Description
This paper explain strategy implementation process in commercial banks in kenya.
STRATEGY IMPLEMENTATION PROCESS IN COMMERCIAL BANKS IN KENYA
Charles Ngonjo
Master of Business Administration, University of Nairobi, Kenya
Moses Sindani
Master of Business Administration, University of Nairobi, Kenya
Citation: Ngonjo, C. & Sindani, M. (2013). Strategy implementation process in commercial
banks in Kenya. International Journal of Social Sciences and Project Planning Management, 1
(1), 1-18.
ABSTRACT
Implementing strategies successfully is vital for any organization, either public or private.
Without implementation, even the most superior strategy is useless. The banking environment in
Kenya has undergone many regulatory and financial reforms. These reforms have brought about
many structural changes in the sector and have also encouraged foreign banks to enter and
expand their operations in the country. The objective of the study was to establish strategy
implementation processes by commercial banks in Kenya and determine challenges of strategy
implementation in commercial banks in Kenya. This study adopted a descriptive research design.
The target population of this study was the 44 commercial banks operating in Kenya. This study
used primary data collected using a questionnaire. The questionnaire contained both closed and
opened ended questions. The questionnaires were administered to communications managers.
The completed questionnaires were first edited for completeness and consistency. Quantitative
data collected was analyzed by the use of descriptive statistics using Statistical Package for
Social Sciences (SPSS) and presented through percentages, means, standard deviations and
frequencies. The study concludes that in most banks there is moderate involvement of staff in the
formulation of strategies. The study concludes that in majority of banks, the comparison of actual
results with the set objectives is always great. The study further concludes that the process of
strategy implementation in banks is not affected by rigid organization structure, poor
organizational culture, limited top management involvement, poor communication,
interdepartmental competition and poor leadership skills as these challenges are not evident in
the banks. The study recommends that the top management at the banks should put in place
measures to ensure that resources are availed for successful implementation of the strategies. The
study recommends that training should be done in order to improve the performance of the staff
as well as the top management.
Key Words: strategy implementation process, commercial banks, Kenya
INTRODUCTION
Strategy implementation is the process of allocating resources to support the chosen strategies.
This process includes the various management activities that are necessary to put strategy in
motion, institute strategic controls that monitor progress, and ultimately achieve organizational
goals. According to Raps and Kauffman, (2005), the implementation process covers the entire
managerial activities including such matters as motivation, compensation, management
appraisal, and control processes which entail cascading strategy to all functional areas in such a
way as to achieve both vertical and horizontal logic and enhance implementation of policies.
Organizations seem to have difficulties in implementing their strategies. Several researchers have
revealed a number of problems in strategy implementation: for example weak management roles
in implementation, a lack of communication, lacking a commitment to the strategy, unawareness
or misunderstanding of the strategy, unaligned organizational systems and resources, poor
coordination and sharing of responsibilities, inadequate capabilities, competing activities, and
uncontrollable environmental factors (Galpin, 1998; Beer and Eisenstat, 2000).
The commercial banking sector in Kenya has faced various challenges following changes in their
operating environment. The banking environment in Kenya has undergone many regulatory and
financial reforms. These reforms have brought about many structural changes in the sector and
have also encouraged foreign banks to enter and expand their operations in the country (Kamau,
2009). In an attempt to strengthen the Kenyan banking industry which, with 43 banks, is
considered to be over-saturated, the minister for finance amended the Second Schedule of the
Banking Act to increase the minimum core capital requirement from KSh250 million to KSh1
billion by December, 2012. This brought about a lot of strategizing among commercial banks on
ways of complying with the law and at the same time maintaining their operations stable.
Strategy Implementation
Strategy implementation evolves either from a process of winning group commitment through a
coalitional form of decision-making, or as a result of complete coalitional involvement of
implementation through a strong corporate culture. It involves organization of the firm's
resources and motivation of the staff to achieve objectives (Rapa and Kauffman, 2005).
Implementing strategies successfully is about matching the planned and realizing strategies,
which together aim at reaching the organization’s vision. With firms evolving in terms of
structure it follows that the style of strategy implementation will differ depending on the style of
organization and management that exists in the firm. Different types of leadership styles can play
a critical role in overcoming barriers to implementation. The environmental conditions facing
many firms have changed rapidly. Today's global competitive environment is complex, dynamic,
and largely unpredictable. To deal with this unprecedented level of change, a lot of thinking has
gone into strategy formulation. Strategic management is about managing the future, and effective
strategy formulation is crucial, as it directs the attention and actions of an organization. The
assessment of strategy formulation processes becomes crucial for practitioners and researchers
alike in order to conduct and evaluate different formulation processes (Olson et al. 2005).
According to Balogun and Johnson (2004) responsibility, resources and power in firms has been
the subject of decentralization and delayering. Given an intensifying competitive environment, it
is regularly asserted that the critical determinant in the success and, doubtlessly, the survival of
the firm is the successful implementation of marketing strategies (Chebat, 2009). The role and
tasks of those employees charged with strategy implementation duties, the mid-level managers,
in these new restructured organizations is under scrutiny. Numerous researchers in strategic
management bestowed great significance to the strategic formulation process and considered
strategy implementation as a mere by-product or invariable consequence of planning (Wind and
Robertson, 2003). Fortunately, insights in this area have been made recently which tamper our
knowledge of developing strategy with the reality of executing that which is crafted (Olson et al.,
2005). However, as strategy implementation is both a multifaceted and complex organizational
process, it is only by taking a broad view that a wide span of potentially valuable insights is
generated.
Strategy Implementation Process
Strategy implementation is the process that turns strategies and plans into actions in order to
accomplish an organization’s strategic objectives and goals (Ansoff, 1999). The first step in
strategy implementation is the act of knowing what the strategic plan is. This involves reviewing
it carefully, and highlights any elements of the plan that might be especially challenging
(Johnson and Scholes, 1998). This enables recognition of any parts of the plan that may be
unrealistic or excessive in cost, either of time or money. This stage also requires that one keeps
back-up ideas in mind in case the original plan fails.
The second step involves selecting a team of members to help with implementing the strategic
plan. This involves establishing a team leader who can encourage the team and field questions or
address problems as they arise (Pearce and Robinson, 2007). The next step involves schedule
meetings to discuss progress reports. This involves presentation of the list of goals or objectives,
and letting the strategic planning team know what has been accomplished. Whether the
implementation is on schedule, ahead of schedule, or behind schedule, assessing the current
schedule regularly to discuss any changes that need to be made is important for successful
strategy implementation (Beer and Eisenstat, 2000). In all these stages, the organization’s
executives need to be informed on what is happening, and provide progress reports on the
implementation of the plan. Letting an organization’s management know about the progress of
implementation makes them a part of the process, and, should problems arise, the management
will be better able to address concerns or potential changes (Pearce and Robinson, 2007).
Challenges of Strategy Implementation
Wessel (1993) states that most of the barriers to strategy implementation that have been
encountered fit into one of the following interrelated categories: too many and conflicting
priorities, the top team does not function well; a top down management style; inter-functional
conflicts; poor vertical communication, and inadequate management development. These
categories can be translated into the following problems: Competing activities distracted
attention from implementing this decision, Changes in responsibilities of key employees were
not clearly defined, Key formulators of the strategic decision did not play an active role in
implementation, and Problems requiring top management involvement were not communicated
early enough (Pearce and Robinson, 2007).
Banking Sector in Kenya
Kenya’s banking history goes back to 1896 when the national Bank of India opened a branch in
the East African country. The Companies Act, the Banking Act, the Central Bank of Kenya Act
and the various prudential guidelines issued by the Central Bank of Kenya (CBK), governs the
Banking industry in Kenya. The banking sector was liberalised in 1995 and exchange controls
lifted. The CBK, which falls under the Minister for Finance’s docket, is responsible for
formulating and implementing monetary policy and fostering the liquidity, solvency and proper
functioning of the financial system. The CBK publishes information on Kenya’s commercial
banks and non-banking financial institutions, interest rates and other publications and guidelines.
