1

THE EFFECT OF IT ON ORGANISATIONAL PERFORMANCE: A CASE OF

CENTENARY BANK

BY

BARASA RICHARD

REG. NO: 06/U/9403/EXT

SUPERVISOR: DR. MUYINDA PAUL B.

A RESEARCH REPORT SUBMITTED TO THE COLLEGE OF EDUCATION AND

EXTERNAL STUDIES IN PARTIAL FULFILLMENT OF THE REQUIREMENTS

FOR THE AWARD OF A DEGREE OF BACHELOR OF COMMERCE

OF MAKERERE UNIVERSITY

SEPTEMBER 2011

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DECLARATION

This dissertation is truly a result of my independent investigations and where it is intended to the

work of others due acknowledgement has been made. It has never been presented for any award

in any other institution.

Signed …………………………… Date ……………………………

BARASA RICHARD

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APPROVAL

I Certify that Mr. Barasa Richard carried out this research under my supervision and is submitted

with my approval.

Signed ………………………… ……………………………………………...

Dr. Muyinda Paul Birevu Date

SUPERVISOR

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DEDICATION

Unto God the father, and the son Jesus Christ and the Holy spirit I give glory, honor and praise,

for the opportunities, strength, courage, wisdom, Health, friendship and provisions that have lead

to the accomplishment of this dissertation.

To my Supervisor and family whose efforts, sacrifice and resources took me this far.

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ACKNOWLEDGEMENT

My special and sincere thanks go to my supervisor Dr. Muyinda Paul B. for his support. I am

indebted to all the academic staff of Makerere University for their support in various capacities.

I am grateful to the management and staff of Centenary Bank for providing the required field

data and all the support throughout the data collection period.

I am deeply indebted to my friends for their support towards this noble endeavor. I thank my

wife and children for their patience for all the time I was away during the course.

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TABLE OF CONTENTS

DECLARATION ....................................................................................................................... i

APPROVAL ............................................................................................................................. ii DEDICATION ......................................................................................................................... iii

ACKNOWLEDGEMENT ........................................................................................................ iv TABLE OF CONTENTS .......................................................................................................... v

LIST OF TABLES .................................................................................................................. vii ACRONYMS / ABBREVIATIONS ....................................................................................... viii

CHAPTER ONE ....................................................................................................................... 1 1.0 INTRODUCTION ............................................................................................................ 1

1.1 Background ......................................................................................................................... 1 1.2 Statement of the Problem .................................................................................................... 2

1.3 Purpose of the Study ......................................................................................................... 3 1.4 Objectives ........................................................................................................................... 3

1.5 Research Questions ............................................................................................................. 3 1.5.0 Scope .............................................................................................................................. 3

1.5.1 Geographical scope .......................................................................................................... 3 1.5.2 Content scope ................................................................................................................... 3

1.5.3 Time scope ....................................................................................................................... 4 1.6 Significance........................................................................................................................ 4

CHAPTER TWO ...................................................................................................................... 5 2.0 LITERATURE REVIEW ................................................................................................. 5

2.1 Introduction ......................................................................................................................... 5 2.2 IT costs and Organizational performance ............................................................................. 5

2.3 Contribution of IT towards organizational performance ....................................................... 8 2.4 Customer satisfaction as a result of IT ................................................................................ 9

CHAPTER THREE ................................................................................................................. 12 3.0 METHODOLOGY ........................................................................................................... 12

3.1 Introduction ...................................................................................................................... 12 3.2 Study Design .................................................................................................................... 12

3.4 Population ........................................................................................................................ 12 3.5 Sample Size and Selection Method .................................................................................. 12

3.6 Data collection Tools / Method .......................................................................................... 13 3.8 Limitations ........................................................................................................................ 14

CHAPTER FOUR ................................................................................................................... 15 4.0 PRESENTATION, INTERPRETATION AND DISCUSSION OF FINDINGS ............... 15

4.1 Introduction ....................................................................................................................... 15

4.2 Demographic characteristics of the respondents ................................................................. 15

Table 1: Sex of respondents..................................................................................................... 15

Table 2: Age of respondents .................................................................................................... 16

Table 3: Education level of respondents .................................................................................. 16

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Table 4: Time spent in Centenary Bank ................................................................................... 17

Table 5: IT application in Centenary Bank .............................................................................. 17

Table 6: IT areas of application in Centenary Bank ................................................................. 18

4.4 Contribution of IT towards organizational performance ..................................................... 19

Table 7: Reason for choice of IT application in Centenary Bank ............................................. 20

Table 8: Existence of the relationship ...................................................................................... 21

Table 9: Kind of existing relationship ...................................................................................... 21

Table 10: IT application in Centenary Bank a good idea .......................................................... 22

4.3 Information Technology and customer satisfaction ............................................................ 22

Table 11: Whether IT has improved the confidence of the customers in the bank .................... 23

Table 12: Whether customers find it easy to make their transactions ....................................... 23

Table 13: Improvement in the daily activities of the bank as a result of IT ............................... 24

Table 14: Whether the customers are increasing as a result of easy banking ............................ 25

Table 15: Whether bank customers feel secure with their money in centenary bank because of the

security and easy access .......................................................................................................... 26

Table 16: Whether IT has improved genuine transaction in the bank ....................................... 26

Table 17: Whether IT saves a lot of time in banking ................................................................ 27

CHAPTER FIVE .................................................................................................................... 28

5.0 SUMMARY, RECOMMENDATIONS AND CONCLUSION ........................................ 28 5.1 Introduction ....................................................................................................................... 28

5.2 Summary ........................................................................................................................... 28 5.4 Recommendations ............................................................................................................. 29

