Effect of Performance Contracting in the Implementation of Strategic Plan in East African Portland Cement Company Limited

Abstract

The extent to which the performance contracts reflect what is captured in the strategic plan and to the extent to which their effects are felt is what this study sought to investigate. The objective of this study was to establish the effect of performance contracting in the implementation of strategic plan in East African Portland Cement Company Limited. A case study approach through content analysis was used to have an in-depth on the effect of performance contracting in the implementation of the strategic plan in EAPCC. Primary and secondary data were used and the respondents were drawn from the top level management who are involved in corporate strategic management issues. The interview guide was used to collect the primary data from the respondents and the results were then used to make inferences about the implementation of performance contract at the organization and how significant it was in the implementation of the strategic plan at both the corporate and the departmental levels. The fundamental principle of performance contracting is the devolved management style where emphasis is management by outcome rather than management by processes. Its therefore provides a framework for the changing behaviors in the context of devolved management structures. Government view performance contracts as a useful vehicle for articulating clearer definitions of objectives and supporting new management monitoring and control methods, while at the same time leaving day- to- day management to the managers themselves. The public sector in Kenya is faced with the challenge of poor and declining performance, which in turn inhibits realization of sustainable economic growth. The problem of poor performance in the public service is largely attributable to excessive regulations and control, frequent political interference, multiplicity of principals, poor management, outright mismanagement and bloated staff establishment. In addition to regressing economic growth, declining performance in the service has resulted to poor service delivery, degeneration of infrastructure and a severe brain flight. All these issues are exhibited in the organization under this study. It was also clear from the study that organizations sometimes squander business opportunities in terms of sales and derived profits. This is due to the slow pace of reaction caused by bureaucratic tendencies and rules and interference from other stakeholders. The procurement and disposal Act, the appointment of CEO’s by the government agencies has slowed down the performance of the organization in a great deal. From the finding, though with aforesaid which is common to many public organizations, it is concluded that the performance contract has been effective because it has enhance accountability, commitment, transparency in the general running of the organization. This has led to improved financial results for the period under review.