ORGANIZATION CULTURE, STRATEGY OPERATIONALISATION AND PERFORMANCE OF COMMERCIAL BANKS IN KENYA DAVID NTONGAI A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE CONFERMENT OF THE DOCTOR OF PHILOSOPHY DEGREE IN BUSINESS ADMINISTRATION AND MANAGEMENT (STRATEGIC MANAGEMENT) OF KENYA METHODIST UNIVERSITY OCTOBER 2020 I DECLARATION This Thesis is my original work and has not been presented for a degree in any other university. Signature………………………… Date …………………………… David Ntongai BUS-4-0188-1-2015 This Thesis has been submitted for examination with our approval as University Supervisors: Signature……………………….… Date……………………… Prof. (Eng.) Thomas A. Senaji (PhD) School of Business and Economics Kenya Methodist University Signature……………………….… Date……………………… Prof. George K. King’oriah, PhD., MBS University of Nairobi ii DEDICATION To my mother for instilling in me virtues of hard work, responsibility, discipline, passion and aspirations for greater things in life and for making me who I am, your prayers and wise counsel will forever be treasured. To my wife, your encouragement and patience during the long and many hours of absence cannot be taken for granted. iii ACKNOWLEDGEMENTS I sincerely salute my University supervisors Prof. (Eng.) Thomas A. Senaji and Prof. George K. King’oriah for their effective guidance and continuous availability for consultation. To all other lecturers in KEMU who guided me throughout my course work, I thank you. Special thanks to all members of my family, whose financial support and moral encouragement made this study possible; thank you for being there for me. All my friends and colleagues I acknowledge you, for the encouragement. I sincerely appreciate and acknowledge all my respondents in this research who took their valuable time to respond. Thank you. iv ABSTRACT Given the highly competitive banking sector, banks must design, adopt and successfully implement superior strategies. Successful implementation of strategies remains a challenging task to organizations. While empirical literature indicates that a relationship exist between organizational culture and organization performance, there is insufficient research on how strategy operationalisation affects this relationship. The purpose of this study was to examine the mediating effect of strategy operationalisation on the relationship between organization culture and bank performance. The purpose of this study was to assess the relationship between organisational culture and performance and to examine the effect of strategy operationalisation on the relationship between culture and performance of commercial banks in Kenya. While, Trompenaar’s organisational culture framework comprising incubator, Eiffel tower family and guided missile culture was used to underpin organisational culture, the balanced scorecard framework was used in to measure performance. A descriptive census survey was conducted using structured questionnaire to collect primary data from three employees from each of the 43 commercial banks in Kenya. Secondary data was collected from the banks records and from the Central Bank of Kenya reports. Descriptive statistics were used to assess the status of organisational culture type, strategy operationalisation and performance of the banks while the relationship between these variables was studied using correlation analysis. Further, multiple linear regression and the Baron and Kenny’s procedure for mediation were used to respectively test direct effects of culture on performance and the mediation effect of strategy operationalisation on the relationship between organisational culture and performance. The findings were that 64% (R2 = 0.674, F = 21.894, p < 0.05) of variations in banks performance (Return on assets) was explained by the organisational culture. There was also significant mediation of the relationship the between bank culture and performance. Guided missile culture had the most significant influence on performance of banks at p < 0.001 < 0.05. Based on these findings, it is recommended that banks develop a culture that is task oriented, and which support organization communication. Further strategy operationalisation should be strengthened because it significantly mediated the relationship n between organisational culture and bank performance. v TABLE OF CONTENTS DECLARATION............................................................................................................... ii DEDICATION.................................................................................................................. iii ACKNOWLEDGEMENTS ............................................................................................ iv ABSTRACT ........................................................................................................................v LIST OF TABLES ............................................................................................................x LIST OF FIGURES ........................................................................................................ xii LIST OF CHARTS ........................................................................................................ xiii CHAPTER ONE ................................................................................................................1 INTRODUCTION..............................................................................................................1 1.1 Background of the study ................................................................................................1 1.1.1 Concept of strategy ..............................................................................................1 1.1.2 Concept of strategy operationalisation ................................................................3 1.1.3 Organization culture ............................................................................................4 1.1.4 Performance .......................................................................................................13 1.1.5 Banking Sector in Kenya ...................................................................................15 1.2 Statement of the problem .............................................................................................47 1.3 Objectives of the study.................................................................................................49 1.3.1 General objective ...............................................................................................50 1.3.2 Specific objectives .............................................................................................50 1.4 Hypotheses of the study ...............................................................................................50 1.5 Justification of the study ..............................................................................................51 1.6 Scope and limitations of the study ...............................................................................52 1.7 Delimitation of the study .............................................................................................52 1.8 Assumptions of the Study ............................................................................................53 operational Definition Of Terms ........................................................................................54 1.9 Organization of the thesis ............................................................................................55 CHAPTER TWO .............................................................................................................56 LITERATURE REVIEW ...............................................................................................56 2.1 Introduction ..................................................................................................................56 2.2 Theoretical Review ......................................................................................................56 2.2.1 Trompenaar’s Culture framework .....................................................................56 2.2.2 Alignment Theory .............................................................................................60 vi 2.2.3 Strategy as Practice ...........................................................................................61 2.2.4 Goal Setting Theory ..........................................................................................65 2.2.5 Balanced Scorecard Framework ........................................................................66 2.3 Empirical Review.........................................................................................................66 2.3.1 Organization culture and performance ..............................................................70 2.3.2 Strategy Implementation and Performance .......................................................73 2.3.3 Strategy operationalisation and performance ....................................................85 2.3.4 Organization Performance .................................................................................90 2.3.5 Summary of Literature Review .........................................................................93 2.4 Conceptual Framework ................................................................................................94 CHAPTER THREE .........................................................................................................96 METHODOLOGY ..........................................................................................................96