Effects of organizational structure on strategy implementation: a survey of commercial banks in Kenya
Gituma, Isaiah Muriithi
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The business environment is changing rapidly due to changes in the external environment and emergence of dynamic technological advancements. These changes require organizations to continually craft new strategies that can give them competitive advantages over the competition and also to enable them respond to the market demands accurately, effectively and efficiently. The Kenyan commercial banking sector has continued to witness phenomenal growth on various key fronts underpinned by an industry-wide branch network expansion strategy both in Kenya and the East African Community (EAC) member countries as well as automation of a large number of services. However, there are existing challenges as outlined in the CBK annual supervision report of 20 I0, which require commercial banks to be proactive and deliberate in developing and implementing appropriate strategies to enable them to survive in a highly volatile business environment. For this objective to be achieved, appropriate matching of structure and strategy is absolutely critical because the organizational structure of any organization plays a crucial role in the successful implementation of strategies, and hence the need to study "Effects of Organizational Structure on Strategy Implementation". The aim of this survey study therefore was to establish whether the implementation of strategies is influenced by organizational structure factors. The specific objectives of the study were to determine whether communication, hierarchical levels, decision-making structure, and line-and-staff affect strategy implementation in the commercial banking sector. The study was anchored on the contingency theory that argues that there is no one best way of doing things advocated by Lawrence and Lorsch (1967). It was conceptualized within the dependent independent variable components and their indicators. Higgins (2005) 8-S model describing the eight factors critical for effective strategy execution was used. The study's research design was descriptive survey. The sampling frame was forty (40) commercial banks. Three commercial banks were randomly selected for piloting, one each from the three categories of commercial banks: large, medium, and small. The respondents were the heads of strategy and/or the in-charge of strategy implementation in the respective banks at the headquarters of all the commercial banks. Questionnaires were the key instrument used to obtain the primary data supported by comprehensive review of secondary information. A total of 38 questionnaires were filled. Data analysis constituted both qualitative and quantitative analysis, which was carried out using the Statistical Package for Social Sciences (SPSS). The analysis provided qualitative information in form of descriptive statistics such as percentages and means. Data was presented using statistical tables, bar graphs and pie-charts. The findings of the study revealed that organizational structure variables: communication, hierarchical levels, decision-making, and line-and-staff have great effect on strategy implementation thus calling for accurate matching of structure and strategy. The study findings will form a vital tool in decision making to the industry stakeholders such as managers, chief executive officers, and the boards of directors. They can also be generalized to other industries thus helping the management in those industries in making critical decisions with regard to strategy implementation. It is also hoped that the suggested research areas will offer opportunities for future research. Finally, the research findings will be useful to the government agencies when making policies or decisions related to commercial banking in Kenya.