderating effect of perceived corruption on the relationship
between perceived human resource management practices and performance of
commercial parastatals in Kenya.

1.4 Research Hypotheses

A hypothesis is a logical conjectured relationship between two or more variables

expressed in the form of testable statements. In order to achieve the objectives designed
for this study, the following research hypotheses were stated based on the revelations in
the review of literature concerning HRM strategies and organizations’ performance:

Ho1: Perceived recruitment and selection has no significant effect on the performance of
commercial parastatals in Kenya.

Ho2: Perceived training have no significant influence on the performance of commercial

parastatals in Kenya.

Ho3: Perceived decentralized teams have no significant influence on the performance of

commercial parastatals in Kenya.

Ho4: Perceived reward have no significant influence on the performance of commercial

parastatals in Kenya.

Ho5: Perceived corruption has no significant moderating effect on the relationship

between perceived human resource management practices and performance of
commercial parastatals in Kenya

15
1.5 Significance of the Study

The results of this study were of great importance to different beneficiaries. They
include;

1.5.1 Government

The findings of this study would assist the Government to evaluate the role of HRM
strategies in enhancing organizational performance. Not all corporate organizations have
high growth potential; therefore, research and policy makers seek potential sources of
growth with notions of competitive advantage, competitiveness, productivity and
structural changes. It would also open up new opportunities for increasing the
performance of other organizations which have not embraced HRM. The study aims at
giving an insight into the role of HRM in enhancing performance of organizations. The
growth in competition, liberalization of the economy and the environmental changes put
additional challenges to organizations. As such, they need to respond to greater market
imperatives and challenges. There is lack of a theoretically grounded understanding of
the strategies underlying organization’s success or failure in general (Coplin, 2002). The
question posited is how a model can be created to the established organizations or those
entering the market to perform well, succeed or produce a sustainable competitive
advantage.

1.5.2 Parastatals Management

The study results can enable the management in planning for the development and
implementation of effective and efficient human resource management strategies that
will lead to improved performance of the parastatals. This can in turn help in ensuring
economic growth and stability of the country. The findings of this study may be
valuable to researchers and academicians in providing more knowledge on contributions
of HRM strategies to organization’s performance. Theories of HRM were generated
relying on western organizations but not in all parts of the world and many writings on

16
HRM describe the application of HRM strategies mostly in theoretical context in
western developed countries (Grant, 2018).

1.5.3 Policy Makers

It is against this background that this study was conducted in order to extend research to
different parts of the world. This study provided an opportunity for empirically testing
the theories in developing countries, particularly in Kenya. The moderating effect of
corruption on the relationship between HRM practices and parastatal performance was
assessed. Information obtained was useful in policy formulation. To Policy Makers
(State Corporation Advisory Board, Inspectorate of State Corporations, and Board of
Directors in State corporations) this study would improve the policy making capacity
and also apply innovation in policy implementation.

1.5.4 Academicians and Researchers

Other researchers who may need reference to information on role of human resource
management practices on organizational performance also can benefit by being able to
assess previous approaches used to solve similar management questions and revise their
research on human resources management. In addition they can be able to spot flaws in
the logic, errors in assumptions or even management questions that are not adequately
addressed by the objectives and designs. The study also advanced literature by
moderating (corruption) the relationship between human resources management
practices and organization performance of parastatals.

1.6 Scope of the Study

The study was carried out in Kenya. There are 185 parastatals in Kenya as outlined by
the report of the presidential taskforce on parastatal reforms of 2013 (GOK, 2013). The
parastatals studied are 32 parastatals that are purely commercial. These parastatals are
facing stiff competition from other industry players. This study covered the commercial
parastatals in Kenya to establish the effect of HRM practices on organizational
performance. The parastatals are the key players in the public sector. The justification
17
for this is that they are the engine that is supposed to drive government business and
ineffectiveness of government policies and programs can directly be traced to the
actions or inactions of employees working in these parastatals. This study was done in
2017.

1.7 Limitations of the Study

The objective of this study was to establish the effect of Human Resource Management
(HRM) practices on the performance of parastatals in Kenya. Some of the bottlenecks
experienced were lack of cooperation from the respondents to fill correctly the
questionnaire as they may overlook the significance of the study. However, attempt of
lack of commitment from the participants was used by the researcher to take time to
meet with all potential respondents and clarify to them the scope of the study and its
significance to the organization.

The respondents were also unwilling to give responses due to fear of the unknown and
in that the information collected may be used to intimidate them or print a harmful
image about them or their respective parastatals. Some respondents even turned down
the request to fill questionnaires. This was mitigated by obtaining a letter of introduction
from Jomo Kenyatta of Agriculture and Technology University, which assured the
respondents of the academic purpose of the study and that it would be treated with
maximum confidentiality.

Another issue is the fact that this research was conducted in the parastatals only without
involving firms in the private sector. This means that the results obtained cannot allow
for generalization in other sectors. This was mitigated by recommending a study of
other selected public sectors. There was also indequate of current studies dealing with
HRM in the public sector especially in developing countries and specifically in Kenya.

18
 CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter reviewed the information from other researchers who have carried out
research in the same field of study in prior years. It also offers a critical analysis of
previous studies that have been done by other scholars in the area. It finally presents the
research gap which this research intends to examine.

2.2 Theoretical Framework

This study is supported by the following theories; Universalistic theory, Configurational

theory, Resource based theory, Ability, Motivation, Opportunity Theory (AMO
Theory), and Bureaucratic theory. Universalistic scholars argue that there is a set of
superior HRM practices which if adopted by an organization, would lead to enhanced
performance. The Configurational theory emphasizes on the importance of achieving
both internal and external fit in the organization. Resource based value theory focuses
on satisfying the human capital requirements of the organization. Ability, Motivation,
Opportunity theory proposes that performance at individual level depends on high
motivation, possession of the necessary skills and abilities and an appropriate role and
understanding of that role. Human Capital theory posits that organization needs to invest
to increase employee skills, knowledge, and abilities. Bureaucratic theory proposes that
bureaucracies have superior performance compared to traditional forms of organizing
(based on nepotism, tribalism and cronyism, among other things).

2.2.1 Universalistic Theory

This theory is also referred to as the best practice model, which is based on the
assumption that there is a set of superior/best HRM practices, and that adopting them
will inevitably lead to superior organizational performance (Luthans & Summer, 2005).
The notion of best practice was identified initially in the early US models of HRM,
many of which mooted the idea that the adoption of certain ‘best’ human resource
19
practices would result in enhanced organizational performance, manifested in improved
employee attitudes and behaviors, lower levels of absenteeism and turnover, higher
levels of skills and therefore higher productivity, enhanced quality and efficiency and of
course increased profitability (Marchington & Wilkinson, 2008). HRM practices like
proper employee recruitment and selection, training and development, decentralized
teams and employee reward may therefore enhance firm performance. Firms should
therefore have focused their attention to strategies like recruitment of competent
employees, adopt proper management of employees, giving employees enhanced
capacity for functioning as well as adequate motivation.

Thus, universalistic perspective maintains that firms will see performance gains by
identifying and implementing best practice irrespective of the product market situation,
industry or location of the firm (Pfeffer, 2001). However, the notion of a single set of
best HRM practices has been overstated. There are examples in every industry of firms
that have very distinctive management practices. These distinctive human resources
management practices shape the core competences that determine how the firms
compete. What works well in one organization may not necessarily work well in another
because it may not fit its strategy or working practices. According to Becker, Huselid
and Urich (2001), organizational high performance work systems are highly
idiosyncratic and must be tailored carefully to each firm’s individual situation and
specific context in order to provide maximum performance. These high performance
work practices will only have a strategic impact therefore, if they are aligned and
integrated with each other and if the total HRM system supports key business priorities.

The idea of best practice might be more appropriate for identifying the choices of
practices as opposed to the practices themselves. The good practices that do well in one
successful environment should not be ignored altogether. Benchmarking is a valuable
way of identifying areas of innovation and development that are practiced to good effect
elsewhere by leading firms. Nepotism in organizations is not a good practice. It prevents
organizations from performing optimally. It compromises on recruitment of employees,

20
allocation of training and development opportunities, employees working environment
and the reward system. Each organization must therefore adopt its unique HRM
practices that would enable it to perform well. This theory anchors this study since it
links the best human resource management practices to performance, and by adopting
them will inevitably lead to superior organizational performance.

2.2.2 Configurational Theory

A strategy’s success turns on combining external fit and internal fit. A firm with bundles
of HR practices should have a high level of performance (Marchington & Grugulis,
2000). Emphasis is given to the importance of bundling HRM practices so that they are
interrelated and therefore complement and reinforce each other. Employee performance
is a function of both ability and motivation. A key theme that emerges in relation to
best-practice HRM is that individual practices cannot be implemented effectively in
isolation but rather combining them into integrated and complementary bundles is
crucial (Storey, 2007). MacDuffie (2005) argues that a ‘bundle’ creates the multiple,
reinforcing conditions that support employee motivation, given that employees have the
necessary knowledge and skills to perform their work effectively (Storey & Sisson).

In the configuration school, cohesion is thought likely to create synergistic benefits

which in turn enable the organization’s strategic goals to be met. The aim of bundling is
to achieve coherence which exists when a mutually reinforcing set of HR practices have
been developed that jointly contribute to the attainment of the organization’s strategies
for matching resources to organization needs, improving performance and quality and
achieving competitive advantage in commercial enterprises. The approach of bundling is
holistic as it is concerned with the organization as a total entity and addresses what
needs to be done as a whole in order to enable it to achieve its corporate strategic
objectives. The notion of a link between business strategy and the performance of every
individual in the organization is central to ‘fit’ or vertical integration. Internal fit
advocates bundles of practice, to ensure that organizations gain benefits from

21
implementing a number of complementary practices rather than only a single practice
(MacDuffie, 2005).

Most models of best fit focus on ways to achieve external fit. The most influential
model of external fit is that from Schuler and Jackson (1987) which argues that business
performance will improve if their HR practices support their choice of appropriate
strategies. Under this model, organizations need to work out the required employee
behaviors to implement a chosen strategy and devise supporting HR practices to enable
those behaviors to be encouraged in the workforce. Vertical integration can be explicitly
demonstrated through the linking of a business goal to individual objective setting, to
the measurement and rewarding of attainment of that business goal.

The Configurational approach represents non-linear synergistic effects and high-order

interactions that can result in maximum performance (Delery & Doty, 2000). Wilkinson
(2002) note that the key point about configurational perspective is that it seeks to derive
an internally consistent set of HR practices that maximize horizontal integration and
then link these to alternative strategic configurations in order to maximize vertical
integration and therefore organizational performance. Thus put simply, HRM according
to configuration theorists requires an organization to develop a HR system that achieves
both horizontal and vertical integration. The configuration approach contributes to the
HRM debate in recognizing the need for organizations to achieve both vertical and
horizontal fit through their HR practices and therefore be deemed strategic. The best HR
practices on employee recruitment and selection, training and motivation should be
adopted. Thus, the acquisition of the right employees for the right tasks is of paramount
importance. Firms should allocate sufficient budgets for recruitment and selection of
employees with relevant skills, knowledge and attitudes. Once the right employees are
recruited, their capacity to perform should be enhanced through training and
development. Motivation of the employees also affects their performance which in turn
has a major impact on firm performance. Multiple incentives to enhance motivation
should be sought. This can be through different forms of financial and non-financial

22
rewards. The influence of this bundle of HR practices on performance of Kenyan
parastatals needs to be investigated. This theory supports two variables which are
employee recruitment and decentralized teams.

2.2.3 Resource Based Theory

The genesis of the resource-based model can be traced back to Selznick (1957), who
suggested that work organizations possess ‘distinctive competence’ that enables them to
outperform their competitors, and to Penrose (1959) who conceptualized the firm as a
‘collection of productive resources’. The theory was further supported by Barney
(1991). This theory is generally accepted as a background for understanding the
relationship between strategic human resource management and organizational
performance. According to Schuler, Jackson and Storey, (2001) there are three types of
resources associated with organization; physical resources(plant; technology and
equipment); human resources (employees experience and knowledge), and
organizational resources (structures, system for planning, monitoring, and controlling
activities; social relations within and between organization and external contingencies).

A resource can be considered to be a source of sustained competitive advantage if it

meets the criteria of value, rarity, non-substitutability, and inimitability (Wright et
al.2005; Guestet al., 2003; Barney, 1995, 1991, 2001). Human resources may be viewed
as the accumulated stock of knowledge, skills, and abilities that individual possess,
which the organization has built up overtime into an identifiable expertise. This view
focuses on the quality of the human resource available to the organization and their
ability to learn and adapt more quickly than their competitors. These resources include
the human resources such as the experience, training, judgments, intelligence,
relationships and insights of individual managers and workers in an organization.

According to this theory, the sum of people’s knowledge and expertise, and social
relationships, has the potential to provide non substitutable capabilities that serve as a
source of competitive advantage (Cappelli & Singh, 1992). Perce and Robinson (2007)

23
argue that the resource based view of a firm helps improve upon the SWOT analysis by
examining a variety of different yet specific types of resources and capabilities any firm
possesses and then evaluating the degree to which they become the basis for sustained
competitive advantage based on industry and competitor considerations. Thus
theoretical work on the resource based view of the firm supports the notion that HRM
may be an important source of competitive advantage (Barney, 1991; Perce &
Robinson, 2007). Effective recruitment and selection of employees, coupled with
training and development of enables the organizational to get the best skills and enhance
them to retain a higher performance. Proper management systems ensure high
productivity of the skilled manpower, such as use of decentralized teams. Mechanisms
that retain the expertise engaged like motivation should be put in place. All these factors
give an organization a competitive advantage over its competitors. However, corruption
can compromises on the quality of employees. This will ultimately prevent the
organization from operating at its full potential. The RBV theory is relevant to the
current study because organizations need to identify their resources and how they can
use such resources to deliver quality services and thus remaining competitive in the
market marked by stiff competition. This theory thus addresses the third variable of the
study on the effect of training on performance of parastatals in Kenya.

2.2.4 Ability, Motivation, Opportunity Theory (AMO Theory)

This theory owes its genesis from Vroom (1964). Appelbaum, Bailey, Berg and
Kalleberg, (2000) and Katou (2008) also supported this theory. The theory proposes that
performance at individual level depends on high motivation, possession of the necessary
skills and abilities and an appropriate role and understanding of that role (Savaneviciene
& Stankeviciute, 2010). According to Vroom (1964), the effects of motivation on
performance are dependent on the level of ability of the worker, and the relationship of
ability to performance is dependent on the motivation of the worker. The effects of
ability and motivation on performance are not additive but interactive. Vroom proposed
the following formula showing that performance is a function of ability and motivation:

24
Performance = f(A, M).Boxall and Purcell (2003) summarize it as: P = f(A,M,O) Where
P is performance, A is ability, M is motivation, and O is opportunity. In other words,
HR systems will be most effective when they foster ability, motivation, and opportunity
to contribute to effectiveness (Purcell & Hutchinson, 2007; Boselie,Dietz &
Boon,2005).Different HR practices/policies have many effects on ability, motivation,
and to some degree, ability requirements/opportunity (Katou, 2008; Lepak, Liao,
Chung& Harden, 2006; Purcellet al., 2003).

Recruitment, training policies are expected to have their primary effect on ability (and
related expectancy motivation perceptions). Job design and job analysis primarily
determine ability requirements/opportunity and to some degree, (intrinsic) rewards
offered. Motivation needs/values are primarily influenced by employee selection and
training as well as employee reward. Thus the AMO theory thus states that performance
is the function of employee ability, motivation and opportunity (Musah, 2008).Scholars
have argued that a skilled, motivated, and flexible workforce can help develop a
company's sustainable core competencies (Musah, 2008; Hsi-An,Yun-Hwa& Chu-Chun,
2006). Committed and motivated workers are less likely to want to leave the
organization (Gould-Williams & Davies, 2012).

The AMO theory claims that people will perform well when they are able to do so
(because they have the necessary knowledge and skills to the job), they have the
motivation to do so (they will do the job because they want to) and finally, there will be
enhance performance if their work environment provides the necessary support (for
example through functioning technology) (Musah, 2008). Whitener (2001) argued that
the organization may adopt a high-commitment strategy, including employment
practices, appraisal, competitiveness, fair reward, and comprehensive training and
development in order for employees to have high commitment and motivation.

This theory encourages high skills and abilities for employees, for example careful
selection and high investment in training. It advocates for high employee motivation, for

25
example employee involvement and performance-related pay; and an appropriate role
structure and role perception, for example job design and extensive communication and
feedback. According to proponents of this theory, organizational performance is a
function of motivation. Employee involvement, capacity building, shared
responsibilities and employee reward, plays a major role in employee motivation. If
nepotism is allowed to thrive, it may lead to recruitment of employees that are not
qualified. Promotions, training and development may not be done on merit. This may
demoralize the employees and hence lower their output. This can ultimately be reflected
in enhanced parastatal performance. This theory addresses the fourth variable of the
study on employee rewards which is associated with performance.

2.2.5 Bureaucratic Theory

Bureaucracy refers to a situation where there is stringent following of organizational

structure, rules and procedures. This theory was proposed by Max Weber in 1922 as
shown by Weber 1947. The formal organizations both as a concept and a reality
emerged largely as a result of industrialization in the Western society (Henslin, 2012).
The rationalization of society as a historical shift in people's thinking and behavior is
associated with modernization and accompanying it economic processes, and involves
many characteristics of a contemporary world where bureaucracy is a main form of
organizations. The term itself, definition and list of characteristics originated in the
magnum opus "The Economy and Society" (first published in 1922) of Max Weber. The
six main operation principles of a bureaucracy are: 1) a clear hierarchy with top-down
assignments and bottom-up accountability levels (pyramid); 2) a division of labor; 3)
written rules; 4) written communication and records; 5) impersonality; 6) merit-based
recruitment of workers. He believed that formal organizations tend to develop into
bureaucracies and in general, large organizations tend to be more bureaucratic (Weber,
1978).

26
In the above sense, parastatals are large bureaucracies. Weber linked the advance of
bureaucratic organization with its "technical superiority", framework of organization
strictly oriented on the result and thus being universal (Downs, 1967). The bureaucratic
model is important because, by and large, parastatals generally strive to uphold the main
characteristics described by Weber. The model in its nature is universal and the ideal
structure of it is 'cemented' in the six principles above. Weber noted that bureaucracies
(where nepotism is constrained by tests and other human-resources systems that seek to
foster decisions based on impersonal assessments of merit) have superior performance
to what he called traditional forms of organizing (based on nepotism and cronyism,
among other things). Although the issue is universal, a need in case-studies for
comparative approach and analysis is strong (Vinton, 1998). In different parts of the
world this phenomenon is associated with different attitudes and consequences
("Nepotism", 2009).

The point of any social phenomenon as large as nepotism is its 'situatedness' in uniquely
shaped environments. The level of corruption, nepotism and tribalism may be different
with different organizations (Wated &Sanchez, 2012). This deeper-level difference
manifests itself when nepotism and tribalism policies meet an environment where family
and tribal bonds are a basis of collective survival penetrating all levels of organizational
hierarchy (Hatch & Cunliffe, 2006). Talking on these terms, there is a conflict between
inherent ways of running organizations as suggested by Weber. Corruption, Nepotism
and tribalism contradict the sixth principle of Weber for organizations that posits that
workers should be recruited purely on merit. Perceptions of employees concerning an
organization may persist for long. Pearce and Huang (2014) reported that once
employees believe that rewards are based on nepotism and tribalism rather than merit,
those perceptions do not change easily even with changes in the administrative system.

Corruption is regarded as unprofessional and unethical practices with detrimental effect

on job satisfaction and the achievement of organizational goals (Arasli & Tumer, 2008).
Nepotism and tribalism are seen as unethical because of their clash with traditional core

27
values of self-reliance and fairness in an organization. They are also connected with
discrimination and other pragmatic issues in an organization. There have been
substantial concerns regarding the possibilities of employers who might have suffered
certain form of bias in terms of preferences for hiring and nepotism and tribalism to
survive in organization, ethical issues notwithstanding.

That corruption damages organizational performance has been documented in numerous

studies. In his large study of Overseas Chinese firms, Redding (1990) found that these
family-based organizations were characterized by extensive political infighting among
siblings and cousins, and usually split into separate small organizations to provide each
family member with their own organization to keep the peace. Supervisors were
autocratic and employees unhappy. Thus, bureaucratic systems pose a challenge to
managers, who may therefore use them to harm rather than to benefit the organization.
There is need to determine the influence of corruption on the relationship between HRM
practices and parastatal performance. This theory addressed the last variable on
corruption, which highlighted issues affecting the human resource practices in
parastatals such as nepotism and tribalism.

2.3 Conceptual Framework

A conceptual framework is the diagrammatic presentation of variables, showing the

relationship between the independent variable, moderating variables and the dependent
variables (Zikmund, 2012).The conceptual model considers how HRM can be utilized in
decision making to achieve high quality decisions that would enhance organizations
performance (Youndt, Subramaniam & Snell, 2004).When human capital attributes are
effectively utilized, an organization can yield significant benefits. HRM practices are the
independent variable in this study, whereas organization performance is the dependent
variable. Corruption was expected to moderate the relationship between HRM practices
and performance of parastatals in Kenya (Figure 2.1).

28
 Perceived Recruitment &
Selection
 Hiring cycle
 Internal promotions
 Recruitment cost

Perceive d Decentralized Perceived Parastatal

teams Performance
 Cross-functional teams  Revenue generation
 Employee involvement  Return on sales.
 Delegated teams  Return on assets
 Employee satisfaction
Perceived Training  Customer satisfaction.
 Programs
 Flexibility
 Training and Perceived Corruption
development budget
 Nepotism
 Tribalism
Perceived Reward
 Incentive system
 Monetary
 Non monetary
Dependent Variable
Independent Variables Moderating Variable

Figure 2.1: Conceptual Framework

2.3.1 Recruitment and Selection

Organizations exhibit higher performance when they recruit and acquired employees
possessing competencies consistent with the organization’s strategies. Recruitment is
central to any management process and its failure can increase difficulties for any
organization including an adverse effect on its profitability and inappropriate levels of
staffing or skills (Soliman, 2010).The basic idea in selection process is to solicit
maximum possible information about the candidates to ascertain their suitability for
employment and given the fact that there are factors which affect the seeking of such
information (Prasad, 2005).Armstrong (2012) observes that candidates can be selected
using different methods in order to assess their suitability for a certain role. These
methods include; individual interviews, interviewing panels, selection boards, and

29
assessment centres. Despite a well-drawn plan on recruitment and selection and
involvement of qualified management team, recruitment processes adopted by
organizations can face significant obstacles in implementation. This study determined
the hiring cycles, internal promotions and recruitment costs in Kenyan parastatals. The
effect of recruitment on parastatal performance in Kenya was also determined.

