Human Capital Management Practices and Firms Performance: A Survey of Commercial Banks in Kenya

Abstract

The objective of the study was to determine the relationship between human capital management (HCM) practices and performance of commercial banks in Kenya. It was carried out using a cross sectional survey design as well as a correlation research. The study population and sample was 45 commercial banks. A total of 23 banks took part in the final survey. The primary data was generated through questionnaires whose respondents were head of human resource departments in banks while secondary data was sought from the financial statements of banks by means of content analysis. In order to test for the relationship between HCM practices and firm performance, the ordinary least squares (OLS) method was used to perform a regression analysis. The investigation established that the most used human capital management practices were in recruitment excellence, collegial and flexible work place and rewards and accountability. The least used practice was communications integrity. The study also noted that with the exception of communication, other human capital management practices had a positive influence on turnover growth. It is concluded that most commercial banks adopt human capital management practices to an average degree. The study further concludes that human capital management practices generally have a positive influence on performance as measured by both turnover growth and return on assets. The study recommends that there is need for commercial banks in Kenya to enhance the human capital management practices.