HUMAN CAPITAL MANAGEMENT PRACTICES AND FIRMPERFORMANCE: A SURVEY OF COMMERCIAL BANKS IN

KENYA

PRESENTED BY

ABDIRASHID HUSSEIN ABIKAR

ADM L/126/23777/2012

SUPERVISOR

MOHAMED ADEN

2012

A Research Proposal Submitted to Garissa extramural University of Nairobi in Partial Fulfillmentof the Requirement for the Diploma in purchasing

and supply management

DECLARATIONI declare that this research proposal is my original work and has

never been submitted to any other University for assessment or

award of a diploma

Signature…………………………….. Date………………………………

ABDIRASHID HUSSEIN ABIKAR

ADM L/126/23777/2012

This proposal has been submitted with my authority as the university supervisor.

Signature……………………………………. Date ……………………………………………

MOHAMED ADEN

ii

Table of ContentsDECLARATION...................................................ii

ABSTRACT.......................................................v

CHAPTER ONE: INTRODUCTION......................................1

1.1 Background.................................................1

1.1.1 Human resource management practices among commercial banks in Kenya.......................................................2

1.1.2 Benefits of quality HRM practices........................3

1.1.3 Commercial banks in Kenya................................3

1.2 Statement of the problem...................................4

1.3 Research objectives........................................6

1.4 Significance of the study..................................6

CHAPTER TWO: LITERATURE REVIEW.................................8

2.1 Evolution of Human Resource Management Practice............8

iii

2.2 The use of the Concept of Human Resource Management Practice..............................................................11

2.3 Planning Process..........................................12

2.3.1 Recruitment Process.....................................14

2.3.2 Selection Process.......................................15

2.3.3 Orientation, Training and Development...................16

2.3.4 Career Planning and Development Process.................17

2.3.5 Performance Appraisal Process...........................19

2.3.6 Employee Compensation Process...........................21

2.3.7 Occupational Health and Safety Process..................22

CHAPTER THREE: RESEARCH METHODOLOGY...........................24

3.1 Introduction..............................................24

3.2 Research design...........................................24

3.3 Population of the study...................................24

3.4 Sample size and sampling procedures.......................24

3.5 Data collection...........................................25

3.6 Validity..................................................26

3.7 Reliability...............................................26

3.8 Data analysis.............................................26

CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION................27

4.1 Introduction..............................................27

4.2 Demographic data..........................................27

iv

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS...............................................33

5.1 Introduction..............................................33

5.2 Summary of findings.......................................33

5.3 Conclusions...............................................34

5.4 Recommendations...........................................34

5.5 Suggestions for further research..........................34

References....................................................35

APPENDICES....................................................38

Appendix I: Research Budget...................................38

Appendix II: Commercial banks in Kenya........................39

Appendix III: Research Questionnaire..........................41

ABSTRACTA study was carried out to establish the quality human resource

management practices among commercial banks in Kenya. The

researcher conducted a survey of all commercial banks in Kenya.

Stratified sampling was applied in picking the sample size. The

data was analyzed and presented in tables and charts. The

findings indicate that the commercial banks adopt various human

v

resource management practices, prominent among them are career

planning, health and safety and compensation.

vi

CHAPTER ONE:

INTRODUCTION1.1 Background

Over the years, researchers have suggested many human resource

management (HRM) practices that have the potential to improve and

sustain organizational performance. These practices include

emphasis on employee selection based on fit with the company’s

culture, emphasis on behavior, attitude, and necessary technical

skills required by the job, compensation contingent on

performance, and employee empowerment to foster team work, among

others. Pfeffer (1998) has proposed seven HRM practices that are

expected to enhance organizational performance. They include:

Employment security; selective hiring of new personnel; self-

managed teams and decentralization of decision making as the

basic principles of organizational design; comparatively high

compensation contingent on organizational performance; extensive

training; reduced status distinctions and barriers, including

address, language, office arrangements, and wage differences

1

across levels as well as extensive sharing of financial and

performance information throughout the organization.

Every organization differs in how much effort it puts into

harnessing each of the seven HRM practices. An ideal situation

may be one in which each of these HRM practices is explored and

exploited to its highest potential, typically when an

organization exerts the maximum effort possible to develop,

institute, and implement each of these seven practices. Such a

HRM system may be termed an ideal-type HRM system. This ideal-

type HRM system is expected to yield the highest organizational

performance. The more similar an organization’s HRM system is to

the ideal-type HRM system, the better the organization’s

performance (Ahmad and Schroeder, 2003).

1.1.1 Human resource management practices among commercial banks

in Kenya

Commercial banks are profit making financial institutions that

play a significant role in the financial system. Commercial banks

2

offer a wide range of corporate financial services that address

the specific needs of private enterprise. They provide deposit,

loan and trading facilities but will not service investment

activities in financial markets. The term commercial bank is used

to differentiate these banks from investment banks, which are

primarily engaged in the financial markets. Commercial banks are

also differentiated from retail banks that cater to individual

clients only (T.F.Cargill, 1986). Commercial banks in Kenya play

a number of roles in the financial stability and cash flow of the

country’s private sector. They process payments through a variety

of means including telegraphic transfer, internet banking and

electronic funds transfers. They also issue bank cheques and

drafts, as well as accept money on term deposits. They act as

moneylenders, by way of installment loans and overdrafts. Loan

options include secured loans, unsecured loans and mortgage

loans.