The banks have come together under the Kenya Bankers Association (KBA), which serves as a
lobby for the banks’ interests and addresses issues affecting its members, (Kenya Bankers
Association annual Report, 2008)
Commercial Banks in Kenya
As at 31st Central Bank of Kenya December (2012), the banking sector comprised of the Central
Bank of Kenya, as the regulatory authority, 44 banking institutions (43 commercial banks and 1
mortgage finance company - MFC), 4 representative offices of foreign banks, 6 Deposit-Taking
Microfinance Institutions (DTMs) and 118 Forex Bureaus (CBK, 2012). Out of the 44 banking
institutions, 31 locally owned banks comprise 3 with public shareholding and 28 privately owned
while 13 are foreign owned. The 6 DTMs, 2 CRBs and 118 forex bureaus are privately owned.
The foreign owned financial institutions comprised of 9 locally incorporated foreign banks and 4
branches of foreign incorporated banks.
According to CBK (2012) out of the 43 commercial banks 30 of them are domestically owned
and 13 are foreign owned. In terms of asset holding, foreign banks accounted for about 35% of
the banking assets as of 2011. In Kenya the commercial banks dominate the financial sector. In a
country where the financial sector is dominated by commercial banks, any failure in the sector
has an immense implication on the economic growth of the country. This is due to the fact that
any bankruptcy that could happen in the sector has a contagion effect that can lead to bank runs,
crises and bring overall financial crisis and economic tribulations.
RESEARCH PROBLEM
Implementing strategies successfully is vital for any organization, either public or private.
Without implementation, even the most superior strategy is useless (Pearce and Robinson, 2007).
The notion of strategy implementation might at first seem quite straightforward: the strategy is
formulated and then it is implemented. Implementing would thus be perceived as being about
allocating resources and changing organizational structure (Beer and Eisenstat, 2000). However,
transforming strategies into action is a far more complex and difficult task. Furthermore, there
are only a limited number of conceptual models of strategy implementation making strategy
implementation a challenging task for any organization.
The Central Bank of Kenya issued new prudential guidelines earlier 2012 which come into effect
1 January 2013. Some of these changes had an immediate and significant impact on banks,
especially the ones covering capital adequacy requirements, corporate governance and consumer
protection. All these regulations required that banks go back to the drawing board to strategize
on how well to meet these requirements. In addition, the level of competition has increased as
more Microfinance Institutions, Deposit taking microfinance institutions and SACCOs struggle
to attract customers. This has reduced the profitability of some product lines in commercial
banks. In addition, mobile money transfer has taken up much of the businesses initially
undertaken by commercial banks as they launch their money transfer, storage and loan facilities.
These changes have meant that for commercial banks to remain profitable, they have to
continuously develop and implement strategies to ensure their survival. Some banks merged to
meet the capitals adequacy requirement.
Kiptugen (2003) did a study to determine the strategic responses of Kenya Commercial Bank to
a changing competitive environment. Since he focused mainly on strategies that can be adopted
in a competitive environment; the study failed to cover the processes involved in strategy
implementation and challenges in the implementation phase. Kamanda (2006) also did a study on
Kenya Commercial Bank (KCB) with the objective of determining the factors that influence its
regional growth strategy. His study, however, does not cover the issues of strategy
implementation. Situma (2006) also covered KCB but focused on its turnaround strategy.
Muguni (2007) studied the role of executive development in strategy implementation. The study
also failed to capture the process of strategy implementation process and challenges. Given the
importance of these processes, this study sought to fill the gap by seeking answers to two
research questions:
1. What strategy implementation processes are used by commercial banks in Kenya?
2. What are the challenges of strategy implementation among commercial banks in Kenya?
RESEARCH OBJECTIVES
3. Establish strategy implementation processes by commercial banks in Kenya
4. Determine challenges of strategy implementation in commercial banks in Kenya.
LITERATURE REVIEW
Theoretical Perspective
The resource-based view stipulates that in strategic management the fundamental sources and
drivers to firms’ competitive advantage and superior performance are mainly associated with the
attributes of their resources and capabilities which are valuable and costly-to-copy (Mills, Platts
and Bourne, 2003; Peteraf and Bergen, 2003). Building on the assumptions that strategic
resources are heterogeneously distributed across firms and that these differences are stable
overtime, Barney (1991) examines the link between firm resources and sustained competitive
advantage. Four empirical indicators of the potential of firm resources to generate sustained
competitive advantage can be value, rareness, inimitability, and non-substitutability. In Barney
(1991), firm resources include all assets, capabilities, organizational processes, firm attributes,
information, knowledge, etc. controlled by a firm that enable the firm to conceive and implement
strategies that improve its efficiency and effectiveness.
Resource advantage theory draws on marketing's heterogeneous demand theory (Alderson,
1965). This theory holds that, because intra-industry demand is significantly heterogeneous,
different market offerings are required for different market segments in the same industry.
Resource advantage theory draws on differential advantage theory (Porter 1985). In this theory,
marketplace positions of competitive advantage/disadvantage determine superior/inferior
financial performance. Thus, firms can have an efficiency advantage, i.e., more efficiently
producing value or they can have an effectiveness advantage, i.e., efficiently producing more
value or they can have an efficiency/effectiveness advantage, i.e., more efficiently producing
more value. In the same manner, for County governments to successfully implement devolution
changes, they need to utilize the endowment in their territories well.
Hayek (1948) points out that ‘practically every individual has some advantage over all others
because he possesses unique information of which beneficial use can be made only if the
decisions depending on it are left to him or are made with his active co-operation.’ Likewise, for
R-A theory, resources are both significantly heterogeneous across firms and imperfectly mobile.
Day and Wensley (1988) distinguish between ‘skills’ and ‘resources’ on the basis that the former
are ‘the distinctive capabilities of personnel’ and the latter are the ‘more tangible requirements
for advantage. In contrast, R-A theory maintains that intangibles can be resources and views the
skills of individuals (and, as discussed in the next section, the competences of organizations) as
kinds of resources.
Concept of Strategy Implementation
Mintzberg (1996), implementation means carrying out the predetermined plans. Some strategies
are planned and some others just emerge from actions and decisions of organizational members.
Strategy implementation is concerned with the translation of strategy into organizational action
through appropriate structure and design, resource planning and the management of strategic
change (Johnson and Scholes, 2002). When considering implementation, questions relating to
who should be responsible for carrying out the predetermined strategic plans, what are the
structures in place and what changes are necessary must be addressed. Strategic implementation
is thus putting strategy into action. The way in which the strategy is implemented can have a
significant impact on whether it will be successful or not. In most cases, different people from
those who formulated it do implementation of the strategy. For this reason, care must be taken to
communicate the strategy and the reasoning behind it. Otherwise, the implementation might not
succeed if the strategy is misunderstood or if the affected parties resist its implementation
because they do not understand why the particular strategy was selected (Thompson, 1993).
Strategy implementation has attracted much less attention in strategic and organizational
research than strategy formulation or strategic planning. Alexander (1991) suggests several
reasons for this: strategy implementation is less glamorous than strategy formulation, people
overlook it because of a belief that anyone can do it, people are not exactly sure what it includes
and where it begins and ends. Furthermore, there are only a limited number of conceptual models
of strategy implementation. In the world of management, increasing numbers of senior people
are recognizing that one of the key routes to improved business performance is better
implementation (Renaissance Solutions, 1996). However, at the same time, it is also understood
that implementation is one of the more difficult business challenges facing today’s managers
(Piercy, 1992).
