Effect of strategic leadership on performance of MFI’s Kenya

Abstract

Proper strategic leadership is essential in an organisation’s decision making to ensure short term success and long term sustainability given the current volatile business environment. SMEs in Kenya are the key vehicles of economic development but they fall short of achieving their potential. SMEs are facing problems such as stiff competition, inadequate financing and the inability of the leaders to make long term strategic decisions. This study aimed at establishing the effect of strategic leadership on performance of small and medium enterprises in Kenya. Descriptive survey design was used. The target population consisted of 3,001 registered SMEs in Kenya. 301 SMEs were selected as a sample using stratified sampling technique. Respondents were the owners and managers of the organisations. Collection of primary data was done through a structured questionnaire. The response rate of this study was 56% based on 170 respondents out of 301. Descriptive statistics (standard deviations, percentages and mean) was used in the analysis. Pearson correlation analysis was also performed to determine the level of the relationship between strategic leadership and performance of the SMEs in Kenya. Strategic leadership practices have been discussed in this study, which include: determined corporate strategic direction, effectively managed corporate resource portfolio, emphasized organizational culture, ethical practices and organizational controls that are balanced. Measures of organisational performance such as customer satisfaction, net profit margin, high annual revenue and low annual employee turnover were also studied. The two variables’ level of relationship was tested using a correlation analysis and it confirmed that strategic leadership has an effect on organizational performance. Therefore, this study concluded that strategic leadership positively affects the performance of SMEs in Kenya. The researcher recommended that balanced organizational controls should be effectively applied to realize good performance. Further studies are recommended to be undertaken to determine the effect of strategic leadership on the performance of county governments in Kenya.