Analysing the Organizational Culture on Performance of SMEs in Kisumu County, Kenya

Abstract

Asia-Pacific Economic Cooperation (APEC) has recognized and emphasized the vital contribution of Small and Medium-sized Enterprises within the Asia- Pacific region. SMEs, which constitute a staggering 95% of businesses in the region, play a pivotal role by employing 60% of the workforce. Globally, SMEs contribute to 90% of businesses and are essential for economic growth in both developing and developed nations. In Kenya, SMEs constitute 98% of all businesses and contribute significantly to job opportunities and the national GDP. In Kisumu District, SMEs account for 70% of employment and over 60% of the Gross National Product (GNP). However, despite their importance, a report from the Kenya National Bureau of Statistics (KNBS) suggests that three out of every five businesses in Kenya are at risk of failure within the next few years. Existing research on the relationship between organizational culture and Small and Medium-sized Enterprises (SMEs) performance is scarce, particularly concerning SMEs located in Kisumu County. Therefore, the primary objective of this study was to examine the impact of organizational culture on the performance of SMEs in Kisumu County. Specifically, the study focused on three types of cultures: clan, adhocracy, and market cultures, guided by the Organizational Culture theory. A sample size of 285 SME owners and managers participated in the study, and data collection involved the use of questionnaires with closed and open-ended questions. The study's findings revealed that all the variables, including clan culture, adhocracy culture, and market culture, were significantly positively correlated with SME performance. Clan culture had a strong positive influence, while adhocracy culture had a moderate positive influence. Market culture had a relatively weaker positive influence. These influences were statistically significant, indicating that organizational culture plays a critical role in SME performance. The study recommends that SMEs in Kisumu County should regularly monitor and evaluate their performance, stay informed about market trends, and effectively compete with other companies. Embracing clan culture, adhocracy culture, and market culture within an organization has the potential to positively impact Small and Medium-sized Enterprises (SMEs) performance. These aspects of organizational culture foster collaboration, adaptability, and market responsiveness, leading to improvements in SME performance. Furthermore, the study underscores the significance of embracing new ideas, fostering creativity and innovation, and investing in research and experimentation to enhance SME performance.