Implementing strategies successfully is about matching the planned and the realizing strategies,
which together aim at reaching the organizational vision. The components of strategy
implementation communication, interpretation, adoption and action are not necessarily
successive and they cannot be detached from one another. Okumu and Roper (1998) observe that
despite the importance of the strategic execution process, far more research has been carried out
into strategy formulation rather than into strategy implementation, while Alexander concludes
that literature is dominated by a focus on long range planning and strategy content rather than the
actual implementation of strategies, on which “little is written or researched (Alexander,
1985).More practical problems associated with the process of strategy implementation,
meanwhile, include communication difficulties and “low” middle management skill levels
(Otley, 2001).
Strategy Implementation Process
Strategic decisions determine the organizational relations to its external environment, encompass
the entire organization, depend on input from all of functional areas in the organization, have a
direct influence on the administrative and operational activities, and are vitally important to long-
term health of an organization (Grant, 2000). Strategies must be well formulated and
implemented in order to attain organizational objectives. Thompson (1993) determined that the
strategy implementation process included the many components of management and had to be
successfully acted upon to achieve the desired results. Here, the critical point is that effective and
successful strategy implementation depends on the achievement of good “fits” between the
strategies and their means of implementation.
Chakravarthy and White (2001) have taken into consideration that no matter how effectively a
company has planned its strategies, it could not succeed if the strategies were not implemented
properly. Hendry and Kiel (2004) also clarified that the more ineffective the top management
decisions, the more ineffective are the choices made at lower levels of management. Similarly, if
top management's strategic choices tend to be successful, it reflects favorably on choices made in
other parts of the organization. Simons (1994) refer to three categories of factors that affected
strategic decision-making process: environmental factors; organizational factors; and decision-
specific factors. Here, environmental factors mean external agents such as national culture,
national economic conditions, and industry conditions. Organizational factors refer to
organizational structure, organizational culture, structure of decision making bodies, impact of
upward influence, and employee involvement. Decision-specific factors can be explained as
time, risk, complexity, and politics. According to Porter (1980) strategists must assess the forces
affecting competition in their industry and identify their company's strengths and weaknesses,
then strategists can devise a plan of action that may include first, positioning the company so that
its capabilities provide the best defense against the competitive force; and/or second, influencing
the balance of the forces through strategic moves, thereby improving the company's position;
and/or third, anticipating shifts in the factors underlying the forces and responding to them, with
the hope of exploiting change by choosing a strategy appropriate for the new competitive balance
before opponents recognize it.
Petersen and Welch (2000) noted two dimensions of strategy implementation: structural
arrangements, and the selection and development of key roles. Kaplan and Norton (2004). The
quality of people as skills, attitudes, capabilities, experiences and other characteristics required
by a specific task or position. Structure refers to the way in which tasks and people are
specialized and divided, and authority is distributed; how activities and reporting relationships
are grouped; the mechanisms by which activities in the organization are coordinated Systems
refer to the formal and informal procedures used to manage the organization, including
management control systems, performance measurement and reward systems, planning,
budgeting and resource allocation systems, and management information systems. Staff refers to
the people, their backgrounds and competencies; how the organization recruits, selects, trains,
socializes, manages the careers, and promotes employees. Skills refer to the distinctive
competencies of the organization; what it does best along dimensions such as people,
management practices, processes, systems, technology, and customer relationships.
Challenges of Strategy Implementation
Strategy implementation is never an easy thing in many organizations. The process of
coordinating different stakeholders and harmonizing their actions towards the common goal
faces several challenges. Some of the challenges reviewed here include: leadership styles,
availability of resources, corporate culture and organizational culture
Leadership Style
Leadership is the process of persuasion, where an individual induces a group to pursue certain
objectives. Effective leadership involves restructuring organizational architecture in a manner
that motivates employees with the relevant knowledge to initiate value-enhancing proposals
(Dubrin, 2001). Drucker (1994) captures an environmental scanning analysis that depicts
leadership as that, which should manage the fundamentals like people, inflation among others.
Strategic leadership should ensure that values and culture within an organization are appropriate
for satisfying key success factors. This should lead to environmental-value-resources (E-V-R)
congruence. However, leadership is not always fully involved in the strategy implementation
process because of the many activities involved which have been delegated. Limited leadership
involvement could inhibit the success of strategic management in an organization.
Successful strategic plan implementation requires a large commitment from executives and
senior managers. Therefore, planning requirement which may be done even at departmental
levels requires executive support. Executives must lead, support, follow-up and live the results of
strategic planning implementation process. According to Healthfield (2009), without
commitment of senior executives, participants feel fooled and mislead. This complements what
Rap (2004) claims that the commitment to the strategic direction is a prerequisite for strategy
implementation, so top managers have to show their dedication to the effort. To implement
strategy successfully, senior executives must not assume that lower level managers have the
same perceptions of the strategic plan and its implementation, its underlying rationale, and its
urgency. Instead, they must assume they don’t, so executives must persuade employees of the
validity of their ideas. This not withstanding what Chris Ahoy (1998) argues; that upfront
commitment by leaders include an adherence to the full and thorough process of strategic
planning which must culminate in implementing programs and services and commit allocations
to meet the objectives of the strategic plan at a level that is doable for the organization and the
level of activity.
Inadequacy of Resources
All organizations have at least four types of resources namely: financial, physical, human
resources and technological resources (Thompson, 1990). These resources are available to an
organization as simple tangible resources (money, human resources and infrastructure) or
intangible resources such as public power e.g. in law enforcement and tax collection or
knowledge base. Resource based view to strategy management view knowledge, skills and
experience of human resource as a key contributor to firm’s bundle of resource and capabilities
(Musyoka, 2008). Johnson at el. (2005) argues that putting strategy into action is concerned with
ensuring that strategies are working in practice. Without adequate resources, strategy
implementation process would not procees as planned. This would thus result in stalled projects
or results being different from those anticipated.
As companies change and as skills expertise become recognized as a major asset of the firm, the
heightened efforts in cultivating and enhancing them becomes significant part of development
strategy (Saunders, 1994). There needs to be appropriate and adequate human capital with
goodwill to the implementation of a strategy. During the process of strategy implementation,
how relationships and beyond the organization are fostered and maintained will influence
performance further while organizations and groups may be assumed as taking strategic actions,
it is individuals who ultimately, in practical terms take action and are responsible for driving an
organization or a group towards objective. Perhaps the most important resource of an
organization is its people (Johnson and Scholes, 2003).
Corporate Structure
At the firm level, extant research has observed that the effective relationship between strategy
and structure is a necessary precondition to the successful implementation of new business
strategies (Drazin and Howard, 2004; Olson et al., 2005; Miller et al., 2004). In addition, a match
between appropriate administrative mechanisms and strategy has been found to reduce
uncertainty within the firm and increase effectiveness in strategy implementation. The relevant
literature (Noble, 2009; Noble and Mokwa, 2009) has advocated factors that influence the
effective implementation of strategies, for example; organizational structure (Drazin and
Howard, 2004); control mechanisms (Daft and Mackintosh, 2004); strategic consensus (Floyd
and Wooldridge, 2002); leadership (Gupta and Govindarajan, 2004; Nutt, 2003); and
communication (Workman, 2003). However, prior research has neglected to ascertain whether
the “style” of strategy implementation undertaken has any impact on the effectiveness of the
implementation effort. An inappropriate organization structure will lead to either poor decision
making which may negatively affect the process of strategy implementation. A vertically tall
organization structure may involve more time in getting the decision made which may affect the
pace of strategy implementation.
The structure of the organization should be consistent with the strategy to be implemented.
Moreover the nature of the organizations structure to be used in implementing strategy is
influenced by the environment stability and the interdependence of the different units (Daft,
2000). Failure to address issues of the broad structural design of roles, responsibilities and lines
of reporting can at a minimum, constrain strategies development and performance (Johnson &
Scholes, 2002; Koske, 2003).
