Managerial Choice

To examine the effect of managerial choice on performance, respondents were requested to state their bank‟s view regarding stated factors. They were to rate these managerial choice factors on a scale of 1-5, where 1= strongly disagree, 2= disagree, 3= not sure, 4= agree, and 5 = strongly agree. The collected data was analysed and computed percentages, means and standard deviation presented in Table 4.6.

Table 4.6 Response Rating on Managerial Choice Statement

N Min Max Mean Std. Deviation Strategies should be formulated by senior

management alone. 40 1 5 2.25 1.171

Not all staff who should be involved in the

strategy formulation process. 40 1 5 2.60 1.516 All managers should be allowed to make their

own decisions 40 1 5 2.80 1.224

Managers should consolidate their thoughts on

major decision-making. 40 1 5 4.15 .864

Not all staff who should be allowed to make their own decisions regarding their roles and duties.

40 1 5 2.70 1.203

Your bank is where it is due to decisions made

earlier by managers. 40 1 5 3.35 1.167

Aggregate score 2.975 1.191

Source: Survey Data 2014

An aggregate mean of 2.975 and SD of 1.191 shows a low rating, which can be interpreted to mean that commercial banks‟ operations support the argument that managerial choices influence bank performance. The argument that strategies should be formulated by senior management alone rated poorly, at M=2.25 and SD= 1.171, with 30% strongly disagreeing, 37.5 % disagreeing, 15% not sure, 12.5 % agreeing, and 5% strongly agreeing. This means that most banks prefer involvement of other employees in addition to the management in strategy formulation, an indication of the importance of team-work. Majority of the respondents supported the argument that managers should seek the contribution of other employees when making major decisions (M=4.15, SD= .864), where 7.5% disagreed, 7.5% were not sure, 47.5%

agreed, and 37.5% strongly agreed. This shows that in the banking sector, it is not expected that business be run by an individual‟s opinion; rather, decisions should involve the input of all staff.

The results were supported by Ayadi and Omolehinwa‟s (1998) study which found out that poor management contributes to poor bank performance. Thus, managerial choice data ought to be firm–specific, not generalized to a sector. Ghemawat (1991) and Porter (1991) seem to support this finding, as they state that the effect of managerial choice on an organization is only felt after a long period of time. Managerial choices influence performance indirectly and hence may be unrecognized by many people when analyzing performance. However, according to Porter (1998), managerial choices influence firm performance significantly.

4.3.13 Dynamic Capabilities

To evaluate the role of dynamic capabilities within Kenyan commercial bank sector, the respondents were required to rate stated factors. Respondents were to rate their bank‟s utilization of sensing dynamic capabilities on a scale of 1-5, where 1= below average, 2= average, 3=above average, 4= good, and 5 = excellent. The computed percentage, mean and standard deviation were presented in Table 4.7.

Table 4.7 Response Rating on Dynamic Capabilities Statement

N Min Max Mean

Std. Deviation Have ability to direct internal R&D and selecting new

technologies. 40 1 5 3.6 1.081

Have ability to tap developments in 40 1 5 3.53 1.062

Have ability to tap supplier and complementor innovation. 40 1 5 3.43 1.035 Have ability to identify target market segments and

changing customer needs. 40 1 5 3.83 0.984

Ability to describe the customer solution and the correct

business model 40 1 5 3.95 0.876

Ability to select correct decision-making procedures 40 1 5 3.7 0.992

Ability to build loyalty and commitment 40 1 5 4.08 0.764

Ability to select enterprise boundaries to manage

complements and "control" platforms 40 1 5 3.85 0.77 Managing strategic fit so that asset combinations are value

enhancing. 40 1 5 3.63 0.925

Adopting loosely coupled structures; embracing open

innovation; developing integration and Coordination skills. 40 1 5 3.53 0.96 Knowledge management: learning; knowledge transfer;

know-how integration; achieving know-how and

intellectual property protection. 40 1 5 3.65 0.949

Governance: achieving incentive alignment; minimizing agency issues; Checking strategic malfeasance; Blocking

rent dissipation. 40 1 5 3.9 0.982

Aggregate score 3.723 0.948

Source: Survey Data 2014

The computed results indicated a moderate rate with an aggregate mean of 3.723 and SD of 0.948. This can be translated to mean that the banking sector utilization of dynamic capabilities is above average and employees probably need to be enlightened on how to employ these capabilities to achieve better performance. The factor testing the ability of banks to identify target market segments and changing customer needs was rated best, with a mean of 3.83 and SD of 0.984, where 2.5% rated below average, 10% average, 12.5% above average, 52.5% good, and 22.5% excellent. This indicates that commercial banks are alert on market dynamics and customer preferences. The ability to tap suppliers and complementor innovation was rated poorly (M=3.43, SD =1.035), with 2.5% rating below average, 17.5% average,

30% above average, 35% good, and 15% rated excellent. This could indicate a decline in knowledge-sharing outside the bank.

The ability to build loyalty and commitment was rated highest among all the factors, with a mean of 4.08 and SD of 0.764, where 2.5% rated average, 17.5% above average, 50% rated it good, and 30% rated it excellent. This shows that banks employ dynamic capabilities to create and modify loyalty and remain committed to the customers despite the changing environment. Ability to identify the correct decision-making procedure seems to be an area that banks needs to employ, seizing DC to improve, which was rated with a mean of 3.70 and SD of 0.992, where 2.5% rated it below average, 10% average, 22.5% above average, 45% good, and only 20% rated it excellent. Governance as a factor was highly rated, with majority, 47.5%, rating it good, 27.5% rated it excellent, 15% above average, 7.5% average, and only 2.5% rated it below average. The mean score was 3.9 and standard deviation was 0.982, indicating that we can generally conclude that banks utilize heavily the transforming DC on governance.

Several scholars support the importance of dynamic capabilities in supporting competitive advantage and performance of firms in dynamic environments (Teece, et al., 1997, Eisenhardt & Martin, 2000, Zahra, et al., 2006). However, Zott (2003)

argues that dynamic capabilities are indirectly linked to firm performance, a view that is corroborated by Bowman and Amrosini (2003). Winter (2003) states that DC are essential requirements for any firm to survive in a dynamic environment. From the unstructured interviews, the banks acknowledge the importance of the sensing, seizing and transforming dynamic capabilities in improving their performance in the rapidly changing environment. Secondary data shows that Kenyan banking

environment is quite dynamic and the competition seem to be stiff among the different banks. The study therefore concludes that there is need to understand the employment of DC in the commercial bank sector and assumes that DC influences performance.