The Moderating Effect of Employee Engagement in the Relationship between Strategic Planning and Organization Performance

A Project Report Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement for the Degree of Master of Business Administration (MBA)The subject of strategic planning has been widely researched specifically in the private sector and in recent years has elicited further interest in government especially after its adoption in the public sector. However, there is mixed set of results that is inconclusive on its relationship with organization performance. In an effort to establish an accurate position, previous studies have proposed introduction of a contextual factor as an intervening variable because organizations do not operate in a vacuum but are heavily affected by their operating environment. Strategic management research consider employees as a critical success factor in the strategic planning process. Therefore this study focused on testing three research questions. First, the extent of strategic planning process; the relationship between strategic planning and performance; and whether employee engagement had a moderating effect on the relationship between strategic planning and organization performance of public sector organizations in Kenya. The study adopted a descriptive research design with a census of 86 public organizations that had embraced strategic management through implementation of strategic plans. Data collection was done through a pre-tested research questionnaire with 33 out of 86 sampling units returning their filled out questionnaire, representing a response rate of thirty eight percent (38%). The data received was then analyzed by use of a computer statistical package with descriptive and inferential statistics computed to test the hypotheses. The findings of this study confirmed the formality of strategic planning across public organization in Kenya. Additionally, the study revealed that the greatest outcome of adoption of strategic planning based on the four perspectives of the balance score card frame work was continuous learning and improvement. This was closely followed with improvements in internal operations as demonstrated by enhanced co-ordination that resulted in better decision making. Overall, the study revealed that strategic planning process had a positive and significant relationship with performance of these public organizations. Furthermore, employee engagement had a positive influence on this relationship though its moderation effect was not significant. Notwithstanding, the study also showed that the degree of involvement varied depending with the level of management with top management having the highest level of involvement in the process. The study also discussed the importance of allowing employees to be involved in the strategic planning process with a majority of respondents reporting improvement in their understanding of the strategic plan, which had an implicit impact on their commitment during implementation of their strategic plan. The study concluded that the strategic planning by public organization is a formal and systematic process, with those engaging in this practice expected to improve on their performance. It was also concluded that engaging employees in the strategic planning does not necessarily result in improvement of organizational performance. In line with the findings, the study recommends that the government of Kenya should ensure that all its agencies initiate strategic planning as it is bound to improve service delivery to its citizens. In the same breadth, for those agencies that have already initiated strategic planning, it is recommended that during review of their strategic plans at the end of every strategy cycle, they strive to carry out the process in its entirety and discouraged against halting mid-stream or taking shortcuts to ensure they accrue its full benefits. Finally, top management is encouraged to involve other employees in the strategy formulation process and also to install effective communication structures that will assist in co-ordination of the entire process. To further the research, it is recommended that this study be replicated in other sectors of the economy by modifying the school of planning to fit the sector of study. In addition, the employee engagement can be narrowed to each level of management and similarly the moderation effect to the different stages of the strategic planning process. Finally, future research should consider utilizing longitudinal data to better measure the impact of strategy over time