Factors considered important in the implementation of performance contracts: a survey of Kenyan parastatals

Abstract

Globalization, liberalization and deregulation have led to sustained pressure from the citizenry for better services from the public sector enterprises, thereby forcing governments to initiate public sector reforms especially in developing countries. Whereas performance contracting has been successful in the private and public sectors in most developed countries, experiences within the public sector in developing countries have been marked with mixed results. This has been due to country and industry specific environments. In Kenya, performance contracting is part of the broad public sector reform agenda Kenyan Parastatals are the Government's State corporations and Boards that enjoy the Government's shareholding and support. Kenyan Parastatals have all been subjected'to performance contracts with the Government. This study sought to determine the factors considered important in implementing performance contracts in the public sector in Kenya. It was a descriptive research that targeted all the 120 state corporations that undertook performance contracting within Nairobi. A sample of 44 Parastatals was selected from the various categories" of Commercial, Regulatory, Research, Education/Training Regional Development & Au-th.ority and Social Services. Questionnaires were used to obtain information and a response rate of 81.8 % was achieved. The data collected was analyzed using descriptive statistics. The research findings indicate that majority of the respondents were from the Commercial Category of Parastatals, had graduate degree education, and had worked with the parastatals for 5 to 10 years. Additionally, majority of the Parastatals (80.6%) had limited the signing of performance contracting to the Heads of Departments, the Chief Executive and the Board. Performance contracting was not cascaded downwards.

Major research findings show that the research was moderately successful with the most important factor considered in performance contract implementation was main stakeholders expectation and the least factor considered was the Performance Information Systems. Although the organization structure supported the process, existing performance behavior, lack of clear vision and mission inhibited it while reporting structure were not reformed adequately. Further, Performance incentives were apparently not effective since employees were only aware of them to a moderate extent. Some heard about them only at the time of signing the contracts, while the mitigating circumstances were factored in the system/assessment to a very small extent. Other factors not pre-determined included lack of autonomy and empowerment, lack of adequate resources to match performance expectations, lack of leadership and support, and lack of clear performance rewards/penalty system. The main limitation to the process/system was that performance contracts have only been signed by the top management hence not embraced by the other employees in the state corporations. The research findings show that there is need for the Kenyan State Corporations to pay more attention to strategy implementation as it affects the organization structure and culture and the way employees adopt to the new environment. Parastatals need to adopt more adequate information systems that are up to date. On the performance evaluation systems there is need to develop a conceptual framework that blends both the government criteria and the best practices specific to the various Parastatals.