2.3.2 Decentralized teams

Decentralization has been regarded as the practice of delegating work process authority
to employees, which constitutes one component of HRM (Becker & Gerhart, 2006). The
delegation of work achievement authority, which is generally known as employee
involvement, is theoretically based on the motivation-based thinking that expanding
work achievement autonomy heightens employee work volition and improved
productivity (Cotton, 2013). Moreover, it is supposed that work achievement authority
delegation practices promote employee learning and information sharing among
employees through total quality management and problem-solving groups, and have
effects on work organization problem solving, product and service quality
improvements and other fronts (Cappelli & Neumark, 2011). More and more,
employees are required to work in teams, make joint decisions, and undertake common
initiatives in order to meet the objectives of their team and organization. Decentralized
teams can affect firm growth in two ways: firstly, a surplus of junior managers in a firm
may create and support dynamics of firm growth (Flamholtz & Randle, 2010) and
secondly, it promotes employee commitment participation and create a sense of
attachment coupled by higher levels of employment security, and satisfaction for
workers (Batt, 2014; Tata & Prasad, 2014). This study examined the cross-functional
teams, employee involvement and delegated teams in parastatals in Kenya. The effect of
delegated teams on performance of parastatals in Kenya was also assessed.

30
2.3.3 Training

In order to ensure that employees are equipped with the right kind of skills, knowledge
and abilities to perform their assigned tasks, training and development plays a crucial
role. Choosing the right type of training, ensure that the employees possess the right
skills for our business, and the same need to be continuously updated in the follow up of
the best HR practices. To meet current and future business demands, training and
development process has assumed its strategic role and in this regard studies by Stavrou,
Brewste and Charalambous (2004) and Apospori et al. (2008), have attained much
importance as these highlight the training and development practices in cross-national
contexts. Apospori et al. (2008) had deduced that there is a considerable impact of
training on organizational performance. The need for developing the employees is
compelling because a sound training and development plan has its contributions to
increase productivity and quality of work. The development strategy reduces staff
turnover and absenteeism and also helps in improving motivation among the employees.
In order to stay ahead of the competition, training and development must be at the core
of any organization and must become part of an organization’s strategy and linked to
business goals and organizational performance. This study determined the training and
development programs, their flexibility budget for different parastatals in Kenya. The
effect of training on performance of parastatals in Kenya was also assessed.

2.3.4 Reward

To motivate behavior, the organization needs to provide an effective reward system.

Managers often use rewards to reinforce employee behavior that they want to continue.
According to Perce and Robinson (2012) reward power is available when the manager
confers rewards in return for desired actions and outcomes. Rewards systems are often
implemented within organizations as a key management tool that can contribute to a
firm’s effectiveness by influencing individual behavior and motivating employees at
work (Fareed et al., 2013).Employees’ job satisfaction is affected by both financial and
nonfinancial rewards (Armstrong, Reilly & Brown, 2011; Ali & Ahmad, 2009).

31
Organizations tend to focus on financial rewards, and non-financial rewards have
become increasingly being overlooked (Fareed et al., 2013). Rewards can be extrinsic or
intrinsic, extrinsic rewards are tangible rewards and these rewards are external to the job
or task performed by the employee. External rewards can be in terms of salary/pay,
incentives, bonuses, promotions, job security, among others. Intrinsic rewards are
intangible rewards or psychological rewards like appreciation, meeting the new
challenges, positive and caring attitude from employer, and job rotation after attaining
the goal (Ali & Ahmad, 2009).This study determined the incentive system, and
monetary as well as non monetary rewards adopted by parastatals in Kenya. The effect
of rewards on performance of parastatals in Kenya was also examined.

2.3.5 Corruption

Many researchers have found that corruption, nepotism and tribalism are a common
phenomenon that occurs in many organizations (Arasli & Tümer, 2008). According to
Hanekom and Thornhill (1983), nepotism and tribalism is the act of awarding a
gratuitous offer or position to someone in close family or tribal relation. When
employees have these relationships, they may make a conscious effort to give favours to
their relatives even when it is not due to them (Okyere-Kwakye, Nor & Nor, 2010).
Price and Cybulski (2005) argue that due to the sharing of tribes, employees may exhibit
certain common behaviors. Issues of nepotism ,tribalism and bribery may negatively
affect organization’s performance(Okyere-Kwakye, Nor & Nor, 2010).This study
determined the extent of relationships in terms of family and tribal ties in parastatals in
Kenya. The moderating effect of corruption on the relationship between human resource
management practices and performance of parastatals in Kenya was also assessed.

2.3.6 Parastatal Performance

The measurement of organizational performance is not easy for business organizations

with multiple objectives of profitability, employee satisfaction, productivity, growth,
social responsibility and ability to adapt to the ever changing environment among other
objectives. Although performance has been traditionally conceptualized in terms of
32
financial measures, some scholars have proposed a broader performance construct that
incorporates non-financial measures. Extant research findings have shown that
perceived measures of performance can be a reasonable substitute of objective measures
of performance (Wan-Jing & Tung, 2005) and have a significant correlation with
objective measures of financial performance. To minimize the effects of random errors,
researchers have suggested the use of multiple items to assess performance. Given this
scenario, this study will use multiple items in order to assess the performance of
parastatals. The financial outcomes to be assessed are revenue generation, return on
sales and return on assets while non-financial items to be assessed items are employee
and customer satisfaction

2.4 Empirical Literature Review

2.4.1 Recruitment and Selection and Performance

According to Noe (2008) staffing strategy refers to a company’s decision regarding

where to find employees, how to select them and the mix of employee skills and
statuses. The objective of HRM resourcing strategies is to obtain the right basic material
in the form of workforce endowed with the appropriate qualities, skills, knowledge and
potential for future training (Armstrong, 2010). The selection, recruitment of workers
best suited to meeting the needs of the organization ought to form a core activity upon
which most other HRM policies geared towards development and motivation should be
built (Armstrong, 2010). Organizations can take one of three actions to fulfill their
employee resourcing: 1) reallocate tasks between employees, so that existing staff take
on more or different work. 2) re-allocate people within the company; and 3) recruit new
staff from the external job market. The emphasis is on flexible working practices,
requiring multi-skilled workers and sophisticated assessment and development
programmes. According to Johnson, Scholes and Whittington, (2012) recruitment is a
key method of improving the performance of an organization. According to Hitt, Ireland
and Hoskin, (2001) the right people should be placed in positions that fit them best. This

33
is based on the fact that failure to properly allocate employees would result in low
organizational performance.

2.4.2 Decentralized Teams and Performance

More and more, employees are required to work in teams, make joint decisions, and
undertake common initiatives in order to meet the objectives of their team and
organization. Self-managed teams can affect firm growth in two ways: Firstly, a surplus
of junior managers in a firm may create and support dynamics of firm growth. The
growth stage is perhaps the most dynamic stage of a firm’s lifecycle. As the business
expands, new levels of management are added. Decision-making becomes more
decentralized, middle managers gain authority and self-managed teams proliferate as the
firm adds more and more projects and customers (Flamholtz & Randle, 2010; Miller &
Friesen, 2014).

Secondly, teamwork and decentralization of decision making promotes employee

commitment participation and create a sense of attachment, thus indirectly affecting
firm performance (Tata &Prasad, 2014).Several studies identified self-managed teams
and decentralization as important high-performance HRM practices (Singer & Duvall,
2010; Pfeffer, 2008). Jayaram, Droge and Vickery, (2009) found that decentralised
teams have a positive effect on two dimensions of the performance, time and flexibility.
Collins and Clark (2013) examined the role of human resource practices in creating
organizational competitive advantage and found that top management team social
networks (practices such as mentoring, incentives, etc.) mediated the relationship
between HR practices and firm performance. Haleblian and Finkelstein (2013)
examined the effects of top management team size and chief executive officer (CEO)
dominance on firm performance in different environments.

Results showed that firms with large teams performed better and firms with dominant
CEOs performed worse in a turbulent environment than in a stable one. Tata and Prasad
(2014) found that a company with micro level of centralization is a receptive

34
environment for self-managed teams. In a study of differential outcomes of team
structures for workers, supervisors, and middle managers in a large unionized
telecommunications company, Batt (2014) found that participation in self-managed
teams is associated with significantly higher levels of employment security, and
satisfaction for workers and the opposite for supervisors. Black, Lynch and Krivelyova
(2004) examined the impact of organizational change on workers and found evidence
that self-managed teams are associated with greater employment reductions.

2.4.3 Training and Performance

Employee training is an important determinant of organizational performance.

According to Noe (2006) development refers to formal education, job experiences,
relationships and assessments of personality and abilities that help employees perform
effectively in their current or future jobs and organization. HollenBeck, Gerhart and
Wright (2006) argue that employee development is a key contributor to a business
strategy based on developing intellectual capital. According to Nzuve (1999) training is
the process that enables people to acquire new knowledge, learn new skills and perform
tasks better than before. According to Barker (2010) training is the planned provision of
learning that equips us with skills. Training and development helps the company create
a workforce that is able to cope with change, meet the increasing demands of consumers
and prepare the future leadership of the company (Noe, 2008).

Barker (2010) argues that training helps employees to maintain standards or improve
their competence hence their performance. A variety of human resource management
practices are related to the development of human resource of the organization. For
strategic purposes it is important to target much more specifically on the development of
competences which can provide a competitive advantage (Johnson, Scholes &
Whittington, 2012).Barker (2010) argues that developing somebody’s skills enables an
organization to achieve greater productivity, improved job performance, greater
empowerment, more satisfactory recruitment and selection and reduced labour turnover.
Training can help employees develop skills needed to perform their jobs, which directly
35
affects the business performance. Giving employees opportunities to learn and develop
creates a positive work environment which supports the business strategy by attracting
talented employees as well as motivating and retaining current employees. Training can
also be used to prepare employees for increased responsibilities in their current human
resource plan (Johnson, Scholes & Whittington, 2012).According to Hitt, Ireland,
Hoskin, Sheppard and Rowe,(2006) human resource managers need to be well trained to
ensure proper staffing skills, change management, counseling, project management and
organizational design.

2.4.4 Reward and Performance

To motivate behavior, the organization needs to provide an effective reward system. A

reward strategy is a declaration of intent that defines what the organization wants to do
in the longer term to develop and implement reward policies, practices and processes
that will further the achievement of its business goals and meet the needs of the
stakeholders (Armstrong, 2010). An effective reward system has four elements: rewards
need to satisfy the basic needs of all employees; rewards need to be included in the
system and be comparable to ones offered by a competitive organization in the same
area; rewards need to be available to people in the same positions and be distributed
fairly and equitably (Goel, 2008). According to Perce and Robinson (2012), reward
power is available when the manager confers rewards in return for desired actions and
outcomes. A reward is a work outcome of positive value to the individual (Armstrong,
2010). A reward strategy should enhance commitment and engagement and provide
more opportunities for the contributions of people to be valued and recognized.

According to Rudman (2003) paying for performance is a big issue in contemporary

human resources management. Studies have found a positive relationship between
performance related pay and performance (Goel, 2008; Huselid, 1995). People receive
extrinsic rewards, for example, pay bonuses, promotions, time off, special assignments,
office fixtures, awards and verbal praise or intrinsic rewards (Armstrong, 2008; Goel,
2008). Intrinsic rewards are self-administered (Dessler, 2006). The overall reward
36
system needs to be multifaceted. Because all people are different, managers must
provide a range of rewards - pay, time off, recognition, or promotion (Armstrong, 2008).
According to Armstrong and Murlis (2006), it is also important to consider non financial
rewards which vary according to the nature of the employment relationship and also the
personal characteristics of the employee. Lewis, Thornhill and Suanders (2009) identify
the following non financial rewards: feeling part of a community, a sense of personal
achievement, social recognition and social and societal responsibility.

2.4.5 Perceived Corruption

Corruption has permeated many sectors of the Kenyan economy including parastatals.
According to a report by presidential taskforce on parastatals, corruption is one of the
contributing factors to poor performance of parastatals (GOK, 2013). In current
international use, it’s defined as the misuse of entrusted power for private gain. This
definition acknowledges that “corruption” cannot be prevented as a single behaviour or
offence. Instead it is more a convenient term for many types (Gorta, 2008) or even
syndromes (Johnston, 2013) of behaviour that have in common a breach of a
relationship of trust that undermine a specific historical or social institution, in this case
government (Miller, Roberts & Spence, 2012). The costs of corruption identified in this
period included lost resources wasted on unproductive expenditure (such as bribes) and
misallocated to those with power or money, public official effort diverted from the
public interest to self-dealing and, at the political level, unstable government and
alienated citizens (Johnston, 2013). Over time other unfavorable consequences of
corruption have been documented including increased costs of doing business, unfair
allocation of public entitlements, poor quality consumer products and reduced public
safety (Rose-Ackerman, 2008).

The term nepotism has its root in the medieval Catholic Church and is thought to be
widely connected to cronyism and favoritism. The word nepotism originates from the
Latin word for “nephew”, relating especially to the "nephews" of the prelates in
medieval times (Arasli & Tümer, 2008). In his work, Farahmand (2013) reported that
37
nepotism affects the quality of human resource in an organization as candidates are
hired due to their affiliations family ties rather than their requisite skill. According to
Arasliet al. (2006) nepotism is an unprofessional phenomenon that provides benefits
merely to the family members. Therefore nepotism paralyzes human resources practices
and affects the level of satisfaction among employees. According Lakshminarasimhan
(2011) unfortunately, not all family members and relatives come with the right merit to
be employed for a particular position or a role. Nepotism allows rules to be broken and
can lead to a chaotic situation for business owners (Lakshminarasimhan, 2011).

Tribalism involves engagement of employees based on tribal affiliation. According to

Hilder (2004), tribalism may affect the effectiveness of teams in that, in a team when
two or more members share a common tribe they would form a cleavage within the team
which would lead to ethnocentrism where other members of the group will feel isolated.
Hilder (2004) denotes that tribalism controls the behavior and attitude of people within
the organization. Thus, employees who possess the same tribal behavior may attract
each other and as such the cohesion in the team will weaken since there would be
“teams within team”. They may cause conflicts within organizations which would
disrupt the activities and eventual productivity of the organizations.

According to Okyere-Kwakye, Nor and Nor (2010) nepotism and tribalism affects the
quality of human resource in an organization as candidates are hired due to their family
or tribal affiliations rather than their requisite skill. They place a negative and
unproductive cost on the existing employees in the organization and impede
organizational justice, motivation and harmony resulting in a higher rate of turnover on
the part of productive employees. Nepotism and tribalism leads to discriminatory
practices in an organization which negatively impact organizational efficiency (Bellow,
2013).

From the foregoing, most empirical researches recognizes that hiring or even promoting
an employee in an organization for any other reasons other simply such an employee

38
connection either of kinship, blood affiliate, family ties, friendship among others,
amount to nepotism in such an organization (Arasli & Tumer, 2008). According to
Arasli and Tumer (2008) nepotism, tribalism and bribery negatively affects work
environment. Teams are unable to function optimally. It is likely to affect access to
training and development opportunities amongst the employees within the organization.
It is likely to compromise on reward system. All these may demoralize the employees
and consequently lowering parastatal performance.

Khatri and Tsang (2013) argue that when nepotism is common in an organization. It is
associated with consequences that are divided into horizontal and vertical nepotism.
They argue that horizontal nepotism happens between counterparts such as business
partners, friends and colleagues, while vertical nepotism is related to the superior and
subordinate relationships. The size and type of ownership of an organization affects its
exposure risk to nepotism (Hayajenh, Maghrabi & Al-Dabbagh, 2004). Al-Aiban and
Pearce (2008) found that in Saudi Arabia, where cultural obligations to protect and
advance family members are strong, managers in for, profit businesses reported less
nepotism and bribery in their organizations than did managers in governmental
organizations, where performance pressures were weaker.

Hellman, Jones and Kaufmann (2010) and Kaufmann and Kraay (2008) have provided
rich data on how nepotism and tribalism produces poorer economies. They reported that
potential employees without connections are shut out and the inefficient in the
organizations are protected. Mulder (2008) argues that previous work experience and
education are two important factors in today's modern nepotism and tribalism. He
explains that people who enter into the organization based on the relationship and
bribery lack the necessary competencies and qualifications (Khatri & Tsang, 2013).
Laker and Williams (2003), distinguishes between optional and mandatory nepotism.
Optional nepotism and bribery occurs when an individual decides to accept a job in the
organization while he/she strongly believes that it is a personal choice and desired career

39
path. On the other hand, mandatory nepotism occurs when an individual accepts a job
that is forced to accept it based on the kinship ties or nepotism.

Pearce et al. (2011) reported that nepotism and tribalism not only affect first-level
employees. Managers change the way they manage when personal relationships are
pervasive in the workplace. Dependence on personal relationships lead managers to
withhold information from their subordinates because keeping critical personal
relationships secret is important to their legitimacy. This leads to over-centralization
(Pearce et al., 2011). According to Pearce, Branyczki and Bakacsi (1994), nepotism and
tribalism places loyalty and obligations to one’s family and tribe over obligations to
one’s employer. It cannot reasonably be expected for people to abandon the love and
support of their families for a particular job. Nepotism and tribalism is damaging
because any claims that family and tribe members make must take precedence over any
organizational requirements (Pearce, Branyczki & Bakacsi, 1994). Nepotism , tribalism
and bribery damages exactly the kinds of social relationships that make for a humane
and tolerable workplace that foster organizational performance (Pearce et al., 2011).
Nepotism and tribalism are bad for employees who are forced to weigh conflicting
obligations, it’s bad for co-workers who become demoralized when they suspect the
worst, and they are bad for organizational performance (Pearce et al., 2011).

2.4.6 Organizational performance

Performance has been used synonymously with productivity, efficiency, effectiveness

and competitiveness. According to Bohlander and Snell (2007) organizational
performance comprises; employee recruitment and selection strategies, employee
motivation, employee commitment, training and development strategies, employee
reward strategies, firm size, technology, capital intensity, culture, and employee
relations strategies. It’s the actual output or results of an organization measured against
its intended outputs (organizational goals and objectives). Various scholars have defined
performance management in different ways, for example, Armstrong (2010) defines

40
performance management as a systematic process for improving organizational
performance by developing the performance of individuals and teams.

Performance management and governance is therefore an essential feature of modern

organizational management (Armstrong, 2010). It enables an organization to
continuously monitor and improve its performance in order to achieve its strategic goals
(Dessler, 2005). Research has shown that a company emphasizes performance when a
substantial portion of its employees pay is tied to individual or group contributions and
the amount received can vary significantly from one person or group to another
(Gomez-Meija, Balkin & Cardy, 2008).Performance indicators include: financial
(profits), market share, efficiency, reliability, flexibility among others. The aim of
human resource strategy is to devise ways of managing people in order to assist in
achievement of organizational objectives. Participation of individuals and team
transforms exchanges from economic to social. According to Mahoney and Watson
(1993) employee involvement has a beneficial impact on performance.

HRM is a new paradigm in managing HR in the modern organization which is hinged

on the understanding that the most critical resource that any organization must provide
itself of is HR, since it is the HR that is responsible for coordinating other factors of
production to spur corporate performance. Schuler, Jackson, and Storey (2001)
described the evolution of SHRM from personnel management in terms of a two-phased
transformation, first from personnel management to traditional HRM (THRM), and then
from THRM to SHRM. To improve firm performance and create competitive advantage,
a firm’s HR must focus on a new set of priorities which are more business and strategic
oriented and less oriented to traditional HR functions such as staffing, training, appraisal
and rewards. Strategic priorities include team-based job designs, flexible workforces,
quality improvement practices, employee empowerment and incentive provision.

Cooke, Shen and McBride (2005) asserted that HRM is an efficient function that copes
with environmental changes. It directly and indirectly benefits companies because it
changes passivity into initiative, transmits organizational goals clearly and encourages
41
the involvement of line managers. Marchington and Wilkinson (2008) argue that HRM
positively influences firm performance because it generates structural cohesion, an
employee generated synergy that propels a company forward, enabling the firm to
respond to its environment while still moving forward. Cooke, Shen and McBride
(2005) investigated the HRM practices of firms in declining industries. They found that
most high performance firms adopted HRM measures. Conversely, low performance
firms tended to employ conventional methods. Various researchers (Appelbaum et al.
2000; Guest et al. 2000;Purcell and Kinnie,2007) have found a positive relation between
HRM practices and firm financial performance. They found that the strategic orientation
of HR in high productivity firms differed obviously from that in low productivity firms.

2.5 Critique of Existing Literature

The independent variables of this study are the following human resource management
strategies: recruitment and selection, decentralized teams, training and development,
employee reward. These strategies affect ability and commitment of employees to work
and this in turn affects the dependent variable of the study which in this case is
organizational performance. The effect of recruitment and selection processes and
procedures, decentralized teams, training and development and reward and motivation
on organization financial performance, employee customer satisfaction and the
moderating role of Corruption on SHRM practices and parastatal performance was
determined.

While many studies have been done on the effect of human resource strategies on
performance most of them have been done in the private sector which makes it
impossible to generalize on the public service. Moreover, most of them are conducted
outside Kenya. For example, a study by Cook (2010) found a positive relationship
between human resource strategies and performance in the manufacturing sector in
Britain. This clearly may have minimal relationship with the public sector due to the
nature of the human resource tasks involved in both. At the same time as mentioned by

42
Mullins (2015) there are national differences on what constitute performance goals,
therefore what may be high performance in Britain may not be so in Kenya.

As explained by Harzing and Ruysseveldt (2014) there are cultural differences in

performance goals and based on the nature of the two countries it may not be possible to
draw a link between a study in Britain and apply it in the Kenyan situation. The two
countries are also at different levels in their economic development, while Kenya is a
developing country that is still at its young stages Britain is a first world economy. As
explained by Perkins and Shortland (2006) employers in the industrialized markets and
economies have had to restructure and emphasize on labour efficiency and cost control
in the wake of increasing competition. At the same time the employment levels in the
two countries are different; in Kenya there is a lot of unemployment and therefore
employees may commit their energies towards achievement of organizational goals not
because the strategies are good but because they are afraid of not meeting their targets
leading to them been declared redundant. As explained by Perkins and Short land (2006)
growing unemployment has sapped the strength of workers and their unions. Thus a
tougher employer’s stance and the introduction of HRM practices have been observed.
In Britain this may not be the case and employees are able to work without such fears
because there are low unemployment rates hence the employees may not fear losing
jobs.

A review of the literature linking HR practices to business strategy shows conflicting

perspectives in HRM. The universalistic perspective suggests that there is a universal set
of best practices that any business can adopt to improve organizational performance.
Conversely, the contingency perspective suggests that business performance improves
when there is fit between business strategy and HR policies. Redman (2006) identifies
both methodological and theoretical problems with the universalistic approach.
Methodologically, the degree and direction of causation can be questioned. Adopting
best practice may just be of one the several factors that improve business performance.

43
Furthermore, it may only be successful firms who can afford to adopt these practices
thus reversing the perceived direction of causation.

