FACTORS AFFECTING EFFECTIVE IMPLEMENTATION

OF SOUND FINANCIAL MANAGEMENT IN COUNTY

GOVERNMENTS IN KENYA: A CASE OF KIAMBU

COUNTY

BY

STANLEY MAGU NJIHIA

UNITED STATES INTERNATIONAL UNIVERSITY -

AFRICA

SPRING 2017

FACTORS AFFECTING EFFECTIVE IMPLEMENTATION

OF SOUND FINANCIAL MANAGEMENT IN COUNTY

GOVERNMENTS IN KENYA: A CASE OF KIAMBU

COUNTY

BY

STANLEY MAGU NJIHIA

A Research Project Report Submitted to the Chandaria School

of Business in Partial Fulfillment of the Requirement for the

Degree of Masters in Business Administration (MBA)

UNITED STATES INTERNATIONAL UNIVERSITY-

AFRICA

SPRING 2017

ii

STUDENT’S DECLARATION

I, the undersigned, declare that this is my original work and has not been submitted to any

other college, institution, or university other than the United States International

University in Nairobi for academic credit.

Signed: ________________________ Date: _______________________

Stanley Magu Njihia (ID: 648416)

This project has been presented for examination with my approval as the appointed

supervisor.

Signed: ________________________ Date: _______________________

Kepha Oyaro

Signed: ________________________ Date: _______________________

Dean, Chandaria School of Business

iii

COPYRIGHT

All the rights reserved. No part of this report may be photocopied, recorded or otherwise

reproduced, stored in a retrieval system or transmitted in any electronic or mechanical

means without prior permission of the copyright owner.

Copyright © 2017

iv

ACKNOWLEDGEMENT

I want to start by expressing gratefulness to the Lord Almighty for the quality,

fearlessness, and direction he has offered to me amid my graduate report. I likewise give

acknowledge and recognize my extraordinary family for the unrestricted bolster they

offered me, and to my supervisor, Kepha Oyaro for his understanding and inspiration for

assisting me in reviewing this report May God favor him abundantly.

v

DEDICATION

I would like to dedicate this proposal to my family and friends for their, motivation, and

support during this MBA program. Thank you.

vi

ABSTRACT

The study sought to analyse factors affecting effective implementation of sound financial

management in County governments in Kenya. This was guided by the following

research questions: How does Organizational Leadership affect sound financial

management in County Governments? How does Organizational Culture affect sound

financial management in County governments? What are the challenges and solutions

affecting sound financial management in County governments?

The study utilised a descriptive study to establish respondent’s perceptions in relation to

sound financial management in Kiambu County. The target population for this study were

county and sub-county administrators, finance managers, and accountants in Kiambu

County who are 340. From the initial target population and using the sample size formula

a sample of 138 respondents was drawn. Primary data was collected by administered

questionnaires and out of the 138 data collection instruments issued just 100 were

finished and returned. This offered a response rate of 72.5% which was adequate for this

study.

An analysis of the first objective revealed that the county government has employed

competence and strategies to survive and there is a long term strategic vision for services

and this raises concerns for the performance of the county. The findings also reveal that

the management has taken an active role in developing the mission statement and to

easily accomplish that the Kiambu County not have segmented their investment portfolio

into sub-portfolios with different investment objectives and strategies.

Analysis of the second objective revealed that the staff are aware of organizational culture

while and it is also believed that the culture affects the setting objectives and resources

management to achieve goals. Despite this pit fall, the organization’s management have

introduced operations tips to improve productivity and the norms and values that

employees should conform to. The county was also been acknowledged for conducting

an-in-depth analysis for employees to find out what factors increases job performance.

An analysis of the last objective revealed that among the challenges experienced is that it

is difficult to provide decision makers with relevant, quality, timely and credible

information and that nearly all reforms go through the resistance stage especially when

they touch on budgets and finances. There is also need for staff to be motivated to use the

information to make decisions away from traditional processes and fears must be

addressed that punishment was used for non-performance issues only.

vii

The study concluded that county government has employed competence and strategies to

survive and although that is the case there are still challenges that the county face in

proving sufficient and clear structures involving all stakeholders. It was also concluded

that county staff are aware of organizational culture that affects the setting of objectives

and resources management to achieve goals. The organization’s management have

introduced operations tips to improve productivity and the norms and values that

employees should conform to. Finally, the study concluded that among the challenges

experienced was difficulty to provide decision makers with relevant, quality, timely and

credible information and that nearly all reforms go through the resistance stage especially

when they touch on budgets and finances.

The study recommends that Kiambu County need to segment their investment portfolio

into sub-portfolios with different investment objectives and strategies; this will ensure

that the firm is covered in case of financial risks. The county also need to do regular

benchmark of their performance against an external benchmark so as to gauge the rate of

performance to other counties. Also the study recommends that the county needs to take

ethical issues seriously and the institution need to gauge employees’ consistency by their

ethical business practices. On matters of communication, the organization needs to set up

a proper effective communication for the organization. Employees also need to adapt

to evolving circumstances although there is a need to change employee attitudes to avert

the challenges.

The study recommended that similar studies done in the other 46 counties in order to

generalize the findings. The study also recommends that future studies should be do on

establishing the financial risk management in county governments.

viii

TABLE OF CONTENT

STUDENT’S DECLARATION .................................................................................... ii

COPYRIGHT ............................................................................................................... iii

ACKNOWLEDGEMENT ............................................................................................ iv

DEDICATION................................................................................................................ v

ABSTRACT ................................................................................................................... vi

LIST OF TABLES ......................................................................................................... x

ACRONYMS AND ABBREVIATIONS ..................................................................... xi

CHAPTER ONE ............................................................................................................ 1

1.0 INTRODUCTION.................................................................................................... 1

1.1 Background of the Problem ....................................................................................... 1

1.2 Statement of the Problem ........................................................................................... 3

1.3 Purpose of the Study .................................................................................................. 4

1.4 Research Questions .................................................................................................... 4

1.5 The Significance of the Study .................................................................................... 4

1.6 Scope of the Study ..................................................................................................... 6

1.7 Definition of Terms.................................................................................................... 6

1.8 Chapter Summary ...................................................................................................... 7

CHAPTER TWO ........................................................................................................... 8

2.0 LITERATURE REVIEW ....................................................................................... 8

2.1 Introduction ................................................................................................................ 8

2.2 How Organizational Leadership Effects Sound Financial Management ................... 8

2.3 How Organizational Culture Effects Sound Financial Management ....................... 15

2.4 Challenges and Solutions Affecting Sound Financial Management........................ 19

2.5 Chapter Summary .................................................................................................... 23

CHAPTER THREE ..................................................................................................... 24

3.0 RESEARCH METHODOLOGY ......................................................................... 24

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

3.2 Research Design....................................................................................................... 24

3.3 Population and Sampling Design ............................................................................. 25

3.4 Data Collection Methods ......................................................................................... 27

ix

3.5 Research Procedures ................................................................................................ 28

3.6 Data Analysis Methods ............................................................................................ 28

3.7 Chapter Summary .................................................................................................... 29

4.0 RESULTS AND FINDINGS ................................................................................. 30

CHAPTER FOUR ........................................................................................................ 30

4.1 Introduction .............................................................................................................. 30

4.2 Demographic Information ........................................................................................ 30

4.3 Effects Of Organizational Leadership On Sound Financial Management ............... 32

4.4 Effects Of Organizational Culture On Sound Financial Management ................... 34

4.5 Challenges and Solutions of Sound Financial Management.................................... 37

4.6 Sound Financial Management.................................................................................. 39

4.7 Regression Analysis ................................................................................................. 40

4.8 Chapter Summary .................................................................................................... 41

CHAPTER FIVE ......................................................................................................... 43

5.0 DISCUSSIONS, CONCLUSION AND RECOMMENDATION ...................... 43

5.1 Introduction .............................................................................................................. 43

5.2 Summary .................................................................................................................. 43

5.3 Discussion ................................................................................................................ 45

5.4 Conclusions .............................................................................................................. 50

5.5 Recommendation ..................................................................................................... 51

REFERENCES ............................................................................................................. 52

APPENDIX I: INTRODUCTION LETTER ............................................................. 59

APPENDIX II: QUESTIONNAIRE .......................................................................... 60

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LIST OF TABLES

Table 3.1: Response Rate ................................................................................................... 26

Table 3.2: Sample size ....................................................................................................... 28

Table 4.1: Response Rate ................................................................................................... 30

Table 4.2:Gender................................................................................................................ 30

Table 4.3: Ages .................................................................................................................. 31

Table 4.4: Duration worked ............................................................................................... 31

Table 4.5: Designation ....................................................................................................... 32

Table 4.6: Level of Education ............................................................................................ 32

Table 4.7: Organizational Leadership ................................................................................ 33

Table 4.8: Organizational Culture...................................................................................... 36

Table 4.9: Challenges and Solutions of Sound Financial Management ............................ 38

Table 4.10: Sound Financial Management ........................................................................ 39

Table 4.11: Model Summary ............................................................................................. 40

Table 4.12: Summary of One-Way ANOVA Results ........................................................ 40

Table 4.13: Regression Coefficients of Sound financial management and Predictive

Variables ............................................................................................................................ 41

xi

ACRONYMS AND ABBREVIATIONS

ANOVA: Analysis of variances

SD: Standard Deviation

SPSS: Statistical Package for social Science

1

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Problem

Historically governments have had the tendency to hold onto absolute power and

centralize the decision making for the whole country. However, in the recent past

countries, both unitary and federal have increasingly pushed for reduction of powers

vested in central governments by devolving power to regional and local governments in

what is known as devolution or decentralization. In the United States, state rights

supporters pushed for diffusion of power from Washington, D.C, to state governments

(Hueglin & Fenna, 2015).

This trend has found its place in recent times throughout the world, though perhaps the

most notable being the in France in the 1980’s and in the United Kingdom in the late

1990’s (Castells, 2014). Winsemius and Guntram (2013) notes that this has attracted a

whole new way in which some National governments have reacted. Some have become

tolerant to divergent views and democracy while some have just stood their traditional

grounds vehemently. Haynes (2015) with devolution, responsibilities have been shifted

to locally manageable levels creating political stability and localized decision making to

deal with unique needs.

Kenya adopted a new system of governance in August 2010 under the new constitution.

The new constitution provided for a devolved system of government that consists of both

National and County governments (Ong’olo & Awino, 2013). One of the key aims of the

devolution was to provide a decentralization of the key functions of national government

including financial management. The constitution stipulated how funds would be shared

between the two (Dafflon, 2015). This was done, however counties have had numerous

challenges absorbing this funds let alone spending them. The financial responsibility

tasked to county managers is one of the key and poorly managed devolved functions

forming the backbone of this paper.

Hayes (2014) explained that financial management may broadly be defined as an efficient

and effective way of managing funds to accomplish certain organizational goals and

objectives, and is a specialized function that top management concerns itself with. Hayes

2

adds that financial management means planning, directing, organizing and controlling the

financial activities such as procurement and utilization of funds of the enterprise. On the

other hand, Bajpai (2016) notes that finance management basically entails; ensuring the

adequate and regular flow of funds to the concern, giving adequate returns to stakeholders

which primarily relies on the earning capacity, share market price, shareholder

expectations, and optimal fund utilization. The world over, countries are in the process of

strengthening their political democracy; however, the changes have not been automatic

and in some instances the reverse has actualized, say in countries like Pakistan and

Gambia where democratic governments have been overthrown through military coups

(Slimbach,2012).

The reason behind this has been rather simple, a disgruntled public due to widespread

corruption by the so called “democratic” politicians. More generally, the public

awareness of the widespread corruption in virtually every continent has led to the need

and focus on institution restructuring and more importantly financial accountability.

Public financial management is a discipline whose focus solely anchors in management of

public organizations at the different levels of operation (Andrews, 2011).

Most public-sector entities find themselves in somewhat seriously constrained budgetary

allocations in terms of resources in light of the existing and future development needs.

