Effects of organizational structure on strategic management process in commercial banks in Kenya: A case of KCB Bank Kenya Limited

Abstract

The significance of strategies to organizations cannot be overemphasized. Strategies are essential to organizations because they provide a sense of direction and outline measurable organizational objectives. Similarly, as an aspect of organizational strategy, the strategic management process is essential in establishing foundation for strategic decision-making in an organizations. The process also provides a consistent framework for managing key activities of a firm. However, in order for the process to be operative, a suitable organizational structure should be put in place because to guide all employees by clearly outlining official reporting relationships that ultimately governs the workflow. The statement of the problem of this study was informed by two key aspects. First, the subject of organizational structure is important in strategic management process but remains an area that has not been adequately explored in Kenya. Secondly, there is a view among some researchers that managers tend to ignore the structure of their organizations while drafting and implementing their strategic plans. The objectives of this study were to determine how centralization of decision-making power, departmentalization, chain of command, and formalization affect strategic management process in commercial banks in Kenya. The results of this study are of significance the policy makers in the banking industry, other industries, and contribute further knowledge to the area of strategic and corporate management. This study was anchored on Fred Edward Fiedler’s Contingency Theory. Both qualitative and quantitative methods of research study were used to in this study. Case study approach was used in this study. Both descriptive and correlational methods were the main quantitative data analysis techniques that were used in this study. KCB Bank Kenya Limited’s headquarters in Nairobi was the case study institution. The target population of the research consisted of the top, middle and low level management as well as the nonmanagerial employees of KCB Bank Kenya Limited. Probability sampling, specifically cluster sampling, were used in this study. Questionnaires were used to collect data from the field. Correlation and ANOVA methods were used to analyse quantitative data. Content and grounded analysis methods were used to analyze qualitative data. The findings of the study indicate that there was a positive correlation between centralization of decision making power and strategic management process in commercial banks in Kenya. Departmentalization was also found to affect strategic decision making process, with a rigid departmentalization being considered favorable for effective strategy formulation and implementation. As opposed to a long chain of command, a short chain of command was viewed and appropriate structure for strategic management process. Finally, a formal structure was appropriate for strategy formulation phase of the strategic management process while an informal structure was ideal for the implementation phase. The conclusion drawn from the findings of the study is that organizational structure is positively related to the strategic management process. From the findings of the study, it is recommended that managers of organizations operating in the financial industry as well as other industries should take into perspective and give considerable attention to their structures while carrying out strategic management process in their institutions.