5.5 Areas for further research .................................................................................................. 29 APPENDIX 1: QUESTIONNARE FOR CENTENARY BANK EMPLOYEES ...................... 33

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LIST OF TABLES

Table 1: Sex of respondents..................................................................................................... 15

Table 2: Age of respondents .................................................................................................... 16

Table 3: Education level of respondents .................................................................................. 16

Table 4: Time spent in Centenary Bank ................................................................................... 17

Table 5: IT application in Centenary Bank .............................................................................. 17

Table 6: IT areas of application in Centenary Bank ................................................................. 18

Table 7:Reason for choice of IT application in Centenary Bank .............................................. 20

Table 8: Existence of the relationship ...................................................................................... 21

Table 9: Kind of existing relationship ...................................................................................... 21

Table 10: IT application in Centenary Bank a good idea .......................................................... 22

Table 11: Whether IT has improved the confidence of the customers in the bank .................... 23

Table 12: Whether customers find it easy to make their transactions ....................................... 23

Table 13: Improvement in the daily activities of the bank as a result of IT ............................... 24

Table 14: Whether the customers are increasing as a result of easy banking ............................ 25

Table 15: Whether bank customers feel secure with their money in centenary bank because of the

security and easy access .......................................................................................................... 26

Table 16: Whether IT has improved genuine transaction in the bank ....................................... 26

Table 17: Whether IT saves a lot of time in banking ................................................................ 27

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ACRONYMS / ABBREVIATIONS

DBMS- Database Management Systems

DSS- Decision support system

KWS- Knowledge work systems

MIS- Management information systems

OAS-Office Automation System

TPS -Transaction processing system

UBOS-Uganda Bureau of Statistics

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ABSTRACT

A Research Study with the major aim of investigating the effect of IT on organizational

performance was conducted. Of recent, customer satisfaction has increasingly depended on

organizations working smart rather than working hard. Measures like use of IT in organizational

activities have been employed in a bid to improve on performance and whether performance has

increased is a question on debate and hence the study. Centenary Bank was chosen as a case

study from where different data regarding the study subject was gathered.

Questionnaires were used to collect data under a case study research design. Qualitative and

quantitative means were used to analyze the data. It was revealed that there were different ways

in which IT costs affect the performance of the organization including reduction in the

profitability hence poor performance, using a lot of money to train the users of the IT systems

hence reducing profitability and building of more confidence in the customers owing to the

security of the customers and their possessions to increase number of customers who open bank

accounts hence increased profitability of the financial institution.

It was revealed that IT contributes significantly to the performance of the organization through

ability to identify and exploit large number of interdependencies, timely availability of

information as the processing of transactions is very fast, reliability of information assuming the

input data are correct and relationships established are valid, the results are reproducible, lower

costs of human resource training, and the ability to performance of sophisticated and sensitive

analyses.

It was also recommended that financial institutions should look into minimizing costs of

computerization to strike a balance between costs and performance.

More so, Banks should put in an effort to introduce IT or improve on the existing technology to

increase their performance and the government should subsidize on IT equipment such that most

financial institutions adopt the idea for customer satisfaction.

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CHAPTER ONE

1.0 INTRODUCTION

This research is aimed at finding out how IT impacts on the organizational performance that can

be indicated by the level of efficiency in service provision and the level of customer satisfaction.

Employment of IT includes among others: the use of computers in financial transactions, use of

CCTV cameras in customer monitoring and use of modern equipment in customer data storage.

The study is expected to generate valuable information about the relevancy of IT usage towards

organizational performance.

1.1 Background

This is an introductory chapter that highlights the background to the study. The chapter

articulates statement of the problem, objectives of the study, research questions, significance of

the study and the scope of the study.

Modern banking technology began in the 1960s when computer and micro electronics started

their growth (Freeman and Perez, 1988).Information technology is rapidly changing the banking

and financial services industry. Online banking and electronic payments available currently are

all new and the development and diffusion of these technologies by financial institutions is

expected to result into a more efficient banking system. This technology offers institutions an

alternative and better delivery channels through which banking products and services can be

provided to consumers (Mpairwe, 2004).

It is true to note that, Information technology leads to decline in the cost and increase in capacity

of computers, as well as development in communications technology. This does not only alter

the way information is transferred but also the cost of storing and processing information. These

new opportunities and changes have had an important effect on the organization of work;

banking personnel `left routine based and time consuming work to computers and began to

concentrate on the service sector. This was the beginning of a new paradigm “the information

technology paradigm”, and banking was probably the first major service branch which adopted

new information technologies extensively (Wit de, 1990).

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Cockroft (1996) defines performance as the degree of accomplishment of tasks that an employee

is fulfilling the requirements of the job. This can be seen in terms in inputs, what individuals or

groups bring to the job or terms of various outputs often in the form of objectives and targets.

Organizational performance may be assessed before a change is initiated, that is, for

hypothetical future scenarios, using peer appraisal (subjective), cost/benefits analysis(

objective), after the change has been completed, that is for actual past events using biblio-metric

measures (objective), technical review (subjective), Nemes, Günter, Schmidt and Bernus, 2003.

These measures are valid at each end of the scale, but tools to assess on-going activities and

performance have not been well developed except for financial indicators and market analysis.

According to Musenero (2008), performance is defined as the measure of achievement or failure

to achieve the desired results. He further states that for performance to take place, there must be

an intention and an attempt to reach or exceed a particular level of results and that if this is not

the case, then it becomes difficult to gauge how far there has been success or failure. Companies

can always increase sales performance by offering fair prices or increasing its services. This

background leaves a lot desired to assess the effect of Information Technology on organizational

performance, a case of Centenary Bank.

1.2 Statement of the Problem

The 1980s saw the arguments with a vision of how the bank office would look like in the future.