Commercial banks in Kenya provide a number of import financial

and trading documents such as letters of credit, performance

bonds, standby letters of credit, security underwriting

3

commitments and various other types of balance sheet guarantees.

They also take responsibility for safeguarding such documents and

other valuables by providing safe deposit boxes. Currency

exchange functions and the provision of unit trusts and

commercial insurance are typically provided by the relevant

departments in larger commercial banks. In today’s competitive

banking environment, exemplary customer service is one of the

distinguishing characteristics that commercial banks can exploit

to establish a competitive edge. Since most of the commercial

banks offer comparable products and services, they continually

search for a competitive advantage that will attract new

customers and help them retain existing ones. They, therefore,

endeavor to develop innovative programs and initiatives to

maintain superior customer service levels while remaining

profitable. These has led to commercial banks either downsizing

or rightsizing their human resources while continuously

restructuring their operations in order to develop more cost

effective and efficient operations (Rajan et al 1998).

4

1.1.2 Benefits of quality HRM practices

HR practices that address and improve conditions that might be

sources of discontent (low pay, meager benefits, arbitrariness,

favoritism, boring or dead-end jobs, lack of say on the job, lack

of due process, etc.) potentially undercut unionism by removing

or at least reducing dissatisfaction. The most obvious reason

that positive HR practices should affect unionism lies in the

notion that unions are based on discontent. Although other

motivations exist, e.g., class consciousness or Marxist beliefs

(Barling et al., 1992) and political instrumentality or altruism

(Knoke, 1990), much research has established that U.S. workers

turn to unions chiefly as a means of alleviating dissatisfactions

with work (Kochan, 1980).

1.1.3 Commercial banks in Kenya

Arthur and Shefrin (2003) define a commercial bank (or business

bank) as a type of financial institution and intermediary. It is

a bank that provides transactional, savings, and money market

accounts and that accepts time deposits. Commercial banks engage

in various activities: processing of payments by way of

5

telegraphic transfer, internet banking, or other means, issuing

bank drafts and bank cheques, accepting money on term deposit,

lending money by overdraft, installment loan, or other means,

providing documentary and standby letter of credit, guarantees,

performance bonds, securities underwriting commitments and other

forms of off balance sheet exposures, safekeeping of documents

and other items in safe deposit boxes, sales distribution or

brokerage, with or without advice, of insurance, unit trusts and

similar financial products as a “financial supermarket”, cash

management and treasury, merchant banking and private equity

financing. Traditionally, large commercial banks also underwrite

bonds, and make markets in currency, interest rates, and credit-

related securities, but today large commercial banks usually have

an investment bank arm that is involved in the mentioned

activities (Martim, 1855).

Kenya currently has 43 licensed commercial banks and one mortgage

finance company. Of these 44 institutions, 31 are locally owned

and 13 are foreign owned. Barclays Bank is among the foreign-

owned financial institutions in Kenya. The government of Kenya

6

has a substantial stake in three of Kenya's commercial banks. The

remaining local commercial banks are largely family owned.

Commercial banks in Kenya accept deposits from individuals and

turn a profit by using the deposits to offer loans to businesses

with a high interest rate (Central Bank of Kenya, 2012).

1.2 Statement of the problem

In an increasingly knowledge-intensive and global economy,

superior management of human resources that involves the skills,

talents, and knowledge of an organization’s employees is arguably

the only sustainable source of competitive advantage for an

organization. Yet many firms remain surprisingly unsophisticated

in managing their human resources, placing their success, if not

survival, at risk (Bassi and McMurrer, 2006). Pfeffer (1998) also

argues that human resources are considered the most important

asset of an organization, but very few organizations are able to

fully harness its potential.

Individuals, organizations, and nations increasingly recognize

that high levels of skill and competence are essential to future7

security and success. It is common knowledge that as individuals

acquire more education and training during a lifetime, human

resources drive the production of goods and services, as well as

new innovations in the marketplace. Currently, such linkage

between these human resource elements and economic development is

well established. While the economic value of human capital

cannot be questioned, an important concern among scholars is what

type and how much human resource is required to create a

competitive advantage for firms (Starbuck, 1992).

A number of studies have been carried out on human resource

management practices. Harel and Tzafir (1999) carried out a study

and identified eight strategic human resource management

practices: grievance procedure, incentive compensation,

participation, promotion from within, recruitment, selection and

training. Other researchers considered innovative work practices

such as total quality management and quality circles as good HR

practices (Ostermann, 1994). Some saw employment security and

employee ownership as best practices (Pfeffer, 1994). When a

8

firm’s human resource practices are consistent with each other

( i.e. internal fit), and with the firm’s strategic goals (i.e.

external fit), organizational efficiency will be

enhanced(Huselid, 1995;Wright and Mcmahan, 1992). Human resource

practices are the exact mechanisms aimed at the acquisition,

development, and motivation of human capital. Human resource

management focuses on what a firm does with human resources,

while human resource practices refer to how these resources are

managed.

A few recent studies have examined the linkage between human

resource management practices and company performance. Bjorkman

and Fan (2002) conducted a study of 62 manufacturing foreign-

invested enterprises and wholly owned foreign subsidiaries in

China. They reported significant positive effects of the human

resource management system and human resource management-business

alignment on company performance.

It is clear from the above studies that quality human resource

practices among commercial banks have not been addressed. There

is need to carry out a study to establish the quality HR9

practices among commercial banks in Kenya. This is the gap that

this study seeks to fill. The study will therefore seek to answer

the following question: what are the quality HR management

practices among commercial banks in Kenya?

