Control Measures Used by Equity Bank to Influence Operations in Its Subsidiaries in East Africa

Abstract

This research project was a case study that sought to find out the control measures used by Equity Bank to influence operations on its subsidiaries in East Africa. Equity Bank Limited is a Kenyan bank that is incorporated and registered under the Kenyan Companies Act CAP 486. It trades in the Nairobi Stock Exchange and the Ugandan Securities Exchange. Even after being declared technically insolvent in 1993, Equity Bank Limited has risen from the ashes to emerge as a leader in the finance sector and has been awarded several awards such as‟ best bank in retail banking‟. Over the years, it has spread its wings to open up subsidiaries in the East African region and has several branches spread out in Uganda, Tanzania, Rwanda and South Sudan. International business involves trade across a nation‟s borders. Globalization has played a large role in the increase of international business. International business is usually carried out by private enterprises and government. Private enterprises usually engage in international business to increase profits. International business led to growth of the multinational corporations. Multinational corporations are firms that are headquartered in one country but have operations in one or more countries. To ensure that their branches met set goals, MNC‟s use control on their subsidiaries. Control is a management practice whose aim is to ensure that plans set in motion are being followed and that corrective measures are taken to ensure that deviations from the set plan are rectified. Control is a multidimensional management practice and it is a process where one entity influences the operations of another entity through the use of power, authority and other bureaucratic, formal and informal mechanisms. The study used primary data which was collected using an interview guide with open- ended questions. The data was obtained from two branch managers of Equity Bank and one Relationship Officer. Content analysis was then used to analyse the respondents view on the control mechanisms used by Equity Bank Limited. From the data gathered, it was found that Equity Bank Limited uses a variety of control methods on its subsidiaries. These methods involved different mechanisms that can fall into three broad categories of output control, behavioral control and organizational culture and clan control. Output control methods include financial measures, how organizational goals are being followed and through the use of operating budgets. Behavioral methods of control are related to organizational structure, appraisal of staff and following laid down rules and procedures. Organizational culture and clan control are implicit methods of control such that employees find themselves doing certain things because it is expected of them. The findings and discussion on the study have been presented in continuous prose. The conclusions of the study were that the bank headquarters controls its subsidiaries both strategically and structurally. Strategic measures of control are geared towards ensuring that organizational goals are met and employees are kept on track through evaluation and corrective measures taken where there are deviations. By using strategic control methods, the organization achieves efficiency through monitoring company processes Structural control methods deal stemming from the organizational structural and define roles and responsibilities for everyone. It defines the reporting system and how information is cascaded in the organization. A summary of the findings and recommendations are given at the end of the study.