Outsourcing and the Performance of State Corporations in Kenya

Abstract

This study sought to establish the effect of outsourcing and the performance of state corporations in Kenya. It was guided by the statement of the problem which revealed that outsourcing has been understood by most managers however there is a disconnect between outsourcing and performance due to the nature of its complexity. This study was also guided by 3 objectives namely: To establish the extent of outsourcing, to establish the performance levels and to determine the relationship between outsourcing and performance of state corporations in Kenya. To satisfy the objectives, descriptive research design was adopted. The study population was the 94 state corporations in Nairobi County. The sample was purposively selected using stratified sampling. A sample size of 30% of the state corporations was used in the study. Primary data was collected from the Head of procurement or supply chain department of each of the state corporations using structured questionnaire. Data analysis was done using Statistical Package for Social Sciences (SPSS) with the main analysis tools being frequencies, mean and standard deviation and multivariate linear regression. The research study results indicated that outsourcing of all the practices was generally low in exception of real estate and physical plants which were outsourced at an average level. Real estate and physical plants was greatly outsourced, followed by finance, logistics and transport, IT, HR, customer support and sales and marketing whereas the least outsourced practice among the state corporations. Outsourcing had also led to an overall performance of above the average among the state corporations in Kenya. Good image impacted greatly on performance, followed by quality of products, innovative practices, customer satisfaction, efficient operations, and staff turnover. It was also established that the relationship between outsourcing and performance differed among the firms. It is recommended that the top management should be in the forefront in support of outsourcing since this would spur the performance of the firms by enabling them to concentrate on their basic competency. The study also recommends that firms seeking to enhance business performance must complete a strategic analysis that will enable them to outsource the functions that other firms or individuals can do for them better at a cheaper cost.