1.3 Research objectives

The study seeks to meet the following objectives

i. Determine the quality human resource management practices

among commercial banks in Kenya.

1.4 Significance of the study

The findings of this study will be beneficial to a variety of

people. The commercial banks in Kenya will be able to get a

better understanding of the various human resource management

practices adopted in Kenya. This will act as a benchmark in

issues related to human resource management.

Human resource management cuts across all industries, the

findings of this study will also assist firms in other industries

other than banking to be able to understand how quality human

resource management practices are important to an organization.

10

Those in the academic realm will also get additional knowledge

that will assist in future research. Those willing to conduct

research in the area of quality human resource management

practices will benefit by accessing reference information that

will be contained in this study.

11

CHAPTER TWO: LITERATURE REVIEW

2.1 Evolution of Human Resource Management Practice

Human resource management practice is defined as a strategic and

coherent approach to the management of an organization’s most

valued assets that are the people working there who individually

and collectively contribute to the achievement of its objectives.

It has been regarded as a set of interrelated policies with an

ideological and philosophical underpinning. Scholars argue that

human resource management practice is a planned approach to

managing people effectively for performance and it aims to

establish a more open, flexible and caring management style so

that employees will be motivated, developed and managed in a way

that they can and will give of their best to support

organizations' missions (Storey, 1989).

Human resource management practice (HRM) has indeed evolved

through the centuries. It has evolved from personnel management

12

in the early 1900s and through to the current use of the term

human capital management that is popularly used by many large

firms (Haslinda, 2009). Since 1900s to date, there have been

considerable changes in both science and practice of HRM. The

human resource management function, once responsible for record

keeping and maintenance, has evolved into a strategic partner

(Ferris et al., 1999).

Some scholars argued that human resource management practice is

said to have started from the term ‘Personnel Management’ which

emerged after the World War in 1945 as an approach by personnel

practitioners to separate and distinguish themselves from other

managerial functions and making the personnel function into a

professional managerial function. Traditionally, the function of

Personnel Management is claimed to ‘hire and fire’ personnel in

organizations other than salary payments and training. But there

were many criticisms and concerns of ambiguity expressed about

the purpose and role of Personnel Management to Human Resource

Management (Tyson, 1985) in that management planned HRM

13

activities, and did not just respond reactively to different

circumstances and situations, but in some cases, to demands of

trade unions. In part to reflect these, none outline approaches

to the management of employees in the mid 1980s. Therefore, the

term HRM gradually tended to replace the term Personnel

Management in the function of obtaining, organizing, and

motivating human resources required by organizations (Beer and

Spector, 1985).

The historical perspective of HRM practices can help in

understanding on how HRM has evolved over the period. First, in

the early 1900s, many changes occurred in the work place. After

industrial revolution, machines and factory methods that

increased production were introduced. However, several problems

occurred with this increased production. Since the machines

required several people to operate them, the number of workers

increased dramatically. This forced managers to develop rules,

regulations and procedures to control the workers. Some of the

regulations required an increase in job specialization, which led

14

to boring, monotonous jobs. At that time, with the effect of

Scientific Management, workers were seen as a part of a machine

without considering that they were social human beings. All the

jobs were broken into specific tasks (Anthony, Perrrewe and

Kacmar, 1996).

The next step in the development of human resources occurred in

the late 1920s and early 1930s by Hawthorne Studies. As a result

of these studies, the social side of workers was realized by

managers and the effect of social factors on the performance was

understood. Expanding on the human relations school of thought

including academic findings from various disciplines such as

psychology, political science, sociology and biology, the

behavioral science era was born. This era focused more on the

total organization and less on the individual. It examined how

the workplace affected the individual worker and how the

individual worker affected the workplace. Many believe that the

modern day fields of organizational behavior and human resource

management grew out of the behavioral science. In the early

15

years, organizations set up welfare secretaries whose jobs were

to keep track of employees’ welfare. Through the years, the

welfare secretaries’ jobs encompassed more duties parallel with

the new laws and employee rights were passed. They started to

keep up all files about employees, maintain payroll systems and

counsel employees (Anthony, Perrrewe and Kacmar, 1996).

Parallel with the changes in some factors like technology,

globalization and work force, HRM began to take more attention

from the organizations and it became a formal department. The

increase in the importance of HR has not happened accidentally.

Rather, these trends are a function of specific changes in the

business environment. With the increased rate of globalization, a

firm’s ability to compete in a global environment becomes

increasingly contingent on having the right people. Pressures

from competitors, shareholders and customers require people that

can create new products, services and processes ahead of the

competition (Brockbank, 1999).

16

There is, however, still argument and disagreement over what this

new development actually represented, although most of the

argument and debate has been confined to academics. Those

actively involved in the management of people appear to have been

less concerned about titles, concerned more with practice and

with the effects on employee behavior and performance of new

ideas about commitment, involvement, resource utilization and the

role of the line manager.

The academic debate is, of course, not without interest or

relevance for those who practice HR and a number of important

contributions to this debate need to be analyzed (Hoque and Noon,

2001).

2.2 The use of the Concept of Human Resource Management Practice

What actually constitutes Human Resource Management practice is

controversial as the concept has attracted numerous definitions.

