Organizational Strategy, Culture, and Performance of Commercial Banks in Kenya

Abstract

This paper examines the relationship between strategy, culture, and performance of commercial banks in Kenya. The population of study are all the commercial banks operating in Kenya while Return on investment (ROI) is the measure of performance. Likert-type questionnaires with questions framed on the basis of pre-designed operational definitions of Miles and Snow’s strategy types of defender, prospector, analyzer and reactor; as well as Schneider`s culture types of control, collaboration, cultivation and competence were designed, and used, in collecting primary data from the bank managers. Secondary data on bank performance were collected consisting of returns on investment. The primary data was analyzed using correlation and regression analysis to test the relationship between strategy types, culture types and performance. The results indicate that analyzer, defender and prospector strategies are positively correlated to performance while reactor strategy is negatively correlated to performance. Similarly, control, cultivation and competence cultures are positively correlated to performance while collaboration culture is negatively correlated to performance. Regression estimates show that commercial banks which perform well are those combining control culture and prospector strategy as well as those combining competence culture and defender strategies. Banks stand to lose if they combine control culture and defender strategy, competence culture and reactor strategy, and cultivation culture and prospector strategy. Consequently, the choice of strategy and culture determines the performance of commercial banks in Kenya.

Keywords: strategy, culture, organizational performance