Organization Culture
Organizational culture refers to the leadership style of managers – how they spend their time,
what they focus attention on, what questions they ask of employees, how they make decisions;
also the organizational culture (the dominant values and beliefs, the norms, the conscious and
unconscious symbolic acts taken by leaders (job titles, dress codes, executive dining rooms,
corporate jets, informal meetings with employees). Organizational culture is among the major
issues, because the cultural dimension is central to all aspects of organizational behavior
(Alvesson, 2002). If strategy implementation is going to realize its full potential of dramatically
improving the way companies do business, changing of the organizational culture must be
considered an integral part of the process. Systems cannot be developed irrespective of the
people that will be managing and operating those systems. One of the biggest reasons why some
process strategy implementation projects do not achieve the level of success the organization
expects is because the organization or functional manager did not deal with the issue of
organization culture change. Greengard (1993) says that an organization should strive to involve
the staff at all stages of the implementation process.
Eisenstat (1993) indicates that most companies attempting to develop new organization
capacities stumble over these common organizational hurdles: competence, coordination, and
commitment. These hurdles can be translated into the following implementation problems:
Coordination of implementation activities was not effective enough, Capabilities of employees
were insufficient, Training and instruction given to lower level employees were inadequate, and
Leadership and direction provided by departmental manager were inadequate.
RESEARCH METHODOLOGY
Research Design
This study adopted a descriptive research design. Descriptive research design is appropriate
because it enables the researcher to build a profile of a phenomenon. It is concerned with the
what, where, how and when of the phenomenon. It can be used when collecting information
about peoples’ attitudes, opinions, habits or any of the variety of education or social issues
(Orodho and Kombo, 2002). Descriptive design was suitable for this study because it enabled the
researcher to generalize the findings to a larger population as well as giving a clear picture of the
phenomenon under study. This study therefore was able to generalize the findings to all the
commercial banks in Kenya.
Population of the Study
According to Ngechu (2004), a study population is a well defined or specified set of people,
group of things, households, firms, services, elements or events which are being investigated.
The target population of this study was the 44 commercial banks operating in Kenya. These were
chosen upon because they were the ones which were affected by the various regulatory changes
instituted by the Central Bank of Kenya in its quest to ensure financial sector stability.
Data Collection
This study used primary data collected using a questionnaire. The questionnaires were used
because they were a cost effective way of collecting information from a large literate sample in a
short span of time and at a reduced cost than other methods (Mugenda and Mugenda, 2003). The
questionnaire contained both closed and opened ended questions. The closed ended questions
used of a five point likert scale where respondents filled according to their level of agreement
with the statements. The unstructured questions were used to encourage the respondents to give
an in-depth response where close ended questions were limiting. The questionnaire designed in
this study comprised of two sections. The first part included the demographic characteristics
questions while the second part covered the process of strategy implementation and the third part
challenges of strategy implementation.
The questionnaires were administered to communications managers. This is because this office is
always informed of the events going on in the Company and are the ones authorized to
communicate on behalf of their banks. The questionnaires were be administered through a drop
and pick later method because the target respondents may be busy to give feedback on the spot.
Data Analysis
The completed questionnaires were first edited for completeness and consistency. Quantitative
data collected was analyzed by the use of descriptive statistics using Statistical Package for
Social Sciences (SPSS) and presented through percentages, means, standard deviations and
frequencies. The data were split down into different aspects of strategic change implementation
aspects and organizational competitiveness so as to offer a systematic and qualitative of the study
objectives.
RESEARCH RESULTS
Discussion
The study found out that majority of the banks appointed a team of staff to spear head the
process of strategy implementation. The study established that to a great extent, strategies of the
banks were communicated to all staff on time. The study further established that the extent to
which staff was involved in one way or the other in strategy formulation was moderate followed
by a great extent. Majority of respondents were in agreement to a great extent that there was
presence of scenario plan at the bank. These findings are in line with those of Johnson at el.
(2005) who argued that putting strategy into action is concerned with ensuring that strategies are
working in practice. Without adequate resources, strategy implementation process would not
proceed as planned.
From the study findings, the extent to which the actual results were always compared with the set
objectives was very great and that to a great extent, top management were always informed of
strategy implementation at the bank. The study established that the strategy management
processes affected strategy implementation in the banks to a great extent. These findings are in
line with those of Grant (2000) who indicated that strategies must be well formulated and
implemented in order to attain organizational objectives.
The study found out that strategy implementation process at most banks was affected by the
challenge of limited resources. The findings of the study are in line with those of Johnson and
Scholes (2002) which established that the strategy implementation process was not affected by
the challenge of poor organizational culture. The study established that the strategy
implementation process was affected by too many conflicting priorities.
Summary of the findings
The findings of this study established that most of the respondents had worked in their banks for
over ten years. Regarding strategy implementation process, the study established that majority of
the banks appointed a team of staff to spear head the process of strategy implementation. The
study established that to a great extent, strategies of the banks were well communicated to all
staff on time. The study further established that the extent to which staff was involved in one
way or the other in strategy formulation was moderate followed by a great extent. Majority of
respondents were in agreement to a great extent that there was presence of scenario plan at the
bank.
Regarding the availability of enough resources for strategy implementation at the bank, the
respondents agreed to a moderate extent. The finding of the study established that, to a moderate
extent frequent meetings were held to assess the progress of strategy implementation. From the
study findings, the extent to which the actual results were always compared with the set
objectives was very great and that to a great extent, top management were always informed of
strategy implementation at the bank. The study established that the strategy management
processes affected strategy implementation in the banks to great extent.
Regarding challenges facing the implementation process, respondents indicated that the strategy
implementation process at their banks was not affected by rigid organization structure. The study
found out that strategy implementation process in most banks was affected by the challenge of
limited resources. The findings of the study established that the strategy implementation process
at banks was not affected by the challenge of poor organizational culture. The finding of the
study was that limited top management involvement was not a challenge in strategy
implementation process at their banks. The study established that the strategy implementation
process at their banks was not affected by interdepartmental competitions. From the findings of
the study, the cited challenges affected the process of strategic management at the banks to a
great extent.
CONCLUSIONS
The study concludes that the strategy management processes affects strategy implementation in
the banks to great extent. The study further concludes that in most banks there is moderate
involvement of staff in the formulation of strategies. The study concludes that in most banks the
careful review of the strategies is done to a great extent prior to the implementation process and
that availing of enough resources for strategy implementation at the banks is very crucial. The
study further concludes that the strategy steering committee is always appointed to steer the
process of strategy implementation at the banks and that the extent to which frequent meetings
are held in banks to assess the progress of strategy implementation is moderate. The study
concludes that in majority of banks, the comparison of actual results with the set objectives is
always great. The study further concludes that top management is always informed of strategy
implementation at the bank.
The study concludes that the process of strategy implementation at various banks in the county is
faced with challenges to a great extent. From the findings, this study further concludes that
limited resources, many conflicting priorities, poor functioning top management and poor
training are major challenges affecting the process strategy implementation at the banks. The
study further concludes that the process of strategy implementation in banks is not affected by
rigid organization structure, poor organizational culture, limited top management involvement,
poor communication, interdepartmental competition and poor leadership skills as these
challenges are not evident in the banks.
RECOMMENDATIONS
The studies found out that limited resources as a major challenge affecting the process strategy
implementation at the banks. The study therefore recommends that the top management at the
banks should put in place measures to ensure that resources are availed for successful
implementation of the strategies.
The study found out those conflicting priorities is a major setback to the process of strategy
implementation. The study therefore recommends that the conflicting priorities among the bank
staff should be clearly addressed so as ensure that there is harmony in the process of
implementation of strategies. The study further recommends that training should be done in order
to improve the performance of the staff as well as the top management.
The study established that the extent to which frequent meetings are held in banks to assess the
progress of strategy implementation was moderate. In view of this, the study recommends that
more frequent meetings should be held more often to scrutinize the process of strategy
implementation of strategies at the banks.
The study found out that strategy management processes affects strategy implementation in the
banks to great extent. The study therefore recommends that the strategy implementation
processes should be keenly scrutinized so as to lead to success.