The situation is further worsened by high pressure exerted by the more informed public to

show what the public sector has achieved (Francesca & Sylvain, 2010). This creates the

need to analyze how effectively sound financial management is applied in the public

sector. Given the circumstances one would question how authorities are able to use the

financial resources for the common good and still maintain accountability and

transparency. Lockwood (2010) notes that public managers must understand recognize

and apply sound financial management skills if any significant development is to be

achieved.

Overhauling the existing financial systems in the public sector may very well be as a

result of outside forces like changing policies, change in management, restructuring,

mergers and splits of the public agencies. These kinds of changes require decisive and

large scale strategic change to regain congruence between the organizations goals and the

environment (Sierak, 2015). A core principle of any public organizations is the level of

3

preparedness to manage its funds efficiently and as effectively as possible as there are

mostly hierarchical decisions, and largely diversified when it comes to decision making.

Jarrett (2010) adds that sound financial management must be led from the top and that it

is solely a managerial decision to implement it. Organizations do not fail managers do.

While the economy can tolerate private organizations that cease to exist when they are no

longer profitable, many public organizations, especially local governments, are expected

to stay in existence, and this requires attention to their financial health asserts (Sierak,

2015). For any public organization, financial condition can be defined as the ability to

meet its expenditure needs with available resources and hence it is prudent to keep a keen

eye on how matters financial are transacted to eradicate any chance of collapsing

economies.

Kiambu County lies among the 47 counties in the Republic of Kenya. It is located in the

central region of Kenya and covers a total area of over 2,600 Km2 according to the 2009

Kenya Population and Housing Census. Kiambu County constitutes twelve

constituencies; “Gatundu South, Gatundu North, Juja, Thika Town, Ruiru, Githunguri,

Kiambu, Kiambaa, Kabete, Kikuyu, Limuru and Lari”. The county's top leaders are

Governor William Kabogo, County Commissioner Wilson Njega, Senator Paul

Wamatangi and Women Representative Anna Nyokabi.

1.2 Statement of the Problem

In the recent years, sound financial management has become a necessity and actually in

some instances a requirement for public institutions. The present day is both competitive

and dynamic and this has prompted most of the public organizations to rethink their

strategy both operational and financial in order to remain relevant (Gunasekaran & Ngai,

2012). Public institutions worldwide are under pressure to increase efficiency and deliver

improved and integrated services, due to increased societal demands by their citizens and

the heightened media attention critical of government inefficiencies in service delivery

(Central, 2003).

Mbugua (2016) highlights that when the County Government of Kiambu started the

Financial Bill public participation that was geared towards identifying issues that would

help formulate policies to fast track development for the business community and the

County as a whole, problems arose. The County has been embroiled in unending trader

protests due to hiked levies leading to simultaneous public hearings that resolved that

4

traders where only willing to pay the levies if they were involved in the formulation of

financial management policies. Memoranda and pleas raised bore no fruit and

participation was seen as the only way out. However not much can be said to have

happened even after incorporating the young entrepreneurs in participating in both

formulation and integration of the Public Finance policies in the County.

This therefore has shown that lack of proper financial management has led to the woes

that are being experienced in the County in terms of lack of confidence in the existing

governance. Since these governments are funded by tax systems it is only fair that the

system is efficient and friendly throughout till the enjoyment of the public services to the

tax payer. Unfortunately, this is yet to be seen. To achieve that, a well trained and

managed-staff is required because the final level of the constituent parts of the public

finance sector depend on the quality of the staff.

Good governance is therefore crucial in financial processes and decision making for

public sector bodies to win public trust hence the need to evaluate the factors that have

hindered the effective implementation of sound financial management policies.

1.3 Purpose of the Study

The purpose of this study was to determine the factors affecting effective implementation

of sound financial management in County governments in Kenya.

14 Research Questions

1.4.1 How does Organizational Leadership affect sound financial management in

County Governments?

1.4.2 How does Organizational Culture affect sound financial management in County

governments?

1.4.3 What are the challenges and solutions affecting sound financial management in

County governments?

1.5 The Significance of the Study

The findings of this study will be beneficial but not limited to;

5

1.5.1 County government of Kiambu

The study is going to be beneficial to the County Government of Kiambu as the study will

focus on the data collected from the Sub-County’s in its jurisdiction. The study will not

only shed some light into the challenges that the County has faced in terms of financial

management but also some suggested long term solutions to address and resolve the said

challenges. The futuristic approach in the suggested solutions will cut across all the areas

financial.

1.5.2 National government

With so me functions now devolved to the County government and the National

government having to fund some of these functions, the study will create a great insight

of how the funds are spent and how regulation can be used to mitigate losses. In the

instance for example the National government has to provide guidelines on how funds are

to benefit the citizens then such a study will be of great use in determining allocation and

also accountability.

1.5.3 Other County governments and Public institutions

Most public institutions adhere to the same code of conduct and County governments are

no exception as the financial management policies are more or less shared and so is the

culture. This study will be of great use to these institutions when developing budgets and

financial systems to ensure sound financial management is part and parcel of the work

ethics.

1.5.4 Financial partners

The County governments as well as other public institutions have financial partners such

as banks, donors and the general business community who have varied interests as to how

they conduct their businesses.

This study will provide the much needed insight on the financial management challenges

that are faced by the aforementioned institutions and therefore help formulate clearly cut

out regulations for funding.

6

1.5.5 Other researchers

Implementation of sound financial management is an area of study that has been studied

immensely therefore, the study will add a pool of knowledge and contribute to further

research.

1.6 Scope of the Study

The study was aimed at determining the factors and challenges affecting effective

implementation of sound financial management in Kiambu County in Kenya. The study

intended to carry out the research based on the population of 340 AIE holders who handle

finances at the county level. The study focused on County and Sub-County

administrators, finance managers, accountants and any other representatives that concern

themselves with financial matters.

The period of the study was between January and March 2017 and given the sensitivity of

the matter in question, the researcher assured confidentiality of the respondents to ease

answering of the questions. The challenges faced was in terms of collecting information

this was curbed by seeking other sources of information such as Acts of Parliament,

books, newsletters, books, reports, White papers and Journals.

1.7 Definition of Terms

1.7.1 Public Organization

Organizations owned and controlled by members of the political communities, their

activities are funded through taxation and they seek to meet the needs of its citizens

(Central, 2003).

1.7.2 County/ Devolved Government

“Means the transfer of powers from a higher or central order of government to a regional

or central order of government to a regional or local order of government” (Sierak, 2015).

1.7.3 Public Service

“Public services are those which public bodies (such as central and local government

either provide themselves or commission others to provide” (World Bank, 2005).

7

1.7.4 Employee performance

“How well an individual executes their job duties and responsibilities” (Mondy et al,

2008).

1.7.5 Leadership

This is a practical skill encompassing the capability of an individual to guide others in a

teams or entire organization (Winsemius & Guntram, 2013)

1.7.6 Financial Management

This is the efficient and effective management of funds in such a manner as to enable a

firm accomplish its objectives (Bajpai, 2016)

1.7.7 Organizational Culture

This represents a system of shared assumptions, values, and beliefs, which an

organization and its people prescribe to. These virtues strongly influence the individuals

and dictate not only how they dress, but also how they act, and perform their jobs

(Dafflon, 2015).

1.8 Chapter Summary

This chapter provides the background information on the factors and challenges affecting

effective sound financial management implementation in County governments. The

background of the study suggests that much is yet to be done to achieve sound financial

management to be developed by the managers of the different County institutions not

only to bring the much-needed change but also to win the public trust back in general.

The chapter discusses the problem statement and identifies the challenges encountered in

implementation of sound financial management practices. The research questions have

been analyzed and the significance of the study also demonstrated. The scope of the study

has also been outlined to give a much clearer understanding of the context.

The next chapter focuses in depth on the research questions which form the literature

review. Chapter 3 covers the procedure and technique that will be used to collect, process

and analyze data. Chapter 4 will present the data analysis interpretation and presentation

of the study findings. Chapter 5 summarizes the findings of the study.

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CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

This chapter explores both the theoretical and empirical literature on sound financial

management implementation in County governments. The chapter is structured in such a

way that the research questions presented in chapter one are discussed and analyzed in

depth. The chapter begins with a presentation of literature of how organizational

leadership and culture affect sound financial management in County Governments then it

is followed by challenges and solutions. The last section covers the summary and the

research gaps.

2.2 How Organizational Leadership Effects Sound Financial Management

Atieno (2012) asserts that leaders are role models who influence the culture, values,

thoughts and actions of the organization and its people. The leadership style practiced by

managers greatly influences the performance and productivity at the work place. Fullan

(2011) notes that employees empathize with each other and demand respectful treatment

of all employees. Senior leaders should set the example for these behaviors by

demonstrating respect towards others while holding people accountable for doing the

same. Lewis (2011) notes that respect for others can be demonstrated

through professional communication and internal policies that are honoring to employees.

For example, if the organization is forced to make some difficult changes that impact an

employee’s jobs, those changes should be communicated in a sensitive way to honor the

employees who may be impacted by the change.

As indicated by Tickner (2010) county governments should work on their personal

leadership brand strategy. This is an exclusive and a specific approach of a leader to

address challenges and manage his/her transactions with their subordinates or followers.

The best part of having a leadership brand is that it allows the flexibility to the leaders to

define their own leadership objectives and then position themselves appropriately as per

the need and situation. For example leadership brand which resolute to, determined,

persuasive and ready to take risks which can help Equity turn around. Mahatma Gandhi’s

9

leadership brand was that of integrity, honesty, principles, strength of character and above

all truth (Kouzes & Posner, 2011).

It is essential for a leader to practice his/her leadership brand in thoughts and actions.

How can a leader build up a leadership brand if they do not have one already. A

leadership brand helps distinguish leaders and outlines their approach, values, beliefs etc.

According to Amabile (2004), the following steps are essential in achieving this. The first

step definitely is identifying and establishing the results one wants to achieve by the end

of a specific time with a focus on preserving the interests of key stakeholders. The second

step becomes those distinguishing features with which one wants to be known as a leader.

For instance one might identify drive for result as one’s core strength area and can create

a leadership brand based on the same. The next step becomes defining your identity. One

might chose two or three word phrases to define their approach to leadership like

“Innovating to Excel”. The last step becomes coming up with a leadership statement

which conjuncts what one wants to be known for and what one wants to achieve.

It is also important for leaders to check their leadership brand with seniors, subordinates

and other stakeholders to understand their expectations from the role; and if any

disconnect is pointed out, it needs to be incorporated. Apart from the above aspects,

leaders need to role model themselves and redefine their perceptions and ambitions to

encompass the entire institution, which they represent. A leader needs to put the interests

of the organization and stakeholders before his/her personal ambition and goals and strive

to create success, which is sustainable and does not need their constant presence (Hueglin

& Fenna, 2015).

The leaders need to understand that a personal leadership brand cannot be created

overnight but credibility is earned the hard way, through years of perseverance. Once a

leadership brand is created its acceptance and stability is established only after results are

achieved. Therefore, if a leader identifies certain goals but fails to achieve them, there are

no takers for that leadership brand, similarly if a leader displays behaviors contradictory

to what is outlined by his brand values, then also the credibility and respect of the brand is

lost (Winsemius & Guntram, 2013).

10

2.2.1 Strategic Leadership

In the last couple of decades there has been immense pressure for top executives to adopt

“Strategic Management” (Yukl, 2012). According to Bateman and Snell (2011), strategic

leadership forms the purpose and gives meaning to an organization. It basically involves

envisaging and anticipating a future for the organization or perhaps a government body as

is our case and working with others to secure a viable future. Rowe (2011) defines

leadership as the ability to influence others to voluntarily make day-to-day decisions that

enhance the long term viability of the organization, while at the same time maintaining its

short-term financial stability. Amos (2009) shares a similar view to that of Rowe and

defines strategic leadership as the ability understand the entire organization and the

environments within which they operate and using this understanding to create change

through people so as to place the organization in a position that will enable both long-

term and short-term viability.

In recent years, environments and markets have been extremely complex, turbulent and

uncertain. This has led most organizations to employ competence and strategies to

survive, sadly public organizations such as County governments have not been spared

even though they do not deal for profit. This traditional thinking has been thrown out with

the emergence of the ‘educated folk’. Leadership focus has become key determinant of

pushing performance in government especially on financial management; this is true

since organizations that embrace greater strategic leadership tend to achieve better

performance and organizational success.

