The Role Of Organizational Policies In The Relationship Between Cost Management Strategies And Organizational Performance Of Selected Tea Processing Firms In Kenya

Abstract

Cost management is concerned with the effective and efficient management of an organization’s assets, liabilities, revenues and cash flow to ensure that organizational goals are achieved. Cost management involves effective; low material cost, efficient manpower, low energy cost and better equipment maintenance policy. In recent years, the organizational performance of the tea manufacturing sectors has been declining, which has resulted in poor bonus payments to growers. The study's objective was to assess the role of organizational policy in the relationship between cost management strategies and the organizational performance of manufacturing firms, specifically, the tea factories. The specific objectives were: To examine the effect of material cost strategy on organizational performance in manufacturing firms in Kenya, to assess the effect of manpower cost strategy on organizational performance of tea manufacturing firms in Kenya, to assess the effect of energy cost strategy on manufacturing firms’ performance in Kenya, to establish the effect of equipment maintenance cost strategy on organizational performance of tea processing firms in Kenya and to investigate the moderating role of organizational policies in the relationship between cost management strategies and organizational performance of tea manufacturing firms in Kenya. The study was based on the cost leadership theory, value chain analysis model and theory of manpower planning. The study used positivist research philosophy. This is the study of phenomena in which an environment takes main point to the acknowledgement of scientist understudy. The research design used in the study was descriptive. The study focused on 1928 workers from all the factories in the KTDA zones that were chosen. Top management, directors, extension officers, supervisors, and junior workers made up the 474-person sample. To choose the sample size for the investigation, stratified random sampling and straightforward random sampling methods were used. A questionnaire was used to obtain the data. The validity of the research instruments was confirmed by the supervisors of the researchers, and the reliability of the instrument was examined by a pilot test using Cronbach's Alpha. A statistical tool called SPSS version 22 was used to analyze the acquired data and produce both descriptive and inferential statistics. Data were displayed using tables and figures. The association between the variables was determined using inferential statistics. The findings indicate that there is a significant relationship between cost management strategies and tea processing firm’s organizational performance, where cost management strategies had a positive and significant effect on the firm’s organizational performance. It was also established that organizational policies significantly moderate the relationship between cost management strategies and organizational performance of tea manufacturing firms, in Kenya with 1.3% effect. The study concludes that tea-processing firms will benefit in formulating new organizational policies intended to transform the sector into a value creation engine for economic growth. The study recommends that tea firms should minimize unnecessary purchases, do proper staffing and training to achieve cost effectiveness that will spur organizational performance, use new technology, focus the uniqueness of cost through planning and development to reduce the cost of energy, adopt prevention maintenance policy, do timely and regular servicing of machinery so as to curb production costs and enhance tea firm’s performance.