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doc_204259852.pdf
This paper explain strategy implementation process in commercial banks in kenya.
STRATEGY IMPLEMENTATION PROCESS IN COMMERCIAL BANKS IN KENYA
Charles Ngonjo
Master of Business Administration, University of Nairobi, Kenya
Moses Sindani
Master of Business Administration, University of Nairobi, Kenya
Citation: Ngonjo, C. & Sindani, M. (2013). Strategy implementation process in commercial
banks in Kenya. International Journal of Social Sciences and Project Planning Management, 1
(1), 1-18.
ABSTRACT
Implementing strategies successfully is vital for any organization, either public or private.
Without implementation, even the most superior strategy is useless. The banking environment in
Kenya has undergone many regulatory and financial reforms. These reforms have brought about
many structural changes in the sector and have also encouraged foreign banks to enter and
expand their operations in the country. The objective of the study was to establish strategy
implementation processes by commercial banks in Kenya and determine challenges of strategy
implementation in commercial banks in Kenya. This study adopted a descriptive research design.
The target population of this study was the 44 commercial banks operating in Kenya. This study
used primary data collected using a questionnaire. The questionnaire contained both closed and
opened ended questions. The questionnaires were administered to communications managers.
The completed questionnaires were first edited for completeness and consistency. Quantitative
data collected was analyzed by the use of descriptive statistics using Statistical Package for
Social Sciences (SPSS) and presented through percentages, means, standard deviations and
frequencies. The study concludes that in most banks there is moderate involvement of staff in the
formulation of strategies. The study concludes that in majority of banks, the comparison of actual
results with the set objectives is always great. The study further concludes that the process of
strategy implementation in banks is not affected by rigid organization structure, poor
organizational culture, limited top management involvement, poor communication,
interdepartmental competition and poor leadership skills as these challenges are not evident in
the banks. The study recommends that the top management at the banks should put in place
measures to ensure that resources are availed for successful implementation of the strategies. The
study recommends that training should be done in order to improve the performance of the staff
as well as the top management.
Key Words: strategy implementation process, commercial banks, Kenya
INTRODUCTION
Strategy implementation is the process of allocating resources to support the chosen strategies.
This process includes the various management activities that are necessary to put strategy in
motion, institute strategic controls that monitor progress, and ultimately achieve organizational
goals. According to Raps and Kauffman, (2005), the implementation process covers the entire
managerial activities including such matters as motivation, compensation, management
appraisal, and control processes which entail cascading strategy to all functional areas in such a
way as to achieve both vertical and horizontal logic and enhance implementation of policies.
Organizations seem to have difficulties in implementing their strategies. Several researchers have
revealed a number of problems in strategy implementation: for example weak management roles
in implementation, a lack of communication, lacking a commitment to the strategy, unawareness
or misunderstanding of the strategy, unaligned organizational systems and resources, poor
coordination and sharing of responsibilities, inadequate capabilities, competing activities, and
uncontrollable environmental factors (Galpin, 1998; Beer and Eisenstat, 2000).
The commercial banking sector in Kenya has faced various challenges following changes in their
operating environment. The banking environment in Kenya has undergone many regulatory and
financial reforms. These reforms have brought about many structural changes in the sector and
have also encouraged foreign banks to enter and expand their operations in the country (Kamau,
2009). In an attempt to strengthen the Kenyan banking industry which, with 43 banks, is
considered to be over-saturated, the minister for finance amended the Second Schedule of the
Banking Act to increase the minimum core capital requirement from KSh250 million to KSh1
billion by December, 2012. This brought about a lot of strategizing among commercial banks on
ways of complying with the law and at the same time maintaining their operations stable.
Strategy Implementation
Strategy implementation evolves either from a process of winning group commitment through a
coalitional form of decision-making, or as a result of complete coalitional involvement of
implementation through a strong corporate culture. It involves organization of the firm's
resources and motivation of the staff to achieve objectives (Rapa and Kauffman, 2005).
Implementing strategies successfully is about matching the planned and realizing strategies,
which together aim at reaching the organization’s vision. With firms evolving in terms of
structure it follows that the style of strategy implementation will differ depending on the style of
organization and management that exists in the firm. Different types of leadership styles can play
a critical role in overcoming barriers to implementation. The environmental conditions facing
many firms have changed rapidly. Today's global competitive environment is complex, dynamic,
and largely unpredictable. To deal with this unprecedented level of change, a lot of thinking has
gone into strategy formulation. Strategic management is about managing the future, and effective
strategy formulation is crucial, as it directs the attention and actions of an organization. The
assessment of strategy formulation processes becomes crucial for practitioners and researchers
alike in order to conduct and evaluate different formulation processes (Olson et al. 2005).
According to Balogun and Johnson (2004) responsibility, resources and power in firms has been
the subject of decentralization and delayering. Given an intensifying competitive environment, it
is regularly asserted that the critical determinant in the success and, doubtlessly, the survival of
the firm is the successful implementation of marketing strategies (Chebat, 2009). The role and
tasks of those employees charged with strategy implementation duties, the mid-level managers,
in these new restructured organizations is under scrutiny. Numerous researchers in strategic
management bestowed great significance to the strategic formulation process and considered
strategy implementation as a mere by-product or invariable consequence of planning (Wind and
Robertson, 2003). Fortunately, insights in this area have been made recently which tamper our
knowledge of developing strategy with the reality of executing that which is crafted (Olson et al.,
2005). However, as strategy implementation is both a multifaceted and complex organizational
process, it is only by taking a broad view that a wide span of potentially valuable insights is
generated.
Strategy Implementation Process
Strategy implementation is the process that turns strategies and plans into actions in order to
accomplish an organization’s strategic objectives and goals (Ansoff, 1999). The first step in
strategy implementation is the act of knowing what the strategic plan is. This involves reviewing
it carefully, and highlights any elements of the plan that might be especially challenging
(Johnson and Scholes, 1998). This enables recognition of any parts of the plan that may be
unrealistic or excessive in cost, either of time or money. This stage also requires that one keeps
back-up ideas in mind in case the original plan fails.
The second step involves selecting a team of members to help with implementing the strategic
plan. This involves establishing a team leader who can encourage the team and field questions or
address problems as they arise (Pearce and Robinson, 2007). The next step involves schedule
meetings to discuss progress reports. This involves presentation of the list of goals or objectives,
and letting the strategic planning team know what has been accomplished. Whether the
implementation is on schedule, ahead of schedule, or behind schedule, assessing the current
schedule regularly to discuss any changes that need to be made is important for successful
strategy implementation (Beer and Eisenstat, 2000). In all these stages, the organization’s
executives need to be informed on what is happening, and provide progress reports on the
implementation of the plan. Letting an organization’s management know about the progress of
implementation makes them a part of the process, and, should problems arise, the management
will be better able to address concerns or potential changes (Pearce and Robinson, 2007).
Challenges of Strategy Implementation
Wessel (1993) states that most of the barriers to strategy implementation that have been
encountered fit into one of the following interrelated categories: too many and conflicting
priorities, the top team does not function well; a top down management style; inter-functional
conflicts; poor vertical communication, and inadequate management development. These
categories can be translated into the following problems: Competing activities distracted
attention from implementing this decision, Changes in responsibilities of key employees were
not clearly defined, Key formulators of the strategic decision did not play an active role in
implementation, and Problems requiring top management involvement were not communicated
early enough (Pearce and Robinson, 2007).
Banking Sector in Kenya
Kenya’s banking history goes back to 1896 when the national Bank of India opened a branch in
the East African country. The Companies Act, the Banking Act, the Central Bank of Kenya Act
and the various prudential guidelines issued by the Central Bank of Kenya (CBK), governs the
Banking industry in Kenya. The banking sector was liberalised in 1995 and exchange controls
lifted. The CBK, which falls under the Minister for Finance’s docket, is responsible for
formulating and implementing monetary policy and fostering the liquidity, solvency and proper
functioning of the financial system. The CBK publishes information on Kenya’s commercial
banks and non-banking financial institutions, interest rates and other publications and guidelines.