Hedberg and Mehlamann (1981) argued that in the 1990s, there would be much higher

technology based machines in the offices and these machines would serve customers. This was

in anticipation that organizational clients would be served better while saving time and space.

Customer satisfaction has increasingly depended on organizations working smart rather than

working hard. Measures like use of IT in organizational activities have been employed in a bid to

improve on performance and whether performance has increased is a question of debate and

hence the study.

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1.3 Purpose of the Study

The purpose of this study was to find out the effect of Information Technology on organizational

performance, a case of Centenary Bank. It is based on the fact that Information Technology is

expected to increase the efficiency of the workers in an organization. Therefore the researcher

intends to understand where IT and performance meet.

1.4 Objectives

The following were the objectives of the study;

1. To establish the effect of IT costs on organizational performance

2. To find out the contribution of IT towards organizational performance

3. Establish the level of customer satisfaction as a result of Information Technology

1.5 Research Questions

The study was guided by the following research questions

1. What is the effect of IT costs on organizational performance?

2. What is the contribution of IT towards organizational performance?

3. What is the level of customer satisfaction as a result of Information Technology?

1.5.0 Scope

1.5.1 Geographical scope

The study was carried out in Centenary Bank Entebbe Road, Kampala. The place has been

selected because it has recently beefed up its Information technology in quest to improve its

performance.

1.5.2 Content scope

The study mainly focused on the effect of Information Technology on organizational

performance. It based on how IT has eased the business transactions in the bank, cost element of

IT hence improved performance.

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1.5.3 Time scope

The study covered the period for the information gathered between 2006 and 2010. It this period

that Centenary bank has increased its networks including inter- branch networking such that

customers can deposit and withdraw money any where any time.

1.6 Significance

The study results are expected to:

i. Provide information for the policy makers to address the IT problems affecting the

Banking industry and devise means of coming up with possible solutions.

ii. More so, the findings are hoped to help the managers of the manufacturing industry on

how to effectively deliver services meant for their customers.

iii. Study findings are expected to provide up to date literature for academicians and other

researchers.

iv. The study may provide the general public with an understanding of IT in the Banking

sector. This will help enhance the understanding of the technicalities and mechanisms of

IT in banking and how to use it in accessing and utilizing IT services offered by Banks in

general and Centenary Bank in particular.

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CHAPTER TWO

2.0 LITERATURE REVIEW

2.1 Introduction

This chapter focuses on the review of the related literature about Information Technology and

organizational performance. This was done in regard to the objectives of the study where the first

section talks about the costs involved in using IT, the second section talks about the contribution

of IT towards organizational performance and lastly customer satisfaction as a result of IT.

2.2 IT costs and Organizational performance

According to Uganda Bureau of Statistics (2006), it is difficult if not impossible to manage a

modern organization with out at least some knowledge of information systems.

The business environment today has under gone various powerful worldwide changes, which

pose a number of new challenges to business firms and their management and requiring

approaches of computerized systems. Business organizations today need to quickly capture

business data, process it and produce out put or feed back for quick decision making in today’s

competitive business world (Laudon et al, 1998). Using an electronic spread sheet (also called a

ledger sheet or work sheet) one can do a detailed analysis of accounting and financial

information just as on paper. Spreadsheet has rows and columns into which numbers can be

entered and further processed.

However, in an attempt to computerize financial record management, some costs are incurred.

These are costs of computerizing financial records.(Ramez et al ,2000) says that there are a few

situations in which such system may involve un necessary overhead costs that would not be

incurred in traditional (manual) file processing. These costs include; high initial investment in

hardware, software, and training. Generally, that a data base management system provides for

defining and processing data and overheads for providing security, concurrency control, recovery

and integrity functions.

Serenko (2006), notes that today the major types of information systems in organizations

include; The Transaction processing system(TPS) that tracks the flow of daily routine

transactions necessary to conduct business, Office Automation System (OAS) for increasing the

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productivity of data workers, and the Knowledge work systems (KWS) for enhancing the

productivity of knowledge workers. That the management level systems(Management

information systems (MIS) and Decision support system (DSS),provide the management control

level with reports and access to organizations current performance and historical records. TPS

are major sources of data to other systems especially MIS and DSS.

According to Bond et al (2006), providing security to computerized financial record management

is another area of cost to business organizations, that the problems of data security fall into two

categories; accidental and miscellaneous loss or corruption of data. Business enterprises are

advised to take care of the equipment, avoid hostile environment with smoke, magnetic fields or

dust, make back up copies of important data, plan for disaster, use fire proof safes, keep

generations of back up, have alternative sources of power or means by which the system can be

safely shut down in the event of power loss, have duplicated hard ware to continue processing,

have effective systems to extinguish fire, lock away or shred sensitive printouts, destroys old

printer ribbons, not to leave floppy disks lying about, bolt hardware down to prevent its theft, use

passwords, secure rooms with identity cards, avoid fraud by staff, regularly and strictly clean

viruses and avoid copying disks of un known origin and take out insurance against loss or

corruption of data.

As the use of personal computers is spreading so fast, it can be very difficult top keep their use

under control. Some data processing departments are worried that all these computers will be

miss used. The potential of crime, invasion of privacy, fraud, mistakes and lack of security is

very real. Providing security in the above cases is all costly to organizations. (Bigne et al, 2003)

Innis et al (1994) also note that automated systems are so vulnerable to destruction, errors, abuse,

fraud, viruses, and hardware or software failures; such that organizations that become so

dependent on computerized systems must keep special measures to ensure that these systems are

properly controlled. That the effect of disaster in a computerized system can be greater than in a

manual system because all records for particular function or organization can be lost or

destroyed. They add that developing control systems may be so expensive that the system may

be economically or operationally unfeasible; such that some cost-benefit analysis has to be

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performed to determine which control mechanism provides the most effective safe guards

without sacrificing operational efficiency or cost. They add that the major financial and

accounting systems for example payroll system or one that tracks purchases and sales must have

high standard of control than others.

