INFLUENCE OF ORGANIZATIONAL RESTRUCTURING ON PERFORMANCE OF COOMERCIAL BANKS IN KENYA: A CASE OF KENYA COMMERCIAL BANK

Abstract

Organizational restructuring is a process which includes improvement in efficiency and management, reduction in staff and wages and sale of assets with the expectation of higher profitability and cash flow. This study was to evaluate the impact of organizational restructure on the performance of commercial banks in Kenya. This study was guided by the specific objective that seek to find out the effect of centralization of activities, departmentalization, and staff turnover on the performance of banking sector in Kenya. The theories that were used to describe the research objectives included innovation theory; resource based theory, management by objectives theory and planned change theory. The scope of the study spanned from the year 2001 to 2014. That was the period within which the commercial banks in Kenya had incurred high operating expenses and also went through restructuring to reduce cost and promote efficiency. The target population included employees of the commercial banks at the head office. This was because major decisions impacting on the performance of the company were formulated and implemented at the head office. Hence a sample size of 462 staff were taken from commercial banks head office units. The study used stratified random sampling techniques to select the sample. Primary data was collected through a questionnaire that was distributed to respondents. The study explored literature on the financial performance of KCB between the years 2001 and 2014. The data from the questionnaires was screened and entered in readiness for analysis using SPSS software version 21. Results were presented using pie charts, bar charts and graphs, percentages and frequency tables. The analysis showed that systems upgrade had the strongest positive (Pearson correlation coefficient =.881) influence on performance of banking sector. In addition, departmentation, centralization of processes and staff turnover are positively correlated to performance of banking sector (Pearson correlation coefficient =.672, .579 and .611). The study recommended that to improve organizational restructuring on performance of banking sector, the management should make sure that all the respective heads of departments had full and clear information on time to enhance easy decision making on organizational restructuring to enhance performance at KCB.