East African Journal of Engineering An Evaluation of the Organizational Performance of Local Contractors in Kenya.

Organizational performance is the ultimate measure of the success of any local contractor. It involves the analysis of a firm’s performance measured against its goals and objectives. Whilst it is generally agreed that the organizational performance of local contractors is insufficient, such a notion is arbitrary and most of the time based on anecdotal evidence. The purpose of this research was therefore to establish the level of organizational performance of local contractors here in Kenya. A survey research design was adopted. A questionnaire with the evaluation criteria of organizational performance was used to collect data.


INTRODUCTION
Organizational performance is the ultimate measure of the success of any local contractor. It involves the analysis of a firm's performance measured against its goals and objectives. According to Rolstadas (1998), the organizational performance of any system is a complex relationship that involves seven critical performance criteria: efficiency, effectiveness, productivity, quality, quality of work, profitability and innovation. Local contractors in Kenya exhibit the following shortcomings; managerial incompetence at all levels of the firm, poor staffing, lack of access to finance, poor planning, inadequate supervision, and poor engagement with regulatory stakeholders (Moramati Foundation, 2011). Waweru and Omwenga (2015) also found the following weaknesses in Kenyan local contractors; internal and external inefficiencies, reduced profitability and growth, minimal usage of technology, lack of cohesion and fluidity in organizational teams, lack of strategic roadmaps, and weak management structures. Wainaina (2020) observed 73% of stakeholders in the construction industry cited low coordination levels, lack of enforcement of regulations and inadequate qualified workers among local contractors. All these symptoms are directly linked to the stated performance criteria in an inverse proportionality. This means that local contractors lack the ingredients of enhanced organizational performance. However, whilst it is generally agreed that the organizational performance of local contractors is insufficient, such notion is arbitrary and most of the times based on anecdotal evidence. The purpose of this research was therefore to establish the level of organizational performance of local contractors here in Kenya.

Evolution of Organizational Performance Measurement
The concept of organizational performance measurement has evolved over the years. According to Jenatabadi (2015), the history of organizational performance can be discussed in five phases. During the 1960s, Etzioni (1960) believed that good organizational performance could only be realized through frequent assessments to ascertain whether or not organizations achieved their set goals and objectives. However, the amount of resources needed to achieve these objectives were not taken into consideration. Chandler (1962) and Thompson (1967) argued that the ultimate organization performance criterion was its growth and long-term survival. The underlying similarity between these three researchers was their focus on 'effectiveness', the company's aim to realize set objectives. Research by Lawrence and Lorsch (1969) provided the concept of organizational performance with another dimension, 'relevancy', which was deemed to be the measure of client satisfaction. Lorsch (1970) introduced a new way of measuring organizational performance which involved analyzing the relationship between the organization, its environment and its employees. The firm was considered to be successful if there was a good relationship between the company and its environment while maintaining employee satisfaction. It is in the 1970s when the aspect of resource utilization during the attainment of goals was introduced. According to Lupton (1977), the effective organizational performance was characterized by high levels of productivity rate, satisfaction and employee motivation, and low levels of costs, turnover and labour unrests. Katz and Kahn (1978) argued that both 'effectiveness' and 'efficiency' (ratio of output to input) were vital components of overall organizational performance. It is evident from the foregoing that the three most critical dimensions of organizational performance were 'effectiveness, ' 'efficiency,' and 'relevancy'. In the 1980s, the performance was measured as the extent to which organizations, being social systems, could not only consider the ends but also the means (Robbins, 1987). Organizational performance was viewed as an indication of the organizational manner in which it was performing effectively in its attempt to achieve its goals successfully (Cherrington, 1989).
During the 1990s, the focus shifted towards the effectiveness and efficiency of the employee. Adam (1994) considered organizational performance to be heavily reliant on the performance quality of employees. His argument was that in order for any organization to perform highly, there was a need for regular training of employees while exposing them to up-to-date technology and skills. This would ultimately improve the quality of organizational performance. On their part, Harrison and Freeman (1999) argued that a high-performing organization was that which kept the demands of their stakeholders satisfied. Such stakeholders included customers, shareholders and employees. Such arguments supported the earlier raised dimension of 'relevancy'.
Recently in the 2000s, organizational performance revolved mostly around the capability of a firm to efficiently deploy available resources in achieving accomplishments that are consistent with the organization's set objectives while maintaining relevance to its users (Peterson, Gijsbers, & Wilks, 2003). Such a definition seems to put similar emphasis on the three main dimensions, 'efficiency,' 'effectiveness, ' and 'relevancy'. Cornerstone Learning (2017), an international performance and leadership consulting organization, has made an attempt to analyse the evolution of organizational performance based on a six-point criterion. This has been presented in table 1. They argue that companies of today should be employee-led and leader-supported. This means all the employees should be adequately trained and equipped to lead in every activity they are engaged in.
4 | This work is licensed under a Creative Commons Attribution 4.0 International License. Purpose-Driven Employee-Led