In summary, Laudon et al (1998), notes that there are five key management challenges in

building and using computerized systems in organizations; designing system that are competitive

and efficient, understanding the system requirement of global business environment, creating an

information architecture that supports organizational goals, determining the business value of

automated systems and designing systems that people can understand, control and use in

ethically and socially responsible manner. While explaining why computerized systems are

difficult to build and sustain, they add that not all such systems make profit; they can be

expensive and risky to build. Other firms can easily copy that many systems so that the strategic

advantage is sustainable. Implementing strategic systems often requires extensive organizational

change and transition from one socio-technical level to another. Such changes are called strategic

transitions and are often difficult and pain full to achieve. Because such systems potentially

change important organizational dimensions including the structure, culture, power relationships

and work activities, there is often considerable resistance to these new systems.

Loudon et al (1998), further notes that development of a data base environment requires much

more than a selection of technology. It requires a change in corporation attitude towards

information. The organization must develop data administration function and data planning

methodology, that there are difficult cost-benefit questions and resistance to many key database

concepts.

They add that information systems can also present quality problems because of difficulty in

developing software that capture user specifications accurately, because of high costs of

maintaining software and correcting errors and because software bugs may be impossible to

eliminate.

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2.3 Contribution of IT towards organizational performance

The major disadvantage with manual system is that it is time consuming. Besides as the number

of transactions increases, the recording and processing systems may be affected because of the

errors arising out of over loading. Also because of interdependencies of financial and accounting

variables, small revision or minor change may involve a lot of work. On the other hand,

computerization has the ability to identify and exploit a large number of interdependencies,

timely and reliably generates information as processing of transactions is very fast. (Assuming

the input data is correct). With computer, the results are producible, lower costs are met in terms

of human resource training and the system has the ability to perform sophisticated and sensitive

analysis. Verifications and revisions are simple. (UBOS 2006)

In recent years, computerization of financial functions is no longer restricted to big

organizations; even small organizations can profit from use of small personal computers (UBOS,

2006)

The major advantages of using computerized approach include; The ability to identify and

exploit large number of interdependencies, timely availability of information as the processing of

transactions is very fast, reliability of information assuming the input data are correct and

relationships established are valid, the results are reproducible, lower costs of human resource

training, and the ability to performance of sophisticated and sensitive analyses (FAO, 2006)

While explaining the problems of traditional file environment, Laudon et al, (1998) note that old

files create problems such as data redundancy and inconsistence, program data dependence,

inflexibility, poor security and lack of data sharing, that the database management systems

(DBMS) instead organize information much better. It is these problems that create a need for

computerizing financial record management.

Ramez et al (2000) also believes that capabilities of database management systems include;

controlling redundancy, restricting unauthorized access, providing persistent storage for

programmed objects and data structures, permitting inferences and actions by using rules,

providing multi-user interfaces, representing complex relationship constraints and providing

recovery and back up. He adds that additional advantages of the computerized approach over

traditional file processing include potential for enforcing standards, reduced application

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development time, flexibility, availability of up to date information to all user and economies of

scale

Ralphy (1986) believes that computers are also needed in office automation. That today,

computer has had a profound effect on office procedures and in future, the computer will

revolutionize day to day business activities. We can readily see the dramatic impact. Presently,

many companies are using computers to streamline office operations, perform word processing,

electronically handle mail and messages and handle electronic voice storage and forwarding.

Computerized systems can manipulate process or even find stored data very quickly. Manual

systems are limited in size due to the bulk of paper. There are many large centrally held files by

government, local authorities, and private companies. In such away, applying manual system

would almost be impossible. (www.nothern.ac.uk,2011)

Computers are needed in assessing applicability to treasury departments of business units.

www.himachal.nic.in/nichp/proj-deptts.htm, (2006) explains that the most foremost advantage of

software applications has been reducing the drudgery of treasury staff involved in compilation of

accounts and maintaining related records. In the process, the volume of records is reduced

drastically. The other one is in terms of generating MIS reports required for monitoring purposes

by the finance department which otherwise would not be possible to generate. The reconciliation

process has also become very easy now.

2.4 Customer satisfaction as a result of IT

By definition, customer satisfaction is the degree of overall pleasure or commitment felt by the

customer, resulting from a good or service to fulfill the customers’ desires, expectation and needs

in relation to the good/ service (Oliver 1993). It may also be defined as the degree to which a

consumer’s pre- purchase expectations are fulfilled or surpassed by a product or service

(Christopher, 1992). The latter definition by Peter and Olson details that not only are the

expectations fulfilled but also they may be surpassed leading to delightedness which is the

climax of most organizations.

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Customer satisfaction also depends on the products’ perceived performance relative to buyers’

expectations if the products’ performance falls short of expectations. The customer is

dissatisfied. If performance matches expectations, the customer is satisfied. If performance

exceeds expectations, the customer is highly satisfied or delighted.

To achieve customer satisfaction, Johnston (1991), in his study outlined different variables of

customer service including on time performance, specifications and quality services. Thus

services like on time delivery and quality control play an important role both as part of customer

service activities and as valuable feedback for further customer service improvement. These

customer service activities are in many cases emphasized to ensure that the customers achieve

higher satisfaction levels. However, satisfaction may be achieved if firms use the right personnel

to deliver services.

