Effect of Organization Redesign Strategy on Performance of Commercial Banks in Nairobi County, Kenya

Abstract

The capping of interest rates by the Central Bank of Kenya in September 2016, led to massive downsizing by commercial banks in Kenya to reduce costs, survive and generate profits. However, by the end of the financial year 2017 when banks that downsized were releasing their financial reports some banks had made a profit like Kenya Commercial Bank, Cooperative bank, while others including Family bank, Barclays among others had made losses. Therefore, it is not clear whether downsizing has a positive or a negative impact on banks’ profitability. The survey looked at the impact of organization redesign strategy on commercial bank financial performance. A descriptive research design was used. The research targeted 12 commercial banks in Kenya. The research targeted three managers from each bank in the following categories: senior, middle and supervisory level. Therefore, the target respondents were 36 managers. A census approach was adopted since the population size is not large. Data was gathered using structured questionnaires issued to bank managers. The data collected was quantitative and was sorted to ensure completeness. Findings revealed that organization redesign strategy had a positive and significant effect on commercial bank financial performance in Nairobi County. The study recommends that banks should diversify to increase their income levels. Banks also need to invest more in innovation, agency, and digital banking as the main drivers of bank diversification and distribution channels for banking products. Banks are also encouraged to unite to work together and survive in the market.