Senyucel (2009) sees HRM as a combination of people-centered

management practices that recognizes employees as assets and

geared to creating and maintaining skilful and committed

17

workforce for achieving organizational goals. On the other hand,

Coyle at al. (2004) regard HRM as the philosophy, policies,

procedures, and practices related to the management of people

within an organization. Monody and Noe (2005) simply see HRM as

the utilization of employees to achieve organizational goals.

 

On the other hand, the term Human Resource Management practice

has been depicted as the “art and science”. It is regularly

referred to as the art and science since it entails both the art

of managing people by recourse to creative and innovative

approaches. As the art, HRM is considered as the process of

managing people in organizations in a structured and thorough

manner. This covers the fields of staffing (hiring people),

retention of people, pay and perks setting and management,

performance management, change management and taking care of

exits from the company to round off the activities. This is the

traditional use and definition of HRM. It is a science as well

because of the precision and rigorous application of theory that

is required. As a science HRM encompasses the management of

18

people in organizations from a macro perspective i.e. managing

people in the form of a collective relationship between

management and employees. This approach focuses on the objectives

and outcomes of the HRM function. What this means is that the HR

function in contemporary organizations is concerned with the

notions of people enabling, people development and a focus on

making the “employment relationship” fulfilling for both the

management and employees (Management study guide, 2012).

 

The HRM literature identifies the following activities as common

to all HRM systems of organizations: recruitment, selection,

compensation, performance rewards, rewards, training,

development, promotion, performance management, grievance

handling, and overtime management. This means hiring (recruiting

and selecting) the right person; appropriate compensation;

appropriate remuneration; appropriate rewards for performance;

opportunities for training, development, and promotion; proper

performance management; and appropriate grievance handling

(Dzansi & Dzansi, 2010).

19

2.3 Planning Process

The success of a business is directly linked to the performance

of those who work for that business. Underachievement can be a

result of workplace failures. Because hiring the wrong people or

failing to anticipate fluctuations in hiring needs can be costly,

it is important therefore for organizations to put a lot effort

into human resource planning. An HR plan works hand in hand with

a business plan and helps firms to prepare for staff turnover,

recruitment, and strategic hiring – and alleviate stress during

the emergency/last-minute hiring needs (Armstrong,2006).

According to Beer et al. (1985), the planning process starts with

forecasting of the hiring needs. Failure to anticipate potential

changes in the workforce often leads to last minute or crisis

mode decision-making. Needless to say, quick fixes are no

solution to long-term issues. Taking the time to forecast future

hiring needs today will save time and money in the long-run. HR

planning must be tied to the overall business plan. Therefore

20

the managers responsible for hiring need to assess the current

conditions and future goals of the business. If the firm

determines that it needs additional employees to fulfill the

business strategy, it is recommended that they conduct a four-

step job analysis: first is to review the current workforce. Here

description of current employees in terms of their knowledge,

skills, and experience and how they function together to get work

done. This is then mapped onto the business’s strategic plan and

description of the skills and knowledge that will need for the

anticipated new work or function. The next step is identifying

any skills and knowledge gaps. Any gaps between the skills and

abilities current employees have and the skills and abilities

that the workforce needs to meet the business objectives in the

future are noted. After completing steps the foregoing steps,

one then can begin to draft a job description. And then set a

salary range to help you determine what needed budget – and

whether potential candidates are within the budget. The next step

is to determine the feasibility of hiring in order to understand

the costs of hiring, the benefits of hiring, and the risks of not

21

hiring. The next thing in the process is establish employment

arrangements that would best suit the business.

2.3.1 Recruitment Process

According to Richardson (n.d.), recruitment is described as the

set of activities and processes used to legally obtain a

sufficient number of qualified people at the right place and time

so that the people and the organization can select each other in

their own best short and long term interests. In other words, the

recruitment process provides the organization with a pool of

potentially qualified job candidates from which judicious

selection can be made to fill vacancies.

Richardson (n.d.), further points out that acquiring and

retaining high-quality talent is critical to an organization’s

success. As the job market becomes increasingly competitive and

the available skills grow more diverse, recruiters need to be

more selective in their choices, since poor recruiting decisions

can produce long-term negative effects, among them high training

22

and development costs to minimize the incidence of poor

performance and high turnover which, in turn, impact staff

morale, the production of high quality goods and services and the

retention of organizational memory. At worst, the organization

can fail to achieve its objectives thereby losing its competitive

edge and its share of the market. Successful recruitment begins

with proper employment planning and forecasting. In this phase of

the staffing process, an organization formulates plans to fill or

eliminate future job openings based on an analysis of future

needs, the talent available within and outside of the

organization, and the current and anticipated resources that can

be expended to attract and retain such talent.

Dessler (2000) asserts that when a position is created or

vacated, a recruitment process can be initiated. This can either

be a predefined procedure that governs how a position is to be

filled or a flexible process tailored to the unique position. An

unlimited number of stages can be defined during a recruitment

process. According to Fisher at el. (1993), successful

23

recruitment involves the several processes of: development of a

policy on recruitment and retention and the systems that give

life to the policy; needs assessment to determine the current and

future human resource requirements of the organization. If the

activity is to be effective, the human resource requirements for

each job category and functional division/unit of the

organization must be assessed and a priority assigned;

identification, within and outside the organization, of the

potential human resource pool and the likely competition for the

knowledge and skills resident within it; job analysis and job

evaluation to identify the individual aspects of each job and

calculate its relative worth; assessment of qualifications

profiles, drawn from job descriptions that identify

responsibilities and required skills, abilities, knowledge and

experience; determination of the organization’s ability to pay

salaries and benefits within a defined period; and identification

and documentation of the actual process of recruitment and

selection to ensure equity and adherence to equal opportunity and

other laws.