The banks have come together under the Kenya Bankers Association (KBA), which serves as a
lobby for the banks’ interests and addresses issues affecting its members, (Kenya Bankers
Association annual Report, 2008)
Commercial Banks in Kenya
As at 31st Central Bank of Kenya December (2012), the banking sector comprised of the Central
Bank of Kenya, as the regulatory authority, 44 banking institutions (43 commercial banks and 1
mortgage finance company - MFC), 4 representative offices of foreign banks, 6 Deposit-Taking
Microfinance Institutions (DTMs) and 118 Forex Bureaus (CBK, 2012). Out of the 44 banking
institutions, 31 locally owned banks comprise 3 with public shareholding and 28 privately owned
while 13 are foreign owned. The 6 DTMs, 2 CRBs and 118 forex bureaus are privately owned.
The foreign owned financial institutions comprised of 9 locally incorporated foreign banks and 4
branches of foreign incorporated banks.
According to CBK (2012) out of the 43 commercial banks 30 of them are domestically owned
and 13 are foreign owned. In terms of asset holding, foreign banks accounted for about 35% of
the banking assets as of 2011. In Kenya the commercial banks dominate the financial sector. In a
country where the financial sector is dominated by commercial banks, any failure in the sector
has an immense implication on the economic growth of the country. This is due to the fact that
any bankruptcy that could happen in the sector has a contagion effect that can lead to bank runs,
crises and bring overall financial crisis and economic tribulations.
RESEARCH PROBLEM
Implementing strategies successfully is vital for any organization, either public or private.
Without implementation, even the most superior strategy is useless (Pearce and Robinson, 2007).
The notion of strategy implementation might at first seem quite straightforward: the strategy is
formulated and then it is implemented. Implementing would thus be perceived as being about
allocating resources and changing organizational structure (Beer and Eisenstat, 2000). However,
transforming strategies into action is a far more complex and difficult task. Furthermore, there
are only a limited number of conceptual models of strategy implementation making strategy
implementation a challenging task for any organization.
The Central Bank of Kenya issued new prudential guidelines earlier 2012 which come into effect
1 January 2013. Some of these changes had an immediate and significant impact on banks,
especially the ones covering capital adequacy requirements, corporate governance and consumer
protection. All these regulations required that banks go back to the drawing board to strategize
on how well to meet these requirements. In addition, the level of competition has increased as
more Microfinance Institutions, Deposit taking microfinance institutions and SACCOs struggle
to attract customers. This has reduced the profitability of some product lines in commercial
banks. In addition, mobile money transfer has taken up much of the businesses initially
undertaken by commercial banks as they launch their money transfer, storage and loan facilities.
These changes have meant that for commercial banks to remain profitable, they have to
continuously develop and implement strategies to ensure their survival. Some banks merged to
meet the capitals adequacy requirement.
Kiptugen (2003) did a study to determine the strategic responses of Kenya Commercial Bank to
a changing competitive environment. Since he focused mainly on strategies that can be adopted
in a competitive environment; the study failed to cover the processes involved in strategy
implementation and challenges in the implementation phase. Kamanda (2006) also did a study on
Kenya Commercial Bank (KCB) with the objective of determining the factors that influence its
regional growth strategy. His study, however, does not cover the issues of strategy
implementation. Situma (2006) also covered KCB but focused on its turnaround strategy.
Muguni (2007) studied the role of executive development in strategy implementation. The study
also failed to capture the process of strategy implementation process and challenges. Given the
importance of these processes, this study sought to fill the gap by seeking answers to two
research questions:
1. What strategy implementation processes are used by commercial banks in Kenya?
2. What are the challenges of strategy implementation among commercial banks in Kenya?
RESEARCH OBJECTIVES
3. Establish strategy implementation processes by commercial banks in Kenya
4. Determine challenges of strategy implementation in commercial banks in Kenya.
LITERATURE REVIEW
Theoretical Perspective
The resource-based view stipulates that in strategic management the fundamental sources and
drivers to firms’ competitive advantage and superior performance are mainly associated with the
attributes of their resources and capabilities which are valuable and costly-to-copy (Mills, Platts
and Bourne, 2003; Peteraf and Bergen, 2003). Building on the assumptions that strategic
resources are heterogeneously distributed across firms and that these differences are stable
overtime, Barney (1991) examines the link between firm resources and sustained competitive
advantage. Four empirical indicators of the potential of firm resources to generate sustained
competitive advantage can be value, rareness, inimitability, and non-substitutability. In Barney
(1991), firm resources include all assets, capabilities, organizational processes, firm attributes,
information, knowledge, etc. controlled by a firm that enable the firm to conceive and implement
strategies that improve its efficiency and effectiveness.
Resource advantage theory draws on marketing's heterogeneous demand theory (Alderson,
1965). This theory holds that, because intra-industry demand is significantly heterogeneous,
different market offerings are required for different market segments in the same industry.
Resource advantage theory draws on differential advantage theory (Porter 1985). In this theory,
marketplace positions of competitive advantage/disadvantage determine superior/inferior
financial performance. Thus, firms can have an efficiency advantage, i.e., more efficiently
producing value or they can have an effectiveness advantage, i.e., efficiently producing more
value or they can have an efficiency/effectiveness advantage, i.e., more efficiently producing
more value. In the same manner, for County governments to successfully implement devolution
changes, they need to utilize the endowment in their territories well.
Hayek (1948) points out that ‘practically every individual has some advantage over all others
because he possesses unique information of which beneficial use can be made only if the
decisions depending on it are left to him or are made with his active co-operation.’ Likewise, for
R-A theory, resources are both significantly heterogeneous across firms and imperfectly mobile.
Day and Wensley (1988) distinguish between ‘skills’ and ‘resources’ on the basis that the former
are ‘the distinctive capabilities of personnel’ and the latter are the ‘more tangible requirements
for advantage. In contrast, R-A theory maintains that intangibles can be resources and views the
skills of individuals (and, as discussed in the next section, the competences of organizations) as
kinds of resources.
Concept of Strategy Implementation
Mintzberg (1996), implementation means carrying out the predetermined plans. Some strategies
are planned and some others just emerge from actions and decisions of organizational members.
Strategy implementation is concerned with the translation of strategy into organizational action
through appropriate structure and design, resource planning and the management of strategic
change (Johnson and Scholes, 2002). When considering implementation, questions relating to
who should be responsible for carrying out the predetermined strategic plans, what are the
structures in place and what changes are necessary must be addressed. Strategic implementation
is thus putting strategy into action. The way in which the strategy is implemented can have a
significant impact on whether it will be successful or not. In most cases, different people from
those who formulated it do implementation of the strategy. For this reason, care must be taken to
communicate the strategy and the reasoning behind it. Otherwise, the implementation might not
succeed if the strategy is misunderstood or if the affected parties resist its implementation
because they do not understand why the particular strategy was selected (Thompson, 1993).
Strategy implementation has attracted much less attention in strategic and organizational
research than strategy formulation or strategic planning. Alexander (1991) suggests several
reasons for this: strategy implementation is less glamorous than strategy formulation, people
overlook it because of a belief that anyone can do it, people are not exactly sure what it includes
and where it begins and ends. Furthermore, there are only a limited number of conceptual models
of strategy implementation. In the world of management, increasing numbers of senior people
are recognizing that one of the key routes to improved business performance is better
implementation (Renaissance Solutions, 1996). However, at the same time, it is also understood
that implementation is one of the more difficult business challenges facing today’s managers
(Piercy, 1992).
