Relationship between Organizational Structure and Performance of Commercial Banks in Kenya

Abstract

The banking sector is among the sectors expected to facilitate the realization of vision 2030, by ensuring that there is the provision of efficient financial services and investment opportunities that will create vibrant and globally competitive financial services in Kenya. This study will focus on the effect of structure on the organizational performance of commercial banks in Kenya since they provide an important contribution to the economy. The study is prompted by the increased number of commercial banks in the recent past facing financial difficulties. These difficulties resulted in low returns to the investors and in some cases, commercial banks put under statutory management thus threatening the wellbeing of the country’s economy. The study adopted a descriptive research design where a census of 39 commercial banks regulated by CBK was carried out. The study targeted 4 respondents from each of the 39 commercial banks. The respondents were head of human resource department, operations department, finance department, research, and development department, information technology department, head of customer care department, and sales and marketing department. Primary data were collected through a questionnaire from the selected managers and were analyzed using SPSS version 26 for regression analysis and model specification tests. Correlation and multivariate regression analysis were used to test five hypotheses. The regression analysis results showed that organization structure influenced performance (β = 0.287; p-value >0.05). It was recommended the management of commercial banks in Kenya should put in place high organizational structure strategies as it leads to high performance. The banks should ensure they have a specialized organizational structure, high nature of the span of control, centralized structure, and have departmentalization in the company.