24

An HRM approach can be adapted to recruitment, which involves

taking much more care in matching people to the requirements of

the organization as a whole as well as to the particular needs of

the job. And these requirements will include commitment and

ability to work effectively as a member of a team.

2.3.2 Selection Process

Selection is the process of picking up the most suitable

candidate who would best meet the requirements of the job and the

organization. For most people, this is the only visible stage of

the resourcing cycle because their experience of it is likely to

be as a subject – or candidate – rather than involvement in

planning the entire process. While recruitment can be perceived

as a positive activity generating an optimum number of job-

seekers, selection is inherently negative in that it will

probably involve rejection of applicants. It would be prudent to

argue that selection decisions should be based on a range of

selection tools as some have poor predictive job ability.

25

The selection process usually consists of a series of steps. The

sequence of the steps may vary from job to job and organization

to organization. The sequence of steps includes: Screening

interview, Application Blank, Selection Test, Selection

Interview, Medical Examination, Reference Checks and Hiring

Decision. While it is almost inconceivable that employment would

be offered or accepted without a face-to-face encounter, many

organizations still rely almost exclusively on the outcome of

interviews to make selection decisions. To have any value,

interviews should be conducted or supervised by trained

individuals, be structured to follow a previously agreed set of

questions mirroring the person specification or job profile, and

allow candidates the opportunity to ask questions.

2.3.3 Orientation, Training and Development

Once employees are selected, they must be prepared to do their

jobs, which is when orientation and training come in. Orientation

means providing new employees with basic information about the

26

employer. Training programs are used to ensure that the new

employee has the basic knowledge required to perform the job

satisfactorily. Orientation and training programs are important

components in the processes of developing a committed and

flexible high-potential workforce and socializing new employees.

In addition, these programs can save employers money, providing

big returns to an organization, because an organization that

invests money to train its employees results in both the

employees and the organization enjoying the dividends (Cliff

Notes, 2012).

Orientation programs not only improves the rate at which

employees are able to perform their jobs but also help employees

satisfy their personal desires to feel they are part of the

organization's social fabric. The HR department generally orients

newcomers to broad organizational issues and fringe benefits.

Supervisors complete the orientation process by introducing new

employees to coworkers and others involved in the job. A buddy or

mentor may be assigned to continue the process. On the other

27

hand, after specific training goals have been established,

training sessions should be scheduled to provide the employee an

opportunity to meet his or her goals. Most training takes place

on the job due to the simplicity and lower cost of on-the-

job training methods. Two popular types of on-the-job training

include the following: Job rotation by assigning people to

different jobs or tasks to different people on a temporary basis,

employers can add variety and expose people to the dependence

that one job has on others. And mentoring programs or

apprenticeship where a new employee frequently learns his or her

job under the guidance of a seasoned veteran (Cliff Notes, 2012).

2.3.4 Career Planning and Development Process

Career planning and development are concepts which include all

those events either happening to or initiated by individuals

which affect a person's progress or promotion, higher widening

and/or changing employment possibilities and acquiring a

different and normally higher status, better conditions of

28

service or increased satisfaction with the job (Waterman et al.,

1994).

Career development is the process which enables an organization

to meet its current and projected manpower requirement, through

provision of career opportunities for its employees. It aims at

optimizing the effectiveness of human resources of the

organization, through planned development and their knowledge,

skills and potentialities. Career planning refers to planned and

systemized progression of events and development in the field of

work or vocation of individuals during the employable periods of

their life. This definition seeks to balance the two dimensions

i.e., the objective of the organization and the individual

ambitions of getting to the top. Career, it cannot be forgotten,

is intensely particularistic in its basics; it must relate to an

individual without whom it loses all relevance (Wheeler and

Waddel, 1996).

Career planning or development is primarily 'proactive' in the

sense that it must anticipate and take steps to address the29

future, rather than be overtaken by emerging situations. It does

not belong to the realm of 'crisis management' nor is it related

to mere 'maintenance' functions; it is the other name of 'future

management'. The process involves smooth succession and

symbolizes systematized continuity (Wheeler and Waddel, 1996).

.

Since the most valuable asset of an organization is human

resources which generate ' the needed manpower, it is essential

to retain them and develop them to their fullest potential.

Career planning and development benefits both the individual and

the organization. Adequate succession planning helps an

organization by providing continuity and generating employee

motivation. Also if the organization is to survive and prosper in

an ever changing environment, its human resources must be in a

constant state of development. The career, planning and

development process is a continuous endeavor. If 'career' means a

continuous and long stretch of professional work-life covering a

series of jobs or positions of higher responsibility

30

'commensurate with time and experience, then there should be some

planning, imparting management programmes for the incumbents

whether they are operated through 'cadre' system or 'position-

classification'. This begins with the placement of person through

recruitment and goes on to ensure their growth potentiality

through training, promotions, and adaptation of proper retention

system (Waterman et al., 1994).

2.3.5 Performance Appraisal Process

Performance appraisals are one of the most important requirements

for successful business and human resource policy (Kressler,

2003). Rewarding and promoting effective performance in

organizations, as well as identifying ineffective performers for

developmental programs or other personnel actions are essential

to effective to human resource management (Pulakos, 2003). The

ability to conduct performance appraisals relies on the ability

to assess an employee’s performance in a fair and accurate

manner. Evaluating employee performance is a difficult task.