Strategic Leadership has an element of focusing on the future by creating an expectation

that is better while still marinating today is standing as the foundation. A leader must

realize that their primary goal is to gain a thorough and all inclusive understanding of the

environmental conditions to anticipate future problems. It is marked by a systematic

concern for the whole organization, its evolution, changing aims as well as selection,

development and maintenance of the requisite resources and capabilities to enable it cope

and compete effectively (Boal & Hooijberg, 2011).

Nel (2013) further observes that the main organizational challenge is to provide sufficient

and clear structures that ensure that all stakeholders in the organization are familiar with

and are willing to embrace sound leadership practices. Practically this entails engaging

11

all stakeholders to engage in discussions and debates that outline the need and importance

of a good financial management strategy. This involves the identification of certain

patterns, trends and reactions that maybe elicited by the activation of strategic leadership.

It is important to take the necessary steps and action to make sure that, services and

products delivered meet the needs of both the internal and external customers, financially

in this matter. Matters that touch on empowerment and personal accountability are

important to build on quality needed for this level of strategic financial leadership.

According to Fulmer (2007), strategic leadership problems of current and future leaders

are: competition is coming from unexpected quarters. Because the rules of the business

game are changing with this competition, current leaders represent what the business

needed in the past and not the present or the future; the talent pipeline often lacks

sufficient numbers to replace leaders that are or soon will be leaving; the organization’s

expansion goals outstrip the amount of internal talent needed to support them;

globalization and increasing technological demands make the leader’s job more difficult

than ever; problems with strategic direction, organizational alignment and employee

commitment continue to exist and are exacerbated in the current competitive

environment; human resources and those responsible for leadership development feel

increased pressure to demonstrate value, particularly in terms of return on investment for

leader development, and other education and training initiatives; leadership development

initiatives are not integrated with business needs, and consequently, are of questionable

value to internal customers.

Just like in any industry the concept of core competence is made to support efficient

utilization and identification of the firm’s strength. It is assumed that core competence is

changed gradually However, according Clemons and Row (2009) established that firms

need to focus their roles systematically upon realizing what their core competencies are.

Previous study by Mintzberg (2010) established that the benefits of having core

competencies was very useful in the traditional manufacturing sector than it is now and

this has been to the invention of technology. On the other hand, Barney, (2007)

highlighted that strategy is critical for any firm to be successful in firms. This he said was

because strategy helps in identifying the objectives and helps in planning for the firm’s

resources. Chandler (2012) established that strategy helps in not only defining the

12

primacies in the firm’s vital functional areas but also aids in shaping how the organisation

describes itself including the strategic advantages.

There is importance in identify key strategic partners and involved in offering direction,

and a study by Kennedy and Keeney (2006) to investigate the strategic partnering

activities of software in small to medium sized enterprises and the results established that

strategic partnerships was initiated to enhance the firm synergy, credibility and

reputation. Kennedy and Keeney (2006) also established that such partnerships serve as

vital concept for entry into foreign market thus enable firms increase sales and reduce

overseas market risks.

2.2.2 Acting on Strategic Financial Leadership and Determining the Strategic

Direction

Several identifiable actions characterize strategic leadership that positively contributes to

effective use of the firm’s strategies (Dyck, et. al, 2002). It entails developing the long-

term vision of the firm which is predetermined. Typically, a long-term vision is five to ten

years. According to Prokesch (2001) the purpose and vision of an organization aligns the

actions of people across the whole organization. For the vision to be well activated people

in the organization ought to understand it and live it. It shall be able to drive and energize

people to be proud of their organization purpose and vision. Nel (2008) observes that

there lays a problem that may trap the leadership when they are so engrossed in their

vision that they fail to see new opportunities that may be arising in the dynamic

environment that may come along the way. It is therefore worth noting that when

strategic leadership fails to address matters arising in their full spectra the organizations

performance may be adversely affected and that will be ill prepared to face future

challenges. Providing for certainty and certainty is key element for leadership purposes. It

is prudent to create tension between the desired future and current elements that may

inhibit progress. To achieve this, leaders must keep all stake holders on toes to ensure that

it is virtually impossible for them to maintain the status quo at all times.

A long term strategic vision for services is important for an organisation and generally, a

strategic plan outlines the organization’s mission and describes the tangible activities that

support the goal accomplishment. Bryson et al. (2010) established that it is only after an

organization defines what it objective is, what its role is, and why it does it, it is then that

its strategic plan can be implemented as value addition to public value. Rumelt (2011)

13

also asserts that policy makers need to be thoughtful and premeditated and should ask

questions before goal setting. Such questions should be whether the organisation is the

best to deliver particular services, or whether to outsource them. Rumelt (2011) also adds

that informed decision making can deter leaders from coming up with condescending

targets and outcomes fostered by individual ambition. These sentiments are also

supported by Bryson et al. (2010) who admits that individual ambition is not resourceful

when it produces strategic plan goals that are not easily accomplished.

2.2.3 Managing the Organization Financial Portfolio

Probably the most important task for strategic leaders is effectively managing the firm’s

portfolio of resources, which can be categorized into financial capital, human capital,

social capital and organizational culture (Barney & Arikan, 2001). The financial resource

is a powerful tool for effective execution of strategic leadership. The organization must

acquire the proper financial management skills necessary to develop the particular areas

of responsibility. Grant (1996), core competencies are the resources and capabilities that

give an organization a competitive advantage over its rivals. The relatively unstable

market conditions resulting from innovations, diversity of competitors, and the array of

revolutionary technological changes occurring in the new competitive landscape have

caused core competencies rather than served markets to become the basis upon which

organizations establish their long-term strategies.

Candice, Cohen and Frank (2015) study on managing cash investment portfolios in firms

in the United States where only a third of the firms have segmented their investment

portfolio into sub-portfolios with different investment objectives and strategies. Only

25% agreed to regularly benchmark the performance of our investment portfolio against

an external benchmark. This contradicts Ongeri, Bitange, Matwere and Nyambega (2014)

established that benchmarking has the ability to enhance performance improvement that

was deemed appropriate in the banking industry in Kenya over time. According to their

study it was recommend that the benchmarking initiatives should include the various

views of the employees to improve the process.

In regard to effect of leadership on management, Mehra, Smith, Dixon and Robertson

(2006) contend that when a few associations look for proficient approaches to empower

them outflank others, a longstanding methodology is to concentrate on the impacts of

authority. Group pioneers are accepted to assume an essential part in forming aggregate

14

standards, helping groups adapt to their surroundings, and organizing aggregate activity.

This pioneer focused point of view has given important bits of knowledge into the

relationship amongst authority and group execution. A few reviews have investigated the

vital part of authority to examine how to utilize administration ideal models and utilize

initiative conduct to enhance authoritative execution (Judge & Piccolo, 2004; Keller,

2006). This is on the grounds that immaterial resources, for example, administration

styles, culture, aptitude and capability, and inspiration are seen progressively as key

wellsprings of quality in those organizations that can consolidate individuals and forms

and authoritative execution (Purcell et al., 2004).

Arguments hold that leaders develop skills and visions that enable them accomplish their

goals. Most organizations are made up of many individuals, groups and subsystems that

need to work independently to collectively achieve their goals. Management skills require

one to embrace a broad range of competencies related to facilitation and coordination

daily work in organizations. It includes goal setting, monitoring progress, system

development, solving problems and decision making.

According to Nel (2013), human capital is the knowledge and skills of an organization's

entire workforce. Strategic leaders are those who view organizational employees as a

critical resource on which many core competencies are built and through which

competitive advantages are exploited successfully. In the global economy, significant

investments will be required for the organization to derive full competitive benefit from

its human capital. Some economists argue that these investments are essential to robust

long - term growth in modern economies that depend on knowledge, skills, and

information. Continual, systematic work on the productivity of knowledge and knowledge

workers enhances the organizations ability to perform successfully. Employees appreciate

the opportunity to learn continuously and feel greater involvement with their community

when encouraged to expand their knowledge base. Developing employees result in a

motivated and well educated workforce. The type of workforce that is capable of

performing very well (Miller, 1996).

15

2.3 How Organizational Culture Effects Sound Financial Management

2.3.1 Sustaining effective Organizational Culture

According to Robins (2009) organizational culture refers to a system of common

meanings held by members that made a distinction among different organizations strong

organization cultures had a massive control over the behavior of its members. According

to Miner (2002), the comprehensive awareness of organizational culture was helpful in

enhancing the capacity to examine the behavior of organization which helped to manage

and lead. Schein (2009) argued that Organizational Culture was a design of basic shared

values, norms and expectations that governed the way people approached their work and

intermingled with each other. Lee and Yu (2004) suggest that any organization’s

management has a responsibility of introducing their mode of operations to their

employees. Effective orientation supported them to get familiar with the systems,

processes and procedures of the organization.

Organizational Culture entails a complex ideological set, symbols and values that are core

to the organization that are shared throughout and influence the manner in which business

is conducted. There has been evidence that has proved that a firm can develop core

competencies in its capabilities and how these capabilities can be leveraged by strategies

to produce the so desired outcomes. It is therefore prudent that since organizational

culture has a direct link to outcomes, employee behavior should be regulated and

controlled. It is a source of competitive advantage (Gupta & Govindarajan, 2000). Zellner

(1997) asserts that some organizations operate in areas that have little room for mistakes

and discontent is almost expressed immediately therefore it is important to note that

culture norms can translate to behavior patterns as well.

Drucker (1997) argues that organizations have a culture that shapes, define and establish

the yardstick to perceive and judge individual employee behavior. The leader must set the

proper precedence of the organizational culture and reinforce it by using a formal and

informal reward system as an influencing tool. It is often quite difficult to observe the

most important culture attributes that are most powerful unless one is part of the system

of the organization. Often the rules are unwritten and probably unspoken because they

form the day-to-day life at work and the employees come to their realization once they

are punished or rewarded. They shape the behavior and are most powerful when they are

outside the leadership’s awareness (Drucker, 1997).

16

Schein (2009) emphasizes the need for management to identify the norms and values that

the employees should conform to and this has shown to improve productivity. This

subsequently leads to employee commitment to norms, values and objectives which in

turn help improve the culture. In application of their cultures in organizational

management, leaders established strong relationships between their employees and

clients. Any organizational culture has to be transformative because one has to unlearn in

order to learn and this is the hardest part which most at times causes resistance to change

according to Schein (2009). Organizational culture is what employees perceive and the

patterns of beliefs, values and expectations that come with it. It is basically a pattern of

simple traditions that are developed by a group as it tries to survive problems both

internal and external. The culture must be unique and effective to be passed down to new

employees or members of the organization as the way to think, perceive and relate to

problems arising within the organization.

The County governments should involve shared expectations, values and attitudes and

exert influence on individuals, organizational processes and groups. The unique element

is quite important as no similar organizations share same values and culture. According to

John, Hunt and Richard (2008), just a person’s individual personality was unique the

same applied as there were no two organizations that had similar culture. According to

Denison, Haaland, and Goelzer (2004) culture contributes to the accomplishment of goals

in the organization although not all attributes work to the common good as they differ in

effect by global regions. Organizational culture affects the way people do things, set

objectives and run the necessary resources to achieve goals. It is that which that guides

the response to opportunities and threats that affect the organization. Adkins and Caldwell

(2004) argue out that job satisfaction was positively connected to the degree to which

employees fitted into both the overall culture and subculture in which they operated.

Robbin et al, (2010) stressed the importance of staff being aware of the organizational

culture. This was attributed to the numerous roles culture plays within an organization. It

offers employees identities, regulates their behaviours and attitudes. On the other hand,

72% of the respondents agree that organizational culture affects the setting objectives and

resources management to achieve goals. Ojo (2009) established that organization

development is about promoting the organizations wellbeing and to achieve goals and

objectives. Cascio (2006) also established that employees need to know how to associate

17

with others by identifying norms, beliefs values and rituals while understanding the

importance of organizational culture.

work is performed out of hope, respect, satisfaction and enjoyment and Hellriegel and

Slocum (2007) established that the performance of employees and manager determines

the quality of an employees’ output and issue such as low job satisfaction can be a

disaster. Kreisman (2002) also established that the most valuable asset of any firm is a

well- motivated competent workforce, which is not only dedicated but also productive.