Computerized systems have today created a global market place, where vast array of goods and

services are being advertised, bought, and exchanged world wide with lowered costs for typical

market transactions such as supplier selection, establishing prices, ordering goods and paying

bills.(Malone et al,1987)

Information is now considered strategic resource, and at business level strategy, information

systems can be used to help firms to become the low cost producers, differentiate products or

services, and analyze new markets. At firm level, information systems can be used to achieve

new efficiencies or to enhance services by trying together the operations of desperate business

units so that they can function as a whole. (Laudon et al, 1998)

As stated by Levitt(1992), “A powerful force drives the world towards a converging

commonality, and that force is technology”. From the early beginning of human error,

technology has been one of the most essential and most important factors for development of

mankind. During the last two hundred years, technological change has been often related to the

economic growth in form of new types of goods and services (Coombs et al 1989).The use of

machines was a strength of the capitalist system, because it allowed vast increases in

productivity.

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IT is the cornerstone of self service banking. It gives vending machine convenience to consumers

for deposits and withdrawals of cash transactions that have historically played a key role in bank

branching decisions. The self service machine was installed in mid 1970s in developed countries

consisting of cash dispensers. Towards the end of 1980s, note dispensing cash machines were

joined by self service machines that were capable of paying bills and printing bank statements.

The range of services were have been increased to include exchange of foreign currency and

count and dispense coins.

Today, the network of ITs offers a new alternative way in our daily banking affairs. It is

estimated that over 80% of the bulk services provided daily by banks could be automated or

handled on self service basis. The IT represents an effort by banks to bring their services to the

people. It has value to its consumers through its ability to increase time and space convenience

for the routine function of obtaining cash and making deposits. To the bank the IT offers b a

more cost effective means of delivering these routine functions and frees branch personnel for

selling services with greater return (Wit de 1990). The rapid spread of ITs from which cash can

be drawn round the clock has boosted the use of competitiveness of cash. As a result, of the

expansion of the service outlet network, i.e. combination of traditional bank offices and ITs, it is

estimated that the bank now withdraws smaller sums of money than before from deposit

accounts but at more frequent intervals.

In relation to the Study it is observed that liquid flow rate in the banking industry has greatly

improved and therefore the banks through IT have managed to keep up to date information for

customer consumption hence improved performance (Wit de 1990).

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CHAPTER THREE

3.0 METHODOLOGY

3.1 Introduction

This section explains the research methods that were employed in the bid to achieve the

objectives of the study and the type of data to be collected, its sources, management and analysis.

It includes the study design, Area of study, population and sample selection, tools of data

collection and data management techniques.

3.2 Study Design

A case study research design was used with both quantitative and qualitative methods to access

the respondents. The design was selected because it is a method of investigation in which data is

got from selected samples and records whose response representation respectively gives a clue to

the view of the population.

3.3 Area of Study

The Study was carried out in Centenary Bank Entebbe Road, Kampala. The place was selected

because it had beefed up its Information Technology in quest to improve its performance.

3.4 Population

The study population consisted of the employees and customers of the bank. Centenary Bank

employs employees in different capacities, ranging from cleaners to the Manager.

3.5 Sample Size and Selection Method

A total sample of 25 respondents was purposively selected from the employees of the bank.

The sample size was determined using the framework of Krejcie and Morgan 1970.

To select the respondents, Purposive sampling method will be used to help the researcher get

detailed information for the evaluation of the study and for the inclusion of only those

respondents who hold vital information that the researcher needs. It was important because it

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gave the researcher freedom to select certain respondents with in-depth knowledge regarding the

issue under investigation.

3.6 Data collection Tools / Method

The researcher sought a letter of introduction from the faculty. Using this letter, the researcher

approached the Bank administration for permission to collect information from their employees.

The authorities then arranged for several employees to be approached to administer to them

questionnaires. Respondents filled the questionnaires with the help of the researcher where there

was need. Questionnaires were then gathered for processing.

To obtain information from the respondents, the researcher used self-administered questionnaires

to the respondents. The questionnaires were used because they save time since many

questionnaires can be filled at the same time. The questionnaires contained both closed and

structured questions.

The main method of data collection was questionnaires. To obtain information from the

respondents, the researcher used self-administered questionnaires to the employees of the bank

3.7 Data Management

3.7.1 Data Processing

Errors and mistakes in the questionnaires were thoroughly checked. This was done during data

processing and before data collection.

Responses to questions were classified into a meaningful category for easy understanding. A

coding frame was developed and then answers to similar questions put together into a similar

category

Qualitative and quantitative techniques of data collection were used. Qualitative data was got

from journals, news papers and the internet. Quantitative data was got from the field from

respective respondents. Raw data was obtained from the field, edited coded and tabulated to

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output frequency tables for conclusions to be made. This was based on to fulfill the objectives of

the study.

3.8 Limitations

The study is expected was limited by many factors including

1. Limited funds: More funds were solicited from relatives and friends to boost the process.

2. Time: The problem of time was solved by making sure there was no time wasted

3. Confidentiality of the information: Respondents were assured that that the information

obtained was entirely for academic purposes and would be treated with highest level of

confidentiality.

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CHAPTER FOUR

4.0 PRESENTATION, INTERPRETATION AND DISCUSSION OF FINDINGS

4.1 Introduction

In this chapter, data is presented, interpreted and discussed according to research questions.

Findings are presented in statistical tables and percentages. Responses from the respondents were

analyzed and the results are presented in this chapter.

4.2 Demographic characteristics of the respondents

The researcher started by finding out the sex of the respondents. This was thought to be having

something to do with social perspective. This is due to the fact that sex of an individual affects

that individual’s attitude and perception. The responses were thus:

Table 1: Sex of respondents

Sex Frequency Percent

Male 18 72

Female 7 28

Total 25 100

Source: Primary Data

From the table, the majority of respondents (72%) were males while the remaining 28% were

females. This implies that many males were involved in the study than females. This may be due

the employment policy of Centenary Bank to employ more men than women.

