Compensation Management and the Performance of the Small and Medium Enterprises in the Manufacturing Sector in Nairobi County, Kenya

Abstract

Purpose: The study aimed to examine the effect of compensation management on the performance of the SMEs in the manufacturing sector in Nairobi County, Kenya. Addressing a critical gap by providing specific evidence.

Methodology: The study was based in the Resource-Based View (RBV) of the firm and employed an explanatory research design. The target population included 1124 managers of the SMES in manufacturing sector operating in Nairobi County, Kenya. A stratified random sampling technique was used to select the respondents. Primary data were collected through structured questionnaires. Validity was ensured through face, content, and construct validity procedures, while reliability was evaluated using Cronbach’s Alpha coefficient. Data analysis involved descriptive statistics (means, standard deviations, frequencies, percentages) and inferential statistics, including Pearson correlation and multiple regression analysis.

Findings: The regression analysis revealed that compensation management had a positive significant effect on performance of the firms with all three forms of compensation being statistically significant. Financial compensation for performance (P=0.000, =0.438), non-financial compensation on performance (P=0.000Β=0.411) and indirect compensation on performance (P=0.000, Β=0.494).

Conclusion: The study concluded that compensation management are critical for enhancing performance in the Kenyan manufacturing firms in Nairobi, County, more so in the SMEs sector.

Value: The study offers valuable guidance for policymakers in making informed decisions and promoting fair competition. It also supports practitioners in their decision-making processes and serves as a solid foundation for further theoretical advancements and research by other scholars.