2.3.2 Job Performance and Culture

The job performance concept importance cannot be overemphasized as its very critical

factor in every organization. It is what forms the basis of success of an organization and is

dependent on individual employee performance. In other words, if an individual performs

according to the expected standards, then organization performance will be enhanced and

improved (Chegini 2010). Performance relates directly to organizational success and

outcomes. Management has to from time to time carry out an-in-depth analysis of their

employees to find out what factors increase employee job performance. Factors used to

measure individual performance vary from one field of work to another. Campbell (1990)

came up with three core determinants of job performance, which he classified under

declarative knowledge, procedural knowledge and skill and motivation. The three are the

core of any job performance, as one should have the complete knowledge about the task

at hand.

De Witt (2010) asserts that the ability to make decisions is an indicator of performance as

how well an employee is able to judge a work situation and respond to it is quite

dependent on it. It is also how well an employee can manage his time and resources

effectively. How to gauge this is dependent on each company as some are more

concerned with ability to make snap judgments with limited information while others

prefer employees that analyze information before responding to customer issues.

Irrespective of the kind of organization, whether one is in manufacturing or service

industry, an organization will require its employees to be time conscious (Macleod &

Brady 2008).

An employee’s efficiency scores based on what the expected timeliness outcomes were

examine this. Macleod and Brady (2008) admit that if the objective of an employee is to

18

complete a project in two months, but it takes them four months to complete then this will

serve as an indicator to their supervisor that something went wrong. Another aspect that

job performance can assume is that of consistency, as in how much the good quality work

can be repeated effortlessly. According to Runny (2007), employees ‘consistency can be

gauged by looking at how they demonstrate their ethical business practices, like not

stealing the employer‘s time, and if they are working in the accounts department, how

trustworthy they are. Employee consistency is certainly a positive trait. It is prudent to

observe how consistent employees are with their values, innovation and organizational

skills.

2.3.3 Factors that impact on Organizational Culture to improve performance

There ought to be an elaborate and open communication system culture that ensures free

flow of data at any given time in an organization. Effective communication forms the

backbone of any organization when it comes to correspondence. Both the vertical and

horizontal communication is considered as key success factor. A transparent two way

correspondence is an imperative indicates Makhlouk and Shevchuk (2008). Boosting

correspondence is a hierarchical technique that is not only used to share ideas on culture

but also to reinforce it.

The size and structure of an organization affects the way change in an organization is

handled. Employees must unlearn the current state of affairs in terms of culture for them

to conform to new ways of life and working situations. For employees joining new

organizations it is not only important for them to be oriented into the culture but also the

embracing bit is very important to ensure seamless flow of work and reduced “culture

shocks”.

Management must support the human resource by instilling an in-depth analysis that

establishes a clear strategy of formulation of values that form the culture to be embraced

by all employees. This can be made possible by making conditions active for all partners

participate in culture formulation and increasing the rate of decision making on matters

integration of ideas. On collaboration, an organization must have a clear cut way of

improving the culture to face new challenges as opposed to waiting for challenges in

order to try and fix things.

19

Armstrong (2010) established that all firms are more concerned about the activities that

should be undertaken to achieve sustainable high levels of performance of the team, this

involves close attention to staff motivation through incentives, rewards and the nature of

the work they do. On the other hand, on matters of communication forms the backbone of

the organization. Previous research done have also established that effective

communication is important as securing open interaction with employees, managing

organizational communication and generating an open and adaptive communication

system does present large-scale benefits to the organization (Eisenberg et al.,

2009).Mehay (2001) established that delay or absence of the induction program generates

an indefinite awareness in the minds of the new employee about the mission, culture and

the overall organization goals. Furthermore, its absence may lead the new recruits

receiving incorrect information about the organization via rumours that may distorts

employee perception about the organization.

2.4 Challenges and Solutions Affecting Sound Financial Management

Public finance poses important problems and developmental challenges. Countries are

under pressure to improve public sector performance as they try to limit public

expenditure growth. Ageing populations, pension costs and increasing health care needs

add to budgetary pressures that the citizenry is demanding that governments be more

accountable with the taxpayers’ money. Simply a blueprint for enhancing public sector

efficiency does not exist and as such countries have adopted diverse methods to

reforming institutions that operate within them. The key institutional arrangements

include devolution and decentralization, strengthening competitive pressure, transforming

workforce structure and size, budgeting practices and procedures.

Although a majority of National and Local governments have taken up reforms, the

empirical evidence of their impact on efficiency is limited due to lack of resources, pre-

reform performance measures, isolation of effects of specific institutional reforms and

external influences. However, some evidence does exist showing that some factors may

improve public sector performance; they include responsibility of sub-national

governments, human resource management practices, increasing scale in education and

health.

20

2.4.1 Challenges

Most countries continue to struggle with reforms and although there are expectations,

most of them still find it difficult to provide decision makers with relevant, quality, timely

and credible information let alone use it for budgetary decisions as an incentive for them

to act.

Most countries continue to face challenges with issues to do with measurement and

especially that of outcomes. Even with visible or tangible outputs it is very difficult to

accurately measure this for specific activities. With governments performing a variety of

services, from road construction to travel advisory then performance measures are more

applicable to certain functions more than others. Intangible activities such an advisory

may have serious problems as opposed to functional areas such as education and health

with advanced performance measures. Output and outcome measures each present a

different set of challenges. It is hard to measure with certainty what an agency or

programme does based on the emphasis of the system be it on outcomes or outputs. Time

lag issues may not be within the control of the government. Outcomes as opposed to

outputs have a strong appeal for the public and politicians.

Nearly all reforms go through the resistance stage especially when they touch on budgets

and finances as a whole. There appears to be no motivating factors for actors to move

from familiar or traditional practices. Spending managers can resist change especially

when it is not clear how the change will come about. In most cases they fear that the

information may be misused by the public to criticize programs and as such reduce

funding. There is fear to be held accountable for results that may not be acceptable. In

some case, the burden of data collection may be a factor too, as it may be cumbersome

paperwork and may fall squarely on them. The general feeling is that of fear of loss of

control of the expenditure and spending.

Politicians play a very important role in the development of County governments. They

promote this by applying pressure on actors to implement objectives set. They set

objectives too in their role as legislature or executive depending on the legislature-

executive relationship, which in turn is affected by the political system in place.

Therefore, their main aim should be that of setting clear goals and objectives for agencies

and create formal mechanisms to monitor progress. However, politicians have not always

21

availed themselves of this opportunity. Setting of objectives is further complicated by the

separation-of-power systems with multiple principals that have no clear agency roles. In

many cases, politicians have varied information in terms of quality and relevance.

Politicians in legislature and executive have different information needs and for the

information to be useful, it must be tailored to their specific needs.

On the other hand, politicians face competing priorities when making decisions, as they

are concerned with elections, demonstrating to the electorate that they understand, and are

responsible for their needs. They operate in short-term horizons often requiring quick

results before elections. The issue lies in providing incentives for them to align their

intentions with social needs of the public.

Merchant and van der Stede (2007) notes that employees are sometimes not always

reliable when it comes to acting in the organization’s best interest. As such managers,

have been awarded the mandate to guard the firms’ products against the occurrence and

persistence of such undesirable behaviours. On the other hand, employees are generally

resistant to change, and Julia and Veronica (2008) thus say that individuals' responses to

change will rely on upon the advantages that they think will come about because of it. On

the off chance that they trust they will benefit from change, they will bolster it; in the

event that they feel they will lose status, distinction, procuring power, or the occupation

itself due to change, they will battle it.

Assessment of progress will quite often prompt to one of the four responses: dismissal,

resistance, resilience or acknowledgment. Adaptation to evolving circumstances is key for

employees. Employee versatility to change is important to businesses in view of its

suggestions to high worker imperiousness to change, which has been a noteworthy

deterrent to the change execution prepare. Markus (2011) Argued that organisations need

to execute change programs however traces worker resistance as a hindrance to the

procedure. He proposes that satisfactory arrangements of workers through preparing and

earlier correspondence about the change will empower representatives to grasp change

with negligible resistance. A review by Kotter (2008) on transformational authority

accentuates on the administration potential and how to open their workers to vocation

expectances intended to create potential while enhancing their capacity to lead.

Nonetheless he proposed that solid authority and powerless administration is no better.

The test as indicated by him is to adjust the two. Locally a review Waceke (2013) on

22

change administration watched that workers required preparing, inspiration, and

successful change initiative, to empower them to rise above their dread, dissatisfactions

and by and large imperiousness to change. She additionally refers to sexual orientation

programs as essential to the change administration in business foundations in Kenya. This

review mirrors the significance of determinants of representative flexibility to change,

that may eventually limit worker resistance, which has been broadly referred to in many

reviews as the best deterrent to change.

2.4.2 Solutions

A functional system evolves over time and poses different challenges at every stage hence

the need to constantly monitor the performance and make decisions. Every situation is

unique when public goods are in question. Implementation is not a static approach rather

a continuous one and different governments local or national must alter it to suit the

current practice based on experience and former reform practices that are influenced by

the wider administrative and political structure.

Civil servants should at the very least have an understanding of how systems work and

their role in that process. Motivating them to use the information to make decisions as

they move away from traditional processes is the main task. It is important to have the

support of top leadership which can be promoted through formal and informal incentives.

They must be both positive and negative. It is simply communicating the benefits and

increasing flexibility of managers to get the job done through performance appraisals,

linking performance to bonuses and pay. However, fears must be addressed that

punishment will be used for non-performance only to cut staff or budgets.

Case (1996) asserts that politicians should be involved and consulted in the reform

process and at a bare minimum made aware of the importance and potential benefits of

this delicate balancing act. The idea is not to oversell the benefits, as it is not a substitute

for difficult decisions and hard political choices that have to be made. The key issue is to

provide incentives by tailoring reforms to their needs such that one will be voted in line

with how close he comes to reforms without any outside interference. Sadly, in practice

this remains a myth as the realization of behavior change is very complex and requires a

long-term approach.

23

To encourage use of information for decision making it is important that the information

is relevant, timely, of high quality and credible. A link must exist between the planning

and the reporting documents. The planned and actual should be clearly visible and any

deviations clearly marked and explained in a time series format. Unrealistic expectations

should be avoided as they fail to materialize and lead to punishing good performance and

rewarding the bad. This is clear because most budgetary allocations take place in a

political scenario and may fail to take into account the general good of society (Kandula,

2006).

Civil servants should be trained to understanding how systems work and their role in that

process. Training is considered as a type of human capital speculation, regardless of

whether that venture is made by the individual or by an association. Ceaseless training

will help representatives to keep up and conform to the change procedure, address

developing issues and keep workers on the change track and propel them to adhere to the

change procedure Leon (1995). Preparing and improvement might be of incredible

thought among the change pioneers in that; it helps representatives amid the change

procedure. As indicated by Purcell (2003) obtaining of learning makes workers more

imaginative and inventive subsequently engaging them to adjust to the change procedure

even more viably.

2.5 Chapter Summary

This chapter reviewed literature on how leadership and organizational culture affect the

effective implementation of sound financial management practices and discussed the

challenges and solutions to the same. It demonstrates how leadership and organizational

culture play the most important role and how those managing the institutions ought to

behave and guide their employees. It also clearly demonstrates how communication

facilitates problem solving and defining expectations.

Procedures and structures have also been outlined and the role they assume in public

organizations management. The usefulness of rewards and punishments has also been

brought out clearly and how effective their use is. As for Kiambu County that is in early

political stages, the systems may be evolving before they get to the maintenance stage.

The next chapter looks at the research methodology.

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CHAPTER THREE

3.0 RESEARCH METHODOLOGY

3.1 Introduction

The study involves a blueprint for the collection, measurement and analysis of data. This

section therefore focused on identifying the procedures and techniques that was be used

in the collection, processing and analysis of data. Research methodology is referred to as

the systematic way of solving a problem. It looks at the data collection process, data

collection tools and data analysis plan (Kothari, 2004). The methodology guides the

research direction to get answers to the problems. The methodology addresses the

research method, target population, sample and sampling procedures. Also discussed in

this chapter is data collection process, data collection tools and data analysis plan, target

population, research instrument and procedures involved.