Research suggests that best practices models are only seen in higher value added
sectors. A lot of businesses have proven to be successful without using best practices, as
confirmed by Wood and DeMenezes (2005).From a theoretical position, the wide range
of models and lists of best practices creates a problem. It is the unique context of each
business that matters when developing a HR strategy. In addition, the intention of best
practice should benefit both shareholders and workers. But as with most models of best
practice, there is little reference to the role of unions or the differing and objectives each
group has in the workforce. For example, Marchington and Grugulis (2000) suggest that
Pfeffer (2001) takes a unitary view and doesn’t take into account the complexities of
managing a diverse and differentiated workforce. The best practice approaches are also
not culturally sensitive. Models that tend to reflect the individualist values of the USA
will not be suitable for more collectivist cultures such as Germany or Japan. National
context of each country play a fundamental role in SHRM.

This severely implicates the usefulness of best practice model. The simplistic models of
matching HRM and strategies imply a top down deterministic strategy planning process.
But in reality, many strategies tend to evolve from the input of numerous stakeholders as
a multi-level, multi-stage, incremental and political process (Legge, 2005). Moreover,
many businesses avoid a unified strategy as they operate in many different business or
geographic markets with a different strategy for each market. This makes it difficult to
match HRM with one particular strategy. This criticism indicates there should be a
hybridization of the several strategies and the need for HR to respond accordingly.

2.6 Research Gaps

The rapid growth of private sector , high degree of competition, increase in labor
turnover and high costs of employee replacement have organizations to aggressively
compete for the best employees. This has led organizations to focus on strategic

44
management of its employees. The shift by organizations to strategic management has
created a lot of interest on the effect of SHRM practices on organizational performance.
A vast majority of empirical research on strategic management has focused on the
performance issue and most studies show that well directed human resource practices
increase firm performance (Armstrong & Baron, 2009; Katou, 2008; Huselid, 2007;
Ahmad & Schroeder, 2003).

There is need to question the veracity of the link between HRM and performance.
Analysis of data relating to the question of a link between HRM and performance
reveals there is uncertainty as to the direction of the link. Guest et al. (2003) study
confirms an association between HRM and performance but fails to show a causal
relationship between HRM and performance. Purcell et al.(2003) have noted that while
some of the studies have been able to show an association between HRM and firm
performance, they have not clearly explained when, why and how this association
existed and to identify the inter-connections.

Despite these findings, most HRM studies have been characterized by lack of a solid
theoretical foundation explaining the mechanisms causing the observed enhanced
performance. For instance, so far there is no consistent agreement on how to measure
HRM practices and what to measure with regards to organizational performance (Wright
et al. 2005).The available literature also indicates a serious lack of empirical studies
designed to investigate exactly how a good alignment between HRM leads to improved
performance (Katou, 2008). The literature points out that the link between SHRM and
organizational performance is like a ‘black box’, that is, lack of clarity regarding ‘what
exactly leads to what’(Katou, 2008; Gerhart, 2005).

Serious gaps still remain with respect to the causal ordering ofthe variables involved in
the HRM - performance relationship (Katou, 2008; Wrightet al., 2005; Purcellet
al.2003).Consequently, there is need for additional robust and quantitative evidence to
support the HRM performance link and investigations from different contexts with

45
different practices. Considering that previous researchers do not agree on the SHRM
practices, policies, and systems employed, and accordingly the constructs developed
scholars such as Lepaket al. (2006), Boselie, Dietz and Boon (2005) and Wright et al.
(2005), have argued that the results derived from these studies are not comparable.
Without a clearly delineated theoretical model of effects on performance, scholars
cannot adequately validate the efficacy of such practices, let alone provide useful
suggestions to practitioners. There is a great need for additional evidence to support the
HRM-performance relationship to show exactly what leads to what (Gerhart,
2007).Information on the influence of employee recruitment and selection, delegated
teams, training and employee reward on parastatal performance is limited and
inconsistent.

Literature reviewed has revealed that most studies examining the relationship between
HRM and organizational performance have been conducted mostly in a few
developedcountries like US and UK. Furthermore, only a few researchers have
investigated this relationship in public service sector. There is a great need for more
studies on HRM-performance relationship in developing countries like Kenya in order
to fill the existing knowledge gap, especially for parastatals. Despite corruption,
nepotism and tribalism being real phenomena in Kenya today, there is limited literature
that investigated their influence on parastatal performance.

There is need to extend research in Kenya’s organizations given the increasing

importance of HRM in creating firm competitive advantage. Addressing these research
gaps can help more researchers beyond overly simplistic models of HRM towards a
much fuller understanding of the role of HRM in organizations. The extent of corruption
particularly nepotism, tribalism and bribery issues in Kenya parastatals is not well
documented. It is against this background that this study was undertaken in order to
investigate the effect perceived HRM practices on the performance of the parastatals in
Kenya and provide a better understanding of the effect of perceived corruption,

46
nepotism, tribalism and bribery issues on the relationship between perceived HRM
practices and parastatal performance.

2.7 Summary

This chapter reviewed the relevant literature on effect of HRM on organization

performance. The aim of strategic human resource management is to devise ways of
managing people in order to assist in achievement of organizational objectives. It is now
commonly accepted that employees create an important source of competitive advantage
in organizations (Barney, 1991; Pfeiffer, 1994). The way in which HRM is applied has
an impact on organizational performance. This trend has led to increased interest on the
impact of human resource strategies on organizational performance and a number of
studies have found a positive relationship between high performance work practices
(Huselid, 1995) and different measures of company performance.

The review of the theories supporting this study indicates a link between HRM practices
and organizational performance. Universalistic theory shows superior HRM practices
should be adopted by organization for improved performance. The Configurational
theory emphasizes on the importance of achieving both internal and external fit in the
organization. Resource based theory advocates for satisfaction of firm’s human capital
requirements. Ability, Motivation, Opportunity theory proposes that employee
performance depends on motivation, possession of the necessary skills and abilities and
understanding of their appropriate roles. Bureaucratic theory proposes that proper
bureaucracies should be adopted as they enhance organization’s performance.

Furthermore there is some empirical support for the hypothesis that organizations which
align their human resource management practices with their business strategy will
achieve superior outcomes (Dyer & Reeves, 2010; Guest, 2007; Becker & Huselid,
2008).The emerging field of human resources management on performance suffers from
lack of unity in theory and inconsistency in research methodology. Recently efforts have
been made by human resources management theorists to try to establish a causal link

47
between strategic human resource management and performance (Cook,
2010).According to Barney (2010) organizations that use resources and capabilities to
exploit opportunities and neutralize threats will see an increase in their net revenues or a
decrease in their net costs or both and vice versa. Conclusively, employee recruitment,
training, decentralized teams, employee reward and corruption, nepotism and tribalism
contribute to organization’s performance. However, not much research has been done on
the effect of these practices in the parastatals in Kenya and how they affect the
performance of parastatals.

48
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

This chapter presents the research design that was used in the study. This helped in
adequate planning for the study. The chapter further goes ahead and discussed the study
population, sampling design and sample size, data collection methods, tools and
procedures and the data analysis procedures that were used. The measures used to
ensure validity and reliability of the study instruments are also discussed in this chapter.
In addition, this chapter also presented the measures that were put in place to ensure that
the study was done in an ethical manner.

3.2 Research Philosophy

Research philosophy relates to foundation of knowledge upon which important

assumptions and predispositions of a study are based. A research philosophy is a belief
about the way in which data about a phenomenon should be gathered, analyzed and
used. In social sciences, there are two main research philosophies, namely; positivism
(scientific) and phenomenology (interpretivism) which may also be viewed in terms of
two perspectives, namely quantitative and qualitative approaches (Coopers & Schindler,
2012).

Positivist philosophy premises that knowledge is based on facts and that no abstractions
or subjective status of individuals is considered. Positivism thus derives a quantitative
perspective which holds that there is an objective reality that can be expressed
numerically, with explanatory and predictive power (Neuman, 2006; Furrer, Thomas &
Goussevkaia, 2008). Under this paradigm, knowledge is valid only if it is based on
values of reason and facts, gathered through direct observations and experience,
measured empirically using quantitative methods and statistical analysis. Under this
paradigm, theoretical models can be developed that are generalizable to explain cause

49
and effect relationships (Saunders, Lewis & Thornhill, 2009). Consequently, problem
solving under this approach follows a pattern of formulating hypotheses in which
assumptions of social reality are made and hypotheses tested often using quantitative
techniques (Creswell, 2012).

The philosophical foundation adopted for this study was positivism where scientific
processes were followed in hypothesizing fundamental laws then deducing the
observations so as to determine the truth or falsity of the said hypotheses. Further
according to Beardwell and Claydon (2007) positivism underpins many organizational
activities such as psychometric testing for selection and HRM models. Esmoyol and
Jonasova (2013) underscore the importance of understanding HRM thinking, through
the development of the best-fit approach, the configurational approach, the resource-
based view approach, and find the contribution HRM can make to organizational
performance, through increased competitive advantage and added value. The positivist’s
view in this case considers the context of HRM practice and fragments the relevant
variables in order to establish the relationships among them through several hypotheses.
Further the positivist route help the researcher come up with findings that validate HR’s
long-cherished route to be a strategic partner.

3.3 Research Design

A research design is a framework that guides the collection and analysis of the data and
is a detailed plan for how research study is conducted according to the data required in
order to investigate the research questions in an economical manner (Mugenda &
Mugenda, 2003). The study adopted a descriptive survey research design using both
quantitative and qualitative approaches (Mugenda & Mugenda, 2003). Quantitative
approach emphasizes measurement and data is analyzed in a numerical form to give
precise description. According to Mugenda and Mugenda (2003), quantitative approach,
also known as the scientific method, has been considered as the traditional mode of
inquiry in both research and evaluation. Quantitative approach places emphasis on
methodology, procedure and statistical measures to test hypothesis and make
50
predictions. According to Berg (2001), quantitative research helps in analyzing
information in a systematic way in order to come to some useful conclusions and
recommendations on the social settings and the individuals who portray those
characteristics.

This research adopted quantitative approach because the data to be collected through
questionnaires from respondents was analyzable using the standard statistical tools. This
approach was used to measure return on sales and return on assets. Qualitative approach
was also adopted in this study because qualitative data is more in depth and provides
detailed answers (Berg 2001). It provides information about the phenomenon being
studied, and established patterns, trends and relationships from the information gathered.
The qualitative research provided greater depth to response and understanding which
forms a link with the respondents. Qualitative research is typically rich with detail and
insights into participants ‘experiences of the world and thus more meaningful. It helps in
gaining new perspectives on things about which much is already known (Berg, 2001).
This approach was used to measure customer and employee satisfaction and extent of
nepotism in parastatals.

3.4 Target Population

Target population refers to the larger population to which the researcher ultimately
would like to generalize the results of the study (Berg, 2001). It is thus the entire group
of individuals, events or objects having a common observable characteristic. There are
185 parastatals in Kenya with an estimated staff of 92,000 (GOK, 2013). These
parastatals are categorized into five categories according to their mandate; Purely
Commercial State Corporations (32), State Corporations with Strategic Functions (21),
State Agencies - Executive Agencies (62), State Agencies - Independent Regulatory
Agencies (25), State Agencies - Research Institutions, Public Universities, Tertiary
Education and Training Institutions(45). This study targeted 32 purely commercial
parastatals (See Appendix I) which were the unit of analysis with a total population of

51
9,600 employees. The target population for this study consisted of C.E.Os, managers,
supervisors and other support staff of the purely commercial parastatals.

3.5 Sampling Frame

A sampling frame is a list of all items where a representative sample is drawn for the
purpose of research. In this study, the sampling frame was a list of 10parastatals
distributed across six sectors; Agriculture, Livestock& Fisheries (Agro-Chemical and
Food Company, Kenya Meat Commission and Muhoroni Sugar Company), Education,
Science &Technology(Kenya Literature Bureau), East African Affairs, Commerce &
Tourism (Sunset Hotel Kisumu), Industrialization &Enterprise Development (New
Kenya Co-operative Creameries and Kenya Wine Agencies Ltd), Lands, Housing
&Urban Development (National Housing Corporation), National Treasury
(Consolidated Bank of Kenya and Kenya National Assurance Co. Ltd). A list of purely
commercial parastatals in Kenya was provided (See Appendix IV). These parastatals are
facing competition from other industry players in Kenya.

3.6 Sampling Technique and Sample Size

A sample is a portion or part of the population of interest. The purpose of sampling is to

gain an understanding about some features or attributes of the whole population based
on the characteristics of the sample. The sampling technique used wascluster sampling
as it allowed the study of parastatals in the cluster as they deal with different businesses
(Mugenda & Mugenda, 2003). Cluster sampling technique guarantees that each cluster
is represented in the sample and is more accurate in reflecting the characteristics of the
population (Kothari 2004). In this sampling method, sampling error was considerably
reduced. Using the sampling frame, 10 parastatals were selected from 32 purely
commercial parastatals that are in different categories. This number represented more
than the 30% of the accessible population that is generally recommended by Mugenda &
Mugenda (2003) who recommend that 30 % of the accessible population is enough.

52
The sample size determination formula by Mugenda and Mugenda (2003) was adopted
to determine the sample size and calculated according to the following formula
(Equation 1):

n=z2 pq, 1
d2
Where: n= Sample size

z = Confidence level at 95% (standard value of 1.96)

p = Proportion in the target population estimated to have the characteristics being

measured (80%)

q=1-p

d=level of statistical significance (=0.05)

n= (1.96)2 * (0.8) * (0.2) = 240

(0.05)2

This formula gave a sample size of 240 respondents. This study estimated that around
80% of the parastatals have embraced HRM practices.

Table 3.1: Representative samples of different categories for the ten parastatals

Population Category Number per parastatal Representative Sample (n)

CEOs 1 10
Managers 3 30
Supervisors 6 60
Other support staff 14 140
Total 24 240

3.7 Data Collection Instruments

The study relied on both primary and secondary data. Primary data included use of
questionnaires and interview guide while secondary data was collected by use of a
secondary data collection sheet which gathered actual performance of parastatals.

53
Questionnaires were used in this study to obtain primary data, whereby one
questionnaire was given to each of the target individuals in the sampled parastatals to
generate both qualitative and quantitative data (see Appendix I). Questionnaire was in
the form of open-ended, structured questions, contingency questions and Matrix
questions (Likert scale like). Respondents were presented with descriptive statement in a
5-point Likert rating scale to rate various indicators of variables by scoring. The lowest
rating of 1 signified a low opinion by the respondents while a high rating of 4 signified a
high rating by the respondent while that of 5 signified a very high rating. Questionnaires
have been chosen because administration of questionnaires to individuals helps to
establish relationships with the respondents while introducing the survey (Satirenjit,
Alistair & Martin, 2012).

Questionnaires provide the clarifications sought by respondents and they may even be
collected immediately after they are completed. The data collection phase involved
administration of the research questionnaires to all selected 10 parastatals Kenya. This
was mainly used to assess the effects of SHRM practices and nepotism on parastatal
performance. Person to person oral interviews were conducted to get further
clarification on some issues parastatals. An interview guide was used to conduct the oral
interview (See Appendix II). This was particularly helpful in assessing the performance
indicators of employee and customer satisfaction.

The interviews were recorded in a recorder order to miss on any information provided.
The time for interviews was determined by the extent of issues that required clarification
but should not exceed one hour. In this study, secondary data was obtained through the
review of parastatal documents, books of accounts, reports and manuals. It was also
obtained from information collected from government reports, for example inspectorate
of parastatals, internet and other forms of documents whose source can be verified. The
documents provided information especially of performance indicators to show the actual
performance of the selected parastatals. A secondary data collection sheet and document
analysis guide (Appendix III and IV) was used to obtain secondary data.

54
3.8 Data Collection Procedures

The management of the parastatals that was targeted was briefed concerning the purpose
of the study. The data collection procedures involved getting the authority letter from
the University to facilitate data collection. An authority letter was also sought from the
relevant parastatals earmarked for the study. The questionnaires were administered
through drop and pick method, within a two weeks given for filling them. If a
respondent did not fill the questionnaire after two weeks a follow up was made through
a phone call and they were collected at a time that was conveniently arranged between
the researcher and the respondents. Interview was conducted on person to person basis
especially on the top managers of the parastatals. This was because they are more
knowledgeable on the organizations they lead. Each oral interview was scheduled to
take less than one hour and recorded. The parastatals selected were visited in order to
obtain information deemed important for this study, especially on financial reports. This
aided the study in obtaining secondary data.

3.9 Pilot Study

The questionnaire was pre-tested on pilot units of 24 respondents, representing10 % of

sample population. This proportion was according to recommendation by Mugenda and
Mugenda (2003). This was done to assess comprehension, logic and relevance.
Respondents in the pre-test were drawn from parastatals which were similar to those in
the actual survey in terms of background characteristics, familiarity with the topic of
research, attitudes and behaviour of interest. The parastatals pre-tested were not part of
the target population of study. The pilot study population was picked from Nairobi
County from various categories (see Table 3.2). The parastatals used in the pilot testing
were excluded in the final sample of the research. Zikmund, Babin, Carr &
Griffin,(2009) recommend that the questionnaire pre-tests will be done by personal
interviews in order to observe the respondents reactions and attitudes. All aspects of the
questionnaire was pre-tested including question content, wording, sequence, form and

55
layout, question difficulty and instructions. The feedback obtained was used to revise
the questionnaire before administering it to the study respondents.

Table 3.2: Pilot Test Sample Size

Category Sample size Proportion Pilot size

CEOs 10 0.04 1
Managers 30 0.125 3
Supervisors 60 0.25 6
Other support staff 140 0.58 14
Total 240 1:00 24

3.9.1 Validity Test

An instrument is valid if it measures what it is intended to measure and accurately

achieves the purpose for which it was designed (Patten, 2004). According to Patten
(2004) validity is a matter of degree and no test instrument is perfectly valid. The
instrument used should result in accurate conclusions (Wallen & Fraenkel, 2001).
Validity involves the appropriateness, meaningfulness, and usefulness of inferences
made by the researcher on the basis of the data collected (Wallen & Fraenkel, 2001).
Validity can often be thought of as judgmental. According to Patten (2004) content
validity is determined by judgments on the appropriateness of the instrument’s content.
Patten (2004) identifies three principles to improve content validity: use a broad sample
of content rather than a narrow one; emphasize important material; and write questions
to measure the appropriate skill. These three principles were addressed when writing the
survey items. Instrument validation was achieved in several ways.

To provide additional content validity of the survey instrument, a pre-test was done by
administering the instrument to conveniently selected focus group of five experts in the
field of HRM to provide input and suggestive feedback on survey items. Members of the
focus group were senior employees of the parastatals and other employees who have
worked in the sector for more than five years. The five employees were requested to
evaluate the statement items for relevance, meaning and clarity. On the basis of their

56
response, the instrument was adjusted appropriately before embarking on data
collection. Validation was also done by dividing the instrument into several sections.
Each section carefully checked to ensure that it conveyed the necessary message and
attracted the relevant feedback, as per the specific themes of the research objectives.

Convergent validity refers to the extent to which several indicators of a construct that
should theoretically be related actually show a relation. It can be assessed by calculating
the average variance extracted (AVE) which quantifies the amount of variance that a
construct captures from its indicators in comparison to the amount resulting from
measurement errors (Fornell & Larcker,1981)

AVE= (∑iλi)2,2

∑iλi2+ ∑i var(Ɛi)

Convergent validity is indicated by AVE values of 0.50 and higher. This threshold
signals that the latent construct explains more than half of the variance of its indicators
(Hair et al., 2011).

3.9.2 Reliability Test

Reliability relates to the consistency of the data collected (Wallen & Fraenkel, 2001).
The survey instrument was tested in its entirety, and the subscales of the instrument
were tested independently. Reliability analysis was used to assess internal consistency
among the variables of study. A three-step measure was used to achieve reliability. First,
those items that had been tested for reliability by other researchers were adopted, with
slight modification to suit the context. Second, the researcher collected data from
employees in participating parastatals. In most cases, clarification on questionnaires was
provided where and when necessary. This raised further the reliability of the instruments
and data to be collected.

Construct or composite reliability is an estimate of the internal consistency of the

construct under study and reflects the degree to which the indicators comprehensively

57
measure their respective construct. It can be quantified using the composite reliability
measure that requires a construct’s indicators to show high levels of correlation.
Construct reliability values of above 0.70 are regarded as satisfactory for more advanced
research fields and 0.60-0.70 for exploratory research(Hair et al., 2011). Contrary, no
reliability can be assumed for values below 0.60 (Hair et al., 2011). Composite
reliability can be calculated as (Fornell & Larcker, 1981):

Composite reliability = (∑iλij)2, 3

(∑iλij)2+ (∑i var(Ɛij)

with λijbeing the loading of indicator i of a construct Ɛi, referring to the measurement
error of the construct to which i belongs, and j indicating the pathindex for the reflective
measurement model.

Lastly, reliability of the study measures was also assessed by computing Cronbach’s
Alpha coefficient for all items in the questionnaire and the overall assessment was given
(Sekaran &Bougie, 2010). The Cronbach’s alpha coefficient ranges between 0 and 1
with higher alpha coefficient values being more reliable. As a rule of thumb, acceptable
alpha should be at least 0.70 or above. A questionnaire with a good internal consistency
should have high alpha coefficients. Factor Analysis was carried out to test for construct
validity and highlight variability among observed variables and also to check for any
correlated variables in order to reduce redundancy in data (Sekaran &Bougie, 2010).

Cronbach’s alpha is a general form of the Kunder- Richardson (K – R) 20 formula.

The formula is as follows (Equation 4):

KR20 = (K) (S2 - Σ S2) ,4

(S2) (K – 1)
Where;

KR20 = Reliability coefficient of internal consistency

K= Number of items used to measure the concept

58
 S2 = Variance of all scores

S2= Variance of individual items

After pilot testing, the questionnaire was revised to incorporate the feedback that was
provided. The researcher used the most common internal consistency measure known as
Cronbach’s Alpha (α) which was generated by SPSS. The recommended value of 0.7
was used as a cut–off of reliability for this study.

3.10 Test for Multicollinearity and Normality of Data

Multicollinearity exists when there is a strong correlation between two or more

predictors in a regression model, and poses a problem only for multiple regression and
not on simple regression (Field, 2009). Muliticollinearity poses several problems such
as increases in the standard errors of the β coefficients, meaning that the βs have
relatively higher variability across samples and less likely to represent the population.
The second problem is limiting the size of R,-the measure of the multiple correlation
between the predictors and the outcome, and R2-the variance of the outcome for which
the predictors account, making the second predictor to account for very little of the
remaining variance. The other problem posed by multicollinearity is that it reduces the
importance of predictors, making it difficult to assess the individual importance of a
predictor.