It was necessary to establish the age of the respondents since it affects the level of maturity and

understanding. The table below summarizes the results.

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Table 2: Age of respondents

Age in years Frequency Percent

Below 20 3 12

21-30 7 28

31-50 8 32

50 + 7 28

Total 25 100

Source: Primary Data

According to Table 2 above, 32% of the respondents were from 31 to 50 years, 28% were from

21 to 30 years, another 28% were 50 years and above while the remaining 12% were below 20

years.

The education level was also of interest to the researcher as it affects someone’s understanding

of a phenomenon. The researcher inquired and got the following responses.

Table 3: Education level of respondents

Education level Frequency Percent

Not gone to school 5 20

Primary 2 8

Secondary 6 24

Tertiary institution 12 48

Total 25 100

Source: Primary Data

The Table3 above shows that 48% of the respondents had attended tertiary institution, 24% had

reached secondary level, 20% had not gone to school while the remaining 8% had reached

primary level.

17

The researcher also asked the respondents about how long they have been in Centenary Bank.

This affects the level of understanding of the Organization. The table 4 below summarizes the

responses.

Table 4: Time spent in Centenary Bank

Time spent in

Centenary Bank

Frequency Percent

Less than 1 year 16 64

1-4 years ago 6 24

5-9 years ago 3 12

Total 25 100

Source: Primary Data

From the table 4 above, most respondents (64%) had been working in Centenary Bank for less

than one year. 24% had been there for 1 to 4 years while 12% had been there for 5 to 9 years.4.2

4.3 Effect of IT costs on Organizational performance

The respondents were further asked if Centenary Bank applies IT in its day to day running of the

business. The following table shows the results.

Table 5: IT application in Centenary Bank

IT application in the bank Frequency Percent

Yes 21 84

No 4 16

Total 25 100

Source: Primary Data

According to the table5 above, the biggest number of respondents (84%) agreed the application

of IT in the bank while 16% disagreed.

18

Still it was necessary to know the areas in which IT was applied. This was in a bid to find out the

impact it had on the Organization. The following table shows the responses given.

Table 6: IT areas of application in Centenary Bank

IT application Frequency Percent

Financial transaction 5 20

Security 5 20

Telegraphic transfer 8 32

Others 7 28

Total 25 100

Source: Primary Data

From table 6 above, 32% said that IT was applied in telegraphic transfers, 20% said that it was

applied in financial transactions, another 20% said that it was applied in the field of security

while 28% said it was applied in other ways.

Respondents mentioned different ways in which IT costs affect the performance of the

organization. These included but not limited to:

Costs affect performance because the money that would be making profits is now channeled into

purchases of expensive machines and software for the Information Technology. This reduces the

profitability hence poor performance.

Ramez (2000) agrees with findings by stating that in an attempt to computerize financial record

management, some costs are incurred. These are costs of computerizing financial records. He

further says that there are a few situations in which such system may involve unnecessary

overhead costs that would not be incurred in traditional (manual) file processing. These costs

include; high initial investment in hardware, software, and training. Generally, that a data base

management system provides for defining and processing data and overheads for providing

security, concurrency control, recovery and integrity functions.

19

Respondents further stated that the bank uses a lot of money to train the users of the IT systems.

This reduces its profitability in the short run hence poor performance.

Laudon et al (1998) puts the same idea that training costs and wages and salaries for new

employees is also another cost involved in computerizing financial record management. He

further states that normally, there is always resistance to these new systems and to change in

general. Some managers have perceived these new systems as creating jobs and role

uncertainties and ambiguities, changing the relationship between top, middle and lower level

managers, increasing job pressures and job complexity. Much as computerization created a large

number of jobs (programmers, analysts, data preparation staff as well as the people required to

build the computers and jobs in the computer leisure industry), it has been estimated that since

1978, the introduction of computers has cost 100,000 jobs in India, in many factories, but also

some in clerical areas (Himachal, 2006). This has led to redundancy and the need for training as

they have changed the nature of many jobs. However, others argue that computer may allow

companies to take on more staff as they increase productivity.

On the other hand, the employment and use of information Technology builds more confidence

in the customers owing to the security of the customers and their possessions. In this case there is

an increased number of customers who open bank accounts hence increased profitability of the

financial institution.

This is in line with Laudon et all (1998) that business organizations today need to quickly

capture business data, process it and produce out put or feed back for quick decision making in

today’s competitive business world.

The results imply that IT costs affect the performance of the organization as shown above.

4.4 Contribution of IT towards organizational performance

To achieve this objective, the researcher subjected the respondents to different questions in line

with the objective.

The researcher asked the respondents the reason that could have led the bank to choose to use IT.

The following responses were given.

20

Table 7: Reason for choice of IT application in Centenary Bank

Reason for using IT Frequency Percent

It is cheap financially 2 8

Transactions to manage are many 8 32

It is quick in processing business

transactions

4 16

It doesn’t make many mistakes like

humans

11 44

Total 25 100

Source: Primary Data

According to Table7 above, 44% said that IT does not make many mistakes like humans, 32%

said that transactions to manage are many, 16% said it is quick in processing business

transactions while the remaining 8% said it is cheap financially.

According to Northern (2011), the computerized systems can manipulate process or even find

stored data very quickly. Annual systems are limited in size due to the bulk of paper. There are

many large centrally held files by government, local authorities, and private companies. In such

away, applying manual system would almost be impossible.

