Performance Contracting and Employee Motivation in Selected Commercial Banks in Nairobi City County, Kenya.
Otieka, Austin Michel
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Performance contracting (PC) was introduced for among other reasons, to ensure high performance. True to this, commercial banks in Kenya have performed exemplary over the years. Whereas many factors over and above PC could be attributed to this performance, the effect of PC in enhancing productivity and operational efficiencies which culminate in the profitability of the commercial banks cannot be underscored. Motivation on the other hand has been proven to culminate in high performance. This then raises an interesting question: Is there a relationship between PC and employee motivation in the selected commercial banks in Nairobi City County, Kenya? This study sought to investigate whether there existed a relationship between PC and employee motivation in the selected commercial banks in Nairobi City County, Kenya. The banks were Kenya Commercial Bank, Co-operative Bank of Kenya, Equity Bank, Barclays Bank and Standard Chartered Bank. This study was made necessary by the fact that whereas PC has improved employee motivation in some areas, it had also failed to improved employee motivation in others. No research had been done to establish whether PC had in any way affected employee motivation in the commercial banks and more so in Nairobi County, Kenya. This study therefore had the general objective of finding out whether there existed a relationship between PC and employee motivation in the selected commercial banks in Nairobi City County, Kenya. Specifically, the study looked at target setting and employee motivation, performance evaluation and employee motivation, performance development programs and employee motivation and reward and employee motivation. The target population was the 2727 employees of the selected commercial banks in Nairobi City County based at both Headquarters and branches. The sample was selected through random sampling technique and 12% of the employees for each of the five banks targeted. As a result, a sample of 327 employees were be engaged of whom 259 responded. Descriptive research design was used and primary data collected using a structured questionnaire prepared on a five point likert scale. The questionnaire was checked for reliability using the Cronbach’s Alpha test on which it scored 0.817 against threshold of 0.7 thus reliable. Expert opinion was used to test the validity of the questionnaire. The resulting data first underwent a first stage of editing, coding, entry and processing using Statistical Package for Social Sciences (SPSS) version 23 and analyzed through descriptive analysis, percentages, frequency distribution and inferential analysis. The study established that performance contracting affected employee motivation by 55%. Target setting, performance evaluation and rewards all positively affected motivation whereas performance development programs negatively affected employee motivation. The study recommends for employee involvement in target setting, creation of mechanisms to address bias and partiality in performance evaluation and leveraging on rewards for motivation towards performance development programs. The study also recommends for clarity of rewards associated with certain levels of performance and this information to be made available to employee at the beginning of the performance period to act as a driver for exceptional performance.