Variance inflation factor (VIF) was used to diagnose the collinearity of the data. The
VIF indicates whether a predictor has a strong linear relationship with other predictors
with concern raised if VIF is 10 and above (Field, 2009). At each level of the predictor
variable(s), the variance of the residual terms is expected to be constant
(homoscedasticity). If variances are very unequal, there is said to be heteroscedasticity
(Field, 2009). The data was subjected to Levene’s test, which tests the null hypothesis
that the variances in different groups are equal. The residual terms were tested for
autocorrelation, where residuals are said to be correlated instead of being independent as
expected (Field, 2009). Finally, tests for normality of data were undertaken. The
probability-probability plots (P-P plots) was used for visual test of normality of data,
59
while Kolmogorov-Smirnov (K-S) test and Shapiro-Wilk test, which compares the
scores in the sample to a normally distributed set of scores (Field, 2009), was carried
out.

3.11 Data Analysis and Presentation

The collected quantitative data was analyzed by calculating response rate with
descriptive statistics such as mean, median, standard deviation and proportions using
Statistical Package for Social Sciences (SPSS) version 24. The variables to be measured
were dined and labeled. The responses were coded with numbers including the open
ended questions. After data have been collected, it was screened and cleaned to find out
whether there are errors that can be corrected. The significance was tested at 95%
confidence level. Responses were assigned numerical values which was consistent with
numerical codes. Inferential data analysis was carried out by the use of factor analysis
and correlation analysis to determine the strength and the direction of the relationship
between the dependent variable and the independent variables. Regression models were
fitted and hypothesis testing carried using multiple regression analysis and standard F
tests and t tests.

Qualitative data was collected using a structured interview guide, and that involved
taking down field notes when interviewing the informants. From these field notes,
keywords/phrases that keep on re-occurring were identified and manual themes
developed which became the basis of the codes. The code categories was based on the
research questions of the study and was entered into a computer that developed pattern
codes to group the summaries of data into a smaller number of sets, themes or
constructs, and using SPSS, frequencies of the emerging themes were analyzed; usually
the frequency of appearance of a particular idea is obtained as a measure of content
(Krishnaswamy, Sivakumar &Mathirajan, 2006). Data analysis involved factor analysis
for all components of the practices. Component matrix was prepared. Principal
component analysis was carried out to determine the role the factors. Results were
presented in tables and figures (graphs and pie charts).
60
Further analyses were carried out to address specific research questions. For commercial
parastatals to be profitable they need to be strategic in recruitment and selection of the
required staff. This is achieved through proper hiring cycles and retention of the
employees with exceptional skills and knowledge reflected in their performance. To
assess the understanding employees of the parastatals on recruitment and selection
process, respondents were asked to indicate using a five-point likert, on whether the
selection system followed by the parastatals was scientific and rigorous. Using the same
scale, respondents were requested to indicate whether there are standardized tests and
recruitment policy. Analysis of variance was done to compare the difference in
responses from the respondents. Simple linear regression to investigate the effect of
recruitment and selection process on the parastatal performance was conducted
(Equation 5).

Firm Performance = f (Recruitment and selection), 5

Y = β0 +β1X1 +ε
Y= Firm Performance, β0= intercept, X1= Recruitment and selection, β1= coefficient,
ε= Error term
One of the strategies needed by parastatals is to adopt decentralized authority. This is
reflected in the decision making process and teamwork. The level of decentralization
and teamwork activity was assessed using Likert scale and open and closed ended
questions. Analysis of variance was done to compare if the difference in responses
obtained was significant. Pearson’s correlation was used to establish the relationship
between employee involvement and teamwork and parastatal performance. Simple
linear regression was conducted to investigate the effect of recruitment and selection
process on the parastatal performance (Equation 6).

Firm Performance = f (Decentralized teams) ,6

Y = β0 +β1X2 +ε

Y= Firm Performance, β0= intercept, X2= Decentralized teams, β1= coefficient, ε=

Error term

61
Training and development are important processes that influence parastatal
performance. Likert scale coupled open and close ended question were used to
determine whether parastatals have adequate training programs and training budgets.
Analysis of variance was used to establish the difference in training and development
programs as indicated by respondents. Chi-square test was done to establish whether the
observed responses differed significantly from the expected. Simple regression analysis
was used to investigate the effect of training and development on parastatal performance
(Equation 7).

Firm Performance = f (Training and development), 7

Y = β0 +β1X3 +ε
Y= Firm Performance, β0= intercept, X3= Training and development, β1= coefficient,
ε= Error term

Employee reward was important in retaining and motivating employees. A motivated

work force leads to improved performance. Using Likert scale and open and close ended
questions, respondents was requested to indicate whether parastatals have incentive
systems in place in terms of rewards. Chi-square test was done to establish whether the
observed responses differed significantly from the expected for this variable. Analysis
of variance was used to establish whether the responses differ significantly. Further,
simple linear regression was performed to establish the relationship between employee
reward and parastatal performance (Equation 8).

Firm Performance = f (Employee reward),8

Y = β0 +β1X4 +ε
Y= Firm Performance, β0= intercept, X4= Employee reward, β1= coefficient, ε= Error
term

The Kinship in Public Office (KPO) indicator, which is taken as a proxy measure of
nepotism in the public sector captures k in connectivity among government officials.

62
The KPO is defined as the number of existing family connections in a given
organization relatively to the universe of possible connections, scaled by 100. The
indicator, scaled for readability, ranges from 0 (no family connection in the entity) to
100 (every single person in the entity is connected with every other person). KPO is a
proxy indicator for the prevalence of nepotism in the organization. The KPO indicator is
defined as the percentage of interpersonal connections among public officials (whether
appointed or elected) that are based on kinship. The indicator computed for public entity
j can be formulated as follows (Equation 9):

,9

Where, fi is the number of public officials in entity j with a family tie to official i

N is the total number of public officials in entity j.

Multiple regression analysis was used to investigate the moderating effect of corruption
issues of nepotism, tribalism and bribery on the relationship between SHRM practices
and parastatal performance

The performance of the parastatals was assessed in terms of revenue generation, return
on sales, return on assets, employee satisfaction and customer satisfaction. Ratio of
earnings before interest and tax on sales and ratio of earnings before interest and tax on
total assets was assessed where data was obtained from parastatal records. Return on
Asset was obtained by dividing the profit after tax by book value of total asset and took
the form of the below model (Equation 10):

ROA = M (PAT)/M (TA) , 10

Where:

M (PAT) is the mean of the total Profit After Tax of the parastatals under study, and

63
M (TA) is the mean of the Total Assets of the parastatals

To assess the employee and customer satisfaction, respondents were asked to score on a
five-point likert scale. Further, the scale was used to determine the effect of human
resource management strategies on financial performance of the parastatals. Data on the
financial performance was obtained from financial records obtained from the parastatal
under study for the last three years; 2013, 2014 and 2015. Analysis of variance was used
to establish whether differences in returns on sales and assets over years for different
parastatals are significant. Simple linear regressions were used to establish the
relationship between customer and employee satisfaction and parastatal performance.
Chi-square (χ2) analysis was used to assess whether customer and employee satisfaction
changes over time are significant. It was also used to evaluate the observed from
expected level of nepotism, tribalism and bribery in establishing the KPO. In addition,
some items in the questionnaire asked respondents to indicate their opinion on the
perceived customer satisfaction. Frequencies of these scores were computed and
presented. To assess the relationship between HRM practices on the performance of the
parastatals, multiple regression analysis was performed (Equation 11):

To facilitate the application of the joint effect regression model, weighted averages of
the three independent variables was computed using the following equation:

HRM Practices=∑ (W1X1+W2X2+W3X3+W4X4)/4,

Where

HRM Practices= Composite index of recruitment and selection, decentralised teams,

training and development and Employee Reward

W1, W2, W3, W4= Relative weight given to each component in a particular variable

/= Division

Y=β0+β4HRM Practices +ε , 11

64
Where

Y = Organization performance

HRM Practices= Human Resource Management Practices

β0= Constant

β5= Beta coefficient

is called the error term, disturbance term, or noise.

Multiple regression models indicated below was used to determine the moderating effect
of corruption issues on nepotism, tribalism and bribery on the relationship between
HRM practices and parastatal performance (Equation 12)

Y=β0+β4HRM Practices + β5HRM Practices *Z+ε, 12

Where; Y=firm performance; β0=constant; βiis the coefficient;

HRM Practices= Composite of recruitment & Selection, decentralised teams, training

and Employee Reward;

SHRM Practices *Z= HRM Practices x Perceived Corruption

Z= corruption (moderator)
ε = error term
XiZ= Product term / interaction term of a perceived corruption parameters of nepotism,
tribalism and bribery with the independent variables (HRM Practices).

Table 3.3 below shows how the various hypotheses were attained.

65
Table 3.3: Hypothesis Testing

Hypotheses Hypothesis Test Regression Model

Hypothesis 1: H0: β1=0 Y = β0 +β1X1 + ε
H01: Perceived recruitment and vs Where:
selection have no significant Ha: β1≠ 0 Y= Performance.
β0= intercept
effect on the performance of Reject H0 if p
<0.05, β1 = Coefficient for X1
parastatals in Kenya
Otherwise fail to X1= Recruitment
reject the H0 ε = Error term
Hypothesis 2: H0: β2=0 Y = β0 +β2X2+ ε
Ho2 Perceived training have no vs Where:
significant influence on the Ha: β2≠ 0 Y= Performance.
performance of parastatals in Reject H0 if p β0= intercept
Kenya <0.05, β2= Coefficient for X2
Otherwise fail to X2= Training
reject the H0 ε = Error term
Hypothesis 3: H0: β3=0 Y = β0 +β3X3+ ε
Ho3 Perceived decentralized vs Where:
teams have no significant Ha: β3≠ 0 Y= Performance
influence on the performance Reject H0 if p β0= intercept
of parastatals in Kenya <0.05, β3= Coefficient for X3
Otherwise fail to X3= Decentralized teams
reject the H0 ε = Error term
Hypothesis 4: H0: β4=0 Y = β0 +β4X4+ ε
Ho4 Perceived reward have vs Where:
no significant influence on the Ha: β4≠ 0 Y= Performance
performance of parastatals in Reject H0 if p β0= intercept
Kenya <0.05, β4= Coefficient for X4
Otherwise fail to X4= Employee Reward
reject the H0 ε = Error term
Hypothesis 5: H0: β5=0 Y=β0+β4HRM Practices +
Ho5 Perceived corruption has vs β5HRM Practices *Z+ε
no significant moderating Ha: β5≠ 0 Where:
effect on the relationship Reject H0 if p Y= Performance
between human resource <0.05, β0= intercept
management practices and Otherwise fail to β4,β5= Coefficient
performance of parastatals in reject the H0 HRM = composite of
Kenya recruitment, decentralized teams,
training, reward.
Z= Perceived Corruption
ε = Error term

66
Using SPSS, the regression model was tested on how well it fits the data. The
significance of each independent variable was also tested. Fischer distribution test called
F-test was applied. It refers to the ratio between the model mean square divided by the
error mean square. F-test was used to test the significance of the overall model at a 5
percent confidence level. The p-value for the F-statistic was applied in determining the
robustness of the model. The conclusion was based on the basis of p-value where if the
null hypothesis of the beta was rejected then the overall model was significant and if
null hypothesis was accepted the overall model was insignificant. In other words, if the
p-value was less than 0.05 then it was concluded that the model was significant and had
good predictors of the dependent variable and that the results are not based on chance. If
the p-value was greater than 0.05 then the model was not significant and was not used to
explain the variations in the dependent variable.

Similarly the t-test statistic was used to test the significance of each individual predictor
or independent variable and hypothesis. The p-value for the F-statistic was applied in
determining the robustness of the model. The benchmark for this study for failure to
reject or failure to accept the null hypothesis was a level of significance of 5 percent. If
the p-value was less than 5 percent the null hypothesis failed to be accepted and the
alternate hypothesis would fail to be rejected. Also if the p-value was greater than 5
percent the null hypothesis failed to be rejected and the alternate hypothesis failed to be
accepted, i.e.
Reject H0: βx = 0; if p <0.05,
Otherwise fail to reject the H0: βx = 0

67
 CHAPTER FOUR

RESULTS AND DISCUSSION

4.1 Introduction

This chapter deals with the analysis of data. The data analysis is in harmony with the
specific objectives where patterns were investigated, interpreted and inferences drawn
on them. The specific objectives of the study addressed were to determine the effect of
employee recruitment and selection, decentralized teams, employee reward on the
performance of parastatals and to determine the moderating effect of corruption on the
relationship between strategic human resource management practices and performance
of parastatals in Kenya. This chapter disclosed the study findings in relation to the
variables of study. A detailed discussion has also been provided as the current findings
are compared to findings of other studies in related areas.

4.2 Response Rate

The number of questionnaires, administered to all the respondents, was 240. A total of
187 questionnaires were properly filled and returned from the parastatals in Kenya. This
represented an overall successful response rate of 78%. According to Mugenda and
Mugenda (2003), a response rate of 50% or more is adequate. Babbie (2004) also
asserted that return rates of 50% are acceptable to analyze and publish, 60% is good and
70% is very good.

Table 4.1: Response Rate

Response rate Frequency Percent

Returned 187 78%
Unreturned 53 22%
Total 240 100%

68
4.3 Reliability Test Findings

Reliability was tested using Cronbach’s coefficient Alpha. Cronbach’s Alpha measures
how well a set of items or variables, measure a single uni-dimensional latent construct
that is a coefficient of reliability or consistency. Reliability is expressed as a coefficient
between 0 and 1.00. The higher the coefficient, the more reliable is the test. A threshold
of a Cronbach Alpha of 0.7 and above is acceptable (Cronbach, 1951). Cronbach Alpha
was used to test the reliability of the proposed constructs. The findings indicated that,
recruitment and selection had a coefficient of 0.861, decentralized teams had a
coefficient of 0.843, training had a coefficient of 0.874, reward had a coefficient of 0.89,
perceived corruption had a coefficient of 0.866 and performance had a coefficient of
0.866 .All constructs depicted that the value of Cronbach’s Alpha were greater or equal
to 0.7000 and thus, the study constructs were reliable. The reliability results are
presented in Table 4.2 below.

Table 4.2: Reliability Test Results

Variable Cronbach's Alpha No. of Items

Recruitment and Selection 0.861 11
Decentralised teams 0.843 10
Training 0.874 10
Reward 0.89 11
Perceived Corruption 0.866 7
Performance 0.866 9

4.4 Demographic Characteristics of Respondents

4.4.1 Gender of the Respondents

The respondents were asked to indicate their gender. Results were presented in Figure
4.1. Sixty Four percent (64%) of the respondents were male and 36% were female. This
implies that parastatals is a male dominated field is a male dominated field. According

69
to Ellis et al. (2007), in spite of women being major actors in Kenya’s economy, and
notably in agriculture and the informal business sector, men dominate in the formal
sector citing the ratio of men to women in formal sector as 0.74 : 0.26.

Figure 4.1: Gender of the Respondents

4.4.2 Age Bracket

The respondents were asked to indicate their age brackets. Results in Figure 4.2 revealed
that 46.5% of the respondents were aged between 31- 40 years while 26.2% of the
respondents were aged between 21 to 30 years and 11.8% were between 41 and 50
years. The finding of the study implies that the industry is dominated by young people
who are at their career peak and thus knowledgeable on human resource strategic
practices in parastatals that can enhance performance in their respective firms.

70
Figure 4.2: Age Bracket of the Respondents

4.4.3 Level of Education

The respondents were asked to indicate their highest level of education. The findings in
Figure 4.3 illustrates that 36.4% of the respondents had reached university level, while
25.7% of the respondents had attained a diploma and 26.7% had attained masters level.
Only 7% of the respondents had attained KCSE certificates. The findings imply that
most of the respondents had high level of education which could have contributed to
accurate responses. The high level of education of respondent indicates that many
employees have attained a given level of education and qualifications to secure their
jobs.

71
Figure 4.3: Level of Education

4.4.4 Length of Employment

The study sought to find out the years the respondents had worked in the organization.
Table 4.3 shows that 30.5% of the respondents indicated they had worked in the
organization for 5 to 10 years while 25.7% indicated below 5 years, 18.2% of the
respondents indicated between 11 to 15 years and 16.6% indicated 16-20 years. Only
9.1% of the respondents had worked for over 20 years. The findings imply that the
respondents had worked long enough in the firms and hence had knowledge about the
issues that the researcher was looking for.

Table 4.3: Length of Employment

Length of Employment Frequency Percent

Below 5 48 25.7
5 to 10 57 30.5
11 to 15 34 18.2
16-20 31 16.6
Over 20 17 9.1
Total 187 100

72
4.4.5 Monthly Salary

The study sought to find out the monthly salary the employees were paid. Figure 4.4
reveals that 28.9% of the respondents earned between 60001- 80000, 22.5% indicated
over 80000 while 21.9% indicated 20001-40000 and 16.6% indicated between 40001-
60000 shillings. Ten point two percent (10.2%) indicated less than 20,000 shillings only.
The findings imply that the employees were from different job groups and thus different
salary scales.

Figure 4.4: Monthly Salary

4.4.6 Category of Parastatal

The respondents were asked to indicate the category of parastatals they belong in. Table
4.4 indicates that 46% were in industrialization and enterprise development while 35.8%
were in lands, housing and urban development and 9.1% were in education, science and
technology.

73
Table 4.4: Category of Parastatal

Category of Parastatal Frequency Percent

Agriculture, Livestock& Fisheries 4 2.1
Education, Science &Technology 17 9.1
East African Affairs, Commerce & Tourism 10 5.3
Industrialization &Enterprise Development 86 46
Lands, Housing &Urban Development 67 35.8
National Treasury 3 1.6
Total 187 100
4.4.7 Number of Employees

The study sought to find out the number of employees in the organization. Table 4.5
indicates that 49.2% of the respondents indicated 151-200 employees while 31%
indicated 201-250 employees and 11.8% indicated 101-150 employees. The findings
imply that the parastatals and large number of employees and thus appropriate for the
study to find out how the human resource practices can influence performance of the
organizations.

Table 4.5: Number of Employees

Frequency Percent
51 – 100 10 5.3
101-150 22 11.8
151 – 200 92 49.2
201 – 250 58 31
251- 300 3 1.6
Over 300 2 1.1
Total 187 100

74
4.5 Perceived Performance

4.5.1 Sampling Adequacy

To examine whether the data collected was adequate and appropriate for inferential
statistical tests such as the factor analysis, regression analysis and other statistical tests,
two main tests were performed namely; Kaiser-Meyer-Olkin (KMO) Measure of
Sampling Adequacy and Barlett’s Test of Sphericity. For a data set to be regarded as
adequate and appropriate for statistical analysis, the value of KMO should be greater
than 0.5 (Field, 2000).

Findings in Table 4.6 showed that the KMO statistic was 0.831 which was significantly
high; that is greater than the critical level of significance of the test which was set at 0.5
(Field, 2000). In addition to the KMO test, the Bartlett’s Test of Sphericity was also
highly significant (Chi-square = 685.453 with 36 degrees of freedom, at p < 0.05). The
results of the KMO and Bartlett’s Test are summarized in Table 4.6. These results
provide an excellent justification for further statistical analysis to be conducted.

Table 4.6: Performance KMO Sampling Adequacy and Bartlett's Sphericity Tests

Kaiser-Meyer-Olkin Measure 0.831

Bartlett's Chi- Square 685.453
Bartlett's df 36
Bartlett's Sig. 0
4.5.2 Factor Analysis

Factor analysis was conducted after successful testing of validity and reliability using
KMO coefficient and cronbach alpha results. Factor analysis was conducted using
Principal Components Method (PCM) approach. The extraction of the factors followed
the Kaiser Criterion where an eigen value of 1 or more indicates a unique factor. Total
Variance analysis indicates that the 9 statements on performance can be factored into 1
factor. The total variance explained by the extracted factor is 47.12% as shown in Table
4.7.

75
Table 4.7: Perceived Performance Total Variance Explained

Extraction Sums of Squared

Component
Initial Eigenvalues Loadings
% of Cumulative % of Cumulative
Total Total
Variance % Variance %
1 4.241 47.12 47.12 4.241 47.12 47.12
2 1.138 12.646 59.766
3 0.886 9.848 69.614
4 0.771 8.571 78.184
5 0.637 7.083 85.267
6 0.423 4.695 89.963
7 0.371 4.124 94.086
8 0.287 3.189 97.275
9 0.245 2.725 100
Extraction Method: Principal Component Analysis.
Table 4.8 shows the factor loadings for performance statements. All the nine factors
attracted coefficients of more than 0.4 hence all the statements were retained for
analysis. According to Rahn (2010) and Zandi (2006) a factor loading equal to or greater
than 0.4 is considered adequate. This is further supported by Black (2002) who asserts
that a factor loading of 0.4 has good factor stability and deemed to lead to desirable and
acceptable solutions.

Table 4.8: Perceived Performance Factor Analysis Component Matrix

Statement Component
Compared to the previous year, the level of employee productivity in our
0.58
organization is higher.
Our firm profitability has increased over the last 3 years 0.683
Our firm financial leverage has increased over the last 3 years 0.732
Our firm has experienced an increase in total revenue collected over the last 3
0.682
years
Our firm has experienced an increase in assets over the last 3 years 0.692
Our firm has a higher market value 0.764
Our customers have been highly satisfied for the last 3 years 0.799
There has been a low level of employee turnover for the last 3 years 0.715
Our firm has experienced an increase in sales over the last 3 years 0.474

76
4.5.3 Descriptive Statistics

The general objective of the study was to investigate the perceived effect of Human
Resource Management (HRM) practices on the performance of parastatals in Kenya.
Table 4.9 shows that 88.2% of the respondents agreed that compared to the previous
year, the level of employee productivity in their organization was higher, 78.1% agreed
that their firm profitability had increased over the last 3 years and 71.7% agreed that
their firm financial leverage had increased over the last 3 years. In addition, 69.5% of
the respondents agreed that their firm had experienced an increase in total revenue
collected over the last 3 years, 64.2% agreed that their firm had experienced an increase
in assets over the last 3 years and 78.6% agreed that their firm had a higher market
value. Seventy seven point six percent of the respondents agreed that their customers
had been highly satisfied for the last 3 years, 83.4% agreed that there had been a low
level of employee turnover for the last 3 years and 73.8% agreed that their firm had
experienced an increase in sales over the last 3 years. The mean score for this section
was 4.00 which indicated that many employees agreed to the statements regarding
performance of parastatals in Kenya.

