The role of organizational culture in the relationship between strategy and performance of commercial Banks in Kenya

Abstract

This management research project examines the relationship, if any, between culture, strategy and the performance of banks. Existing studies show that most organizations appreciate the importance of strategy to achieve business success. However, they often disregard the role of culture with regards to strategy, yet the two factors are critical for the success of an organization. The researcher noted that in order to study these two factors and performance, the ideal population will be all the commercial banks operating in Kenya and Return on investment will be the measure of performance. The researcher had three objectives, first, to establish the relationship between culture and performance. Secondly, the relationship between strategy and performance; and finally, establish the effect of culture on relationship between strategy and performance on Kenyan commercial banks. The researcher carried out a survey of all the 44 banks operating in Kenya. Likert scale questionnaires with questions framed on the basis of predesigned operational definitions of the Schneider’s four culture types, namely, control, collaboration, cultivation and competence; and Miles and Snow’s strategy types of defender, prospector, analyzer and reactor, were designed, and used, in collecting primary data from the bank managers responsible for culture and strategy. This was aimed at collecting relevant data. Secondary data on bank performance were collected. The returns on investment were used to rank the banks from number one to thirty one as these was the total number of banks responded. The primary data was analyzed using correlation analysis and tabular analysis to test the relationship between culture, strategy and performance. The first objective of the study was established as the researcher found that control, cultivation and competence cultures are positively correlated to performance. Secondly, the researcher established that analyzer, defender and prospector strategies are positively correlated to performance. The third objective was also established since the researcher found that banks tend to perform better when they adopt prospector strategy with cultivation culture. However, it was noted that even though strategy and culture play a significant role in influencing performance, some other factors exist too in the banking industry.