STRATEGIC DIRECTION DETERMINATION AND PERFORMANCE OF COMMERCIAL BANKS IN KENYA

Abstract

Overview: Determining strategic direction for an organization rests squarely on the leadership at the strategic level and it involves developing a long-term vision for the organization. It entails establishing a strategic plan, developing strategic goals for the organization and articulating an organization's vision and mission, hence this role is important and cannot be left without proper leadership. It is the responsibility of the Chief Executive Officer (CEO) working at close range with the Top Management Teams (TMTs) in providing general guidelines as to where the organization intents to go and the appropriate steps in place to enable the organization reach its goals. Tracy O'Rourke, CEO of Varian Associates agreed with this view and stated that; if you are going to do well in the long run, you need to have some ability of yourself or in combination with others to come up with a vision and follow it with believable and implementation action plans. Strategic leaders need to develop a vision, mission and values to guide an organization in her future.  Organizational mission to help that organization pose superior performance must support strong values illustrated by a vision. Therefore, strategic leaders must inspire their workforce to higher levels of achievements by demonstrating to them how their work and responsibilities contribute to the future direction of the organization.

Purpose: The study sought to investigate the influence of strategic direction determination on the performance of commercial banks in Kenya. The study was enhanced by path-goal theory which asserts that role of the leader is to clarify goals through strategic vision, mission and intent to the subordinates. He also holds a position of ensuring that these goals are well articulated and understood by the subordinates for implementation.

Methodology: The study targeted 577 strategic leaders in commercial Banks in Kenya. The main respondents included; The Chief Executives, Executive Directors and Senior Managers. 277 questionnaires were administered out of which 179 were returned. This represented a percentage rate of 75% response rate. A descriptive survey design was adopted in the study to show the relationship between the study variables. The design was adopted because it’s concerned with a description of phenomena and characteristics linked to the study giving information in regard to its natural occurrences and behavior. Self-administered questionnaires were used in collection of data from the respondents. Collected data was analyzed using SPSS. Both descriptive statistics and inferential statistics were used in analyzing the data. The study clarified the relationship between strategic direction and performance of commercial banks in Kenya.

Findings: Statistics revealed that ANOVA statistic was F (1, 177) = 28.275, p <0.00. This showed that the regression model was statistically significant in predicting the dependent variable. Therefore, the elements of strategic direction establishment explained variations in performance of commercial banks in Kenya. The R² = 0.138 indicates that approximately 13.8 per cent of the competitiveness is explained by the strategic direction establishment practices. The beta coefficients: constant, β₀ = -0.022 (t = -2.504, p< 0.05); strategic direction establishment, β₁ = 0.371 (t = 2.55, p< 0.05) and p-values < 0.05 indicated that all the coefficients were statistically significant.  This regression model has two implications; first, holding the strategic direction establishment practices at zero, the rise in competitiveness of the commercial banks would be -0.022 units; second, a unit change in strategic direction establishment practices would lead to a 0.371 change in competitiveness.

Recommendation: The study established that strategic direction establishment practices have a significant positive effect on performance of commercial banks in Kenya. The study therefore recommends that the top management teams for commercial banks in Kenya should enhance practices for strategic direction determination. Strategic leaders are challenged to establish vision; mission and values for a strategic direction that will help their organization attain competitive advantage in the future. The CEOs and the top management team should practice quick decision making to mitigate or use opportunities affecting the industry at any time while also thinking of possible solutions to unexpected challenges.

Key words: Strategic direction, Strategic Leadership, Performance, Commercial Banks, Kenya

CITATION: Kisiangani, B. W., Mukanzi, C., & Miroga, J. (2023). Strategic direction determination and performance of commercial banks in Kenya. The Strategic Journal of Business & Change Management, 11 (1), 1 – 7. http://dx.doi.org/10.61426/sjbcm.v11i1.2834