Drivers
The What The How The Why Source: (Cornerstone Learning, 2017)

Dimensions of Organizational Performance
Organizational performance is a multidimensional concept. Murphy et al. (1996) pointed out that accurate performance measurement was critical to understanding new business failure and success. They carried out their research in two phases wherein the first phase they surveyed the literature on entrepreneurship ranging from the years 1987-1993 and evaluated the measures and dimensions of performance considered. They noted that the majority of the studies (60%) considered either a single or two dimensions in business performance measurement and there was no proper justification for the selection of the criteria. During the second phase of their research, they examined relationships among performance variables and illustrated the extent to which the dimensions of performance exist. They advised that in order to accurately measure the business performance it was necessary to; (i) explicitly state all the performance dimensions under examination, (ii) provide a theory-based rationale for investigating the selected dimensions, (iii) where possible consider multiple performance dimensions, and (iv) consideration of critical control variables such as age, industry and size of the firm. In order to evaluate the level of organizational performance of local contractors here in Kenya, it was therefore, necessary to first identify the key dimensions of organizational performance. An extensive review of literature identified the following 10 dimensions; quality of products, business efficiency, technical capability, profitability, client satisfaction, managerial capability, employee satisfaction, growth, financial stability and safety performance (Alarcon, Grillo, Freire, & Diethelm, 2001;Byremo, 2015;Department of Trade and Industry, 2002;Draghici, Popescu, & Gogan, 2014;Haddadi & Yaghoobi, 2014;Kaganski, Majak, Karjust, & Toompalu, 2017;Nudurupati, Arshad, & Turner, 2007;Pounder, 1999;Puri & Tiwari, 2014;Ramirez, Alarcon, & Knights, 2004;Schermerhorn, Hunt, Osborn, & Osborn, 2004). These dimensions are however concepts that are not easily measured directly. Rather, measurable attributes are used to 5 | This work is licensed under a Creative Commons Attribution 4.0 International License. measure the concepts indirectly. Such attributes were also identified from reviewed literature (Al-Damen, 2017;Dave, Parmar, Patel and Prajapati, 2017;Hajjat & Hajjat, 2014;Hatush, 1996;Khatun et al., 2014;Murphy et al., 1996;Myšková & Hájek, 2017;Rahman & Alzubi, 2015;Santos & Brito, 2012;Spacey, 2017)

RESEARCH METHODS
A survey research design was adopted. A questionnaire with the evaluation criteria of organizational performance was used to collect data. The sampling frame included all NCA1, NCA2 and NCA3 contractors. To avoid bias in the evaluation process, consultants were included in the survey to obtain an external perspective. A total of 612 questionnaires were administered to both contractors (306) and consultants (306). 378 responses were obtained indicating a response rate of 62%. This was deemed adequate based on Mugenda and Mugenda (2003). Both objective and subjective measures were used in evaluating the organizational performance of local contractors.

