Strategic human resource management practices and Firm performance: a survey of the banking sector in Nairobi

Abstract

Previous studies suggest that strategic human resource management practices are beneficial to firm performance. Different from most previous studies conducted in a western context, this study examined the data of banks in Kenya, and thus examined a very different cultural and institutional environment. A census study was carried out for all the 42 banks in Kenya. However, 32 out of the 42 banks responded resulting into a response rate of 76%. The findings revealed that most of the banks had more than 150 employees. The extent of information flow between human resource department and other departments in the organization was great at 43%. The extent to which the human resource department was treated as a specialized function was also great at 43%. The findings of the study also revealed that strategic human management practices in the key functions of recruitment, training and development, training effectiveness / evaluation, performance - based compensation; flexible benefits, employee relations, consultative performance appraisal and human resource planning were practiced in all the banks under study. However, the extent of practice varied amongst the banks. The banks' organization performance in terms of quality of products, services or programmes, development of new products," services or programmes, ability to attract essential employees, ability to retain essential employees, satisfaction of customers or clients and relationship among employees in general in comparison to other organization's in the same business was generally above industry average. The banks' market performance in terms of profitability, market share, capital level, customer level and total deposits in general in comparison with other organization's in the same business was generally above industry average. A correlation analysis was carried out to establish the relationship between strategic human resource management practices and organization performance using Pearson v product moment correlation technique. The results revealed that there was a positive relationship between strategic human resource management practices and organization performance as the Pearson product moment correlation statistic figure was found to be (r = 0.475, P<O.OOl, n=32). A similar correlation analysis was carried out to establish the relationship between strategic human resource management and market performance. The results revealed a positive and strong relationship of (r = 0.629, P<O.OOl, n = 32). The findings clearly established that there exists a positive relationship between strategic human resource management practices and firm performance