77
Table 4.9: Perceived Performance

Strongly Strongly
Statement Disagree Neutral Agree Mean
Disagree Agree
Compared to the previous year, the
level of employee productivity in 1.1% 6.4% 4.3% 28.3% 59.9% 4.4
our organization is higher.
Our firm profitability has increased
4.3% 8.0% 9.6% 47.1% 31.0% 3.93
over the last 3 years
Our firm financial leverage has
1.6% 5.3% 21.4% 38.0% 33.7% 3.97
increased over the last 3 years
Our firm has experienced an
increase in total revenue collected 3.2% 10.7% 16.6% 40.1% 29.4% 3.82
over the last 3 years
Our firm has experienced an
increase in assets over the last 3 4.3% 13.9% 17.6% 38.5% 25.7% 3.67
years
Our firm has a higher market value 4.3% 6.4% 10.7% 36.9% 41.7% 4.05
Our customers have been highly
2.7% 13.9% 5.9% 28.9% 48.7% 4.07
satisfied for the last 3 years
There has been a low level of
employee turnover for the last 3 3.7% 8.0% 4.8% 23.0% 60.4% 4.28
years
Our firm has experienced an
increase in sales over the last 3 4.8% 10.7% 10.7% 46.5% 27.3% 3.81
years
Average 3.3% 9.3% 11.3% 36.4% 39.8% 4.00

The respondents were asked to indicate the extent to which they are satisfied with the
services and products offered by the parastatals. Table 4.10 indicates that 45.5% were
satisfied and 29.9% were very satisfied with the services and products offered by the
parastatal, while 37.4% indicated were satisfied while 35.8% were very satisfied with
the services and products offered by the parastata. Finally, 42.2% of the respondents
indicated satisfied and 33.2% were very satisfied with the services and products offered
by the parastatal.

78
Table 4.10: Service Satisfaction

Very Very
Statement Dissatisfied Neutral Satisfied
Dissatisfied Satisfied
Indicate the extent to which
you are satisfied with the
5.9% 7.5% 11.2% 45.5% 29.9%
services and products offered
by the parastatal
Indicate the extent to which
you are satisfied with the
3.2% 14.4% 9.1% 37.4% 35.8%
services and products offered
by the parastatal
Indicate the extent to which
you are satisfied with the
2.7% 11.8% 10.2% 42.2% 33.2%
services and products offered
by the parastatal

Figure 4.5 shows the trends analysis for total revenue, total assets and profit before tax
from 2010 to 2014 of parastatals in Kenya. Data was collected from the 10 parastatals
and was illustrated on the graph below. Results show that total revenue and total assets
have been increasing from year to year which means better performance.

Figure 4.5: Trend Analysis for Total Revenue, Total assets and Profit Before Tax

79
Figure 4.6 below shows the trend analysis for ROE and ROA for the years 2010 to
2014. Results show that there has been a declining trend in return on assets and returns
on equity therefore implying poor performance in the parastatals.

Figure 4.6: Trend Analysis of ROE and ROA

4.5.4 Normality Test for Performance

Performance measures were subjected to normality test. Unlike the independent

variables of the study, Performance being the dependent variable of the study was
further subjected to a One-Sample Kolmogorov-Smirnov Test to test its normality. The
following null and alternative hypotheses were as used:

H1: The data is normally distributed

H0: The data is not normally distributed

The results obtained in Table 4.11 indicated that Kolmogorov-Smirnov Z is 2.625 (p-
value=.000) the p-value is less than 0.05; we fail to accept the null hypothesis and
accept the alternative hypothesis and conclude that the data was normally distributed.

80
Table 4.11: One-Sample Kolmogorov-Smirnov Test

Performance
N 187
Normal Parametersa,b Mean 3.9761
Std. Deviation 0.74565
Most Extreme Differences Absolute 0.192
Positive 0.105
Negative -0.192
Kolmogorov-Smirnov Z 2.625
Asymp. Sig. (2-tailed) 0.000
a Test distribution is Normal.
b Calculated from data.

Figure 4.7 shows the results on the normality test of performance. From the graph it is
evident that performance as the dependent variable of the study was normally
distributed and the outliers were few. These results imply that majority of the responses
were closer to the normality line as a result of effective data which was suitable for all
type of statistical analysis including parametric and regression analysis.

Figure 4.7: Normality Plot of Performance

81
4.5.5 Testing Assumptions of Regression Model - Multi-Collinearity test

Multicollinearity in the study was tested using Variance Inflation Factor (VIF). A VIF
of more than 10 (VIF ≥ 10) indicate a problem of multicollinearity. According to
Montgomery (2001) the cutoff threshold of 10 and above indicate the existence of
multicollinearity while tolerance statistic values below 0.1 indicate a serious problem
while those below 0.2 indicate a potential problem as shown in Table 4.12. The results
in table 4.12 indicate that the VIF value for recruitment and selection was established to
be 2.879 while its tolerance statistic was reported to be 0.347, decentralized teams had a
VIF value of 2.65 and tolerance value of 0.377, training (tolerance statistics = 0.263,
VIF value =3.798), employee reward (tolerance statistics = 0.273, VIF value =3.658)
and corruption (tolerance statistics = 0.826, VIF value =1.211). Based on these the
assumption of multicollinearity between predictor variables was thus not rejected as the
reported VIF and tolerance statistics were within the accepted range

Table 4.12: Results of Collinearity Diagnostics

Collinearity Statistics
Tolerance VIF
Recruitment and selection 0.347 2.879
Decentralised Teams 0.377 2.65
Training 0.263 3.798
Reward 0.273 3.658
Perceived Corruption 0.826 1.211

4.6 Perceived Recruitment and Selection

4.6.1 Sampling Adequacy

To examine whether the data collected was adequate and appropriate for inferential
statistical tests such as the factor analysis, regression analysis and other statistical tests,
two main tests were performed namely; Kaiser-Meyer-Olkin (KMO) Measure of
Sampling Adequacy and Barlett’s Test of Sphericity. For a data set to be regarded as

82
adequate and appropriate for statistical analysis, the value of KMO should be greater
than 0.5 (Field, 2000).

Findings in Table 4.13 showed that the KMO statistic was 0.847 which was
significantly high; that is greater than the critical level of significance of the test which
was set at 0.5 (Field, 2000). In addition to the KMO test, the Bartlett’s Test of
Sphericity was also highly significant (Chi-square = 1130.71 with 55 degree of freedom,
at p < 0.05). The results of the KMO and Bartlett’s Test are summarized in Table 4.13.
These results provide an excellent justification for further statistical analysis to be
conducted.

Table 4.13: Recruitment and Selection KMO Sampling Adequacy and Bartlett's
Sphericity Tests

Kaiser-Meyer-Olkin Measure 0.847

Bartlett's Chi- Square 1130.71
Bartlett's df 55
Bartlett's Sig. 0.000

4.6.2 Factor Analysis

Factor analysis was conducted after successful testing of validity and reliability using
KMO coefficient and cronbach alpha results. Factor analysis was conducted using
Principal Components Method (PCM) approach. The extraction of the factors followed
the Kaiser Criterion where an eigen value of 1 or more indicates a unique factor. Total
Variance analysis indicates that the 11 statements on recruitment and selection can be
factored into 1 factor. The total variance explained by the extracted factor is 49.097% as
shown in Table 4.14.

83
Table 4.14: Recruitment and Selection Total Variance Explained

Extraction Sums of Squared

Component Initial Eigenvalues
Loadings
% of Cumulative % of Cumulative
Total Total
Variance % Variance %
1 5.401 49.097 49.097 5.401 49.097 49.097
2 1.431 13.01 62.107
3 1.002 9.112 71.22
4 0.71 6.458 77.678
5 0.652 5.926 83.604
6 0.514 4.677 88.281
7 0.326 2.961 91.242
8 0.311 2.826 94.068
9 0.258 2.343 96.411
10 0.226 2.053 98.464
11 0.169 1.536 100
Extraction Method: Principal Component Analysis.

Table 4.15 shows the factor loadings for recruitment and selection statements. All the
eleven factors attracted coefficients of more than 0.4 hence all the statements were
retained for analysis. According to Rahn (2010) and Zandi (2006) a factor loading equal
to or greater than 0.4 is considered adequate. This is further supported by Black (2002)
who asserts that a factor loading of 0.4 has good factor stability and deemed to lead to
desirable and acceptable solutions.

84
Table 4.15: Recruitment and Selection Factor Analysis Component Matrix

Statement Component
The selection systems followed in the parastatal are highly scientific and
0.533
rigorous.
In the parastatal, line managers and HR managers participate in selection. 0.518
Valid and standardized tests are used when required in the selection
0.779
process.
Selection systems in the parastatal select those having the desired
0.797
knowledge, skills and attitudes.
To be selected in this parastatal you must know someone 0.761
The parastatal takes measures to attract good quality employees 0.829
The parastatal always selects only the highest quality employees 0.838
There is relationship between recruitment and selection of employees and
0.703
parastatal performance
You must give a bribe to be recruited in the parastatal 0.739
You must have to be related to somebody by family or tribe to be
0.461
employed in the parastatal
Nepotism and tribalism plays a major role on recruitment and selection of
0.619
employees
Extraction Method: Principal Component Analysis.
a 1 components extracted.

4.6.3 Descriptive Statistics

The first objective of the study was to determine the effect of recruitment and selection
on the performance of parastatals in Kenya. Table 4.16 shows that 79.1% of the
respondents agreed that the selection systems followed in the parastatal are highly
scientific and rigorous, 80.8% agreed that in the parastatal, line managers and HR
managers participate in selection, and 79.7% agreed that valid and standardized tests are
used when required in the selection process. In addition 77.1% of the respondents
agreed that selection systems in the parastatal select those having the desired
knowledge, skills and attitudes, 83.5% agreed that to be selected in this parastatal you
must know someone and 77.6% agreed that the parastatal takes measures to attract good

85
quality employees. Furthermore, 78.1% of the respondents agreed that the parastatal
always selects only the highest quality employees, 75.4% agreed that there was
relationship between recruitment and selection of employees and parastatal performance
and 72.4% agreed that you must give a bribe to be recruited in the parastatal. Finally
77.5% of the respondents agreed that you must have to be related to somebody by
family or tribe to be employed in the parastatal and 80.7% agreed that nepotism and
tribalism plays a major role on recruitment and selection of employees. The mean score
for responses for this section was 4.06 which indicates that majority of the respondents
agreed that recruitment and selection was a key determinant of performance of
parastatals. However the employees felt that as much as recruitment and selection was
carried out in the parastatals; corruption, nepotism and tribalism played a major role on
the people employed in different parastatals and thus have similar tribes in different
organizations.

The findings concur with the assertions of Johnson, Scholes and Whittington (2012)
who opined that recruitment is a key method of improving the performance of an
organization. According to Hitt, Ireland and Hoskin, (2010) the right people should be
placed in positions that fit them best. This is based on the fact that failure to properly
allocate employees would result in low organizational performance. These findings were
in agreement with findings by Stewart (2010) that organizations that fail to link their
recruitment and selection policy with the overall corporate strategy often ends up
recruiting non-competitive staff which in turn affects realization of the organization
performance goals.

86
Table 4.16: Recruitment and Selection Descriptive Statistics

Strong
Strongly Disag Neutr Mea
Agree ly
Disagree ree al n
Statement Agree
The selection systems followed
10.2
in the parastatal are highly 3.2% 7.5% 35.8% 43.3% 4.06
%
scientific and rigorous.
In the parastatal, line managers
and HR managers participate in 4.3% 7.0% 8.0% 47.1% 33.7% 3.99
selection.
Valid and standardized tests are
used when required in the 1.6% 9.1% 9.6% 36.9% 42.8% 4.1
selection process.
Selection systems in the
parastatal select those having
2.1% 9.1% 11.8% 31.6% 45.5% 4.09
the desired knowledge, skills
and attitudes.
To be selected in this parastatal
1.1% 9.1% 6.4% 36.4% 47.1% 4.19
you must know someone
The parastatal takes measures
10.2
to attract good quality 3.7% 8.6% 34.8% 42.8% 4.03
%
employees
The parastatal always selects
only the highest quality 1.6% 9.1% 11.2% 31.6% 46.5% 4.12
employees
There is relationship between
recruitment and selection of
3.2% 9.6% 11.8% 36.9% 38.5% 3.98
employees and parastatal
performance
You must give a bribe to be 14.6
1.6% 11.4% 38.9% 33.5% 3.88
recruited in the parastatal %
You must have to be related to
somebody by family or tribe to 2.7% 9.1% 10.7% 38.5% 39.0% 4.02
be employed in the parastatal
Nepotism and tribalism plays a
major role on recruitment and 2.1% 6.4% 10.7% 35.8% 44.9% 4.15
selection of employees
Average 2.5% 9.4% 9.8% 36.8% 41.6% 4.06

87
The respondents were asked to indicate whether their organization had a staff
recruitment and selection policy. Figure 4.8 illustrates that 77% indicated yes while 23%
indicated that their organization did not have a staff and recruitment and selection
policy. In regards to whether the parastatals adhere to the recruitment policy; 78.1%
indicated yes while 21.9% indicated that the parastatals did not adhere to the recruitment
policy. The respondents were asked to indicate whether the parastatal recruitment
process ensured that the very qualified staffs are attracted to the organization, 79.1% of
the respondents indicated Yes while 20.9% indicated that the recruitment process did
not attract the qualified staffs. The findings are in line with those of Armstrong (2010)
who asserted that the objective of HRM resourcing strategies is to obtain the right basic
material in the form of workforce endowed with the appropriate qualities, skills,
knowledge and potential for future training. The selection, recruitment of workers best
suited to meeting the needs of the organization ought to form a core activity upon which
most other HRM policies geared towards development and motivation should be built
(Armstrong, 2010).

Figure 4.8: Recruitment and Selection Policy

88
4.6.4 Relationship between Recruitment & Selection and Performance

Figure 4.9 shows the scattered plot for recruitment & selection and performance. Results
show that there is a positive relationship between recruitment and selection and
performance thus an increase in effectiveness in recruitment and selection will
positively increase the performance of parastatals in Kenya. This findings are consistent
with findings from similar studies by Alalha et al. (2012); Chenevert and Trembly
(2009) and Vlachos (2008) which found that recruitment has a positive effect on
performance. According to Taylor, (2012), the major components of employee
resourcing are staffing (recruitment and selection), performance and administration. The
objective of employee recruitment and selection is ‘to obtain the right workforce
endowed with the appropriate qualities, skills, knowledge and potential for future
training.

Figure 4.9: Scatter Plot on Relationship between Recruitment & Selection and
Performance

89
Table 4.17 presents Pearson’s correlation of recruitment and selection and performance
of parastatals. Results show that recruitment and selection was positively correlated
performance. This is supported by a significant value of 0.000 and a positive correlation
of 0.714. This implies that an increase in recruitment and selection effectiveness in
parastatals will increase the performance of commercial parastatals in Kenya. These
findings are consistent with Terpstra and Rozell’s (2013) study of the relationship
between recruiting/selection practices and firm performance, where they found a
significant and positive link between extensiveness of recruiting, selection and the use
of formal selection procedures and firm performance.

Table 4.17: Relationship between Recruitment and selection and Performance

Performanc Recruitment
Variable e &Selection
Pearson
1
Performance Correlation
Sig. (2-tailed)
Recruitment and Pearson
0.714 1
selection Correlation
Sig. (2-tailed) 0.000

Figure 4.10 presents graphical representation of the linear relationship between

recruitment and performance. The results show that there is a positive relationship
between the two.

90
Figure 4.10: Linear Relationship between Recruitment & Selection and
Performance

4.6.5 Regression Analysis on Recruitment & Selection and Performance

Regression analysis was conducted to empirically determine whether recruitment and

selection was a significant determinant of performance in purely commercial parastatals
in Kenya. Regression results in Table 4.18 indicate the goodness of fit for the regression
between recruitment and performance was satisfactory. An R squared of 0.51 indicates
that 51% of the variations in performance are explained by the variations in recruitment
effectiveness. This implies that 49% of the unexplained variations in performance is
accounted for by the other variables including training, decentralized teams and
employee reward. Results are in tandem with Gurbuz and Mert (2011) who found that
selection and development had a positive impact on the perceived financial and market
performance, the organizational performance, and the job satisfaction. It had a negative
effect on the turnover.

91
Table 4.18: Model Summary for Recruitment and Selection

Indicator Coefficient
R 0.714
R Square 0.51
Adjusted R Square 0.508
Std. Error of the Estimate 0.52319

The overall model significance is presented in table 4.19. An F statistic of 192.803

indicated that the overall model was significant. The ANOVA test shows that the
significance of the F-statistic 0.000 is less than 0.05 meaning that null hypothesis is
rejected and conclude that there is a significant relationship between recruitment and
selection and performance of commercial parastatals. The findings imply that
recruitment and selection was statistically significant in explaining performance of
parastatals in Kenya. These findings are consistent with Terpstra and Rozell’s (2013)
study of the relationship between recruiting/selection practices and firm performance,
where they found a significant and positive link between extensiveness of recruiting,
selection and the use of formal selection procedures and firm performance.

Table 4.19: ANOVA for Recruitment and Selection

Indicator Sum of Squares df Mean Square F Sig.

Regression 52.775 1 52.775 192.803 0.000
Residual 50.639 185 0.274
Total 103.414 186

The recruitment coefficients are presented in table 4.20. The results show that
recruitment contributes significantly to the model since the p-value for the constant and
gradient are less than 0.05. The findings imply that one positive unit change in
recruitment and selection led to a change in performance at the rate of 0.727. This
confirms the positive effect of recruitment and selection on performance. The fitted
equation is as shown below
92
Y= 1.034 + 0.727X1

Table 4.20: Coefficients of Recruitment and Selection

Variable Beta Std. Error t Sig.

Constant 1.034 0.215 4.805 0.000
Recruitment and Selection 0.727 0.052 13.885 0.000

4.7 Perceived Decentralized Teams

4.7.1 Sampling Adequacy

To examine whether the data collected was adequate and appropriate for inferential
statistical tests such as the factor analysis, regression analysis and other statistical tests,
two main tests were performed namely; Kaiser-Meyer-Olkin (KMO) Measure of
Sampling Adequacy and Barlett’s Test of Sphericity. For a data set to be regarded as
adequate and appropriate for statistical analysis, the value of KMO should be greater
than 0.5 (Field, 2000).

Findings in Table 4.21 showed that the KMO statistic was 0.807 which was
significantly high; that is greater than the critical level of significance of the test which
was set at 0.5 (Field, 2000). In addition to the KMO test, the Bartlett’s Test of
Sphericity was also highly significant (Chi-square = 794.861 with 45 degrees of
freedom, at p < 0.05). The results of the KMO and Bartlett’s Test are summarized in
Table 4.21. These results provide an excellent justification for further statistical analysis
to be conducted.

93
Table 4.21: Perceived Decentralized Teams KMO Sampling Adequacy and
Bartlett's Sphericity Tests

Kaiser-Meyer-Olkin Measure 0.807

Bartlett's Chi- Square 794.861
Bartlett's df 45
Bartlett's Sig. 0
4.7.2 Factor Analysis

Factor analysis was conducted after successful testing of validity and reliability using
KMO coefficient and cronbach alpha results. Factor analysis was conducted using
Principal Components Method (PCM) approach. The extraction of the factors followed
the Kaiser Criterion where an eigen value of 1 or more indicates a unique factor. Total
Variance analysis indicates that the 10 statements on decentralized teams can be
factored into 1 factor. The total variance explained by the extracted factor is 40.465% as
shown in Table 4.22.

Table 4.22: Perceived Decentralized Teams Total Variance Explained

Extraction Sums of Squared

Component Initial Eigenvalues
Loadings
% of Cumulative % of Cumulative
Total Total
Variance % Variance %
1 4.047 40.465 40.465 4.047 40.465 40.465
2 2.108 21.084 61.549
3 0.827 8.272 69.821
4 0.715 7.146 76.967
5 0.562 5.616 82.583
6 0.485 4.846 87.429
7 0.388 3.884 91.313
8 0.323 3.226 94.539
9 0.306 3.061 97.6
10 0.24 2.4 100
Extraction Method: Principal Component Analysis.

94
Table 4.23 shows the factor loadings for decentralized teams statements. All the ten
factors attracted coefficients of more than 0.4 hence all the statements were retained for
analysis. According to Rahn (2010) and Zandi (2006) a factor loading equal to or greater
than 0.4 is considered adequate. This is further supported by Black (2002) who asserts
that a factor loading of 0.4 has good factor stability and deemed to lead to desirable and
acceptable solutions.

Table 4.23: Perceived Decentralized Teams Factor Analysis Component Matrix

Statement Component
The parastatal encourages decentralized decision making 0.599
The parastatal uses teams to decide about production issues 0.532
Teams are regularly used to perform various tasks 0.511
The parastatal involves the departments in making decisions that affect
employees 0.652
Team formation and maintenance is encouraged 0.662
During problem solving sessions, you always make an effort to get all
team members opinions and ideas before making a decision 0.749
There is relationship between decentralized teams and parastatal
performance 0.736
Corruption plays a role in team formations 0.696
Teams are affected by family and tribal relations 0.618
Teams are mainly based on family and tribal relationships 0.558
Extraction Method: Principal Component Analysis.
a 1 components extracted.

4.7.3 Descriptive Statistics

The second objective of the study was to determine the effect of perceived decentralized
teams on the performance of parastatals in Kenya. Table 4.24 shows that 81.9% of the
respondents agreed that the parastatal encouraged decentralized decision making, 82.9%
agreed that the parastatal used teams to decide about production issues and 76.4%
agreed that teams are regularly used to perform various tasks. Seventy two point eight
percent of the respondents agreed that the parastatal involved the departments in making

95
decisions that affected employees, 70.6% agreed that team formation and maintenance
was encouraged and 80.2% agreed that during problem solving sessions, they always
made an effort to get all team members opinions and ideas before making a decision. In
addition, 69% of the respondents agreed that there was relationship between
decentralized teams and parastatal performance, 66.3% agreed that corruption plays a
role in team formations and 60.5% agreed that teams were affected by family and tribal
relations. Finally, 60.4% of the respondents agreed that teams were mainly based on
family and tribal relationships. The mean score for responses for this section was 3.89
which indicates that majority of the respondents agreed that decentralized teams was a
key determinant of performance of parastatals. The findings imply that the organizations
had formed teams to enhance performance however they were challenges along the
tribal lines. The study findings agree with those of Tata and Prasad (2014) who found
that a company with micro level of centralization is a receptive environment for self-
managed teams. In a study of differential outcomes of team structures for workers,
supervisors, and middle managers in a large unionized telecommunications company,
Batt (2014) found that participation in self-managed teams is associated with
significantly higher levels of employment security, and satisfaction for workers and the
opposite for supervisors. Black, Lynch and Krivelyova(2014)examined the impact of
organizational change on workers and found evidence that self-managed teams are
associated with greater employment reductions.