3.2 Research Design

The research design that was employed here is the descriptive research design in

collecting and analyzing data. According to Kothari (2013) a descriptive study is

concerned with finding out the what, where and how of a phenomenon. Descriptive

research design was chosen because it enabled the researcher to generalise the findings to

a larger population. In addition, visual aids such as table, graphs and charts were used to

assist in understanding data distribution.

Descriptive design was ideal when one may not be able to test large sample numbers as

opposed to a quantitative based study. The research design was ideal as the researcher

was able to observe natural behaviour without influencing it in any way and make

inferences objectively. According to Robson (2002), the objective of descriptive research

is to portray an accurate profile of persons, events or situations. It gave a clear picture of

the factors affecting implementation of sound financial practices in Kiambu County. A

combination of qualitative and quantitative tools of analysis was used to establish how

respondents perceive the influence of leadership and culture on the financial management

of Kiambu County.

25

3.3 Population and Sampling Design

3.3.1 Population

Schindler and Schindler (2006) defines population as the total collection of elements

about which we wish to make inferences. A population as explained by Kombo and

Tromp (2006) is a group of individuals, objects or items for which samples are taken for

measurement. A study population is a well-defined or specified set of people, group of

things, households, firms, services, elements or events, which are being investigated. A

population should fit a certain specification, that the researcher study’s and homogeneity

was important. The population was County and Sub-County Administrators, Finance

managers, Accountants in Kiambu County who were 340 in number as shown in Table

3.1 below.

Table 3.1: Population

Category Population Percentage

County and Sub-County Administrators 150 44

Finance managers 50 14

Accountants 140 42

Total 340 100

Source: Kiambu County (2016)

3.3.2 Sampling Design

A sample is defined as a group of individuals that represent the population. Sampling

design is a way of selecting a sample of the population so that the sample selected is a

true representation of the whole population, (Saunders, Lewis and Thornhill, 2003). Due

to the huge geographical area involved in the study then selection of a proportionate

representation was applied. Reasons for sampling include: lower cost, greater accuracy of

results, availability of the population elements and greater speed of data collection.

3.3.2.1 Sampling Frame

Saunders et al (2003) described a sampling frame as a comprehensive list of all the

individuals or unit in a population from which selection of the sample would be drawn.

A sampling frame is a list of elements from which a sample was drawn. A sampling

frame provides a way of choosing the particular members of the target population that are

to be interviewed in the study. The sampling frame for this study was drawn from the all

the members of Kiambu County that handle financial matters especially those with the

26

Authority to Incur Expenditure to participate in the study. A detailed description of the

sampling frame was provided and the actual set of units from which a sample was drawn.

The sampling frame defined a set of elements from which a researcher could select a

sample of the target population. Accessing the entire population may not be always

possible so one has to rely on a sample frame to represent all the elements of a population

of interest.

3.3.2.2 Sampling Technique

The study was carried out using stratified and simple random sampling to select the

objects that represent the population. Factors that divide the population into

subpopulations have to be considered when selecting a sample from the population. Using

the stratified method helps in obtaining a sample that is a representative of the population.

Taking samples from each stratum or sub-group of a population will give us a stratified

sample. A population with several strata, was required to have the proportion of each

stratum in the sample, this should be the same as in the population. Using this method, the

sample was divided into different strata at the organization, the divisions being according

to their working departments. An advantage of using this method is that the cost per

observation in the study may be reduced, and that estimates of the parameters was used

for each sub-population. The sampling method will make sure that all individuals in the

population are included in the study. A random sample is used since it is free from any

bias.

3.3.2.3 Sample Size

A sample size is the set of elements from which data is collected. A good sample size

should provide information that is both detailed and comprehensive. The study was a

survey so the researcher here studied all the persons handling finances in Kiambu County.

From the 340 possible sample population, stratified random sampling was employed to

select County and Sub-County Administrators’, Accountants and Finance Managers from

the Sub-County. Mugenda and Mugenda, (2012) states that in stratified sampling where

population within each stratum is known, a sample of 30% is adequate representation for

data collection. The chosen respondents was the best since they handle finances in the

County on a daily basis and are the best in giving feedback.

27

Sample size = (Zα/2)2 x P(1-P)

E2

Where: (Zα/2) = Z value (2.58=99%; 1.96= 95%; 1.645=90% confidence level)

In this case 1.96 used.

P = percentage proportion of choice (10% used for sample size needed)

E = margin of error (5%)

Going as per the stated assumptions the sample size will therefore be:

Sample size = (1.96)2 x 0.1 (1 - 0.1)

0.052

= 3.8416 x 0.09

0.002.5

Sample size = 138.2976 = 138 Respondents

Table 3.2: Sample Size

Category Sample Percentage

County and Sub-County Administrators 61 44

Finance managers 19 14

Accountants 58 42

Total 138 100

3.4 Data Collection Methods

According to Cox, (2014) there are many methods of data collection. The attributes of

subjects, research topic, problem question, objectives, design, expected data and results

determine the choice of a tool and instrument used in collecting data. The reason behind

this was because every tool and instrument collects different data. This study required the

use of questionnaires to collect data directly from the various respondents who gave

primary data. The questionnaire had two sections where the first part contained

information on the County background, which included the gender, age and years of

experience. The second part focused on how the culture and leadership affected sound

28

financial implementation. Both close and open-ended questions was used in the

questionnaire. The research tool which was mostly structured the respondents was

provided with guidelines to ensure they understand the question and therefore, respond

suitably.

3.5 Research Procedures

According to Uma, (2015) questionnaires are valuable because they are efficient “in

terms of (a) researcher time, (b), researcher effort, and (c), financial resources.” However,

he also points out the major disadvantages of questionnaires: the answers may be so

simple; respondents may be unmotivated or unreliable; the famous halo effect; the

agreement and prestige biases; self-deception issues and respondent literacy and finally

the effect of fatigue in cases where the questionnaires are too long. The research used

both the structured and semi structured questionnaires so as to meet the research

objectives.

Using the close-ended questions helped in limiting irrelevance to the goals that the

questionnaires want to achieve. The open ended on the other hand was designed to

enhance clarity of the responses during the interviews. According to (Bailey et al., 2012)

questionnaires make each respondent respond to the set of questions and provide efficient

way of collecting responses from a large sample prior to the quantitative analysis. If

everyone given the questionnaire would be good enough to return it fully answered, then

data collection and analysis would be much simpler and faster. The researcher

individually gave the research instruments to a sample of 107 respondents all working in

Kiambu County. He kept a record of the questionnaires issues and how many were

returned to keep track of how data collection went on. A pilot test was conducted to rid of

bias effects as well as misunderstandings of words and concepts was taken care of.

3.6 Data Analysis Methods

Data analysis entails editing, coding and tabulation of data collected into manageable

summaries. To ensure easy analysis, the questionnaire was coded according to each

variable of the study to ensure accuracy during analysis. This analysis was conducted

using the Statistical Package for Social Sciences (SPSS). Data was analyzed using

descriptive statistics, which include measures of central tendencies, such as mean,

median, standard deviation, mode, cross-tabulations, frequencies and percentages.

29

According to Kirk and Miller (2014) content analysis uses a set of categorization for

making valid and replicable inferences from data to their context. This offered a

systematic and qualitative description of the objectives of the study. The researcher

conducted a multiple regression analysis to determine the factors affecting effective

implementation of sound financial management in Kiambu County. The results of the

analysis was presented using tables, pie charts and graphs to provide an accurate picture

of the research findings.

3.7 Chapter Summary

This chapter covered the main research methodology that was used to carry out the study.

It has covered the research design (descriptive design), population and sampling design,

data collection methods and instruments (questionnaires was the main one), a pilot study

and data analysis methods. Data collected was analyzed by the use of descriptive statistics

using Statistical Package for Social Sciences (SPSS). A self-administered questionnaire

was used to gather the data which was developed by the researcher on the basis of the

research questions divided into two parts. The next chapter presents the data analysis

interpretation and presentation of study findings, which paves the way for Chapter 5,

which presents a summary of the study findings, discussions, conclusions,

recommendations and suggestions for further research.

30

CHAPTER FOUR

4.0 RESULTS AND FINDINGS

4.1 Introduction

This chapter presents the findings of the data collected from the respondents. The purpose

of this study was to determine the factors affecting effective implementation of sound

financial management in County governments of Kiambu in Kenya. The research

questions were: How does Organizational Leadership affect sound financial management

in County Governments? How does Organizational Culture affect sound financial

management in County governments? What are the challenges and solutions affecting

sound financial management in County governments? The data has been presented in

form of tables.

4.1.1 Response Rate

The researcher issued 138 data collection instruments and just 100 were finished and

returned. This offered a response rate of 72.5%, which was adequate as shown in Table

4.1. This rate was sufficient for the examination of the results.

Table 4.1: Response Rate

Category Frequency Percentage

Completed and returned 100 72.5

Not returned 38 27.5

Total 138 100

4.2 Demographic Information

4.2.1 Gender

The data was taken and the male gender represented 75% while the female representing

25% of the applicants as indicated in Table 4.2, this was attributed to the fact that the

male gender dominates in the financial sector and most of them are the breadwinners in

their families.

Table 4.2:Gender

Category Frequent percentage

Male 75 75

Female 25 25

Total 100 100

31

4.2.2 Ages

Table 4.3 shows that most of the respondents are between 31-40 years representing 43%,

those of 41-50 years represented 23% and those below 30 years were 19% of the total

applicants, while those between 51-59 were 14%, those above 60 were 3% as illustrated

in Table 4.3. This has implication that most respondents were mature and as such this

research gathered clear and valid information.

Table 4.3: Ages

Category Frequency Percentage

30 years or below 19 19

31 – 40 years 43 43

41 – 50 years 23 23

51-59 Years 14 14

Above 60 years 3 3

Total 100 100

4.2.3 Duration worked

The researcher wanted to establish the duration the respondents had worked at the county.

Table 4.4 shows that those who had worked less than one year represented 17%, those

between 1-5 years were 47%, employees who had worked between 6-10 years were 27%,

while those of between 10-15 were 6% and those above 15 years were only 2%.

Table 4.4: Duration worked

Category Frequency Percentage

Less than one year 17 17

Between 1-5 years 47 47

Between 6-10 years 27 27

Between 10-15 6 6

Above 15 years 2 2

Total 100 100

4.2.4 Designation

To establish the designation of the respondents at the county. Table 4.5 shows that those

who county and sub-county Administrators was 45%, finance managers were 8% while

accountants were 47%.

32

Table 4.5: Designation

Category Frequency Percentage

County and Sub-County Administrators 45 45

Finance managers 8 8

Accountants 47 47

Total 100 100

4.2.5 Education Level

The researcher wanted to establish the level of education of the respondents. Table 4.6

shows that 37% were college graduates, 48% were holders of first degree, while only

15% were second degree holders. The researcher therefore established that respondents

were all learned and effectively assisted with the objective of the study. The table 4.6

shows the responses concerning their level of education.

Table 4.6: Level of Education

Education level Frequency Percentage %

College 37 37

University first degree 48 48

University Second

Degree

15 15

Total 100 100

4.3 Effects Of Organizational Leadership On Sound Financial Management

The respondents were also asked to rate the extent to which organizational leadership on

sound financial management in Kiambu Kenya on a likert scale of 1-5 (where S. A:

Strongly Agree, A: Agree, N: Neutral, D: Disagree, S. D: Strongly Disagree). The results

have been summarized on the Table 4.7.

The research established that the county government has employed competence and

strategies to survive where 80% agreed with only 20% disagreed. The findings also

revealed that 32% agreed to facing challenges in proving sufficient and clear structures

involving all stakeholders 25% were neutral with 43% disagreed. In addition, 70% also

agreed to experiencing competition from unexpected quarters while 10% were neutral and

33

20% disagreed, only 60% of the respondents agreed to identifying key strategic partners

and involved in offering direction 2% were neutral with 38% in disagreement. It was

revealed that 55% of the respondents agree that there is a long term strategic vision for

services, 5% were neutral and only 40% disagreed. 88% of the respondents agree that

current mission statement is compatible with the activities being carried on by the

association 2% were neutral and 10% disagreed.

