OUTSOURCING HUMAN RESOURCE SERVICES AND THE ORGANIZATIONAL PERFORMANCE OF COMMERCIAL BANKS IN NAKURU CITY, KENYA

Abstract

Kenyan commercial banks face significant challenges in terms of performance, particularly in relation to profitability, capital adequacy, asset quality and customer satisfaction. The Kenyan banking sector has experienced rapid growth over the past decade, but this has also led to increased competition and pressure on banks’ performance. This study established the effect of outsourcing human resource services and the organizational performance of commercial banks in Nakuru City, Kenya. The study was anchored on resource based view theory. The study used explanatory research design. Twenty eight (28) licensed commercial banks in Nakuru City were targeted. Purposive sampling was used to sample the branch managers, credit managers and operational managers in the twenty eight (28) licensed commercial banks in Nakuru City making a sample size of 84 respondents. Data was collected using structured questionnaires. Statistical Package for Social Sciences (SPSS) software aided in analysis of the quantitative data collected where analysis was conducted using both descriptive and inferential statistics. The results indicated that there was a positive and significant correlation between outsourcing human resource services (r=0.295, p=0.013) and performance of commercial banks. The regression results show a positive and significant effect of outsourcing human resource services (β = 0.041, Sig. = 0.046) on performance of commercial banks which implies that outsourcing HR services affects performance of commercial banks positively. The study concludes that the outsourcing HR services allows banks to tap into the expertise and specialized knowledge of HR service providers who have experience in managing these complex HR processes and recommends commercial banks in Nakuru City to outsource employee relations services since they can help maintain confidentiality and impartiality in sensitive employee-related matters.