31

Once the supervisor understands the nature of the job and the

sources of information, the information needs to be collected in

a systematic way, provided as feedback, and integrated into the

organization’s performance management process for use in making

compensation, job placement, and training decisions and

assignments (London, 2003).

Performance appraisals should focus on three objectives:

performance, not personalities; valid, concrete, relevant issues,

rather than subjective emotions and feelings; reaching agreement

on what the employee is going to improve in his performance and

what you are going to do (McKirchy, 1998). Each employee should

be allowed to participate in periodic sessions to review

performance and clarify expectations. Both the supervisor and the

employee should recognize these sessions as constructive

occasions for two-way communication. Sessions should be scheduled

ahead of time in a comfortable setting and should include

opportunities for self-assessment as well as supervisor feedback.

These sessions will be particularly important for new employees

32

who will benefit from early identification of performance

problems. Once these observations have been shared, the

supervisor and employee should develop a mutual understanding

about areas for improvement, problems that need to be corrected,

and additional responsibilities that might be undertaken. When

the goals are identified, a plan for their achievement should be

developed. The plan may call for resources or support from other

staff members in order to meet desired outcomes. In some cases,

the plan might involve additional training. The supervisor should

keep in contact with the employee to assure the training

experiences are producing desired impact (Barr, 1993).

A portion of the process should be devoted to an examination of

potential opportunities to pursue advancement of acceptance of

more complex responsibilities. The employee development goals

should be recognized as legitimate, and plans should be made to

reach the goals through developmental experiences or education.

Encouraging development is not only a supervisor's professional

responsibility, but it also motivates an employee to pursue

33

additional commitments. In addition, the pursuit of these

objectives will also improve the prospect that current employees

will be qualified as candidates when positions become available.

This approach not only motivates current performance but also

assists the recruitment of current employees as qualified

candidates for future positions (Barr, 1993).

2.3.6 Employee Compensation Process

Compensation is an essential and universal component of the

management process of every organization. Most organizations want

to fulfill their mission, achieve their objectives and maximize

return on their investment, particularly on their human capital.

Doing so requires that their compensation philosophy, design,

delivery and decisions be balanced, fair, focused, and understood

by their employee and potential employee constituencies (Gomez &

Welbourne, 1991).

All employers recognize the importance of attracting, hiring and

retaining employees with the skills, abilities and other

34

qualities necessary to achieve the goals of their organizations.

These skills, abilities and qualities are possessed by many

people whose personal characteristics—e. g., age, disability,

ethnicity, gender, nepotism, race, sexual orientation, veteran

status—may not be identical and should be irrelevant in making

hiring, compensation, advancement, and other human resource and

business decisions. Compensation is a key factor in attracting

and retaining women and people of color, vital and growing

components of the current and future workforce (Bishko, 1990).

Best practices in a fair compensation include: Communicating any

differentiation in pay practices clearly; Link pay ranges to

neutral, relevant factors; Link compensation to the

organization’s as well as the individual’s and/or team’s

performance and promoting an integrated view of rewards. It is

also important to develop tracking tools and processes to monitor

compensation criteria and decisions; directly link an

organization’s performance appraisal system to the compensation

system; routinely audit the outcomes of compensation systems

35

against legal and fairness standards. The other best practice

requires that managers are trained so that they understand basic

principles of compensation and the organization’s philosophy of

compensation (Von, 1993).

2.3.7 Occupational Health and Safety Process

Health and safety policies and programs are concerned with

protecting employees and other people affected by what the

company produces and does – against the hazards arising from

their employment or their links with the company. Occupational

health programs deal with the prevention of ill-health arising

from working conditions. They consist of two elements:

occupational medicine, which is a specialized branch of

preventive medicine concerned with the diagnosis and prevention

of health hazards at work and dealing with any ill-health or

stress that has occurred in spite of preventive actions; and

occupational hygiene, which is the province of the chemist and

the engineer or ergonomist engaged in the measurement and control

of environmental hazards. The achievement of a healthy and safe

36

place of work and the elimination to the maximum extent possible

of hazards to health and safety are the responsibility of

everyone employed in an organization, as well as those working

there under contract. The importance of healthy and safe policies

and practices is, sadly, often underestimated by those concerned

with managing businesses and by individual managers within those

businesses. But it cannot be emphasized too strongly that the

prevention of accidents and elimination of health and safety

hazards are a prime responsibility of management and managers in

order to minimize suffering and loss (Bibbings, 2003).

Close and continuous attention to health and safety is important

because ill-health and injuries inflicted by the system of work

or working conditions cause suffering and loss to individuals and

their dependants. In addition, accidents and absences through

ill-health or injuries result in losses and damage for the

organization. Managing health and safety at work is a matter of:

developing health and safety policies; conducting risk

assessments which identify hazards and assess the risks attached

37

to them; carrying out health and safety audits and inspections;

implementing occupational health programs; managing stress;

preventing accidents; measuring health and safety performance;

communicating the need for good health and safety practices;

training in good health and safety practices; and organizing

health and safety (Armstrong, 2006).

38

CHAPTER THREE: RESEARCH METHODOLOGY

3.1 IntroductionThis chapter discusses the methodology that the researcher

employed in the study. The methodology includes the research

design, the target population, the sampling design and the sample

size, the data collection instruments as well as the data

analysis techniques that were used to analyze the data.

