Cost cutting practices and service quality among commercial Banks in Kenya

Abstract

The study sought is to establish the effect of the cost cutting practices on service quality in commercial banks. This study used a descriptive research design. The target respondents included the operations managers from the head offices of each bank. In addition, the study collected data from two customers from each bank. The study made use of a survey questionnaire. Quantitative data collected was analyzed by the use of descriptive statistics. The qualitative data from the open ended questions were analyzed using content analysis. In addition, the study conducted a Chi square to test the study hypotheses. The study established that banks have implemented termination planning to reduce training costs, laying off direct labour to reduce trade union and group costs and laying off staff to reduce direct labour cost to a great extent. Employee pay reduction practices implemented in the banks operations to cut cost to a great extent include freeze or reduction in planned pay rise, pursuing employee benefits and allowances cost reduction and pension cost-alignment initiative. The study deduced that process automation, rolling out new and cheaper services and reviewing plan options/developing contingency plans were implemented to a great extent. The study concludes that the banks adopt more of the longer-term strategic cost initiatives such as laying off staff, retirement, termination planning, pay reduction practices, shrinking of product portfolio, outsourcing of cleaning and sanitary services and security services, flexible work option and office restructuring. The study also concludes that the cost cutting practices affect various facets of service quality such as reliability, responsiveness, assurance, empathy and tangible attributes of services provided. The study recommends that to ensure service quality provision is at exceptional levels even with various cost cutting practices, it is essential to have written policies and staff training on both procedural and personal aspects of service delivery. The management should also establish policies such as part-time employment, lactation breaks for nursing mothers, temporary employment, changing hours of service and compressed work weeks using other companies such as those in the telecommunication industry that have low effect on the service quality.