To establish the rate of participation in developing the mission statement by the

management 70% agreed that they were actively involved 8% were neutral with 22%

disagreed. The findings also established that the Kiambu County have segmented their

investment portfolio into sub-portfolios with different investment objectives and

strategies and in this regard 35% agreed, 5% were neutral while 60% disagreed. Only

25% agreed to regularly benchmark the performance of our investment portfolio against

an external benchmark, 9% were neutral 66% disagreed. 90% of the respondents agreed

that the firm uses external investment managers 10% disagreed. In addition, 92% agree

that they prefer moderate income but safe portfolio, 1% was neutral while 7% disagreed.

95% also prefer high income but moderate risk portfolio 1% was neutral and 4%

disagreed. The results are highlighted in table 4.7

Table 4.7: Organizational Leadership

Statements S. A A N D S. D

The county has employed competence and strategies to

survive 70% 10% 0% 15% 5%

Challenges in proving clear structures for stakeholders 22% 10% 25% 10% 33%

We experience competition from unexpected quarters 50% 20% 10% 10% 10%

Key strategic partners have been identified in offering

direction 48% 12% 2% 31% 7%

There is a long term strategic vision for services 45% 10% 5% 5% 35%

Mission statement is compatible with the association 60% 28% 2% 5% 5%

Management instrumental in developing the mission statement 49% 21% 8% 8% 14%

Segmented investment with different objectives and strategies 15% 20% 5% 30% 35%

Regularly benchmark externally 15% 10% 9% 26% 40%

The firm uses external investment managers 80% 10% 0% 0% 10%

I prefer moderate income but safe portfolio 48% 44% 1% 5% 2%

I prefer high income but moderate risk portfolio 51% 44% 1% 1% 3%

34

From the above findings, it is clear that the county government has employed competence

and strategies to survive and although that is the case there are still challenges that the

county face in proving sufficient and clear structures involving all stakeholders. It was

also revealed that the county has experienced competition from unexpected quarters

although the management has identified key strategic partners and involved them in

offering direction. Only slightly over half of the respondents agree that there is a long-

term strategic vision for services and this raises concerns for the performance of the

county. The institutions current mission statement is compatible with the activities being

carried out.

The findings also reveal that the management has taken an active role in developing the

mission statement and to easily accomplish that that the Kiambu county have not

segmented their investment portfolio into sub-portfolios with different investment

objectives and strategies. While it is advised to compare results to other firms, the county

does not do regular benchmark of their performance against an external benchmark

although the firm uses external investment managers. On issues of risk tolerance majority

prefer moderate income but safe portfolio and high income but moderate risk portfolio.

4.4 Effects Of Organizational Culture On Sound Financial Management

The respondents were also asked to rate the extent to which organizational culture affect

sound financial management in Kiambu county in Kenya on a Likert scale of 1-5 (where

S. A: Strongly Agree, A: Agree, N: Neutral, D: Disagree, S. D: Strongly Disagree). The

results are summarized in the table 4.8.

The study revealed that 80% of the Staff are aware of organizational culture while 20%

disagreed. On the other hand, 72% of the respondents agree that organizational culture

affects the setting objectives and resources management to achieve goals, 3% were

neutral while 25% disagreed. The respondents were also asked if the organization’s

management have introduced operations tips to improve productivity 71% agreed, 4%

were neutral and 25% disagreed. To establish if management has identified the norms and

values that employees should conform to 77% agreed, 5% were neutral while 18%

disagreed. It was also revealed that 55% of the respondents believe that the Work is

performed out of hope, respect, satisfaction and enjoyment, however, 5% were neutral

while 40% disagreed.

35

To establish whether duties and responsibilities are first priority for employee, 87%

admitted so , 2% neither agreed nor disagreed and 11% disagreed. A majority accounting

for 70% agreed that they conduct an-in-depth analysis for employees to find out what

factors increases job performance, 8% were neutral while 22% were in disagreement. On

the other hand 52% agreed that the institution gauge employees’ consistency by their

ethical business practices, 8% were neutral and 40% disagreed.

On matters of communication 53% agreed that effective communication forms the

backbone of the organization, 9% were neutral and only 38% disagreed to that. It was

also established that 85% of the respondents agreed that orientation of new staff is carried

out regularly to induct the new staffs, 1% were neutral and only 14% disagreed. A

majority accounting for 92% admitted that norms and values are held in high regard by

both management and employees, 1% were neutral and 7% disagreed. Finally, about 50%

of the respondents agreed that the organization has a clear way of improving the culture

as opposed to waiting for challenges in order to try and fix things, 12% were neutral and

38% disagreed.

36

Table 4.8: Organizational Culture

From the findings above, it is clear that the Staff are aware of organizational culture while

and it is also believed that the culture affects the setting objectives and resources

management to achieve goals. Despite this pit fall, the organization’s management have

introduced operations tips to improve productivity and the norms and values that

employees should conform to. The attitude created by the employees is that work is

performed out of hope, respect, satisfaction and enjoyment, and their duties and

responsibilities are first priority. The county has also been acknowledged for conducting

Statements S. A A N D S. D

Staff are aware of organizational culture 55% 25% 0% 15% 5%

Organizational culture affects the objectives and

resources management

45% 27% 3% 7% 18%

Organization’s management have introduced

operations tips to improve productivity

48% 23% 4% 11% 14%

Management has identified the norms and values that

employees should conform to.

51% 26% 5% 11% 7%

Work is performed out of hope, respect, satisfaction

and enjoyment.

45% 10% 5% 5% 35%

Duties and responsibilities are first priority for

employee.

55% 32% 2% 6% 5%

We conduct an-in-depth analysis for factors affecting

job performance

42% 28% 8% 8% 14%

We gauge employees’ consistency by their ethical

business practices

35% 17% 8% 15% 25%

Effective communication forms the backbone of the

organization.

22% 31% 9% 26% 12%

Orientation of new staff is carried out regularly to

induct the new staffs.

65% 20% 1% 4% 10%

Norms and values are held in high regard by both

management and employees.

48% 44% 1% 5% 2%

The organization has a clear way of improving the

culture

22% 28% 12% 24% 14%

37

an-in-depth analysis for employees to find out what factors increases job performance.

Despite ethics being a dilemma in the counties, slightly over half of the interviewed

agreed that the institution gauge employees’ consistency by their ethical business

practices, similarly, on matters of communication slightly above half of the respondents

think that effective communication forms the backbone of the organization.

The firm undertakes orientation of new staff regularly to induct the new staffs, and the

norms and values of the institution are held in high regard by both management and

employee., Finally, half of the respondents agreed that the organization has a clear way of

improving the culture as opposed to waiting for challenges in order to try and fix things.

4.5 Challenges and Solutions of Sound Financial Management

The respondents were also asked to rate the extent to which challenges and solutions

affect sound management Kenya on a Likert scale of 1-5 (where S. A: Strongly Agree, A:

Agree, N: Neutral, D: Disagree, S. D: Strongly Disagree). The results have been

summarized in the Table 4.9

The findings revealed that 75% of the respondents believe that it is difficult to provide

decision makers with relevant, quality, timely and credible information while 21%

disagreed. Mean, while 77% agreed that nearly all reforms go through the resistance stage

especially when they touch on budgets and finances, 20% disagreed. On analysis, 69%

agreed that it was a challenge to apply pressure on actors to implement objectives set, and

24% disagreed. Additionally, 66% agreed that even with visible or tangible outputs it is

very difficult to accurately measure outcome for specific activities, 29% disagreed. It was

also revealed the county employees are generally resistant to change, and 63% agreed,

5% were neutral with 32% disagreed. It was also revealed that politicians influence

decision making a great deal and 82% agreed, 2% were neutral and 16% disagreed.

The findings also revealed that 68% agreed that adaptation to evolving circumstances is

key for employees., 8% were neutral and 24% disagreed. The findings also established

that 22% agree that there are incentives to change employee behavior, 8% while 70%

disagreed. In addition, only 21% agreed that there are incentives to change politician’s

behavior, 3% were neutral and 76% disagreed. On the other hand, 85% agreed that civil

servants should be trained to understanding how systems work and their role in that

process, 1% disagreed and 14% disagreed. To establish whether staff should be motivated

38

to use the information to make decisions away from traditional processes 82% agreed, 7%

were neutral and 11% disagreed. It was also established that 57% of the respondents

agreed that fears must be addressed that punishment was used for non-performance only

issues only, 5% were neutral while 38% disagreed.

Table 4.9: Challenges and Solutions of Sound Financial Management

The findings above show that among the challenges experiences is that it is difficult to

provide decision makers with relevant, quality, timely and credible information and that

nearly all reforms go through the resistance stage especially when they touch on budgets

and finances. It is also difficult to apply pressure on actors to implement objectives set,

and county employees are generally resistant to change while politicians influence

decision making a great deal.

Employees need to adapt to evolving circumstances although there is a need to change

employee attitudes to avert the challenges, there are currently no incentives to change

employee behavior, neither are there incentives to change politician’s behavior. There is a

need though for the civil servants to be trained to understanding how systems work and

their role in that process. There is also need for staff to be motivated to use the

Statements S. A A N D S. D

Difficult to provide decision makers with relevant,

quality, timely and credible data.

47% 28% 4% 12% 9%

Nearly all reforms go through the resistance stage

especially when they touch on budgets and finances.

48% 29% 3% 7% 13%

Applying pressure on actors to implement objectives

set.

36% 33% 7% 11% 13%

Even with visible or tangible outputs it is very

difficult to accurately measure outcome for specific

activities

40% 26% 5% 11% 18%

County employees are generally resistant to change. 46% 17% 5% 7% 25%

Politicians influence decision making a great deal. 42% 40% 2% 6% 10%

Adaptation to evolving circumstances is key for

employees.

40% 28% 8% 10% 14%

There are incentives to change employee behavior. 15% 7% 8% 30% 40%

There are incentives to change politician’s behavior. 12% 9% 3% 37% 39%

Trained to understanding how systems work and their

role in that process.

45% 40% 1% 4% 10%

Motivated to use the information to make decisions

from traditional processes.

38% 44% 7% 5% 6%

Punishment was used for non-performance only

issues only

31% 26% 5% 24% 14%

39

information to make decisions away from traditional processes and fears must be

addressed that punishment was used for non-performance issues only.

4.6 Sound Financial Management

The respondents were also asked to rate sound financial management on a Likert scale of

1-5 (where S.A: Strongly Agree, A: Agree, N: Neutral, D: Disagree, S.D: Strongly

Disagree). The results are indicated in Table 4.10.

On analysis, the results established that 85% of the respondents agree that financial

implications are considered when choosing the best way of delivering services and

products and only 13% disagree. In addition, 82% agreed that there is enough incentive to

make decisions that result in more money being available for other uses, 7% were neutral

and 11% disagreed. It was also revealed that 68% of the respondents get advice from

experts on the financial viability of proposals involving significant expenditures, 8% were

neutral and 24% disagreed. To establish whether plans and proposals are improved as a

result of financial review-analysis 57% of the respondents agreed, 5% were neutral and

38% disagreed. Finally, 63% agreed that financial elements are properly reviewed before

they submit plans and proposals for approval, 5% were neutral and 32% disagreed.

Table 4.10: Sound Financial Management

Statements S. A A N D S. D

Financial implications are considered when choosing

the best way of delivering services and products.

37% 48% 2% 6% 7%

There is enough incentive to make decisions that

result in more money being available for other uses

38% 44% 7% 5% 6%

I get advice from experts on the financial viability of

proposals involving significant expenditures

40% 28% 8% 10% 14%

My plans and proposals are improved as a result of

financial review-analysis

31% 26% 5% 24% 14%

Financial elements are properly reviewed before I

submit my plans and proposals for approval

36% 27% 5% 7% 25%

40

4.7 Regression Analysis

In this study, a multiple regression analysis was undertaken to test the influence among

predictor variables and sound financial management. The research used statistical

package for social sciences (SPSS) to code and compute the measurements of the

multiple regressions.