Implementing strategies successfully is about matching the planned and the realizing strategies,
which together aim at reaching the organizational vision. The components of strategy
implementation communication, interpretation, adoption and action are not necessarily
successive and they cannot be detached from one another. Okumu and Roper (1998) observe that
despite the importance of the strategic execution process, far more research has been carried out
into strategy formulation rather than into strategy implementation, while Alexander concludes
that literature is dominated by a focus on long range planning and strategy content rather than the
actual implementation of strategies, on which “little is written or researched (Alexander,
1985).More practical problems associated with the process of strategy implementation,
meanwhile, include communication difficulties and “low” middle management skill levels
(Otley, 2001).
Strategy Implementation Process
Strategic decisions determine the organizational relations to its external environment, encompass
the entire organization, depend on input from all of functional areas in the organization, have a
direct influence on the administrative and operational activities, and are vitally important to long-
term health of an organization (Grant, 2000). Strategies must be well formulated and
implemented in order to attain organizational objectives. Thompson (1993) determined that the
strategy implementation process included the many components of management and had to be
successfully acted upon to achieve the desired results. Here, the critical point is that effective and
successful strategy implementation depends on the achievement of good “fits” between the
strategies and their means of implementation.
Chakravarthy and White (2001) have taken into consideration that no matter how effectively a
company has planned its strategies, it could not succeed if the strategies were not implemented
properly. Hendry and Kiel (2004) also clarified that the more ineffective the top management
decisions, the more ineffective are the choices made at lower levels of management. Similarly, if
top management's strategic choices tend to be successful, it reflects favorably on choices made in
other parts of the organization. Simons (1994) refer to three categories of factors that affected
strategic decision-making process: environmental factors; organizational factors; and decision-
specific factors. Here, environmental factors mean external agents such as national culture,
national economic conditions, and industry conditions. Organizational factors refer to
organizational structure, organizational culture, structure of decision making bodies, impact of
upward influence, and employee involvement. Decision-specific factors can be explained as
time, risk, complexity, and politics. According to Porter (1980) strategists must assess the forces
affecting competition in their industry and identify their company's strengths and weaknesses,
then strategists can devise a plan of action that may include first, positioning the company so that
its capabilities provide the best defense against the competitive force; and/or second, influencing
the balance of the forces through strategic moves, thereby improving the company's position;
and/or third, anticipating shifts in the factors underlying the forces and responding to them, with
the hope of exploiting change by choosing a strategy appropriate for the new competitive balance
before opponents recognize it.
Petersen and Welch (2000) noted two dimensions of strategy implementation: structural
arrangements, and the selection and development of key roles. Kaplan and Norton (2004). The
quality of people as skills, attitudes, capabilities, experiences and other characteristics required
by a specific task or position. Structure refers to the way in which tasks and people are
specialized and divided, and authority is distributed; how activities and reporting relationships
are grouped; the mechanisms by which activities in the organization are coordinated Systems
refer to the formal and informal procedures used to manage the organization, including
management control systems, performance measurement and reward systems, planning,
budgeting and resource allocation systems, and management information systems. Staff refers to
the people, their backgrounds and competencies; how the organization recruits, selects, trains,
socializes, manages the careers, and promotes employees. Skills refer to the distinctive
competencies of the organization; what it does best along dimensions such as people,
management practices, processes, systems, technology, and customer relationships.
Challenges of Strategy Implementation
Strategy implementation is never an easy thing in many organizations. The process of
coordinating different stakeholders and harmonizing their actions towards the common goal
faces several challenges. Some of the challenges reviewed here include: leadership styles,
availability of resources, corporate culture and organizational culture
Leadership Style
Leadership is the process of persuasion, where an individual induces a group to pursue certain
objectives. Effective leadership involves restructuring organizational architecture in a manner
that motivates employees with the relevant knowledge to initiate value-enhancing proposals
(Dubrin, 2001). Drucker (1994) captures an environmental scanning analysis that depicts
leadership as that, which should manage the fundamentals like people, inflation among others.
Strategic leadership should ensure that values and culture within an organization are appropriate
for satisfying key success factors. This should lead to environmental-value-resources (E-V-R)
congruence. However, leadership is not always fully involved in the strategy implementation
process because of the many activities involved which have been delegated. Limited leadership
involvement could inhibit the success of strategic management in an organization.
Successful strategic plan implementation requires a large commitment from executives and
senior managers. Therefore, planning requirement which may be done even at departmental
levels requires executive support. Executives must lead, support, follow-up and live the results of
strategic planning implementation process. According to Healthfield (2009), without
commitment of senior executives, participants feel fooled and mislead. This complements what
Rap (2004) claims that the commitment to the strategic direction is a prerequisite for strategy
implementation, so top managers have to show their dedication to the effort. To implement
strategy successfully, senior executives must not assume that lower level managers have the
same perceptions of the strategic plan and its implementation, its underlying rationale, and its
urgency. Instead, they must assume they don’t, so executives must persuade employees of the
validity of their ideas. This not withstanding what Chris Ahoy (1998) argues; that upfront
commitment by leaders include an adherence to the full and thorough process of strategic
planning which must culminate in implementing programs and services and commit allocations
to meet the objectives of the strategic plan at a level that is doable for the organization and the
level of activity.
Inadequacy of Resources
All organizations have at least four types of resources namely: financial, physical, human
resources and technological resources (Thompson, 1990). These resources are available to an
organization as simple tangible resources (money, human resources and infrastructure) or
intangible resources such as public power e.g. in law enforcement and tax collection or
knowledge base. Resource based view to strategy management view knowledge, skills and
experience of human resource as a key contributor to firm’s bundle of resource and capabilities
(Musyoka, 2008). Johnson at el. (2005) argues that putting strategy into action is concerned with
ensuring that strategies are working in practice. Without adequate resources, strategy
implementation process would not procees as planned. This would thus result in stalled projects
or results being different from those anticipated.
As companies change and as skills expertise become recognized as a major asset of the firm, the
heightened efforts in cultivating and enhancing them becomes significant part of development
strategy (Saunders, 1994). There needs to be appropriate and adequate human capital with
goodwill to the implementation of a strategy. During the process of strategy implementation,
how relationships and beyond the organization are fostered and maintained will influence
performance further while organizations and groups may be assumed as taking strategic actions,
it is individuals who ultimately, in practical terms take action and are responsible for driving an
organization or a group towards objective. Perhaps the most important resource of an
organization is its people (Johnson and Scholes, 2003).
Corporate Structure
At the firm level, extant research has observed that the effective relationship between strategy
and structure is a necessary precondition to the successful implementation of new business
strategies (Drazin and Howard, 2004; Olson et al., 2005; Miller et al., 2004). In addition, a match
between appropriate administrative mechanisms and strategy has been found to reduce
uncertainty within the firm and increase effectiveness in strategy implementation. The relevant
literature (Noble, 2009; Noble and Mokwa, 2009) has advocated factors that influence the
effective implementation of strategies, for example; organizational structure (Drazin and
Howard, 2004); control mechanisms (Daft and Mackintosh, 2004); strategic consensus (Floyd
and Wooldridge, 2002); leadership (Gupta and Govindarajan, 2004; Nutt, 2003); and
communication (Workman, 2003). However, prior research has neglected to ascertain whether
the “style” of strategy implementation undertaken has any impact on the effectiveness of the
implementation effort. An inappropriate organization structure will lead to either poor decision
making which may negatively affect the process of strategy implementation. A vertically tall
organization structure may involve more time in getting the decision made which may affect the
pace of strategy implementation.
The structure of the organization should be consistent with the strategy to be implemented.
Moreover the nature of the organizations structure to be used in implementing strategy is
influenced by the environment stability and the interdependence of the different units (Daft,
2000). Failure to address issues of the broad structural design of roles, responsibilities and lines
of reporting can at a minimum, constrain strategies development and performance (Johnson &
Scholes, 2002; Koske, 2003).