Demographic Profile of Local Contractors (a) Number of permanent staff
Respondents were asked to report the number of permanent employees in their companies. The results have been presented in figure 1. The majority (171) of the firms had a workforce of up to 30 employees. The highest (64) reported frequency was 'less than 10' while the lowest (2) frequency was '61-70'. The frequencies generally reduced with the increasing size of the workforce except for the last category. The approximate mean (average) of the grouped data is 25.89 employees. It can therefore be concluded that most of the firms operate with a lean workforce.  (c) Annual Turnover/Revenue Based on provided ranges, contractors were required to indicate the average (mean) size of the organization in terms of annual turnover/revenue for the previous five years. 9 contractors failed to disclose this information. As seen in figure 3, the highest (73) frequency was reported in up to 200 million while the lowest (0) was reported in '1.601 -1.800 billion'. Only 5 contractors representing 2.2% reported revenues above 1.8 billion. The overall mean revenue of all the contractors in the three categories was found to be Kshs. 435.84 million. Further analysis of the revenue based on the NCA categories has been presented in figure 4. survey reported revenues of less than 200 million while almost half (49.5%) of these contractors had revenues of less than 600 million. These numbers were considered to be high since according to NCA (2020), NCA1 contractors are supposed to undertake construction jobs worth more than 250 million for specialist works, more than 500 million for building works and more than 750 million for road/civil works. This clearly indicates that a majority of local contractors registered under NCA1 category are handling relatively smaller projects compared to what they are supposed to. The mean revenue of NCA1 contractors was estimated to be Kshs. 617.14 million compared to Kshs. 373.68 million and Kshs. 193.75million for NCA2 and NCA3 respectively. These figures have been presented in figure 4. The trend observed was as expected.

Figure 4: Annual Turnover/Revenue per NCA category
Source: (Author, 2021) (d) Total Annual Expenditure Contractors were also required to indicate the average (mean) of their annual total expenditure for the previous five years. 10 contractors failed to disclose this information. As seen in figure 5, the highest (80) frequency was reported in 'less than 100 million' while the lowest (6) was reported in 'more than 900 million'. The overall mean expenditure of all the contractors in all the three categories was found to be Kshs. 247.33 million. Further analysis of the expenditure based on the NCA categories has been presented in figure 6.  A majority (41) of the contractors who reported their revenues to be less than 100 million were from NCA3 followed by NCA2 (n=22) and NCA1 (n=17) respectively. Out of the 40 contractors who reported total expenditures exceeding 500 million, 33 of them representing 82.5% were NCA1 contractors. This was expected since contractors in this category were expected to handle a relatively higher volume of construction work. The mean total expenditure of NCA1 contractors was estimated to be Kshs. 351.47 million compared to Kshs. 217.80 million and Kshs. 108.59 million for NCA2 and NCA3 respectively. These figures have been presented in figure 6. The trend observed was also as expected.   The percentage profitability for NCA1, NCA2 and NCA3 contractors was estimated to be 43%, 42% and 44% respectively. The difference in the three categories was very minimal. than Ksh 1 billion for the previous ten years. As seen in the figure, it is evident that approximately half (n=53, 49.5%) of the NCA1 contractors almost handle no projects worth more than 1 billion. A big proportion of their projects (91-100%) are worth less than 1 billion. 20% of the contractors (n=21) had 11-20% of their projects being worth 1 billion meaning 80-89% of their projects were worth less than 1 billion. 13% of the contractors (n=14) had 21-30% of their projects being worth 1 billion meaning 70-79% of their projects were worth less than 1 billion. The frequencies dropped as the proportionality of the projects worth more than 1 billion increased.
The estimated mean employee turnover was 27.8%. Whether voluntary such as resignation or involuntary such as termination due to poor performance, employee turnover is costly and unwanted. A study conducted by Harris, Tang and Tseng (2002) conducted a study between employee turnover and productivity established that the sample mean for studied firms was 18% but concluded that the optimal employee turnover was 30 %. This therefore gives an indication that the employee turnover rate in our case is slightly high but within acceptable range.

