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Worldwide, the public sector plays a central role in any country‟s socio-economic development. The sector has however been affected by globalization, public sector reforms, regional and international partnerships, climate change, information, communication and technology and human resource development, among other factors. In an increasingly changing global environment, the mandate, structure and operations of public sector must be reshaped and productivity enhanced to make it more focused, efficient and responsive to the needs of those it serves. This research sought to examine the extent to which strategic human resource management practices influence performance of parastatals in Kenya. The specific objectives were to establish the relationship between strategic human resource management practices and organizational performance, examine the relationship between strategic human resource management practices and human resource capabilities, determine the relationship between human resource capabilities and organizational performance and to assess the extent to which public sector culture influence on the relationship between strategic human resource management and organizational performance. The philosophical foundation of the study was positivism. The study utilized both the descriptive research design and explanatory research design which was cross-sectional survey in nature. The study population comprised of all the 185 parastatals in Kenya as outlined in the report of the presidential taskforce on parastatal reforms of 2013. Self-administered questionnaires were used to collect primary data. Descriptive statistics were computed to describe the characteristics of the variables in the study while multiple regression analysis was used to establish the nature and magnitude of the relationships between the independent and dependent variables. The findings indicate that there is a significant positive relationship between training and parastatals‟ performance in Kenya, performance management has a significant positive relationship with performance of parastatals while compensation has a significant positive relationship with Parastatals performance in Kenya. Human resource capabilities partially mediate the relationship between strategic human resource management practices and parastatals‟ performance in Kenya, public sector culture was found to be an explanatory variable in explaining the relationship between organizational performance and strategic human resource management practices. However recruitment was found not to have significant relationship with organizational performance. The findings supported the theoretical foundation of the resource based view theory that competitive advantage comes from the internal resources that are possessed by an organization. The recommendations are; human resource managers should offer a variety of trainings to their staff, policy makers should create an adequate performance management framework that will effectively link performance of parastatals to national development goals and hence adequately link individual performance to institutional performance. Finally on compensation the study recommends that the boards of parastatals set specific levels of remuneration of executives and senior staff in consultations with the parent Ministry and the State corporations Advisory Committee.
Background of the Study
Strategic Human Resource Management (SHRM) is crucial in all organizations particularly public organizations, where it facilitates those who work in the public service in adapting to the changing role of the government. Comprehensive Human Resource (HR) strategies are necessary in exploiting new opportunities and ensuring that all public service functions are carried out accordingly to the highest professional standards. The need for skills and knowledge in the public service in areas of policy development, in the management of organizations, in public service delivery and in tackling economic crises of global magnitude than ever before. Public service leaders around the world are looking for new approaches to inspire integrity, accountability and motivation in public service in order to achieve coherence and coordination between government policies and various interests (Tompkins, 2003; Storey, 2010).
The concept of SHRM has been instrumental in management research and practice for the last three decades (Purcell, 2011). Continuing analysis within the field usually focuses on how Human Resource Management (HRM) can add strategic value and hence to organizational success. According to this approach, which has mainly been applied in the private sector, people are a key resource and a significant element in an organization‟s performance. The main rationale for strategic HRM thinking is that by integrating HRM with the organization‟s strategy and by utilizing particular sets of HR policies and practices,
workers will be managed more effectively, and consequently individual and organizational performance will improve (Fombrun, 2010).
At the international level the transformation of systems structures, and processes inside public services has been well acknowledged over the past 20 years. The key rationale of these changes has been to improve the cost-effectiveness, efficiency and performance of public organizations. Government owned entities have therefore been under immense pressure to follow private sector managerial practices, such as performance management, customer orientation, and a heightened strategic focus (Truss, 2008).
Truss (2008), asserts that improved HRM helps facilitate the acquisition, training and retention of esteemed employees, this serves to improve organizational cost-effectiveness, and serve to create a performance-driven culture via the adoption of a more strategic HR function. Truss further argues that, the confirmation as to whether or not there have been any substantive changes in the role of the HR function still remains both incomplete and open to doubt despite the acknowledged significance of HRM under New Public Management (NPM). This study, contributes to the imperative discussion over the actuality of change in the public sector, while also trying to find out whether the HR function in the public sector has become more strategic and hence affecting organizational performance.
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