Table 4.11: Model Summary

Model R R Square Adjusted R Square STD error of the

Estimate

1 0.62 0.38 0.37 0.44

The R 2 (0.38) also called the coefficient of multiple determinations, is the percent of the

variance in the dependent variable explained by the independent variables. Therefore,

38% of the changes in sound financial management could be attributed to the combined

effect of the predictor variables as illustrated in Table 4.11

Table 4.12: Summary of One-Way ANOVA Results

Model Sum of Squares df Mean Square F Sig.

1

Regression 109.533 3 36.511 608.517 .000b

Residual 5.976 96 .06

Total 115.509 99

a. Dependent Variable: Sound financial Management

b. Predictors: (Constant), leadership, culture, challenges and solutions

The probability value of 0.0001 indicates that the regression relationship was highly

significant in predicting how leadership, culture, challenges, and solutions influenced

financial management as shown in Table 4.12.

41

Table 4.13: Regression Coefficients of Sound financial management and Predictive

Variables

Model Unstandardized

Coefficients

B

Std.

Error

Standardized

Coefficients

Beta

T Sig

1 (Constant) 1.076 0.255 4.84 0.0350

leadership 0.760 0.090 0.136 7.15 0.0200

culture 0.785 0.078 0.132 6.22 0.0135

Challenges

and

solutions

0.625 0.282 0.145 3.10 0.6020

As per Table 4.13, the equation (Y= β03+ X1+ X2+ X3+) becomes:

Y= 1.076 + 0.760X1+ 0.785X2+ 0.625X3

Where Y is the dependent variable sound financial performance

X1 - leadership

X2 - Culture

X3 – challenges and solutions

The regression equation illustrated in Table 4.13 above has established that considering

all the factors constant at zero sound financial management was 1.076. The findings

presented also show that with all other independent variables at zero, a unit increase in the

leadership would lead to a 0.760 increase in the scores of financial managements and a

unit increase in the scores of cultures would lead to a 0.785 increase in the scores of

financial managements. Further, the findings show that a unit increases in the challenges

and their solutions would lead to a 0.625 increase in the scores of financial managements.

All the variables were significant (p<0.05) except challenges and solutions.

4.8 Chapter Summary

This chapter brought forward the findings from the primary data collected. The chapter

looked at the demographic factors and subsequently reported the findings. The objective

of the study was to establish How organizational leadership affect sound financial

management in County Governments, how organizational culture affect sound financial

management in County governments, and to establish the challenges and solutions

42

affecting sound financial management in County governments. Data was analyzed by

using percentages and regression analysis was undertaken to identify the relationship

between the variables. Chapter will cover the discussions, conclusions and

recommendations of the study.

43

CHAPTER FIVE

5.0 DISCUSSIONS, CONCLUSION AND RECOMMENDATION

5.1 Introduction

This chapter looks into the findings of this study and discusses them in line with previous

research studies done by various scholars. This chapter also makes conclusions and

recommendations for improvements and further studies.

5.2 Summary

The study sought to analyse factors affecting effective implementation of sound financial

management in County governments in Kenya. This was guided by the following

research questions: How does Organizational Leadership affect sound financial

management in County Governments? How does Organizational Culture affect sound

financial management in County governments? What are the challenges and solutions

affecting sound financial management in County governments?

The study utilised a descriptive study to establish respondent’s perceptions in relation to

sound financial management in Kiambu County. The target population for this study were

county and sub-county administrators, finance managers, and accountants in Kiambu

County who are 340. From the initial target population and using the sample size formula

a sample of 138 respondents was drawn. Primary data was collected by administered

questionnaires and out of the 138 data collection instruments issued just 100 were

finished and returned. This offered a response rate of 72.5% which was adequate for this

study.

The demographic data revealed that male gender represented 75% while the female

representing 25%, and analysis of age also established that most of the respondents are

between 31-40 years representing 43%, those of 41-50 years represented 23% and those

below 30 years were 19% of the total applicants, while those between 51-59 were 14%,

those above 60 were 3%. The findings also show that those who had worked less than one

year represented 17%, those between 1-5 years were 47%, employees who had worked

between 6-10 years were 27%, while those of between 10-15 were 6% and those above 15

years were only 2%.

44

To establish the designation of the respondents at the county revealed that the number of

those who were county and sub-county administrators was 45%, finance managers were

8% while accountants were 47%. To establish the level of education of the respondents

37% were college graduates, 48% were holders of first degree, while only 15% were

second degree holders. The researcher therefore established that respondents were all

learned and effectively assisted with the objective of the study.

An analysis of the first objective revealed that the county government has employed

competence and strategies to survive and although that is the case there are still

challenges that the county face in proving sufficient and clear structures involving all

stakeholders. It was also revealed that the county has experienced competition from

unexpected quarters although the management has identified key strategic partners and

involved them in offering direction. Only slightly over half of the respondents agree that

there is a long term strategic vision for services and this raises concerns for the

performance of the county. The institutions current mission statement is compatible with

the activities being carried out.

The findings also reveal that the management has taken an active role in developing the

mission statement and to easily accomplish that that the Kiambu county not have

segmented their investment portfolio into sub-portfolios with different investment

objectives and strategies. While it is advised to compare results to other firms, the county

does not do regular benchmark of their performance against an external benchmark

although the firm uses external investment managers. On issues of risk tolerance majority

prefer moderate income but safe portfolio and high income but moderate risk portfolio.

Analysis of the second objective revealed that staff are aware of organizational culture

while and it is also believed that the culture affects the setting objectives and resources

management to achieve goals. Despite this pit fall, the organization’s management have

introduced operations tips to improve productivity and the norms and values that

employees should conform to.

The attitude created by the employees is that work is performed out of hope, respect,

satisfaction and enjoyment, and their duties and responsibilities are first priority. The

county has also been acknowledged for conducting an-in-depth analysis for employees to

find out what factors increases job performance. Despite ethics being a dilemma in the

counties, slightly over half of the interviewed agreed that the institution gauge

45

employees’ consistency by their ethical business practices, similarly, on matters of

communication slightly above half of the respondents think that effective communication

forms the backbone of the organization. The firm also undertakes orientation of new staff

regularly to induct the new staffs, and the norms and values of the institution are held in

high regard by both management and employee., Finally, half of the respondents agreed

that the organization has a clear way of improving the culture as opposed to waiting for

challenges in order to try and fix things.

An analysis of the last objective revealed that among the challenges experiences is that it

is difficult to provide decision makers with relevant, quality, timely and credible

information and that nearly all reforms go through the resistance stage especially when

they touch on budgets and finances. It is also difficult to apply pressure on actors to

implement objectives set, and county employees are generally resistant to change while

politicians influence decision making a great deal. Employees need to adapt to evolving

circumstances although there is a need to change employee attitudes to avert the

challenges, there are currently no incentives to change employee behaviour, neither are

there incentives to change politician’s behaviour. There is a need though for the civil

servants to be trained to understanding how systems work and their role in that process.

There is also need for staff to be motivated to use the information to make decisions away

from traditional processes and fears must be addressed that punishment was used for non-

performance issues only. A regression analysis between sound financial management and

other factors revealed that 38% of the variations in sound financial management was

caused by the variations in leadership, culture, and challenges and solutions.

5.3 Discussion

5.3.1 Organization Leadership

The research established that the county government has employed competence and

strategies to survive where 80% agreed. Just like in any industry the concept of core

competence is made to support efficient utilization and identification of the firm’s

strength. It is assumed that core competence is changed gradually However, according to

Clemons and Row (2009) established that firms need to focus their roles systematically

upon realizing what their core competencies are. Previous study by Mintzberg (2010)

established that the benefits of having core competencies was very useful in the

traditional manufacturing sector than it is now and this has been to the invention of

46

technology. On the other hand, Barney, (2007) highlighted that strategy is critical for any

firm to be successful in firms. This he said was because strategy help in identifying the

objectives and helps in planning for the firm’s resources. Chandler (2012) established that

strategy helps in not only defining the primacies in the firm’s vital functional areas but

also aids in shaping how the organisation describes itself including the strategic

advantages.

The findings also revealed that 60% of the respondents agreed to identify key strategic

partners and involved in offering direction. Similarly, a study by Kennedy and Keeney

(2006) to investigate the strategic partnering activities of software in small to medium

sized enterprises and the results established that strategic partnerships was initiated to

enhance the firm synergy, credibility and reputation. Kennedy and Keeney (2006) also

established that such partnerships serve as vital concept for entry into foreign market thus

enable firms increase sales and reduce overseas market risks.

It was revealed that 55% of the respondents agree that there is a long term strategic vision

for services. Generally, a strategic plan outlines the organization’s mission and describe

the tangible activities that support the goal accomplishment. Bryson et al. (2010)

established that it is only after an organization defines what it objective is, what its role is,

and why it does it, it is then that its strategic plan can be implemented as value addition to

public value. Rumelt (2011) also asserts that policy makers need to be thoughtful and

premeditated and should ask questions before goal setting. Such questions should be

whether the organisation is the best to deliver particular services, or whether to outsource

them. Rumelt (2011) also adds that informed decision making can deter leaders from

coming up with condescending targets and outcomes fostered by individual ambition.

These sentiments are also supported by Bryson et al. (2010) who admits that individual

ambition is not resourceful when it produces strategic plan goals that are not easily

accomplished.

The findings also established that the Kiambu County have not segmented their

investment portfolio into sub-portfolios with different investment objectives and

strategies and in this regard only 35% agreed. Similar findings were established by

Candice, Cohen and Frank (2015) study on managing cash investment portfolios in firms

in the United States where only a third of the firms have segmented their investment

portfolio into sub-portfolios with different investment objectives and strategies. Only

47

25% agreed to regularly benchmark the performance of our investment portfolio against

an external benchmark. This contradicts Ongeri, Bitange, Matwere and Nyambega (2014)

established that benchmarking has the ability to enhance performance improvement that

was deemed appropriate in the banking industry in Kenya over time. According to their

study it was recommend that the benchmarking initiatives should include the various

views of the employees to improve the process.

The findings presented also show that increase in the leadership leads to increase in the

scores of financial managements. Mehra, Smith, Dixon and Robertson (2006) contend

that when a few associations look for proficient approaches to empower them outflank

others, a longstanding methodology is to concentrate on the impacts of authority. Group

pioneers are accepted to assume an essential part in forming aggregate standards, helping

groups adapt to their surroundings, and organizing aggregate activity. This pioneer

focused point of view has given important bits of knowledge into the relationship

amongst authority and group execution. A few reviews have investigated the vital part of

authority to examine how to utilize administration ideal models and utilize initiative

conduct to enhance authoritative execution (Judge and Piccolo, 2004; Keller, 2006).

This is on the grounds that immaterial resources, for example, administration styles,

culture, aptitude and capability, and inspiration are seen progressively as key wellsprings

of quality in those organizations that can consolidate individuals and forms and

authoritative execution (Purcell et al., 2004).

5.3.2 Organisation Culture

The study revealed that 80% of the staff are aware of organizational culture. This

according to Robbin et al, (2010) research was attributed to the numerous roles culture

plays within an organization. It offers employees identities, regulates their behaviours and

attitudes. On the other hand, 72% of the respondents agree that organizational culture

affects the setting objectives and resources management to achieve goals. Ojo (2009)

established that organization development is about promoting the organizations wellbeing

and to achieve goals and objectives. Cascio (2006) also established that employees need

to know how to associate with others by identifying norms, beliefs values and rituals

while understanding the importance of organizational culture.

It was also revealed that 55% of the respondents believe that the work is performed out of

hope, respect, satisfaction and enjoyment. It was also establish that duties and

48

responsibilities are first priority for employee. Hellriegel and Slocum (2007) established

that the performance of employees and manager determines the quality of an employees’

output and issue such as low job satisfaction can be a disaster. Kreisman (2002) also

established that the most valuable asset of any firm is a well- motivated competent

workforce, which is not only dedicated but also productive.