(h) Funding of Working Capital
Contractors were required to indicate the extent to which their working capital was funded through loans over a period of ten years. Results have been presented in figure 11. 11% (n=23) of the contractors indicated that more than 50% of their working capital was funded through loans. 20% (n=42) of the contractors had more than 40% of their working capital funded by loans. Only 22.8% (n=49) of the contractors operated almost without (0-10%) loans. The mean proportion of the working capital funded through loans was established to be 27.73%.

i) Growth in size of workforce
Based on a five-year period, the growth of the size of the workforce (both permanent and casual) was asked. Results have been presented in figure 12. The highest frequency (n=62, 28.6%) was reported in '11-20%' while the lowest frequency (n=0, 0.0%) was reported in '91-100%'.
64.5% (n=140) reported growth of up to 30%, 25.4% (n=55) reported growth of between 31 and 60% while the remaining 10.1% (n=22) reported growth of above 60%. The estimated mean growth of the workforce was found to be 29.0%.

(j) Growth in volume of work
The growth in the volume of construction work for a period of five years was sought. Results have been presented in figure 13. The highest frequency (n=44, 20.4%) was reported in '11-20%'. The lowest frequency (n=2, 0.9%) was reported in '91-100%'. 49.1% (n=106) reported growth of up to 30%, 34.7% (n=75) reported growth of between 31 and 60% while the remaining 16.2% (n=35) reported growth of above 60%. The estimated mean growth of the volume of work was found to be 34.9%.

(k) Growth in value of owned equipment
Information regarding the growth in value of owned equipment for a period of five years was requested. Results have been presented in figure 14. The highest frequency (n=54, 25.0%) was reported in '0-10%' while the lowest frequency (n=3, 1.4%) was reported in '61-70%'. 58.3% (n=126) reported growth of up to 30%, 27.8% (n=60) reported growth of between 31 and 60% while the remaining 13.9% (n=30) reported growth of above 60%. The estimated mean growth of the value of owned equipment was found to be 31.0%.

Figure 14: Growth in value of Equipment
Source: (Author, 2021)

Evaluating the Level of Organizational Performance
This study employed a multidimensional approach where ten dimensions were used to measure the level of organizational performance. Each of the dimensions was measured using five indicators. All the indicators were measured on a numerical rating scale of 1-10 ranging from very low to very high. All the five indicators of profitability had almost equal means and standard deviations except for 'return on assets' and 'asset turnover' which had slightly higher standard deviations. The highest mean was 5.72 (gross profit margin) while the lowest mean was 5.26 (return on assets) as shown in table 2. The overall mean for five indicators was 5.406 indicating that the level of profitability among local contractors is moderate. The overall rank indicates the position of the indicator relative to the 50 measured indicators of evaluating the organizational performance of local contractors.  3 indicate that the item with the highest mean (7.13) under client satisfaction was 'service quality' while that with the lowest mean (6.67) was 'adherence to schedule'. The second-lowest mean (6.77) was reported in 'adherence to budget'. This is a reflection of prevailing conditions as Nyangilo, (2012) reported that more than 70% of the projects handled by local contractors experienced time overruns exceeding 50% while 50% of similar projects experience cost overruns exceeding 20%. The overall level of client satisfaction was 6.923 which was considered to be moderately high.

c) Growth
The indicator with the highest mean (6.20) undergrowth was found to be 'client retention' as shown in table 4. This could be as a result of the relatively high level of client satisfaction reported in previously. The lowest mean (5.59) was reported in 'equipment/assets. The second-lowest mean (5.87) was reported in 'profitability'. The trend in the means of the growth in 'volume of work' (5.71), 'number of employees' (5.67) and 'equipment/assets' (5.59) was almost similar to that measured earlier (demographic profiles) at 34.9%, 29.0% and 31.0% respectively. The overall mean of the five indicators was established to be 5.808 and was considered to be moderate.

(d) Technical Capability
As presented in table 5, the item with the highest mean (6.97) under client satisfaction was 'experience (previous works)' while that with the lowest mean (5.96) was 'advancement of electronic software used'. The second-lowest mean (6.03) was reported in 'advancement of electronic hardware used'. This means local contractors do not invest heavily in electronic hardware and software technology as compared to plant and equipment. The overall mean of the five indicators was moderately high at 6.431.