The information from Himachal (2006) retrieved on 3rd

June 2011 explains that the most

foremost advantage of software applications has been reducing the drudgery of treasury staff

involved in compilation of accounts and maintaining related records. In the process, the volume

of records is reduced drastically. The other one is in terms of generating MIS reports required for

monitoring purposes by the finance department which otherwise would not be possible to

generate. The reconciliation process has also become very easy now.

The respondents were further asked whether there is a relationship between use of IT and

organizational performance and they gave the following responses.

21

Table 8: Existence of the relationship

Existence of relationship Frequency Percent

Yes 22 88

No 3 12

Total 25 100

Source: Primary Data

According to Table 8 above, most respondents (88%) agreed while the remaining 12% disagreed.

It was also necessary to find out the kind of relationship that exists and when the respondents

were asked, they gave the following responses.

Table 9: Kind of existing relationship

Kind of relationship Frequency Percent

Strongly positive 11 44

Strongly negative 7 28

Positive 3 12

Negative 4 16

Total 25 100

Source: Primary Data

Table 9 above indicates that 44% of the respondents said the relationship is strongly positive.

28% said it was strongly negative, 16% said it was negative and the remaining 12% said the

relationship was positive.

When the researcher asked the respondents whether they generally considered use of IT in banks

a good idea, the following responses were given.

22

Table 10: IT application in Centenary Bank a good idea

IT application a good idea Frequency Percent

Yes 24 96

No 1 4

Total 25 100

Source: Primary Data

From Table 10 above, the biggest number of respondents (96%) agreed that IT use in a bank was

a good idea while the remaining 4% disagreed.

The responses above indicate that IT contributes significantly to the performance of the

organization.

This agrees with the findings in the FAO report of 2006 that the major advantages of using

computerized approach include; The ability to identify and exploit large number of

interdependencies, timely availability of information as the processing of transactions is very

fast, reliability of information assuming the input data are correct and relationships established

are valid, the results are reproducible, lower costs of human resource training, and the ability to

performance of sophisticated and sensitive analyses.

4.3 Information Technology and customer satisfaction

This formed the responses for the third objective in which the researcher sought the different

ways how customers were satisfied as a result of Information Technology.

The respondents were asked whether IT has improved the confidence of the customers in the

bank and the following table shows the responses.

23

Table 11: Whether IT has improved the confidence of the customers in the bank

Improved confidence Frequency Percent

Strongly agree 5 20

Agree 12 48

Not sure 3 12

Disagree 4 16

Strongly disagree 1 4

Total 25 100

Source: Primary Data

48% of the respondents agreed, 20% strongly agreed, 16% disagreed, 12% were not sure while

4% strongly disagreed.

Responding to whether customers find it easy to make their transactions, the respondents gave

the following responses.

Table 12: Whether customers find it easy to make their transactions

Ease to make transactions Frequency Percent

Strongly agree 11 44

Agree 4 16

Not sure 4 16

Disagree 5 20

Strongly disagree 1 4

Total 25 100

Source: Primary Data

The results summarized in Table12 above shows that 44% of the respondents strongly agreed,

20% disagreed, 16% agreed and this was the same percentage as those who were not sure while

4% strongly disagreed.

Johnston (1991) agrees with the findings in his study outlined different variables of customer

service including on time performance, specifications and quality services. Thus services like on

24

time delivery and quality control play an important role both as part of customer service

activities and as valuable feedback for further customer service improvement. These customer

service activities are in many cases emphasized to ensure that the customers achieve higher

satisfaction levels. However, satisfaction may be achieved if firms use the right personnel to

deliver services.

The researcher further asked the respondents whether there is a lot of improvement in the daily

activities of the bank as a result of IT, the following responses were given.

Table 13: Improvement in the daily activities of the bank as a result of IT

Improvement in daily

activities

Frequency Percent

Strongly agree 6 24

Agree 12 48

Not sure 5 20

Disagree 2 8

Total 25 100

Source: Primary Data

Table 13 above shows that 48% of the respondents agreed. 24% strongly agreed, 20% were not

sure while the remaining 8% disagreed.

The respondents were also asked whether the customers are increasing as a result of easy

banking. They had the following responses.

25

Table 14: Whether the customers are increasing as a result of easy banking

Increase in customers Frequency Percent

Strongly agree 8 32

Agree 9 36

Not sure 4 16

Disagree 2 8

Strongly disagree 2 8

Total 25 100

Source: Primary Data

Table 14 above summarizes the responses as 36% having agreed, 32% having strongly agreed,

16% being not sure while those disagreeing and strongly disagreeing being equal and taking up

8% each.

In agreement Levitt (1992), states that “A powerful force drives the world towards a converging

commonality, and that force is technology”. From the early beginning of human error,

technology has been one of the most essential and most important factors for development of

mankind. During the last two hundred years, technological change has been often related to the

economic growth in form of new types of goods and services. The use of machines was a

strength of the capitalist system, because it allowed vast increases in productivity.

IT is the cornerstone of self service banking. It gives vending machine convenience to consumers

for deposits and withdrawals of cash transactions that have historically played a key role in bank

branching decisions. The self service machine was installed in mid 1970s in developed countries

consisting of cash dispensers. Towards the end of 1980s, note dispensing cash machine were

joined by self service machines that were capable of paying bills and printing bank statements.

The range of services were have been increased to include exchange of foreign currency and

count and dispense coins.

In trying to respond to whether bank customers feel secure with their money in centenary bank

because of the security and easy access, the respondents gave the responses that follow.

26

Table 15: Whether bank customers feel secure with their money in centenary bank because

of the security and easy access

Customer security Frequency Percent

Strongly agree 5 20

Agree 11 44

Not sure 9 36

Total 25 100

Source: Primary Data

According to the table above, 44% agreed followed by 36% who were not sure and 20% who

were not sure.

Respondents were also asked if IT has improved genuine transaction in the bank. They

responded as in the following table.