96
Table 4.24: Perceived Decentralised Teams Descriptive Statistics

Strongly Strongly
Disagree Neutral Agree Mean
Statement Disagree Agree
The parastatal encourages
2.1% 8.6% 7.5% 36.4% 45.5% 4.14
decentralized decision making
The parastatal uses teams to
decide about production 1.6% 6.4% 9.1% 46.0% 36.9% 4.1
issues
Teams are regularly used to
3.2% 9.6% 10.7% 34.2% 42.2% 4.03
perform various tasks
The parastatal involves the
departments in making
3.7% 11.2% 12.3% 39.6% 33.2% 3.87
decisions that affect
employees
Team formation and
2.1% 13.9% 13.4% 32.1% 38.5% 3.91
maintenance is encouraged
During problem solving
sessions, you always make an
effort to get all team members 1.1% 8.0% 10.7% 32.1% 48.1% 4.18
opinions and ideas before
making a decision
There is relationship between
decentralized teams and 2.7% 13.9% 14.4% 36.4% 32.6% 3.82
parastatal performance
Corruption plays a role in
3.2% 13.9% 16.6% 38.5% 27.8% 3.74
team formations
Teams are affected by family
6.4% 17.6% 15.5% 36.4% 24.1% 3.54
and tribal relations
Teams are mainly based on
8.6% 16.0% 15.0% 27.8% 32.6% 3.6
family and tribal relationships
Average 3.5% 11.9% 12.5% 36.0% 36.2% 3.89

The study sought to find out whether there the decentralized teams are functional in the
organization. Figure 4.11 illustrates that 81% of the respondents indicated that yes while
19% indicated that the decentralized teams were not functional.

97
.

Figure 4.11: Functional Decentralised Teams

4.7.4 Relationship between Perceived Decentralised Teams and Performance

Figure 4.12 shows the scattered plot for decentralized teams and performance. Results
show that there is a positive relationship between decentralized teams and performance
thus an increase in effectiveness in decentralized teams will positively increase the
performance of parastatals in Kenya. These findings are consistent with Jayaram, Droge
and Vickery, (2009) who found that decentralized teams have a positive effect on two
dimensions of the performance, time and flexibility.

98
Figure 4.12: Scatter Plot on Relationship between Perceived Decentralised Teams
and Performance

Table 4.25 presents Pearson’s correlation of decentralized teams and performance of

parastatals. Results show that decentralized teams was positively correlated
performance. This is supported by a significant value of 0.000 and a positive correlation
of 0.657. This implies that an increase in decentralized teams effectiveness in parastatals
will increase the performance of commercial parastatals in Kenya. Results are in line
with those of Collins and Clark (2013) who examined the role of human resource
practices in creating organizational competitive advantage and found that top
management team social networks (practices such as mentoring, incentives) mediated
the relationship between HR practices and firm performance.

Table 4.25: Relationship between Perceived Decentralised Teams and Performance

Perceived
Performance
Variable Decentralised Teams
Pearson
1
Performance Correlation
Sig. (2-tailed)
Perceived Decentralised Pearson
0.657 1
Teams Correlation
Sig. (2-tailed) 0.000

99
Figure 4.13 presents graphical representation of the linear relationship between
perceived decentralized teams and performance. The results show that there is a positive
relationship between the two.

Figure 4.13: Linear Relationship between Perceived Decentralised Teams and

Performance

4.7.5 Regression Analysis on Perceived Decentralised Teams and Performance

Regression analysis was conducted to empirically determine whether decentralized

teams were a significant determinant of performance in purely commercial parastatals in
Kenya. Regression results in Table 4.26 indicate the goodness of fit for the regression
between decentralized teams and performance was satisfactory. An R squared of 0.431
indicates that 43.1% of the variations in performance are explained by the variations in
decentralized team. This implies that 56.9% of the unexplained variations in
performance is accounted for by the other variables including recruitment and selection,
training and development and employee reward. Results showed that firms with large
teams performed better and firms with dominant CEOs performed worse in a turbulent

100
environment than in a stable one. Tata and Prasad (2014) found that a company with
micro level of centralization is a receptive environment for self-managed teams. In a
study of differential outcomes of team structures for workers, supervisors, and middle
managers in a large unionized telecommunications company, Batt (2004) found that
participation in self-managed teams is associated with significantly higher levels of
employment security, and satisfaction for workers and the opposite for supervisors.

Table 4.26: Model Summary for Perceived Decentralised Teams

Indicator Variables
R 0.657
R Square 0.431
Adjusted R Square 0.428
Std. Error of the Estimate 0.5638

The overall model significance is presented in table 4.27. An F statistic of 140.332

indicated that the overall model was significant. The ANOVA test shows that the
significance of the F-statistic 0.000 is less than 0.05 meaning that null hypothesis is
rejected and conclude that there is a significant relationship between decentralized teams
and performance of commercial parastatals. The findings imply that decentralized teams
were statistically significant in explaining performance of parastatals in Kenya. The
study findings are in agreement with Black, Lynch and Krivelyova (2014) who
examined the impact of organizational change on workers and found evidence that self-
managed teams are associated with greater employment reductions.

Table 4.27: ANOVA for Perceived Decentralised Teams

Indicator Sum of Squares df Mean Square F Sig.

Regression 44.608 1 44.608 140.332 0.000
Residual 58.806 185 0.318
Total 103.414 186

101
The decentralized team coefficients are presented in table 4.28. The results show that
decentralized teams contribute significantly to the model since the p-value for the
constant and gradient are less than 0.05. The findings imply that one positive unit
change in decentralized teams’ effectiveness led to a change in performance at the rate
of 0.703. This confirms the positive effect of decentralized teams on performance. The
fitted equation is as shown below

Y= 1.239 + 0.703X1

Table 4.28: Coefficients of Perceived Decentralized Teams

Variable Beta Std. Error t Sig.

Constant 1.239 0.235 5.28 0.000
DecentralisedTeams 0.703 0.059 11.846 0.000

4.8 Perceived Training

4.8.1 Sampling Adequacy

To examine whether the data collected was adequate and appropriate for inferential
statistical tests such as the factor analysis, regression analysis and other statistical tests,
two main tests were performed namely; Kaiser-Meyer-Olkin (KMO) Measure of
Sampling Adequacy and Barlett’s Test of Sphericity. For a data set to be regarded as
adequate and appropriate for statistical analysis, the value of KMO should be greater
than 0.5 (Field, 2000).

Findings in Table 4.29 showed that the KMO statistic was 0.819 which was
significantly high; that is greater than the critical level of significance of the test which
was set at 0.5 (Field, 2000). In addition to the KMO test, the Bartlett’s Test of
Sphericity was also highly significant (Chi-square = 794.861 with 45 degrees of
freedom, at p < 0.05). The results of the KMO and Bartlett’s Test are summarized in
Table 4.29. These results provide an excellent justification for further statistical analysis
to be conducted.

102
Table 4.29: Perceived Training KMO Sampling Adequacy and Bartlett's
Sphericity Tests

Kaiser-Meyer-Olkin Measure 0.819

Bartlett's Chi- Square 742.564
Bartlett's df 45
Bartlett's Sig. 0
4.8.2 Factor Analysis

Factor analysis was conducted after successful testing of validity and reliability using
KMO coefficient and cronbach alpha results. Factor analysis was conducted using
Principal Components Method (PCM) approach. The extraction of the factors followed
the Kaiser Criterion where an eigen value of 1 or more indicates a unique factor. Total
Variance analysis indicates that the 10 statements on training and development can be
factored into 1 factor. The total variance explained by the extracted factor is 43.256% as
shown in Table 4.30.

Table 4.30: Perceived Training Total Variance Explained

Extraction Sums of Squared

Component Initial Eigenvalues Loadings
% of Cumulative % of Cumulative
Total Variance % Total Variance %
1 4.326 43.256 43.256 4.326 43.256 43.256
2 1.435 14.353 57.609
3 0.975 9.753 67.361
4 0.781 7.806 75.167
5 0.594 5.94 81.108
6 0.567 5.665 86.773
7 0.419 4.194 90.967
8 0.359 3.59 94.557
9 0.333 3.332 97.889
10 0.211 2.111 100
Extraction Method: Principal Component Analysis.

103
Table 4.31 shows the factor loadings for training statements. All the ten factors attracted
coefficients of more than 0.4 hence all the statements were retained for analysis.
According to Rahn (2010) and Zandi (2006) a factor loading equal to or greater than 0.4
is considered adequate. This is further supported by Black (2002) who asserts that a
factor loading of 0.4 has good factor stability and deemed to lead to desirable and
acceptable solutions.

Table 4.31: Perceived Training Factor Analysis Component Matrix

Statement Component
The parastatal conducts extensive training programs for its employees in all
aspects of quality. 0.496
Employees in each job will normally go through training programs every
year. 0.701
Training needs are identified through a formal performance appraisal
mechanism. 0.487
New knowledge and skills are imparted to employees periodically. 0.605
Training needs identified are realistic, useful and based on the business
strategy of the organization. 0.648
The parastatal has a training budget every year 0.799
Employees are trained to take up more responsibilities and other jobs in the
future 0.799
There is relationship between training and development and parastatal
performance 0.744
Corruption is involved in accessing training and development opportunities 0.622
Training opportunities are shared based on family and tribal relations 0.588
Extraction Method: Principal Component Analysis.
a 1 components extracted.

4.8.3 Descriptive Statistics

The third objective of the study was to assess the effect of training on the performance
of parastatals in Kenya. Table 4.32 shows that 71.1% of the respondents agreed that the
parastatal conducted extensive training programs for its employees in all aspects of
quality, 72.7% agreed that employees in each job normally went through training
programs every year and 68.5% agreed that training needs were identified through a
104
formal performance appraisal mechanism. In addition, 71.1% agreed that new
knowledge and skills were imparted to employees periodically, 72.7% agreed that
training needs identified are realistic, useful and based on the business strategy of the
organization and 73.2% agreed that the parastatal had a training budget every year.
Seventy eight point six percent of the respondents agreed that employees are trained to
take up more responsibilities and other jobs in the future while 75.4% agreed that there
was relationship between training and development and parastatal performance and
73.8% agreed that corruption was involved in accessing training and development
opportunities. Finally 66.9% of the respondents agreed that training opportunities were
shared based on family and tribal relations. The mean score for responses for this
section was 3.84 which indicate that majority of the respondents agreed that training and
development was a key determinant of performance of parastatals.To meet current and
future business demands, training and development process has assumed its strategic
role and in this regard studies by Stavrou, Brewste and Charalambous (2004) and
Apospori et al. (2008), have attained much importance as these highlights the training
and development practices in cross-national contexts. Apospori et al. (2008) had
deduced that there is a considerable impact of training on organizational performance.
The need for developing the employees is compelling because a sound training and
development plan has its contributions to increase productivity and quality of work. The
development strategy reduces staff turnover and absenteeism and also helps in
improving motivation among the employees.

105
Table 4.32: Perceived Training Descriptive Statistics

Strongly Strongly
Disagree Neutral Agree Mean
Statement Disagree Agree
The parastatal conducts
extensive training programs for
4.3% 8.0% 16.6% 44.4% 26.7% 3.81
its employees in all aspects of
quality.
Employees in each job will
normally go through training 5.9% 11.8% 9.6% 43.3% 29.4% 3.79
programs every year.
Training needs are identified
through a formal performance 2.1% 12.3% 17.1% 50.3% 18.2% 3.7
appraisal mechanism.
New knowledge and skills are
imparted to employees 2.7% 10.7% 15.5% 58.8% 12.3% 3.67
periodically.
Training needs identified are
realistic, useful and based on the
3.2% 8.0% 16.0% 44.9% 27.8% 3.86
business strategy of the
organization.
The parastatal has a training
3.2% 12.3% 11.2% 37.4% 35.8% 3.9
budget every year
Employees are trained to take up
more responsibilities and other 4.3% 9.1% 8.0% 41.7% 36.9% 3.98
jobs in the future
There is relationship between
training and development and 0.0% 4.8% 19.8% 35.8% 39.6% 4.1
parastatal performance
Corruption is involved in
accessing training and 3.7% 13.9% 8.6% 43.3% 30.5% 3.83
development opportunities
Training opportunities are shared
based on family and tribal 2.1% 15.5% 15.5% 38.0% 28.9% 3.76
relations
Average 3.2% 10.6% 13.8% 43.8% 28.6% 3.84

The study sought to find out whether the training programs for new employees are
adequate. Figure 4.14 illustrates that 78.6`% of the respondents indicated Yes while
21.4% indicated that the training programs for new employees were adequate. The

106
respondents were also asked to indicate whether the training programs are adequate,
80.2% indicated Yes while 19.8% indicated No. The findings are in support of Barker
(2010) who argued that training helps employees to maintain standards or improve their
competence hence their performance. A variety of human resource management
practices are related to the development of human resource of the organization. For
strategic purposes it is important to target much more specifically on the development of
competences which can provide a competitive advantage (Johnson, Scholes &
Whittington, 2012)

Figure 4.14: Perceived Training and Development

4.8.4 Relationship between Perceived Training and Performance

Figure 4.15 shows the scattered plot for training and performance. Results show that
there is a positive relationship between training and performance thus an increase in
effectiveness in training will positively increase the performance of parastatals in
Kenya. These findings are consistent with those of Barker (2010) who argued that
developing somebody’s skills enables an organization to achieve greater productivity,
improved job performance, greater empowerment, more satisfactory recruitment and
selection and reduced labour turnover. Training can help employees develop skills
needed to perform their jobs, which directly affects the business performance. Giving

107
employees opportunities to learn and develop creates a positive work environment
which supports the business strategy by attracting talented employees as well as
motivating and retaining current employees.

Figure 4.15: Scatter Plot on Relationship between Perceived Training and

Performance

Table 4.33 presents Pearson’s correlation of training and performance of parastatals.

Results show that training was positively correlated with performance. This is supported
by a significant value of 0.000 and a positive correlation of 0.663. This implies that an
increase in training effectiveness in parastatals will increase the performance of
commercial parastatals in Kenya. The study findings are in support of Dimba (2010)
who suggested that there is a significant impact of training and development on
organizational performance and Niazi (2011) who mentioned that training and
development could influence organisational performance because employees’ skills,
knowledge and abilities can be enhanced and up to date.

108
Table 4.33: Relationship between Perceived Training and Performance

Variable Performance Training

Performance Pearson Correlation 1
Sig. (2-tailed)
Training Pearson Correlation 0.663 1
Sig. (2-tailed) 0.000

Figure 4.16 presents graphical representation of the linear relationship between training
and performance. The results show that there is a positive relationship between the two.

Figure 4.16: Linear Relationship between Perceived Training and Performance

4.8.5 Regression Analysis on Perceived Training and Performance

Regression analysis was conducted to empirically determine whether training was a

significant determinant of performance in purely commercial parastatals in Kenya.
Regression results in Table 4.34 indicate the goodness of fit for the regression between
training and performance was satisfactory. An R squared of 0.44 indicates that 44% of
109
the variations in performance are explained by the variations in training. This implies
that 56% of the unexplained variations in performance is accounted for by the other
variables including recruitment and selection, decentralized teams and employee reward.
These findings are consistent with the findings from a previous study by Rowden (2002)
who suggests that training is an efficient tool for improving ones job satisfaction hence
leading to better employee performance. These results are also consistent with the study
by Keep (1989) who found that strategic training and development activities are central
to the reality of anything that can meaningfully be described as human resource
management.

Table 4.34: Model Summary for Perceived Training

Indicator Coefficient
R 0.663
R Square 0.44
Adjusted R Square 0.437
Std. Error of the Estimate 0.55939

The overall model significance is presented in table 4.35. An F statistic of 145.484

indicated that the overall model was significant. The ANOVA test shows that the
significance of the F-statistic 0.000 is less than 0.05 meaning that null hypothesis is
rejected and conclude that there is a significant relationship between training and
performance and performance of commercial parastatals. The findings imply that
training and development were statistically significant in explaining performance of
parastatals in Kenya. Results are in tandem with Garcı´a (2005) and Tharenou, Saks
and Moore (2007) who found out that training and development had a positive effect on
performance. The findings of this study are also consistent with a study by Khan et al
(2011) on the impact of training and development on organizational performance which
found that training and development, on the job training, training design and delivery
style have significant positive effect on organizational performance.

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Table 4.35: ANOVA for Perceived Training

Indicator Sum of Squares df Mean Square F Sig.

Regression 45.524 1 45.524 145.484 0.000
Residual 57.89 185 0.313
Total 103.414 186

The coefficients are presented in table 4.36. The results show that training and
development contributes significantly to the model since the p-value for the constant
and gradient are less than 0.05. The findings imply that one positive unit change in
training effectiveness led to a change in performance at the rate of 0.725. This confirms
the positive effect of training on performance. The fitted equation is as shown below

Y= 1.19 + 0.725X1

Table 4.36: Coefficients of Perceived Training

Variable Beta Std. Error t Sig.

Constant 1.19 0.235 5.075 0.000
Training 0.725 0.06 12.062 0.000

4.9 Perceived Reward

4.9.1 Sampling Adequacy

To examine whether the data collected was adequate and appropriate for inferential
statistical tests such as the factor analysis, regression analysis and other statistical tests,
two main tests were performed namely; Kaiser-Meyer-Olkin (KMO) Measure of
Sampling Adequacy and Barlett’s Test of Sphericity. For a data set to be regarded as
adequate and appropriate for statistical analysis, the value of KMO should be greater
than 0.5 (Field, 2000).

111
Findings in Table 4.37 showed that the KMO statistic was 0.816 which was
significantly high; that is greater than the critical level of significance of the test which
was set at 0.5 (Field, 2000). In addition to the KMO test, the Bartlett’s Test of
Sphericity was also highly significant (Chi-square = 797.214 with 55 degrees of
freedom, at p < 0.05). The results of the KMO and Bartlett’s Test are summarized in
Table 4.37. These results provide an excellent justification for further statistical analysis
to be conducted.

Table 4.37: Perceived Reward KMO Sampling Adequacy and Bartlett's Sphericity
Tests

Kaiser-Meyer-Olkin Measure 0.816

Bartlett's Chi- Square 797.214
Bartlett's df 55
Bartlett's Sig. 0

4.9.2 Factor Analysis

Factor analysis was conducted after successful testing of validity and reliability using
KMO coefficient and cronbach alpha results. Factor analysis was conducted using
Principal Components Method (PCM) approach. The extraction of the factors followed
the Kaiser Criterion where an eigen value of 1 or more indicates a unique factor. Total
Variance analysis indicates that the 11 statements on reward can be factored into 1
factor. The total variance explained by the extracted factor is 41.312% as shown in
Table 4.38.

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Table 4.38: Perceived Reward Total Variance Explained

Extraction Sums of Squared

Component Initial Eigenvalues Loadings
% of Cumulative % of Cumulative
Total Variance % Total Variance %
1 4.544 41.312 41.312 4.544 41.312 41.312
2 1.577 14.333 55.645
3 0.898 8.163 63.807
4 0.781 7.104 70.911
5 0.754 6.857 77.768
6 0.63 5.723 83.491
7 0.531 4.832 88.322
8 0.419 3.805 92.127
9 0.33 3.002 95.13
10 0.303 2.75 97.88
11 0.233 2.12 100
Extraction Method: Principal Component Analysis.

Table 4.39 shows the factor loadings for reward statements. All the eleven factors
attracted coefficients of more than 0.4 hence all the statements were retained for
analysis. According to Rahn (2010) and Zandi (2006) a factor loading equal to or greater
than 0.4 is considered adequate. This is further supported by Black (2002) who asserts
that a factor loading of 0.4 has good factor stability and deemed to lead to desirable and
acceptable solutions.

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Table 4.39: Perceived Reward Factor Analysis Component Matrix

Statement Component
In the parastatal, salary and other benefits are comparable to the market. 0.522
In the parastatal, rewards are decided on the basis of competence orability of
the employee. 0.7
The rewards for all employees is directly linked to his/her performance. 0.474
In the parastatal, profit sharing is used as a mechanism to reward higher
performance. 0.575
The rewards offered by the parastatal have an effect on employee
performance 0.692
The rewards offered attract and retain high quality employees 0.743
Rewards affect the market share of the parastatals by attracting customers 0.786
Employee rewards affects the rate of growth of a parastatal 0.712
There is relationship between reward of employees and parastatal
performance 0.686
Corruption plays a significant role in employee rewarding 0.597
Rewards are based on family, tribal relations and bribery rather than merit 0.492
Extraction Method: Principal Component Analysis.
a 1 components extracted.

4.9.3 Descriptive Statistics

The fourth objective of the study was to examine the effect of reward on the
performance of parastatals in Kenya. Table 4.40 shows that 74.4% of the respondents
agreed that in the parastatal, salary and other benefits are comparable to the market,
79.2% agreed that in the parastatal, rewards are decided on the basis of competence
orability of the employee and 67.4% agreed that the rewards for all employees were
directly linked to his/her performance. Sixty nine percent of the respondents agreed that
in the parastatal, profit sharing was used as a mechanism to reward higher performance,
while 71.7% agreed that the rewards offered by the parastatal had an effect on employee
performance and 77.6% agreed that the rewards offered attracted and retained high
quality employees. Furthermore, 79.1% of the respondents agreed that rewards affected

114
the market share of the parastatals by attracting customers, 69% agreed that employee
rewards affected the rate of growth of a parastatal and 79.1% agreed that there was
relationship between reward of employees and parastatal performance. Finally 70.6% of
the respondents agreed that corruption plays a significant role in employee rewarding
and 74.4% agreed that rewards were based on family, tribal relations and bribery rather
than merit. The mean score for responses for this section was 3.87 which indicates that
majority of the respondents agreed that employee reward was a key determinant of
performance of parastatals. Performance-based reward is the dominant HR practice that
firms use to evaluate and reward employees’ efforts (Collins & Clark, 2013). Evidently,
performance-based reward has a positive effect upon employee and organizational
performance (Brown & Ostroff,2014; Cardon & Stevens, 2014). However, there is
scarce evidence on the effects of reward policy of firm growth. Empirical studies on the
relationship between performance-related pay and company performance have generally
found a positive relationship, but a growing body of empirical evidence suggests that it
is not just pay level that matters, but also pay structure as well (Wimbush, 2005; Singh,
2005).

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Table 4.40: Perceived Reward Descriptive Statistics

Strongly Strongly
Disagree Neutral Agree Mean
Statement Disagree Agree
In the parastatal, salary and other
benefits are comparable to the 3.7% 8.0% 13.9% 41.2% 33.2% 3.92
market.
In the parastatal, rewards are
decided on the basis of
2.7% 9.6% 8.6% 47.6% 31.6% 3.96
competence orability of the
employee.
The rewards for all employees is
directly linked to his/her 3.7% 15.0% 13.9% 48.7% 18.7% 3.64
performance.
In the parastatal, profit sharing is
used as a mechanism to reward 3.7% 10.7% 16.6% 43.9% 25.1% 3.76
higher performance.
The rewards offered by the
parastatal have an effect on 3.2% 9.1% 16.0% 45.5% 26.2% 3.82
employee performance
The rewards offered attract and
1.6% 13.4% 7.5% 44.4% 33.2% 3.94
retain high quality employees
Rewards affect the market share
of the parastatals by attracting 2.7% 11.2% 7.0% 48.1% 31.0% 3.94
customers
Employee rewards affects the rate
0.5% 12.3% 18.2% 34.8% 34.2% 3.9
of growth of a parastatal
There is relationship between
reward of employees and 1.6% 10.7% 8.6% 43.3% 35.8% 4.01
parastatal performance
Corruption plays a significant
1.6% 14.4% 13.4% 43.3% 27.3% 3.8
role in employee rewarding
Rewards are based on family,
tribal relations and bribery rather 5.3% 11.8% 8.6% 42.8% 31.6% 3.83
than merit
Average 2.8% 11.5% 12.0% 44.0% 29.8% 3.87
4.9.4 Relationship between Perceived Reward and Performance

Figure 4.17 shows the scattered plot for employee reward and performance. Results
show that there is a positive relationship between employee reward and performance

116
thus an increase in employee reward effectiveness will positively increase the
performance of parastatals in Kenya. According to Perce and Robinson (2012) reward
power is available when the manager confers rewards in return for desired actions and
outcomes. Rewards systems are often implemented within organizations as a key
management tool that can contribute to a firm’s effectiveness by influencing individual
behavior and motivating employees at work (Fareed et al. 2013).Employees’ job
satisfaction is affected by both financial and nonfinancial rewards (Armstrong, Reilly &
Brown, 2011; Ali & Ahmad, 2009).