(e) Business Efficiency
'Labour productivity' recorded the highest mean (6.72) followed by 'energy efficiency' at 6.25 as seen in table 6. Wachira (1999) observed that labour productivity is so important that it not only determines the contract period and costs of construction projects but also influences the performance of the entire construction industry here in Kenya. This perhaps explains the focus it's given by most local contractors. The lowest mean (6.10) was recorded in 'revenue per employee'. This gives an indication of a relatively high workforce. Earlier, the annual revenue and number of permanent staff were established to be Kshs. 435.84 million and 25.89 respectively. Though this means that the revenue per employee is Kshs. 16.83 million, it is misleading in the sense that since the construction industry is 'project-based', most of the employees engaged by contractors are casuals. The overall mean of the five indicators was moderately high at 6.293.

(f) Employee Satisfaction
The highest (5.92) employee satisfaction was reported in 'favourability of working conditions' while the lowest (5.38) was reported in 'reward for excellence in job performance' as seen in table 7. Generally, the level of employee satisfaction was moderate at 5.683. This could be a reason why the employee turnover had been found to be relatively high at 27.8%. High employee satisfaction is associated with low employee turnover and higher employee performance.

(g) Financial Stability
As presented in table 8, the two highest means were 6.42 and 6.30 for 'credit ratings' and 'access to overdraft facilities' respectively. This means that due to relatively good credit ratings, local contractors are able to access overdraft facilities from local financial institutions. The least financial stability was reported in 'adequacy of working capital'. This explains why 27.73% of the working capital by local contractors is financed through loans. The second last item was found to be 'net cash flow from projects' with a mean of 6.16. The reduced cash flow could be a result of loan repayments which reduce the net cash flow from projects.

(h) Quality of Products
The means reported in all the indicators were high with the lowest at 7.16 as seen in table 9. The overall mean for 'quality of products' was 7.303. This is a clear indication that local contractors are capable of achieving good quality in the projects they execute.

(i) Managerial Capability
As seen in Table 10, the two highest means were 6.97 and 6.96 for 'effectiveness of strategic management' and 'consistency in decision making' respectively. The least (6.81) level of managerial capability was reported in 'efficiency in human resource management'. The overall mean for managerial capability was found to be 6.907 and considered to be moderately high.

(j) Safety Performance
As seen in table 11, the indicator with the highest (7.09) mean was found to be 'use of personal protective equipment'. Based on regulations provided by the NCA, it is usually mandatory for all personnel on construction sites to use personal protective equipment (NCA, 2012). This could be the reason why this indicator had the best performance compared to the rest. The least performed (6.37) indicator was 'availability of health and safety officer'.  Figure 15 below is a radar chart of the means of all the 50 indicators used to evaluate the level of organizational performance. Notable low levels of organizational performance were observed in profitability, growth, and employee satisfaction while relatively higher levels were noted in client satisfaction, quality of products and managerial capability.

in Local Contractors in Kenya
A summary of the organizational performance across the ten dimensions has been presented in table 12. The three highest performed dimensions were 'Quality of products' (7.308), 'Client satisfaction' (6.923) and 'Managerial capability' (6.907). The three least performed dimensions were 'Financial stability' (6.243), 'Employee satisfaction' (5.683) and 'Profitability' (5.406). This gives an indication of financially struggling local contractors. Local contractors were found to perform poorly in financial aspects (mean=5.938) compared to nonfinancial aspects (mean=6.665). The overall level of organizational performance of local contractors .in Kenya was obtained using the following formula where 'n' is the number of dimensions of organizational performance and 'p' is the individual mean of each of the dimensions.

CONCLUSIONS AND RECOMMENDATIONS
The following main conclusions were made from the research; • The organizational performance of local contractors can be evaluated on the basis of ten dimensions namely; profitability, client satisfaction, growth, technical capability, business efficiency, employee satisfaction, financial stability, quality of products, managerial capability, and safety performance. • The financial performance of local contractors here in Kenya is lower compared to nonfinancial performance.
• There is a need for improvement in the organizational performance of local contractors here in Kenya. This research recommended that; local contractors should not only pay attention to financial performance but non-financial performance as well. Both aspects complement each other and are equally significant in the overall organizational performance.