Table 16: Whether IT has improved genuine transaction in the bank

Improved genuine

transaction

Frequency Percent

Strongly agree 16 64

Agree 5 20

Not sure 3 12

Disagree 1 4

Total 25 100

Source: Primary Data

From the table, majority of the respondents (64%) strongly agreed, 20% agreed, 12% were not

sure while 4% disagreed.

Lastly the respondents were asked whether IT saves a lot of time in banking and the table below

summarizes their responses.

27

Table 17: Whether IT saves a lot of time in banking

Frequency Percent

Strongly agree 9 36

Agree 14 56

Not sure 2 8

Total 25 100

Source: Primary Data

According to the table, most respondents (56%) agreed, 36% strongly agreed, and the remaining

8% were not sure.

The responses above indicate that customers were satisfied as the result of IT use in Centenary

Bank.

28

CHAPTER FIVE

5.0 SUMMARY, RECOMMENDATIONS AND CONCLUSION

5.1 Introduction

This chapter presents interpretation and discussions of the research about the findings of the

study themes. The discussions are presented according to the objectives of the study.

5.2 Summary

The study sought to investigate the effect of IT on organizational performance. Centenary Bank

was taken as a case study from where different data relating to the study subject was gathered.

It was revealed that there were different ways in which IT costs affect the performance of the

organization including reduction in profitability hence poor performance, using a lot of money to

train the users of the IT systems hence reducing profitability and building of more confidence in

the customers owing to the security of the customers and their possessions to increase the

number of customers who open bank accounts hence increased profitability of this financial

institution.

It was further revealed that IT contributes significantly to the performance of the organization.

Through ability to identify and exploit large number of interdependencies, timely availability of

information as the processing of transactions is very fast, reliability of information assuming the

input data are correct and relationships established are valid, the results are reproducible, lower

costs of human resource training, and the ability to performance of sophisticated and sensitive

analyses.

More so, results show that customers were satisfied regarding service delivery including on time

performance, specifications and quality services. Thus services like on time delivery and quality

control play an important role both as part of customer service activities and as valuable

feedback for further customer service improvement. These customer service activities are in

many cases emphasized to ensure that the customers achieve higher satisfaction levels.

29

5.3 Conclusions

It was concluded that IT costs affect the organizational performance as shown above.

The responses above indicate that IT contributes significantly to the performance of the

organization.

More so, the customers were satisfied as the result of IT use in Centenary Bank.

5.4 Recommendations

In view of the various observations and finding, the following were recommended:

Financial institutions should look into minimizing costs of computerization to strike a balance

between costs and performance.

More so, Banks should put in an effort to introduce IT or improve on the existing technology to

increase their performance.

Government should subsidize on IT equipment such that most financial institutions adopt the

idea for customer satisfaction.

5.5 Areas for further research

There is need for more study into the analysis of other issues neglected in the process of IT

development in organizations.

30

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33

APPENDIX 1: QUESTIONNARE FOR CENTENARY BANK EMPLOYEES

Dear respondent, the questions contained here in are meant to generate some information

concerning the effect of Information Technology on organizational performance. The

information generated is purely meant for academic purposes and will therefore be kept with the

highest degree of confidentiality. Please answer the questions as honest as possible.

Barasa Richard,

Researcher

SECTOIN 1: BACK GROUND INFORMATION

1. Sex

a) Male

b) Female

2. Age

a) Below 20

b) 21-30

c) 31-50

d) 50 and above

3. Level of Education

a) Not gone to school

b) Primary

c) Secondary

d) Tertiary institution

e) University

4. For how long have you been in Centenary Bank?

a) Less than 1 year ago

b) 1-4 years ago

34

c) 5-9 years ago

d) 10 and more years ago

SECTION A: EFFECT OF IT COSTS ON ORGANIZATIONAL PERFORMANCE

10. Do you agree that Centenary Bank uses IT in the day to day running of its activities?

a) Yes

b) No

11. If yes, in which way is IT used outside and inside the bank?

a) Financial transaction

b) security

c) Telegraphic fund transfer

d) Other (Please specify) ………………………………………………………………………

13. In your opinion what is the effect of IT cost on the performance of Centenary Bank?

………………………………………………………………………………………………

………………………………………………………………………………………………

………………………………………………………………………………………………

………………………………………………………………………………………………

SECTION B CONTRIBUTION OF IT TOWARDS ORGANIZATIONAL

PERFORMANCE

12. What could be the reason why Centenary Bank chose to use IT?

a) It is cheap financially

b) Transactions to manage are many

c) It is quick in processing business transactions

d) It does not make many mistakes like humans

e) Others (Please specify) ………………………………………………………….

35

14. Does there exist a relationship between Information use and organizational performance?

a) Yes

b) No

c) Don’t know

15. If the answer in 14 is yes, what relationship does exist?

a) Strongly positive

b) Positive

c) Negative

d) Strongly negative

16. Is IT usein banks a good idea?

a) Yes

b) No

17. If yes in 16, what has IT contributed to the Banks performance?

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

…………………………………………………………………………………………………….

36

SECTION C: INFORMATION TECHNOLOGY AND CUSTOMER SATISFACTION

Please tick or circle the appropriate using the following keys

1=strongly agree 2= Agree 3= Not sure 4= Disagree 5= strongly disagree

S/N Statement 1 2 3 4 5

1. IT has improved the confidence of customer in the bank

2 Customers find it easy to make their transactions

3. There is a lot of improvement in the daily activities of

the bank as a result of IT

4. Customers are increasing as a result of easy banking

5. Bank customers feel secure with their money in

centenary bank

6 IT has improved business transaction in the bank

7 IT saves a lot of time in banking

Thank you.