EFFECTS OF PERFORMANCE CONTRACTING ON ORGANIZATIONAL PERFORMANCE IN THE PUBLIC SECTOR, A FOCUS ON COUNTY GOVERNMENT OF MURANG’A IN KENYA

Abstract

Globally, performance contracting has emerged as a commonly used management approach within the state sector, aimed at enhancing organizational efficiency and effectiveness. In the context of county government in Kenya, where the decentralization of governance has gained momentum, it is essential to comprehend how performance contracting influences organizational performance. While studies have explored the effects of performance contracting in different contexts, the specific dynamics within county government organizations in Kenya merit dedicated attention due to the unique challenges and opportunities presented by the decentralization of governance. Local governments were under pressure to increase service delivery, cut expenses, and become more responsible, client-focused, and stakeholder-responsive. Key contributors to poor performance included excessive regulation and control, frequent political interference, ineffective management, blatant misuse of resources, unclear employee expectations, and inadequate or non-existent performance evaluation systems. In order to address the issue, the government chose to implement a performance contracting system in 2003. There remains ambiguity regarding whether performance contracts have enhanced organizational efficiency in public service delivery. This study aimed to examine the effects of performance contracting on the organizational performance of Murang’a County Government. In particular, the goals should determine how setting goals affects organizational performance, assess how employee training affects organizational performance and determine how much performance reviews affect organizational performance, the study utilized a mixed methods research design, integrating both qualitative and quantitative approaches to ensure a thorough collection of data and to compensate for the shortcomings of using either method alone. The target population comprised employees across management, supervisory, and subordinate levels within the Murang’a County Government. A sample size of 358 participants was selected using stratified sampling. Primary data was gathered from respondents using questionnaires. To increase the instrument's dependability, the expert did a pilot test which was done using available staff of Murang’a County Government. The research instruments were subjected to validity testing to confirm their accuracy and relevance. Documentary analysis was used to gather secondary data from organization’s strategic plans and websites. Data analysis was conducted using SPSS version 23. Descriptive statistics, including frequencies, percentages, and mean scores, were used to summarize the data. The study revealed that target setting was widely viewed as a crucial factor in enhancing organizational performance while training programs emerged as vital for organizational performance. However, respondents agreed that appraisals are fundamental in improving performance and the majority of respondents perceived that Performance Contracting as having significantly improved efficiency. These findings suggest that resource allocation, goal specificity, and effective task management play crucial roles in driving organizational performance. Further, from the findings the study recommended a comprehensive approach across training, resource allocation, performance appraisals, and performance contracting. The major conclusions of the study were that target setting is widely viewed as a crucial factor in enhancing organizational performance and training programs emerged as vital for organizational performance.