Figure 4.17: Scatter Plot on Relationship between Perceived Reward and

Performance

Table 4.41 presents Pearson’s correlation of perceived reward and performance of

parastatals. Results show that employee reward was positively correlated with
performance. This is supported by a significant value of 0.000 and a positive correlation

117
of 0.643. This implies that an increase in employee reward effectiveness in parastatals
will increase the performance of commercial parastatals in Kenya. The study findings
are in agreement with Ali and Ahmad, (2009) who asserted that rewards can be extrinsic
or intrinsic, extrinsic rewards are tangible rewards and these rewards are external to the
job or task performed by the employee. External rewards can be in terms of salary/pay,
incentives, bonuses, promotions, job security, among others. Intrinsic rewards are
intangible rewards or psychological rewards like appreciation, meeting the new
challenges, positive and caring attitude from employer, and job rotation after attaining
the goal. He further asserted that all this types of rewards had a positive and direct effect
on performance.

Table 4.41: Relationship between Perceived Reward and Performance

Variable Performance Perceived Reward

Performance Pearson Correlation 1
Sig. (2-tailed)
Perceived Reward Pearson Correlation 0.643 1
Sig. (2-tailed) 0.000

Figure 4.18 presents graphical representation of the linear relationship between

employee reward and performance. The results show that there is a positive relationship
between the two.

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Figure 4.18: Linear Relationship between Perceived Reward and Performance

4.9.5 Regression Analysis on Perceived Reward and Performance

Regression analysis was conducted to empirically determine whether reward was a

significant determinant of performance in purely commercial parastatals in Kenya.
Regression results in Table 4.42 indicate the goodness of fit for the regression between
reward and performance was satisfactory. An R squared of 0.414 indicates that 41.4% of
the variations in performance are explained by the variations in employee reward. This
implies that 58.6% of the unexplained variations in performance is accounted for by the
other variables including recruitment and selection, decentralized teams and training
development. The study findings are in support that performance-based reward has a
positive effect upon employee and organizational performance (Brown &
Ostroff,2014;Cardon & Stevens, 2014). In addition other empirical studies on the
relationship between performance-related pay and company performance have generally
found a positive relationship, but a growing body of empirical evidence suggests that it

119
is not just pay level that matters, but also pay structure as well (Wimbush, 2005;
Singh2005).

Table 4.42: Model Summary for Perceived Reward

Indicator Coefficient
R 0.643
R Square 0.414
Adjusted R Square 0.41
Std. Error of the Estimate 0.57255

The overall model significance is presented in table 4.43. An F statistic of 130.466

indicated that the overall model was significant. The ANOVA test shows that the
significance of the F-statistic 0.000 is less than 0.05 meaning that null hypothesis is
rejected and conclude that there is a significant relationship between reward and
performance of commercial parastatals. The findings imply that reward was statistically
significant in explaining performance of parastatals in Kenya.

Table 4.43: ANOVA for Perceived Reward

Indicator Sum of Squares df Mean Square F Sig.

Regression 42.769 1 42.769 130.466 0.000
Residual 60.646 185 0.328
Total 103.414 186

The coefficients are presented in table 4.44. The results show that reward contributes
significantly to the model since the p-value for the constant and gradient are less than
0.05. The findings imply that one positive unit change in reward led to a change in
performance at the rate of 0.725. This confirms the positive effect of reward on
performance. The fitted equation is as shown below

Y= 1.222 + 0.715X1

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Table 4.44: Coefficients of Perceived Reward

Variable Beta Std. Error t Sig.

Constant 1.222 0.245 4.996 0.000
Reward 0.715 0.063 11.422 0.000

4.10 Perceived Corruption

4.10.1 Sampling Adequacy

To examine whether the data collected was adequate and appropriate for inferential
statistical tests such as the factor analysis, regression analysis and other statistical tests,
two main tests were performed namely; Kaiser-Meyer-Olkin (KMO) Measure of
Sampling Adequacy and Barlett’s Test of Sphericity. For a data set to be regarded as
adequate and appropriate for statistical analysis, the value of KMO should be greater
than 0.5 (Field, 2000).

Findings in Table 4.45 showed that the KMO statistic was 0.864 which was
significantly high; that is greater than the critical level of significance of the test which
was set at 0.5 (Field, 2000). In addition to the KMO test, the Bartlett’s Test of
Sphericity was also highly significant (Chi-square = 625.227 with 21 degrees of
freedom, at p < 0.05). The results of the KMO and Bartlett’s Test are summarized in
Table 4.45. These results provide an excellent justification for further statistical analysis
to be conducted.

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Table 4.45: Perceived Corruption KMO Sampling Adequacy and Bartlett's
Sphericity Tests

Kaiser-Meyer-Olkin Measure 0.864

Bartlett's Chi- Square 625.227
Bartlett's df 21
Bartlett's Sig. 0
4.10.2 Factor Analysis

Factor analysis was conducted after successful testing of validity and reliability using
KMO coefficient and cronbach alpha results. Factor analysis was conducted using
Principal Components Method (PCM) approach. The extraction of the factors followed
the Kaiser Criterion where an eigen value of 1 or more indicates a unique factor. Total
Variance analysis indicates that the 7 statements on perceived corruption can be factored
into 1 factor. The total variance explained by the extracted factor is 57.044% as shown
in Table 4.46.

Table 4.46: Perceived Corruption Total Variance Explained

Extraction Sums of Squared

Component Initial Eigenvalues Loadings
% of Cumulative % of Cumulative
Total Variance % Total Variance %
1 3.993 57.044 57.044 3.993 57.044 57.044
2 0.829 11.846 68.89
3 0.761 10.872 79.762
4 0.548 7.833 87.595
5 0.337 4.81 92.405
6 0.284 4.055 96.459
7 0.248 3.541 100
Extraction Method: Principal Component Analysis.

Table 4.47 shows the factor loadings for perceived corruption statements. All the seven
factors attracted coefficients of more than 0.4 hence all the statements were retained for

122
analysis. According to Rahn (2010) and Zandi (2006) a factor loading equal to or greater
than 0.4 is considered adequate. This is further supported by Black (2002) who asserts
that a factor loading of 0.4 has good factor stability and deemed to lead to desirable and
acceptable solutions.

Table 4.47: Perceived Corruption Factor Analysis Component Matrix

Statement Component
Corruption is rampant in the parastatal 0.554
The practice of nepotism, tribalism and bribery is rampant in the parastatal. 0.783
Nepotism, tribalism and bribery play a role in employee recruitment and
selection. 0.846
Nepotism, tribalism and bribery play a role in operations of decentralized teams. 0.66
Nepotism, tribalism and bribery play a role in training and development. 0.823
Nepotism, tribalism and bribery play a role in employee reward. 0.833
There is relationship between Nepotism, tribalism and bribery on parastatal
performance 0.741
Extraction Method: Principal Component Analysis.
a 1 components extracted.

4.10.3 Descriptive Statistics

The fourth objective of the study was to determine the moderating effect of perceived
corruption on the relationship between human resource management practices and
performance of parastatals in Kenya. Table 4.48 shows that 71.6% of the respondents
agreed that corruption was rampant in the parastatal, 66.9% agreed that the practice of
nepotism, tribalism and bribery was rampant in the parastatal and 62.1% agreed that
nepotism, tribalism and bribery played a role in employee recruitment and selection.
Furthermore, 65.2% of the respondents agreed that nepotism, tribalism and bribery
played a role in operations of decentralized teams, while 56.7% agreed that nepotism,
tribalism and bribery played a role in training and development and 57.2% agreed that
nepotism, tribalism and bribery played a role in employee reward. Finally, 62.6% of the
respondent agreed that there was relationship between Nepotism, tribalism and bribery

123
on parastatal performance. The mean score for responses for this section was 3.63 which
indicates that majority of the respondents agreed that corruption was a key determinant
of performance of parastatals. Corruption has permeated many sectors of the Kenyan
economy including parastatals. The study findings are in agreement with Okyere-
Kwakye, Norand Nor, (2010), who argued that nepotism and tribalism affects the
quality of human resource in an organization as candidates are hired due to their family
or tribal affiliations rather than their requisite skill. They place a negative and
unproductive cost on the existing employees in the organization and impede
organizational justice, motivation and harmony resulting in a higher rate of turnover on
the part of productive employees. Nepotism and tribalism leads to discriminatory
practices in an organization which negatively impact organizational efficiency (Bellow,
2013).

Table 4.48: Perceived Corruption Descriptive Statistics

Strongly Strongly
Disagree Neutral Agree Mean
Statement Disagree Agree
Corruption is rampant in the
3.2% 11.8% 13.4% 46.5% 25.1% 3.79
parastatal
The practice of nepotism, tribalism
and bribery is rampant in the 9.6% 9.6% 13.9% 45.5% 21.4% 3.59
parastatal.
Nepotism, tribalism and bribery
play a role in employee recruitment 8.0% 13.9% 16.0% 36.4% 25.7% 3.58
and selection.
Nepotism, tribalism and bribery
play a role in operations of 6.4% 11.8% 16.6% 40.1% 25.1% 3.66
decentralized teams.
Nepotism, tribalism and bribery
play a role in training and 11.2% 13.4% 18.7% 25.7% 31.0% 3.52
development.

Nepotism, tribalism and bribery 10.7% 18.7% 13.4% 24.6% 32.6% 3.5
play a role in employee reward.
There is relationship between
Nepotism, tribalism and bribery on 4.8% 15.5% 17.1% 24.1% 38.5% 3.76
parastatal performance
Average 7.7% 13.5% 15.6% 34.7% 28.5% 3.63

The respondents were asked to rank the corrupt practices listed below in order of
prevalence in the parastatal from 3 (most prevalent) to 1 (least prevalent). Table 4.49
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showed that bribery came first as most prevalent, while nepotism came second and
tribalism came third. These findings are in support of many researchers who have found
that corruption, nepotism and tribalism are a common phenomenon that occurs in many
organizations (Arasli & Tümer, 2008). According to Hanekom and Thornhill (2013),
nepotism and tribalism is the act of awarding a gratuitous offer or position to someone
in close family or tribal relation. When employees have these relationships, they may
make a conscious effort to give favours to their relatives even when it is not due to them
(Okyere-Kwakye, Nor & Nor, 2010). Price and Cybulski (2005) argue that due to the
sharing of tribes, employees may exhibit certain common behaviors. Issues of nepotism
, tribalism and bribery may negatively affect organization’s performance(Okyere-
Kwakye, Nor& Nor, 2010).

Table 4.49: Perceived Corruption Practices

Least Moderate Most

Statement Prevalent prevalent Prevalent
Nepotism 33.2% 28.3% 38.5%
Tribalism 25.7% 38.5% 35.8%
Bribery 28.3% 25.7% 46.0%

4.11 The Moderating effect of Perceived Corruption on the relationship between

HRM Practices and Performance

This section provides results of analysis on the effect of the independent variable on the
dependent variable before and after introducing a moderating variable. The independent
variable herein is; human resource practices with perceived corruption as the moderating
variable. R square also referred to as coefficient of determination and significance tests
were done to determine the effects of the predictor variables on the dependent variable.
The R square and the overall significance of the model were analyzed before and after
introducing the moderating variable to independent variable. The introduction of the
moderating variable introduces an interaction effect on the prediction strength of the

125
independent variable on the dependent variable. The interaction effect leads to either a
stronger or weaker prediction power of the independent variable on the dependent
variable. In this study, interaction effect was created by use of the product between
predictor variable and the moderating variable.

Table 4.50 shows the results of the R-square before involving the moderating variable
(perceived corruption) and after incorporating the moderating variable to the
independent variable (HRM practices). The results indicate that perceived corruption
had a positive moderating effect on HRM practices (Rsquared change of 0.009) which
translates to 1.59% change in the R-square. Results show that after introducing the
moderating variable (perceived corruption) the R- square improved from 0.558 to 0.567
and was significant (0.047) since the R-square became weaker. This means perceived
corruption moderate HRM practices negatively and statistically significant. These
findings are in line with Hellman, Jones and Kaufmann (2010) and Kaufmann and
Kraay (2008) have provided rich data on how nepotism and tribalism produces poorer
economies. They reported that potential employees without connections are shut out and
the inefficient in the organizations are protected. Mulder (2008) argues that previous
work experience and education are two important factors in today's modern nepotism
and tribalism. He explains that people who enter into the organization based on the
relationship and bribery lack the necessary competencies and qualifications (Khatri &
Tsang, 2003).

126
Table 4.50: Moderation Tests Using R Square and Significance Change

Adjuste
Mo R Std. Error of
R dR Change Statistics
del Square the Estimate
Square
R d Sig. F
F
Square f df2 Chang
Change
Change 1 e
1 .747a 0.558 0.555 0.49722 0.558233.303 1 185 0.000
2 .753b 0.567 0.562 0.49325 0.009 3.985 1 184 0.047
a Predictors: (Constant),
HRMPractices
b Predictors: (Constant), HRM Practices, HRM Practices*Corruption

The ANOVA results for HRM practices with moderating variable in Table4.51 also
indicates that the model was significant with F=120.526 and p=0.000<0.05 meaning that
human resource practices and perceived corruption had significant effect on
performance of parastatals. A further test on the beta coefficient of the resulting model
in Table 4.51 shows a significant change in the beta coefficients before and after the
introduction of the moderating variable. The model remained statistically significant
with p value= 0.000 < 0.05. These findings are in agreement with those of Hilder
(2004) who opined that tribalism may affect the effectiveness of teams in that, in a team
when two or more members share a common tribe they would form a cleavage within
the team which would lead to ethnocentrism where other members of the group will feel
isolated. Hilder (2004) also denotes that tribalism controls the behavior and attitude of
people within the organization. Thus, employees who possess the same tribal behavior
may attract each other and as such the cohesion in the team will weaken since there
would be “teams within team”. They may cause conflicts within organizations which
would disrupt the activities and eventual productivity of the organizations.

127
Table 4.51: ANOVA Test for HRM Practices with Moderating Variable

Model Sum of Squares df Mean Square F Sig.

1 Regression 57.678 1 57.678 233.303 .000b
Residual 45.736 185 0.247
Total 103.414 186
2 Regression 58.647 2 29.324 120.526 .000c
Residual 44.767 184 0.243
Total 103.414 186
a Dependent Variable: Performance
b Predictors: (Constant), HRM Practices
c Predictors: (Constant), HRM Practices, HRM Practices*Corruption

In order to determine the significance of coefficients Table 4.52 shows the coefficients
of the regression equations for both models. Model 1 indicates that the coefficient of
HRM practices was positive and significant. In model 2 the coefficient of HRM
practices became negative and significant after moderation at 95% level of confidence.
The Beta values for variables are HRM practices was 0.965 and -0.019 for HRM
practices*corruption. This is indicative that perceived corruption moderated the
relationship between HRM practices and performance of parastatals in Kenya.

Corruption place a negative and unproductive cost on the existing employees in the
organization and impede organizational justice, motivation and harmony resulting in a
higher rate of turnover on the part of productive employees. Nepotism and tribalism
leads to discriminatory practices in an organization which negatively impact
organizational efficiency (Bellow, 2013). Similarly, according to Arasli and Tumer
(2008), nepotism, tribalism and bribery negatively affects work environment. Teams are
unable to function optimally. It is likely to affect access to training and development
opportunities amongst the employees within the organization. It is likely to compromise
on reward system. All these may demoralize the employees and consequently lowering
parastatal performance.

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Table 4.52: Overall Regression Coefficients

Mod Unstandardized Standardized

el Coefficients Coefficients
B Std. Error Beta t Sig.
1 (Constant) 0.49 0.231 2.12 0.035
HRM Practices 0.892 0.058 0.747 15.274 0.000
2 (Constant) 0.426 0.232 1.838 0.068
HRM Practices 0.965 0.069 0.808 14.075 0.000
HRM
-0.019 0.009 -0.115 -1.996 0.047
Practices*Corruption
a Dependent Variable: Performance

The equations for moderations were captured in the following equations;

Performance =0.49+ 0.892HRM Practices +ε

Performance= 0.426 + 0.965HRM Practices - 0.019HRM Practices*Corruption + ε

The Beta values for variables are HRM practices was 0.965 and -0.019 for HRM
practices*corruption. This is indicative that perceived corruption moderated the
relationship between HRM practices and performance of parastatals in Kenya
negatively. This implies that after introducing the moderating variable (corruption) the
beta coefficients for HRM practices reduced from 0.965 to -0.019, thus a clear
indication that perceived corruption had a negative and significant moderating effect on
the relationship between HRM and performance of parastatals in Kenya.

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 CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

This chapter presents the summary of major findings of the study, relevant discussions,
conclusions and the necessary recommendations. The study sought to investigates the
effect of Human Resource Management (HRM) practices on the performance of
parastatals in Kenya. The summary is done in line with the objectives of the study based
on the output of the descriptive and inferential statistical analyses guided to test the
research hypothesis of the study. Each recommendation traces directly to each
conclusion in line with practice and policy.

5.2 Summary of the Findings

The summary of the study findings was presented based on specific objectives as
provided in the sections that follow.

5.2.1 Perceived Recruitment and Selection and Performance of Parastatals

The first objective of the study was to determine the effect of recruitment and selection
on the performance of commercial parastatals in Kenya. The study indicated that
employee recruitment had a positive influence on performance of parastatals. This was
attributed by the fact that the parastatals had selection systems in place and valid and
standardized tests were used when required in the selection process and the selection
systems in the parastatal selected those having the desired knowledge, skills and
attitudes. However the employees felt that as much as recruitment and selection was
carried out in the parastatals; corruption, nepotism and tribalism played a major role on
the people employed in different parastatals and thus have similar tribes in different
organizations. The KMO statistic was 0.847 and Bartlett’s Test of Sphericity which was
highly significant (Chi-square = 1130.71 at p < 0.05). Correlation and regression
analysis results indicated that there was a positive and significant relationship between

130
employee recruitment & selection and performance (β=0.727, p=0.000). The findings
imply that one positive unit change in recruitment and selection effectiveness led to a
change in performance at the rate of 72.7%. The null hypothesis was rejected and the
study concluded that there was a significant relationship between perceived recruitment
and selection and performance of commercial parastatals

5.2.2 Perceived Decentralized Teams and Performance of Parastatals

The second objective of the study was to investigate the effect of decentralized teams
on the performance of parastatals in Kenya. Results indicated that decentralised teams
were a key determinant of performance in the parastatals. The study findings indicated
that the organizations had formed teams to enhance performance however they were
challenges along the tribal lines. The KMO statistic was 0.807 which was significantly
high and the Bartlett’s Test of Sphericity was also highly significant (Chi-square =
794.861 with 45 degrees of freedom, at p < 0.05). Correlation and regression analysis
results indicated that there was a positive and significant relationship between
decentralised teams and performance (β=0.703, p=0.000).The findings imply that one
positive unit change in decentralized teams’ effectiveness led to a change in
performance at the rate of 0.703. The null hypothesis was rejected and the study
concluded that there was a significant relationship between perceived decentralized
teams and performance of commercial parastatals.

5.2.3 Perceived Training and Performance of Parastatals

The third objective of the study was to assess the effect of training and development on
the performance of parastatals in Kenya. Results indicated that the parastatals conducted
extensive training programs for its employees in all aspects of quality and the training
needs were identified through a formal performance appraisal mechanism. In addition,
the study findings showed that new knowledge and skills were imparted to employees
periodically and employees were trained to take up more responsibilities and other jobs
in the future this therefore means the parastatals were thinking of succession planning.

131
The KMO statistic was 0.819 which was significantly high and the Bartlett’s Test of
Sphericity was also highly significant (Chi-square = 794.861 with 45 degrees of
freedom, at p < 0.05). The findings indicated that the relationship between training and
performance of parastatals was positive and statistically significant. The null hypothesis
was rejected and the study concluded that there was a significant relationship between
perceived training and performance of commercial parastatals.

5.2.4 Perceived Reward and Performance of Parastatals

The fourth objective of the study was to examine the effect of employee reward on the
performance of parastatals in Kenya. The study findings indicated that employee reward
was a key determinant of performance in Kenyan parastatals. This was evidenced by the
overwhelming responses from the respondents who agreed that in the parastatals, salary
and other benefits were comparable to the market, rewards were decided on the basis of
competence orability of the employee and the rewards for all employees were directly
linked to their performance. Furthermore, the study findings indicated that the rewards
offered by the parastatals had an effect on the employee’s performance and it attracted
and retained high quality employees. The KMO statistic was 0.816 which was
significantly high and the Bartlett’s Test of Sphericity was also highly significant (Chi-
square = 797.214 with 55 degrees of freedom, at p < 0.05). Correlation and regression
results indicated that there was a positive and significant relationship between employee
reward and performance (β=0.725, p=0.000).The findings imply that one positive unit
change in employee reward effectiveness led to a change in performance at the rate of
0.725. The null hypothesis was rejected and the study concluded that there was a
significant relationship between perceived reward and performance of commercial
parastatals.

5.2.5 Moderating Effect of Perceived Corruption

The fifth and last objective of the study was to determine the moderating effect of
corruption on the relationship between strategic human resource management practices

132
and performance of parastatals in Kenya. The study findings indicated that corruption,
the vice practices of nepotism, tribalism and bribery were rampant in the parastatals and
the employees indicated that nepotism, tribalism and bribery played a major role in
employee recruitment and selection process. The KMO statistic was 0.864 which was
significantly high and the Bartlett’s Test of Sphericity was also highly significant (Chi-
square = 625.227 with 21 degrees of freedom, at p < 0.05). The study findings indicated
that corruption had a negative and statistically significant effect on the relationship
between human resource management practices and performance. The findings imply
that the vices affect the performance of the organizations downward since the
employees recruited through corruption, bribery and on tribal lines are not selected due
to their qualifications rather due to the influence of their relatives thus not on merit. The
null hypothesis was rejected and concluded that corruption had a negative and
statistically significant effect on the relationship between strategic management
practices and performance of commercial parastatals.