3.2 Research designThe study adopted a survey of commercial banks in Kenya. The

researcher conducted a survey of selected commercial banks in

Kenya in order to establish the quality human resource management

practices adopted by them. A survey was more appropriate since

there was more than one bank involved in the study. The design

allowed the researcher to observe the elements in their natural

set up without manipulating them.

3.3 Population of the studyThere are 43 commercial banks currently operating in Kenya. The

43 banks formed the population of this research. The researcher

39

sampled out the banks that were surveyed from the 43 commercial

banks that are currently licensed to operate in Kenya.

3.4 Sample size and sampling proceduresThe researcher adopted systematic and stratified sampling to

arrive at the appropriate sample size. There are a total of 43

commercial banks in Kenya from which the sample was taken. From

the list of commercial banks, the researcher selected every

fourth bank to participate in the study. This led to a total of

10 banks that were included in the study. According to Mugenda

and Mugenda (2003) a sample size of at least 10% of the target

population is enough for the study. The 10 banks selected

represented 23.26% of the target population and was therefore

considered representative enough for this study. The study

targeted respondents from human resources department of the

selected banks. Four respondents will be selected from each bank.

No

.

Bank HR

4 Bank of India 4

8 Chase Bank (K) Ltd. 4

40

12 Co-operative Bank of Kenya Ltd. 4

16 Dubai Bank Kenya Ltd. 4

20 Family Bank Limited 4

24 Giro Commercial Bank Ltd. 4

28 Habib Bank Ltd. 4

32 Kenya Commercial Bank Ltd 4

36 NIC Bank Ltd 4

40 Standard Chartered Bank Kenya Ltd 4

TOTAL 40

3.5 Data collectionPrimary data was collected through a structured questionnaire.

The questionnaire was considered appropriate because it is easy

to administer. The questionnaire contained both open and closed

ended questions. It was administered through a drop-and-pick

method. The questionnaire was divided into three sections.

Section A contained questions on the personal information of the

selected respondents, section B sought data on quality human

resource management practices among commercial banks in Kenya

41

whereas the last section contained open ended questions where the

respondents indicated their views on human resource management

practices among commercial banks in Kenya.

3.6 ValidityValidity addresses the accuracy with which the research

instrument measures what it is supposed to. This study will use a

questionnaire and will test its validity by use of content

validity. This will be done through logical analysis which

involves careful and critical examination of the questions in the

questionnaire. The researcher will select a few human resource

managers from some commercial banks to examine the questionnaires

to ensure they have the right content.

3.7 ReliabilityThe research questionnaire used in this study should be able to

give reliable information that can be used in decision making. It

should therefore produce the same results if used by other

researchers. To determine the reliability of the research

questionnaire, a re-test of the same was done among few branches.

42

The results were compared to establish if there are any

variances.

3.8 Data analysisThe data collected from this study was subjected to both

quantitative and qualitative data. Frequencies and percentages

were generated from the descriptive data whereas qualitative

analysis was done for the qualitative data that was collected

from the open ended questions. The findings were presented in

graphs and tables.

CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION

4.1 IntroductionThis chapter presents the findings and their interpretation. A total

of 40 questionnaires were issued but only 30 were returned. This gives

a response rate of 75% which was considered enough for this study.

4.2 Demographic dataThe study sought to know the gender of the respondents who

participated in the study. From the table below, it is evident

that 60% of the respondents were males. The female respondents

constitute 40% .43

Table 4.1 Gender

Gender Frequency Percent

Male 18 60

Female 12 40

Total 30 100

The researcher was interested to know the education level of the

respondents. It can be seen from the findings as illustrated in

the chart below that majority of the respondents represented by

50% hold bachelors degrees. 30% hold diplomas whereas 20% have

Masters Qualifications.

Figure 4.1: Education

44

When the respondents were asked to state the extent to which they

agree with transparent recruitment as a quality human resource

management practice in their organization, 33% of the respondents

agreed that it is one of the quality human resource management

practices in their banks.

Table 4.2: Transparent recruitment

Response Frequency Percent

Strongly agree 10 33

Agree 10 33

Not sure 5 17

Disagree 2 7

Strongly disagree 3 10

Total 30 100

The respondents were required to indicate the extent to which

they agreed that there was fair selection in their banks. The

findings as illustrated in the table below indicate that 66% of

the respondents agree that there is fair selection in their

organizations.

Table 4.3: Fair selection process

Response Frequency Percent45

Agree 20 66

Not sure 3 10

Disagree 2 7

Strongly disagree 5 17

Total 30 100

The study sought to establish the extent to which the respondents

considered proper induction as a quality human resource

management practice in their organizations. It can be seen from

the chart below that 60% of the respondents consider it as a

quality human resource practice in their organizations.

Figure 4.2: Induction

46

It was established from the study that regular training of

employees is considered as a quality human resource management

practice among commercial banks in Kenya. 66% of the respondents

who participated in the study supported this practice.

Table 4.4: Regular Training

Response Frequency Percent

Agree 10 66

Not sure 7 24

Strongly disagree 3 10

Total 30 100

47

On fair compensation as a quality human resource management

practice, 50% of the respondents agreed that it is indeed one of

the quality human resource management practices among commercial

banks in Kenya.