A majority accounting for 70% agreed that they conduct an-in-depth analysis for

employees to find out what factors increases job performance. Similarly, Armstrong

(2010) established that all firms are more concerned about the activities that should be

undertaken to achieve sustainable high levels of performance of the team, this involves

close attention to staff motivation through incentives, rewards and the nature of the work

they do. On the other hand, on matters of communication 53% agreed that effective

communication forms the backbone of the organization. Previous research done have also

established that effective communication is important as securing open interaction with

employees, managing organizational communication and generating an open and adaptive

communication system does present large-scale benefits to the organization (Eisenberg et

al., 2009).

It was also established that 85% of the respondents agreed that orientation of new staff is

carried out regularly to induct the new staffs. Mehay (2001) established that delay or

absence of the induction program generates an indefinite awareness in the minds of the

new employee about the mission, culture and the overall organization goals. Furthermore,

its absence may lead the new recruits receiving incorrect information about the

organization via rumours that may distort employee perception about the organization.

5.3.3 Challenges and Solutions of Sound Financial Management

The findings revealed that 77% agreed that nearly all reforms go through the resistance

stage especially when they touch on budgets and finances. This is a method that has been

used by the organisation to control the firm’s resources. Merchant and van der Stede

(2007) noted that employees are sometimes not always reliable when it comes to acting in

the organization’s best interest. As such managers have been awarded the mandate to

guard the firms’ products against the occurrence and persistence of such undesirable

behaviours.

It was also revealed the county employees are generally resistant to change, and 63%

agreed and similar findings as established by Julia and Veronica (2008) where they

49

concluded that individuals' responses to change will rely on upon the advantages that they

think will come about because of it. On the off chance that they trust they will benefit

from change, they will bolster it; in the event that they feel they will lose status,

distinction, procuring power, or the occupation itself due to change, they will battle it.

Assessment of progress will quite often prompt to one of the four responses: dismissal,

resistance, resilience or acknowledgment.

The findings also revealed that 68% agreed that adaptation to evolving circumstances is

key for employees. Employee versatility to change is important to businesses in view of

its suggestions to high worker imperiousness to change, which has been a noteworthy

deterrent to the change execution prepare.

Markus (2011) Argued that organisations need to execute change programs however

traces worker resistance as a hindrance to the procedure. He proposes that satisfactory

arrangements of workers through preparing and earlier correspondence about the change

will empower representatives to grasp change with negligible resistance. A review by

Kotter (2008) on transformational authority accentuates on the administration potential

and how to open their workers to vocation expectances intended to create potential while

enhancing their capacity to lead. Nonetheless he proposed that solid authority and

powerless administration is no better. The test as indicated by him is to adjust the two.

Locally a review Waceke (2013) on change administration watched that workers required

preparing, inspiration, and successful change initiative, to empower them to rise above

their dread, dissatisfactions and by and large imperiousness to change. She additionally

refers to sexual orientation programs as essential to the change administration in business

foundations in Kenya. This review mirrors the significance of determinants of

representative flexibility to change, that may eventually limit worker resistance, which

has been broadly referred to in many reviews as the best deterrent to change.

On the other hand, 85% agreed that civil servants should be trained to understanding how

systems work and their role in that process, 1% disagreed and 14% disagreed. Training is

considered as a type of human capital speculation, regardless of whether that venture is

made by the individual or by an association. Ceaseless training will help representatives

to keep up and conform to the change procedure, address developing issues and keep

workers on the change track and propel them to adhere to the change procedure Leon

(1995). Preparing and improvement might be of incredible thought among the change

50

pioneers in that; it helps representatives amid the change procedure. As indicated by

Purcell (2003) obtaining of learning makes workers more imaginative and inventive

subsequently engaging them to adjust to the change procedure even more viably.

5.4 Conclusions

5.4.1 Organization Leadership

County government has employed competence and strategies to survive and although that

is the case there are still challenges that the county face in proving sufficient and clear

structures involving all stakeholders. The county has experienced competition from

unexpected quarters although the management has identified key strategic partners and

involved them in offering direction. The institutions current mission statement is

compatible with the activities being carried out and it was also reveal that the

management has taken an active role in developing the mission statement.

5.4.2 Organisation Culture

County staff are aware of organizational culture that affects the setting of objectives and

resources management to achieve goals. The organization’s management have introduced

operations tips to improve productivity and the norms and values that employees should

conform to. In addition, the attitude created by the employees is that work is performed

out of hope, respect, satisfaction and enjoyment, and their duties and responsibilities are

first priority. The county has also been acknowledged for conducting an-in-depth analysis

for employees to find out what factors increases job performance. The firms undertake

orientation of new staff regularly to induct the new staffs, and the norms and values of the

institution are held in high regard by both management and employee.

5.4.3 Challenges and Solutions of Sound Financial Management

Some of the challenges experienced is that it is difficult to provide decision makers with

relevant, quality, timely and credible information and that nearly all reforms go through

the resistance stage especially when they touch on budgets and finances. It is also difficult

to apply pressure on actors to implement objectives set, and county employees are

generally resistant to change while politicians influence decision making a great deal.

51

5.5 Recommendation

5.5.1 Recommendation for Improvement

5.5.1.1 Organization Leadership

The study recommends that Kiambu County need to segment their investment portfolio

into sub-portfolios with different investment objectives and strategies, this will ensure

that the firm is covered in case of financial risks. The county also need to do regular

benchmark of their performance against an external benchmark so as to gauge the rate of

performance to other counties.

5.5.1.2 Organisation Culture

The study recommends that the county needs to take ethical issues seriously and the

institution need to gauge employees’ consistency by their ethical business practices. On

matters of communication, the organization needs to set up a proper effective

communication for the organization.

5.5.1.3 Challenges and Solutions of Sound Financial Management

Employees need to adapt to evolving circumstances although there is a need to change

employee attitudes to avert the challenges. There is also need for staff to be motivated to

use the information to make decisions away from traditional processes and fears must be

addressed that punishment are only used for non-performance issues only.

5.5.2 Recommendation for Further Studies

The study recommended that similar studies done in the other 46 counties in order to

generalize the findings. The study also recommends that future studies should be done on

establishing the financial risk management in county government.

52

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APPENDIX I: INTRODUCTION LETTER

Dear Sir/ Madam,

RE: FACTORS AFFECTING EFFECTIVE IMPLEMENTATION OF SOUND

FINANCIAL MANAGEMENT IN COUNTY GOVERNMENTS- A STUDY OF

KIAMBU COUNTY

I am a graduate student from the United States International University (USIU)

undertaking a Master of Business Administration in Finance. This questionnaire is meant

to source and solicit information from employees handling finances in Kiambu County

Government concerning factors affecting effective implementation of sound financial

management.

I hereby request for your assistance in filling the provided questionnaire. Please note that

none of the information received from the participants will be used for any other purpose

apart from that of the study. It is specifically for learning purposes. Information given was

accorded maximum confidentiality.

I am therefore requesting for your time and for you to answer the questions as freely as

possible. Your cooperation in this study will be highly appreciated.

Yours Faithfully,

NJIHIA STANLEY MAGU

60

APPENDIX II: QUESTIONNAIRE

RESEARCH QUESTIONNAIRE ON THE FACTORS AFFECTING EFFECTIVE

IMPLEMENTATION OF SOUND FINANCIAL MANAGEMENT IN COUNTY

GOVERNMENTS- A STUDY OF KIAMBU COUNTY

INTRODUCTION:

This questionnaire intends to solicit information about the factors affecting effective

implementation of sound financial management in county governments- a study of

Kiambu County. It will enable the author to identify these factors as well as make

recommendations on how to improve public financial management for the benefits of the

organization and its employees. This study is carried out in fulfillment of the

requirements for MBA in Finance.

SECTION A: DEMOGRAPHIC DETAILS

1. Gender

Male

Female

2. Age

30 years or below

31 – 40 years 51-59 Years

41 – 50 years Above 60 years

3. How long have you been working for Kiambu County Government

Less than one year Between 10- 15 years

Between 1-5 years Over 15 years

Between 6-10 years

4. Which Finance department (s) are you working currently?

………………………………………………………………………………………………

5. What designation are you?

………………………………………………………………………………………………

…

6. Kindly indicate your highest level of education

No Formal Education College

Primary University First Degree

Secondary University Second Degree

61

SECTION B

Please indicate your opinion as per the level of disagreement or agreement with the

outlined statement regarding how Organizational Leadership affect sound financial

management using a 1 to 5-scale guideline.

1= Strongly Disgree 2- Disgree, 3= Neutral, 4 =Agree, 5= Strongly Agree

A. LEADERSHIP

B. Strategic financial leadership

1 2 3 4 5

1. The county government has employed competence and

strategies to survive

2 We have faced challenges in proving sufficient and clear

structures involving all stakeholders

3 We experience Competition from unexpected quarters

Strategic Direction

4 Key strategic partners have been identified, and involved

in offering direction

5 There is a long term strategic vision for services?

6 Your current mission statement is compatible with the

activities being carried on by the association?

7 How would you rate participation in developing the

mission statement by the management

Managing the Organization Financial Portfolio 1 2 3 4 5

8 We have segmented our investment portfolio into sub-

portfolios with different investment objectives and

strategies

9 We regularly benchmark the performance of our

investment portfolio against an external benchmark

10 The firm uses external investment managers

11 I prefer moderate income but safe portfolio

12. I prefer high income but moderate risk portfolio

SECTION C

Please indicate your opinion as per the level of disagreement or agreement with the

outlined statement regarding how organizational culture affect sound financial

management using a 1 to 5-scale guideline.

1= Strongly Disgree 2- Disgree, 3= Neutral, 4 =Agree, 5= Strongly Agree

62

C. B. CULTURE

Sustaining effective Organizational Culture

1 2 3 4 5

1. Staff are aware of organizational culture

2. Organizational culture affects the setting objectives and

resources management to achieve goals.

3. Organization’s management have introduced operations

tips to improve productivity

4. Management has identified the norms and values that

employees should conform to.

Job Performance and Culture

5. Work is performed out of hope, respect, satisfaction and

enjoyment.

6, Duties and responsibilities are first priority for employee.

7. We conduct an-in-depth analysis for employees to find

out what factors increases job performance

8. We gauge employees’ consistency by their ethical

business practices

Factors that impact on Organizational Culture to

improve performance

9. Effective communication forms the backbone of the

organization.

10. Orientation of new staff is carried out regularly to induct

the new staffs.

11. Norms and values are held in high regard by both

management and employees.

12. The organization has a clear way of improving the culture

as opposed to waiting for challenges in order to try and

fix things.

63

SECTION D

Please indicate your opinion as per the level of disagreement or agreement with the

outlined statement regarding challenges and solutions affecting sound financial

management using a 1 to 5-scale guideline.

(1= Strongly Disgree 2- Disgree, 3= Neutral, 4 =Agree, 5= Strongly Agree)

D. CHALLENGES & POSSIBLE SOLUTIONS

Challenges

1 2 3 4 5

1. It difficult to provide decision makers with relevant,

quality, timely and credible information.

2. Nearly all reforms go through the resistance stage

especially when they touch on budgets and finances.

3. Applying pressure on actors to implement objectives set.

4. Even with visible or tangible outputs it is very difficult to

accurately measure this for specific activities

5. County employees are generally resistant to change.

6. Politicians influence decision making a great deal.

Solutions

7. Adaptation to evolving circumstances is key for

employees.

8 There are incentives to change employee behavior.

9. There are incentives to change politicians behavior.

10 Civil servants should be trained to understanding how

systems work and their role in that process.

11. Staff should be motivated to use the information to make

decisions away from traditional processes.

12. Fears must be addressed that punishment will be used for

non-performance only issues only.

64

SECTION E

Please indicate your opinion as per the level of disagreement or agreement with the

outlined statement regarding sound financial management using a 1 to 5-scale guideline.

(1= Strongly Disgree 2- Disgree, 3= Neutral, 4 =Agree, 5= Strongly Agree)

E: SOUND FINANCIAL MANAGEMENT 1 2 3 4 5

1. Financial implications are considered when choosing

the best way of delivering services and products.

2. There is enough incentive to make decisions that result

in more money being available for other uses

3. I get advice from experts on the financial viability of

proposals involving significant expenditures

4. My plans and proposals are improved as a result of

financial review-analysis

5. Financial elements are properly reviewed before I

submit my plans and proposals for approval

END OF QUESTIONS

THANK YOU