5.3 Conclusions

5.3.1 Perceived Recruitment and Selection and Performance of Parastatals

The focus of recruitment and selection is to match the capabilities of prospective

candidates against the demands and rewards inherent in a given job. For this reason, top
performing companies devote considerable resources and energy to creating high quality
selection systems. Recruitment and selection process are important practices for human
resource management, and are crucial in affecting organizational success. The study
concludes that there were recruitment and selection policies in the parastatals however
they were faced by a lot of challenges due to corruption, nepotism and tribalism. The
respondents felt that the procedures and policies were for records purposes and this
could have led to deteriorating performance due to incompetent employees being
absorbed in the parastatals. The quality of new recruits depends upon an organization’
recruitment practices, and that the relative effectiveness of the selection phase is
inherently dependent upon the calibre of candidates attracted. From the analysis,

133
recruitment and selection is of prime importance to organizations in order to get the best
of employees.

5.3.2 Perceived Decentralized Teams and Performance of Parastatals

The study findings indicated that the ultimate performance of the firms increases with
the decentralization. As the communication and cooperation of the top level
management with middle and lower level management increases, the organization
performance increase. The study concludes that the cooperation of top level
management with lower level management is much more important. Majority of the
organization have experiences and well educated Top level management that consider
the importance of decentralized decision making and they consider their employee as an
asset and they take the opinion of their employees while making decision, the
management is called cooperative management, however in some organization the
management consider the staff as illiterate, inexperience so they don’t even think to
involve their staff for decision making, if the element of cooperation exist in the
management then they will consider they employee opinion and they will give respect to
the opinion of their employees and vice versa. If the Management is cooperative,
employee will feel respect for themselves and they work hard for the betterment and
prosperity of the organization and if the management is not cooperative and they did not
give authority to make decision by employees or not consider the opinion of their
employee then definitely the organization performance will move downward.

5.3.3 Perceived Training and Performance of Parastatals

The study established that the organizations employed strategic training through
developed skills of staff in accordance with job requirements, trainings to enhance
quality and standards of product and services, the organizations offered training to
enhance employee participation to higher grade. The organizations offered induction
training, on job training, mentorship training and career development which has
influenced the employee performance in the organization. The study concludes that

134
training and development strategies have a very significant contribution to make to
organization success. Strategic human resource training and development plan plays a
very big role in the achievement of the firm's strategic plan by providing employees
with up to date expertise to meet present and future performance demands. Training and
development also assumes a vital role in shaping strategy and enabling the organization
to take full advantage of emergent business strategies. Parastatals in Kenya use training
and education programmes in order to create knowledge and understanding among staff
of how their attitudes and behaviour towards customers form an integral part of the
overall service offering. The development of specific skills and core competencies is
therefore the key to keep the parastatals viable.

5.3.4 Perceived Reward and Performance of Parastatals

From this study it is concluded that reward affects the performance of parastatals to a
moderate extent. Reward explains a 41.4% variance in performance. From this study, it
is concluded that there is a general direct/positive relationship between employee
rewards and performance. The results of correlation matrix have supported the
hypothesis that there exists a positive relationship between employee rewards and
performance. Based on the findings of this study, it was revealed that employee rewards
affects the motivation of employees which in turn influences the firm’s performance. It
is also possible to conclude that reward is a very critical and central activity in the
human resource management function in any organization. Human resource is the most
vital tool for organizational development.

5.3.5 Moderating Effect of Perceived Corruption

Overall the study concludes that strategic human resources management practices have a
significant positive effect on the performance of parastatals. When all this practices
(recruitment and selection, training, decentralized teams and employee reward) were
used, it was found that there was improved performance in the parastatals. Therefore,
human resource managers in organizations that want to boast their performance should

135
endeavor to adopt HRM practices that enhance the abilities of their workforce, and
create for them opportunities to use their skills within the workplace. However when the
moderating variable was added into the model, the study found a negative and
significant effect on performance. The study therefore concludes that corruption had a
negative and statistically effect on the relationship between strategic management
practices and performance of parastatals.

5.4 Recommendations

From the findings of this study, several policy implications can be drawn for effective
application of SHRM practices in parastatals in Kenya. The policy implications are
presented as per the study objectives.

5.4.1 Policy Recommendations

Recruitment and selection of employees to a greater extent determines the performance

of an institution and it is of great importance if institutions want to achieve their goals.
The study therefore recommends that all applicants should be treated fairly and issues of
favouritism should be avoided while selecting applicants. Although a good number of
the respondents had recruitment and selection policy, a policy requiring recruitment and
selection processes to engage the best person for the job on merit must be put in place.
The organization should also ensure that workers of its organization or any person
engaged in recruitment or selection is aware of the policies and trained in how to
interview and select in an unbiased fashion.

On decentralized teams, the study recommends that parastatals should embrace the team
spirit and ensure that there are decentralized teams that are functional and not based on
tribal lines. This is because in team work it is easier for functions coordination and team
spirit that enhances performance. Parastatals also need to create and sustain cultures that
enhance employee attachment to the service goals of the firm. Employees are bound to
be much more productive when they work in a positive, supportive environment.

136
Managers must strive to maintain an enjoyable, family oriented atmosphere in which all
employees focus on achieving team goals.

On training, the parastatals should also conduct strategic human resources management
training programs including total quality management training programs. The training
should be done to employees at all levels and should also expand to include training on
other areas in readiness for other jobs in the future (succession planning). The
government should also establish an active training and development policy for its
employees in public organizations. To achieve this, employees should be involved in all
organizations activities starting from the formulation through implementation and up to
evaluation. The study also recommends that the management in Kenya parastatals
should ensure that training needs analysis is conducted regularly in order to establish the
training needs of the employees.

On rewards, the parastatals need to re-evaluate their compensation programs within the
context of their corporate strategy and specific HR strategy to ensure that they are
consistent with the necessary performance measures required by the public sector. The
study recommends that the boards of parastatals set specific levels of remuneration of
executives and senior staff in consultations with the parent Ministry and the State
corporations Advisory Committee. The Salaries and Remuneration Commission can
also borrow from the study to deal with high inconsistencies in the remuneration of the
executives and senior staff of these entities, since there is no clear reason why in some
entities they are remunerated at significantly higher levels than those of others. HR
managers should also ensure that the salaries and benefits offered by organizations are
comparable to what is generally in the industry.

On corruption, nepotism and tribalism which were found to moderate negatively the
relationship between HRM practices and performance, HR managers should recognize
the contribution of the vices to organizational success. The study recommends that
change management should be encouraged to wipe out corruption in the recruitment and

137
selection processes so as to have the competent employees who will enhance
organizational performance. The top management should be in support of the changes so
as to make the strategic human resource management practices effective in the
organization if any success is to be achieved.

5.5 Areas for Further Research

This study was done in purely commercial parastatals in Kenya; similar studies can be
done in other categories of the parastatals such as the State Corporations with Strategic
Functions, State Agencies - Executive Agencies, State Agencies - Independent
Regulatory Agencies, State Agencies - Research Institutions, Public Universities,
Tertiary Education and Training Institutions in order to compare the findings from these
different sectors. Other studies can be done to compare the effect of human resources
practices on performance of private and public sector organizations in Kenya. Secondly,
although longitudinal research is both time consuming and expensive, future studies
would benefit from testing the current study’s model through a longitudinal research
design so as to determine the causal links more explicitly. Longitudinal research could
also help evaluate the stability of parastatals overtime, and determine whether it is a
static trait that does not change over time or a dynamic state which can be affected by
organizational changes.

138
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APPENDICES

Appendix I: Questionnaire

I am a PhD student at Jomo Kenyatta University of Agriculture and Technology. As part

of the requirement for the award of the degree I am required to undertake a research. To
fulfill this requirement I am doing a survey on the effect of human resource strategies on
the performance of parastatals in Kenya. The survey focuses on employees in the
parastatal sector that are purely commercial. Your input by filling this questionnaire is
not only critical to the study but also highly appreciated. All the information received
will be handled with confidentiality and will only be used for academic purposes.

Where options are given, indicate your selection by marking “√” in the space [ ]
provided. Otherwise, write out your full response after each query.

A. RESPONDENT’S BACKGROUND

1. Gender: i) Male [ ] ii) Female [ ]

2. Respondents Age Groups (in years):

i) Below 20 [ ] ii) 21-30 [ ] iii) 31-40 [ ]

iv) 41-50 [ ] v) 51-60 [ ] vi) Over 60 [ ]

3. Highest academic qualification:

i) K.C.S.E [ ] iii) Diploma [ ] iv) Degree [ ]

159
 v) Masters [ ] vi) PhD [ ]

Other [ ] (Specify)…………………………………………………………….

4. Number of years worked with the organization

Below 5 [ ] 5- 10 [ ] 11-15 [ ] 16-20 [ ] Over 20 [ ]

5. Monthly Salary

Less than 20,000 [ ] 20,001- 40,000 [ ] 40,001-60,000 [ ]

60,001-80,000 [ ] Over 80,000 [ ]

B. ORGANIZATIONAL INFORMATION

6. a. Name of the parastatal:……………………………………………………………….

b. Category of parastatal;

Agriculture, Livestock& Fisheries [ ]

Education, Science &Technology [ ]

East African Affairs, Commerce & Tourism [ ]

Industrialization &Enterprise Development []

Lands, Housing &Urban Development [ ]

National Treasury []

7. No. of Employees in the parastatal

Less than 50 [] 51 – 100 [ ] 101-150 [ ] 151 – 200 [ ]

201 – 250 [ ] 251- 300 [] Over 300 [ ]

C. HUMAN RESOURCE MANAGEMENT PRACTICES

i. Perceived Recruitment and selection

160
On a scale of 1 to 5 (5 means strongly agree and 1means strongly disagree) express the
extent to which you agree or disagree with the following statements as concerns the
parastatal.

5= Strongly Agree 4=Agree 3=Neutral 2= Disagree 1=Strongly Disagree

5 4 3 2 1
1 The selection systems followed in the parastatal are highly
scientific and rigorous.
2 In the parastatal, line managers and HR managers
participate in selection.
3 Valid and standardized tests are used when required in the
selection process.
4 Selection systems in the parastatal select those having the
desired knowledge, skills and attitudes.
5 To be selected in this parastatal you must know someone
6 The parastatal takes measures to attract good quality
employees
7 The parastatal always selects only the highest quality
employees
8 There is relationship between recruitment and selection of
employees and parastatal performance
9 You must give a bribe to be recruited in the parastatal
10 You must have to be related to somebody by family or tribe
to be employed in the parastatal
11 Nepotism and tribalism plays a major role on recruitment
and selection of employees

Does the parastatal have a staff recruitment and selection policy?

……………………………………………………………………………………………
………...

161
In your opinion, does the parastatal adhere to the recruitment policy?
………………………….

Briefly explain

……………………………………………………………………………………………
……………………………………………………………………………………………
…………

What are the main factors considered during recruitment and selection of staff?

……………………………………………………………………………………………
……………………………………………………………………………………………

Does the parastatal recruitment process ensure that the very qualified staffs are
attracted?...........

Explain……………………………………………………………………………………

To what extent do you thinks recruitment and selection outcome affects the performance
of the parastatal?

……………………………………………………………………………………………
……………………………………………………………………………………………

ii. Perceived Decentralized Teams

On a scale of 1 to 5 (5 means strongly agree and 1 means strongly disagree) express the
extent to which you agree or disagree with the following statements as concerns the
parastatal.

5= Strongly Agree 4=Agree 3=Neutral 2= Disagree 1=Strongly Disagree

5 4 3 2 1
1 The parastatal encourages decentralized decision making

162
2 The parastatal uses teams to decide about production issues
3 Teams are regularly used to perform various tasks
4 The parastatal involves the departments in making
decisions that affect employees
5 Team formation and maintenance is encouraged
6 During problem solving sessions, you always make an
effort to get all team members opinions and ideas before
making a decision
7 There is relationship between decentralized teams and
parastatal performance
8 Corruption plays a role in team formations
9 Teams are affected by family and tribal relations
10 Teams are mainly based on family and tribal relationships

In your opinion, are the decentralized teamsfunctional in your organization?

……………………

Explain:
…………………………………………………………………………………………….

To what extent do you think decentralized teams affect the performance of the
parastatal?
……………………………………………………………………………………………
……………………………………………………………………………………………
……………………

iii. Perceived Training

On a scale of 1 to 5 (5 means strongly agree and 1 means strongly disagree) express the
extent to which you agree or disagree with the following statements as concerns the
parastatal.

5= Strongly Agree 4=Agree 3=Neutral 2= Disagree 1=Strongly Disagree

5 4 3 2 1

163
1 The parastatal conducts extensive training programs for its
employees in all aspects of quality.
2 Employees in each job will normally go through training
programs every year.
3 Training needs are identified through a formal performance
appraisal mechanism.
4 New knowledge and skills are imparted to employees
periodically.
5 Training needs identified are realistic, useful and based on
the business strategy of the organization.
6 The parastatal has a training budget every year
7 Employees are trained to take up more responsibilities and
other jobs in the future
8 There is relationship between training and parastatal
performance
9 Corruption is involved in accessing training opportunities
10 Training opportunities are shared based on family and tribal
relations

In your opinion, are the training programs for new employees adequate?
……………………

Explain……………………………………………………………………………………

Do you think the training programs are adequate?

………………………………………………

Explain

……………………………………………………………………………………………
……………………………………………………………………………………………
……………………

To what extent do you think training affects the performance of the parastatal.

……………………………………………………………………………………………
……………………………………………………………………………………………
……………………

164
iv. Perceived Reward

On a scale of 1 to 5 (5 means strongly agree and 1 means strongly disagree) express the
extent to which you agree or disagree with the following statements as concerns the
parastatal.

5= Strongly Agree 4=Agree 3=Neutral 2= Disagree 1=Strongly Disagree

5 4 3 2 1
1 In the parastatal, salary and other benefits are comparable to
the market.
2 In the parastatal, rewards are decided on the basis of
competence orability of the employee.
3 The rewards for all employees is directly linked to
his/herperformance.
4 In the parastatal, profit sharing is used as a mechanism to
reward higherperformance.
5 The rewards offered by the parastatal have an effect on
employee performance
6 The rewards offered attract and retain high quality
employees
7 Rewards affect the market share of the parastatals by
attracting customers
8 Employee rewards affects the rate of growth of a parastatal
9 There is relationship between reward of employees and
parastatal performance
10 Corruption plays a significant role in employee rewarding
11 Rewards are based on family, tribal relations and bribery
rather than merit

What do you think should be the major factor for determining rewards of the staff?

……………………………………………………………………………………………

165
……………………………………………………………………………………………

In your opinion, does the parastatal offer competitive salaries and

wages?………………………

To what extent does employee reward affect performance of the parastatal?

……………………………………………………………………………………………
……………………………………………………………………………………………

166
 D. PERCEIVED CORRUPTION

On a scale of 1 to 5 (5 means strongly agree and 1 means strongly disagree) express the
extent to which you agree or disagree with the following statements as concerns the
parastatal.

5= Strongly Agree 4=Agree 3=Neutral 2= Disagree 1=Strongly Disagree

5 4 3 2 1
1 Corruption is rampant in the parastatal
2 The practice of nepotism, tribalism and bribery is rampant
in the parastatal.
3 Nepotism, tribalism and bribery play a role in employee
recruitment and selection.
4 Nepotism, tribalism and bribery play a role in operations of
decentralized teams.
5 Nepotism, tribalism and bribery play a role in training and
development.
6 Nepotism, tribalism and bribery play a role in employee
reward.
7 There is relationship between Nepotism, tribalism and
bribery on parastatal performance

Rank the corrupt practices listed below in order of prevalence in the parastatal from 3
(most prevalent) to 1 (least prevalent).

Nepotism [ ]

Tribalism [ ]

Bribery [ ]

167
 E. PERCEIVED PARASTATAL PERFORMANCE

This section aims at exploring and rating the performance of parastatals. Kindly respond
with the response that matches you opinion. Please tick as appropriate in the boxes using
a tick (√) or cross mark (x). Where:
1=strongly disagree, 2= disagree, 3=Neutral, 4= agree and 5= strongly agree.

5 4 3 2 1
1 Compared to the previous year, the level of
employee productivity in our organization is
higher.
2 Our firm profitability has increased over the
last 3 years
3 Our firm financial leverage has increased
over the last 3 years
4 Our firm has experienced an increase in total
revenue collected over the last 3 years
5 Our firm has experienced an increase in assets
over the last 3 years
6 Our firm has a higher market value
7 Our customers have been highly satisfied for
the last3 years
8 There has been a low level of employee
turnover for the last 3 years
9 Our firm has experienced an increase in sales
over the last 3 years

Indicate the extent to which you are satisfied with the services and products offered by
the parastatal;where;VerySatisfied (VS)-5, Satisfied (S)-4, Neutral (N)-3, Dissatisfied
(D)-2, Very

Dissatisfied (VD)-1

5 4 3 2 1

2013 ( ) ( ) ( ) ( ) ( )

2014 ( ) ( ) ( ) ( ) ( )

2015 ( ) ( ) ( ) ( ) ( )

168
Any other comments related to HRM strategies concerning employees. (Specify)

……………………………………………………………………………………………

……………………………………………………………………………………………
…………

Thank you for your input.

169
Appendix II: Interview Guide

My name is Julius Ochieng Olayo. I am conducting a research for the award of a Ph.D
in Human Resource Management. I am humbly requesting you provide information on
your experiences in application of human resource management strategies in your
organization. The interview should take less than 20 minutes and will be taped in order
not to miss any of your comments. All responses will be kept confidential. Are you
willing to participate in this interview?

Interviewee Name: ……………………………………………………. Date:

…………………

Department………………………………………………………………………………
……….

Position held:
………………………………………………………………………….................

Length of working in the

parastatal………………………………………………………………
Serial Interview Item Response from respondent
No.
Recruitment and selection
1. How is recruitment done in your
parastatal?

2. How is selection of employees done in

your parastatal?

3. To what extent does recruitment and

selection process affect the performance
of this parastatal?

170
Decentralized teams
4. How is teamwork enhanced in this
parastatal?

5. To what extent are employees involved

in the management of the parastatal
affairs?

6. To what extent does teamwork and

delegation of authority affect the
performance of this parastatal?

Training
7. How often is training done in this
parastatal?

8. How are training needs identified?

9. To what extent does the training given to

the employees affect the overall
performance of this parastatal?

Employee reward
10. What types of incentives are offered in
this parastatal?

11. How do incentives relate to motivation

of employees and customers?

12. To what extent do incentives affect

171
 performance of this parastatal?

Corruption,Nepotism, tribalism and bribery

13. How prevalent is corruption in this
parastatal and which the most common
form?

14. How prevalent isnepotism ,tribalism and

bribery in the parastatal?

15. Comment on the influence of corruption

issues ofnepotism, tribalism and bribery
in employee recruitment and selection in
the parastatal?

16. Comment on the influence of , nepotism,

tribalism and briberyon delegated teams
in the parastatal?

17. Comment on the influence ofnepotism,

tribalismand bribery on training and
development in the parastatal?

18. Comment on the influence of nepotism,

tribalism and bribery on employee
reward in the parastatal?
19. Comment on availability of policies that
limit nepotism, tribalism and bribery?

Parastatal performance

172
20. Indicate howstrategic practices
employed by the parastatal affect
customer satisfaction?

21. Indicate how strategic practices

employed by the parastatal
affectemployee satisfaction?

22. To what extent do strategic human

resource practices employed by this
parastatal affect its profitability?

Are you satisfied with the performance of this parastatal?.....................................

Explain……………………………………………………………………………………
……………………………………………………………………………………………
…………………

Thank you for your time.

173
Appendix III: Secondary Data Collection Sheet

Year ROE ROA PBT Total Assets Total

Revenue

2010

2011

2012

2013

2014

174
Appendix IV: Document Analysis Guide

Serial Indicator Item Indicate the response in the space

No. provided
Year
2013 2014 2015
1. Recruitment Recruitment and
and selection selection procedures
procedure. available
2. Recruitment Total amounts used
and selection for recruitment and
costs. selection process.
3. Recruitment Stages of
cycle. recruitment process
followed.
4. Corruption, Level of corruption,
nepotism, nepotism , tribalism
tribalism and and bribery in
bribery recruitment and
selection
5. Cross- Cross-functional
functional teams available.
teams
6. Corruption, Role of corruption,
nepotism, nepotism, tribalism
tribalism and and bribery on
bribery teams
7. Training Training programs
programs. conducted.
9. Training Total costs for
costs. training programs.
10. Corruption, Level of corruption,
nepotism, nepotism, tribalism
tribalism and and bribery in
bribery training
11. Incentives Types of incentives
system. available.
12. Employee Total costs on
rewards costs. rewards.
13. Non-monetary Types of non-
incentives monetary
incentives.

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14. Corruption, Level of corruption,
nepotism , nepotism , tribalism
tribalism and and bribery in
bribery rewards
15. Corruption Type of corruption
16, Revenue Increase in revenue
16. The level of Amount of return on
return on assets.
assets.
17. The value of Amount of return on
return on sales.
sales.
18. Employee Level of satisfaction
satisfaction. with the job.
19. Customer Level of satisfaction
satisfaction. with the services.

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Appendix V: List of Purely Commercial Parastatals in Kenya

1. Agro-Chemical and Food Company

2. Kenya Meat Commission Kenya Meat
3. Muhoroni Sugar Company Ltd
4. Nyayo Tea Zones Development Corporation
5. South Nyanza Sugar Company Limited
6. Chemilil Sugar Company Ltd
7. Nzoia Sugar Company Ltd
8. Simlaw Seeds Kenya
9. Kenya National Trading Corporation (KNTC)
10. Kenya Safari Lodges and Hotels Ltd. (Mombasa Beach Hotel, Ngulia Lodge,
Voi Lodge)
11. Golf Hotel Kakamega
12. Kabarnet Hotel Limited
13. Mt Elgon Lodge
14. Sunset Hotel Kisumu
15. Jomo Kenyatta Foundation
16. Jomo Kenyatta University Enterprises Ltd.
17. Kenya Literature Bureau (KLB) n Mandate Sector
18. Rivatex (East Africa) Ltd.
19. School Equipment Production Unit
20. University of Nairobi Enterprises Ltd.
21. University of Nairobi Press (UONP)
22. Development Bank of Kenya Ltd.
23. Kenya Wine Agencies Ltd (KWAL)
24. KWAL Holdings
25. New Kenya Co-operative Creameries
26. Yatta Vineyards Ltd
27. National Housing Corporation
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28. Research Development Unit Company Ltd
29. Consolidated Bank of Kenya
30. Kenya National Assurance Co. (2001) Ltd
31. Kenya Reinsurance Corporation Ltd
32. Kenya National Shipping Line

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