Table 4.5: Fair compensation

Response Frequency Percent

Agree 15 50

Not sure 10 33

Disagree 5 17

Total 30 100

The researcher was interested in establishing whether the

respondents consider career planning as one of the quality human

resource management practices. The findings in the table below

indicate that 33% of the respondents agree that career planning

is a quality human resource management practice in their banks.

Table 4.6: Career planning

Response Frequency Percent

48

Strongly agree 10 33

Agree 10 33

Not sure 7 24

Strongly disagree 3 10

Total 30 100

The study sought to know whether the respondents consider fair

appraisal and health and safety as quality human resource

management practices in their organizations. Form the findings

illustrated below, it is clear that majority of the respondents

agree that these two practices are considered as quality human

resource management practices in their banks.

49

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSIONS ANDRECOMMENDATIONS

50

5.1 IntroductionThis chapter presents the findings of the study in summary form.It also shows the conclusions that have been drawn as well as therecommendations made by the researcher concerning quality humanresource management practices among commercial banks in Kenya.The recommendations and conclusions are based on the findings.

5.2 Summary of findings The study established that majority of the employees in

commercial banks hold bachelors degrees. However there are others

who hold diplomas and masters degrees even though the numbers are

not big. When the respondents were asked to state the extent to

which they agree with transparent recruitment as a quality human

resource management practice in their organization, majority

agreed that it is one of the quality human resource management

practices in their banks.

Fair selection was also found out to be among the quality human

resource management practices in commercial banks in Kenya.

Proper induction was also established as a quality human resource

management practice in commercial banks.

It was established from the study that regular training of

employees is considered as a quality human resource management

practice among commercial banks in Kenya. On fair compensation as

a quality human resource management practice, majority of the

respondents agreed that it is indeed one of the quality human

resource management practices among commercial banks in Kenya.

51

Career planning was also found out to be one of the quality human

resource management practices among commercial banks in Kenya.

The study sought to know whether the respondents consider fair

appraisal and health and safety as quality human resource

management practices in their organizations. Form the findings

illustrated below, it is clear that majority of the respondents

agree that these two practices are considered as quality human

resource management practices in their banks.

5.3 ConclusionsIt can be concluded from the study that most commercial banks in

Kenya adopt various quality human resource management practices.

Among the most prominent practices include: career planning,

training and development; employee health and safety as well as

fair compensation for work done.

5.4 RecommendationsEven though most commercial banks in Kenya practice quality human

resource management practices, the level of responses indicates

that there is a lot that needs to be done. There is need for

banks to improve on the practices.

5.5 Suggestions for further researchA comparative study with another industry will be appropriate so

as to find out the similarities and differences.

52

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57

APPENDICES

Appendix I: Research Budget

Activity Description Amount (Ksh0

Transport For data collection and analysis

3000

Printing and photocopying and binding

For rough drafts, questionnaires and final copy

4000

Miscellaneous expenses

To cater for any adjustments

3000

Total Expenditure 10000

58

Appendix II: Commercial banks in Kenya

COMMERCIAL BANKS IN KENYA1 African Banking Corporation Ltd.2 Bank of Africa Kenya Ltd.3 Bank of Baroda (K) Ltd.4 Bank of India 5 Barclays Bank of Kenya Ltd.6 CFC Stanbic Bank Ltd.

59

7 Charterhouse Bank Ltd

8 Chase Bank (K) Ltd.

9 Citibank N.A Kenya

10 Commercial Bank of Africa Ltd.

11 Consolidated Bank of Kenya Ltd.

12 Co-operative Bank of Kenya Ltd.

13 Credit Bank Ltd.

14 Development Bank of Kenya Ltd.

15 Diamond Trust Bank Kenya Ltd.

16 Dubai Bank Kenya Ltd.

17 Ecobank Kenya Ltd

18 Equatorial Commercial Bank Ltd.

19 Equity Bank Ltd.

20 Family Bank Limited

21 Fidelity Commercial Bank Ltd

22 Fina Bank Ltd

23 First community Bank Limited

24 Giro Commercial Bank Ltd.

25 Guardian Bank Ltd

60

26 Gulf African Bank Limited

27 Habib Bank A.G Zurich

28 Habib Bank Ltd.

29 Imperial Bank Ltd

30 I & M Bank Ltd

31 Jamii Bora Bank Limited.

32 Kenya Commercial Bank Ltd

33 K-Rep Bank Ltd

34 Middle East Bank (K) Ltd

35 National Bank of Kenya Ltd

36 NIC Bank Ltd

37 Oriental Commercial Bank Ltd

38 Paramount Universal Bank Ltd

39 Prime Bank Ltd

40 Standard Chartered Bank Kenya Ltd

41 Trans-National Bank Ltd

42 UBA Kenya Bank Limited

43 Victoria Commercial Bank Ltd

61

Source: http://www. Centralbank.go.ke

Appendix III: Research QuestionnaireSection A: Demographic information of respondent

1. Gender

a) Male

b) Female

2. Academic qualification

a) Diploma

b) Bachelors degree

c) Masters

Section B: Quality Human resource management practices

Please indicate the extent to which you agree with the following statements as quality human resource practices in your organization.

Use the scale of: 1= strongly agree 2= Agree 3=Not sure 4= Disagree 5=strongly disagree

1 Practices 1 2 3 4 5

1 Transparent recruitment

2 Fair selection process

3 Proper induction

4 Regular training

5 Fair compensation for work done

6 Career planning and development for all employees

62

7 Fair appraisal of employees

9 Better health and safety of employees

63