Organization Culture
Organizational culture refers to the leadership style of managers – how they spend their time,
what they focus attention on, what questions they ask of employees, how they make decisions;
also the organizational culture (the dominant values and beliefs, the norms, the conscious and
unconscious symbolic acts taken by leaders (job titles, dress codes, executive dining rooms,
corporate jets, informal meetings with employees). Organizational culture is among the major
issues, because the cultural dimension is central to all aspects of organizational behavior
(Alvesson, 2002). If strategy implementation is going to realize its full potential of dramatically
improving the way companies do business, changing of the organizational culture must be
considered an integral part of the process. Systems cannot be developed irrespective of the
people that will be managing and operating those systems. One of the biggest reasons why some
process strategy implementation projects do not achieve the level of success the organization
expects is because the organization or functional manager did not deal with the issue of
organization culture change. Greengard (1993) says that an organization should strive to involve
the staff at all stages of the implementation process.
Eisenstat (1993) indicates that most companies attempting to develop new organization
capacities stumble over these common organizational hurdles: competence, coordination, and
commitment. These hurdles can be translated into the following implementation problems:
Coordination of implementation activities was not effective enough, Capabilities of employees
were insufficient, Training and instruction given to lower level employees were inadequate, and
Leadership and direction provided by departmental manager were inadequate.
RESEARCH METHODOLOGY
Research Design
This study adopted a descriptive research design. Descriptive research design is appropriate
because it enables the researcher to build a profile of a phenomenon. It is concerned with the
what, where, how and when of the phenomenon. It can be used when collecting information
about peoples’ attitudes, opinions, habits or any of the variety of education or social issues
(Orodho and Kombo, 2002). Descriptive design was suitable for this study because it enabled the
researcher to generalize the findings to a larger population as well as giving a clear picture of the
phenomenon under study. This study therefore was able to generalize the findings to all the
commercial banks in Kenya.
Population of the Study
According to Ngechu (2004), a study population is a well defined or specified set of people,
group of things, households, firms, services, elements or events which are being investigated.
The target population of this study was the 44 commercial banks operating in Kenya. These were
chosen upon because they were the ones which were affected by the various regulatory changes
instituted by the Central Bank of Kenya in its quest to ensure financial sector stability.
Data Collection
This study used primary data collected using a questionnaire. The questionnaires were used
because they were a cost effective way of collecting information from a large literate sample in a
short span of time and at a reduced cost than other methods (Mugenda and Mugenda, 2003). The
questionnaire contained both closed and opened ended questions. The closed ended questions
used of a five point likert scale where respondents filled according to their level of agreement
with the statements. The unstructured questions were used to encourage the respondents to give
an in-depth response where close ended questions were limiting. The questionnaire designed in
this study comprised of two sections. The first part included the demographic characteristics
questions while the second part covered the process of strategy implementation and the third part
challenges of strategy implementation.
The questionnaires were administered to communications managers. This is because this office is
always informed of the events going on in the Company and are the ones authorized to
communicate on behalf of their banks. The questionnaires were be administered through a drop
and pick later method because the target respondents may be busy to give feedback on the spot.
Data Analysis
The completed questionnaires were first edited for completeness and consistency. Quantitative
data collected was analyzed by the use of descriptive statistics using Statistical Package for
Social Sciences (SPSS) and presented through percentages, means, standard deviations and
frequencies. The data were split down into different aspects of strategic change implementation
aspects and organizational competitiveness so as to offer a systematic and qualitative of the study
objectives.
RESEARCH RESULTS
Discussion
The study found out that majority of the banks appointed a team of staff to spear head the
process of strategy implementation. The study established that to a great extent, strategies of the
banks were communicated to all staff on time. The study further established that the extent to
which staff was involved in one way or the other in strategy formulation was moderate followed
by a great extent. Majority of respondents were in agreement to a great extent that there was
presence of scenario plan at the bank. These findings are in line with those of Johnson at el.
(2005) who argued that putting strategy into action is concerned with ensuring that strategies are
working in practice. Without adequate resources, strategy implementation process would not
proceed as planned.
From the study findings, the extent to which the actual results were always compared with the set
objectives was very great and that to a great extent, top management were always informed of
strategy implementation at the bank. The study established that the strategy management
processes affected strategy implementation in the banks to a great extent. These findings are in
line with those of Grant (2000) who indicated that strategies must be well formulated and
implemented in order to attain organizational objectives.
The study found out that strategy implementation process at most banks was affected by the
challenge of limited resources. The findings of the study are in line with those of Johnson and
Scholes (2002) which established that the strategy implementation process was not affected by
the challenge of poor organizational culture. The study established that the strategy
implementation process was affected by too many conflicting priorities.
Summary of the findings
The findings of this study established that most of the respondents had worked in their banks for
over ten years. Regarding strategy implementation process, the study established that majority of
the banks appointed a team of staff to spear head the process of strategy implementation. The
study established that to a great extent, strategies of the banks were well communicated to all
staff on time. The study further established that the extent to which staff was involved in one
way or the other in strategy formulation was moderate followed by a great extent. Majority of
respondents were in agreement to a great extent that there was presence of scenario plan at the
bank.
Regarding the availability of enough resources for strategy implementation at the bank, the
respondents agreed to a moderate extent. The finding of the study established that, to a moderate
extent frequent meetings were held to assess the progress of strategy implementation. From the
study findings, the extent to which the actual results were always compared with the set
objectives was very great and that to a great extent, top management were always informed of
strategy implementation at the bank. The study established that the strategy management
processes affected strategy implementation in the banks to great extent.
Regarding challenges facing the implementation process, respondents indicated that the strategy
implementation process at their banks was not affected by rigid organization structure. The study
found out that strategy implementation process in most banks was affected by the challenge of
limited resources. The findings of the study established that the strategy implementation process
at banks was not affected by the challenge of poor organizational culture. The finding of the
study was that limited top management involvement was not a challenge in strategy
implementation process at their banks. The study established that the strategy implementation
process at their banks was not affected by interdepartmental competitions. From the findings of
the study, the cited challenges affected the process of strategic management at the banks to a
great extent.
CONCLUSIONS
The study concludes that the strategy management processes affects strategy implementation in
the banks to great extent. The study further concludes that in most banks there is moderate
involvement of staff in the formulation of strategies. The study concludes that in most banks the
careful review of the strategies is done to a great extent prior to the implementation process and
that availing of enough resources for strategy implementation at the banks is very crucial. The
study further concludes that the strategy steering committee is always appointed to steer the
process of strategy implementation at the banks and that the extent to which frequent meetings
are held in banks to assess the progress of strategy implementation is moderate. The study
concludes that in majority of banks, the comparison of actual results with the set objectives is
always great. The study further concludes that top management is always informed of strategy
implementation at the bank.
The study concludes that the process of strategy implementation at various banks in the county is
faced with challenges to a great extent. From the findings, this study further concludes that
limited resources, many conflicting priorities, poor functioning top management and poor
training are major challenges affecting the process strategy implementation at the banks. The
study further concludes that the process of strategy implementation in banks is not affected by
rigid organization structure, poor organizational culture, limited top management involvement,
poor communication, interdepartmental competition and poor leadership skills as these
challenges are not evident in the banks.
RECOMMENDATIONS
The studies found out that limited resources as a major challenge affecting the process strategy
implementation at the banks. The study therefore recommends that the top management at the
banks should put in place measures to ensure that resources are availed for successful
implementation of the strategies.
The study found out those conflicting priorities is a major setback to the process of strategy
implementation. The study therefore recommends that the conflicting priorities among the bank
staff should be clearly addressed so as ensure that there is harmony in the process of
implementation of strategies. The study further recommends that training should be done in order
to improve the performance of the staff as well as the top management.
The study established that the extent to which frequent meetings are held in banks to assess the
progress of strategy implementation was moderate. In view of this, the study recommends that
more frequent meetings should be held more often to scrutinize the process of strategy
implementation of strategies at the banks.
The study found out that strategy management processes affects strategy implementation in the
banks to great extent. The study therefore recommends that the strategy implementation
processes should be keenly scrutinized so as to lead to success.
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