Factors Affecting Corporate Strategy Implementation in the Electricity Sector in Kenya

Demand for electricity in Kenya is currently growing at a rate higher than the growth in supply. KenGen, as a major player in the electricity sector developed a strategic plan (2008-2015) which if implemented successfully would stabilize the equation for electricity supply and demand in the country, and increase its installed capacity from 912MW to 1510MW by 2015. Implementation of this strategic plan may however dwindle, with most projects running late or stalled. By the end of 2015, KenGen is expected to realize its planned project which when installed capacity figure by nearly 50%. The objective of the study was to determine the challenges affecting implementation of corporate strategies at KenGen. The researchwas to determine to what extent organization culture, resource allocation, organizational preparedness and leadership affect the implementation of corporate strategy at Kengen. The study was carried out in the 5 (five) Ken Gen operation areas in Kenya. The target population was 22 managers and 96 chief officers across the organization. A sample size of 10% was picked using random sampling from the lot of chief officers, and another 10% was picked from the lot of managers. Questionnaires were used to collect data and analysis was done using Statistical Package for Social Sciences (SPSS version 20). Organizational culture, organization preparedness, strategic leadership, and financial resources allocation affected implementation of strategic plans at Kengen. Culturally, poor internationalization of mission and strategic content, lack of participation in making of rules and regulations, affected employees mobilization to executing strategic plans. Organizational preparedness in terms of training, recruitment and timely resource allocation affected corporate strategy implementation. Employee leadership influenced implementation of strategic plans through managerial involvement, employee support, downward communication, conflict resolution, and employee representation in key decision making. The extent to which management committed itself to strategy execution was not satisfactory. This yield employee resistance, meaning that management did not have super support from the shop-floor employees. © 2016 Elixir All rights reserved. Elixir Org. Behaviour 94 (2016) 40637-40646 Organizational Behaviour Available online at www.elixirpublishers. com (Elixir International Journal) Bwire Ogola Albert and Evelyn Datche/ Elixir Org. Behaviour 94 (2016) 40637-40646 40638 culture of an organization (Kotter, Davis and Scheiner (2000) Organization Culture and Leadership 4th Edition, San Francisco). When a strategy fails to achieve expected results it is often because the strategy execution was flawed. Failure to execute is a major concern for management because it limits organization growth and competitiveness. Those who lead organizations to success are not judged by the brilliance of their strategies, but by their ability to implement them. The challenge is normally how to close the gap between strategy and the results (Lippitti, Donald K Kombo, Delno L A, Tromp (2009) Management Task, Responsibilities & Practices, Paulines Publications Africa). Without a coherently aligned implementation, even the most superior strategy becomes useless. Unfortunately most strategic efforts fail at the implementation stage resulting in significant loss of resources already invested. In the rush to act on the strategy, too little attention is paid to finding the best implementation initiatives. Shortcuts often don‟t work because while strategic plans can be copied, execution is not easy to duplicate. Many organizations end up with false starts. Delays and confusion characterize their implementation process in many occasions. 1.1 Historical background and Current Institutional Aspects in the Electricity Sector The history of Kenya‟s electricity sector can be traced back to 1922 when the East African Power and Lighting Company (EAP&L) was established through a merger of two companies. These were; the Mombasa Electric Power and Lighting Company established in 1908 by a Mombasa merchant Harrali Esmailjee Jeevanjee and Nairobi Power and Lighting Syndicate also formed in 1908 by engineer Clement Hertzel. The Kenya Power Company (KPC) was later formed in 1954 as a subsidiary of the EAP&L with the sole mandate of constructing electricity transmission lines between Nairobi and Tororo in Uganda. This infrastructure was mainly to enable Kenya import electricity from the Owen Falls Dam in Uganda. With many operations of EAP&L largely confined to Kenya, the company finally changed its name to Kenya Power and Lighting Company Limited (KPLC) in 1983. KPC was 100% government owned. Following the structural adjustments program in the 1990s, the Government of Kenya officially liberalized power generation as part of the power sector reforms in 1996. Among the first reforms to take place was the unbundling of the state utility in 1997. Kenya Electricity Generating Company Limited (KenGen) became responsible for the generation assets while KPLC assumed responsibility for all distribution and transmission. The Electricity Regulatory Board was also established under the 1997 electric power Act as the sub sector regulator. Reforms in the power sector have continued to take place especially with energy policy development of 2004 and the subsequent enactment of the energy Act of 2006 which established the Energy Regulatory Commission and the Rural Electrification Authority. The sessional paper No 4 of 2004 on energy also provides for the creation of the Geothermal Development Company (GDC) and Kenya Electricity Transmission Company (KETRACO). GDC is a special purpose vehicle for geothermal resource development and KETRACO is a state owned transmission company. The reforms in the electricity sector have seen a complete reorganization of functions hitherto concentrated in the ministry of energy and the Kenya Power and Lighting Company Limited. This was a result of the need to place responsibilities to specific institutions that would specialize in the mandates vested in them under the Energy Act to enhance efficiency. Accordingly the institutions were unbundled into generation, transmission, distribution, oversight and policy functions. The institutional structure in the electricity sub sector in Kenya comprise the Ministry of Energy (MOE), Energy Regulatory Commission (ERC), Kenya Electricity Generating Company (KenGen), Kenya Power and Lighting Company (KPLC), the Rural Electrification Authority (REA), Kenya Electricity Transmission Company (KETRACO), Geothermal Development Company (GDC) and Independent Power Producers (IPPs). The Kenya Electricity Generating Company (KenGen) is the main player in electricity generation, with installed capacity growing from 972MW by end of 2008 to 1,151MW currently. It is listed at the Nairobi Stock Exchange with the shareholding being 70% by the Government of Kenya and 30% by private shareholders. The Company accounts for about 75% of the installed capacity from various power generation sources that include hydropower, thermal, geothermal and wind.Independent Power Producers (IPPs) are private investors in the electricity sector who have come in to fill the growing gap between available and required power under the three Feed-in -Tariff Policy. Current players compriseIberAfrica, Tsavo, Or-power, Rabai,Imenti, and Mumias. Collectively, they account for about 25% of the country‟s installed capacity from thermal, geothermal and biogases, as follows: Iber Africa (108 MW -thermal power plant), OrPower (48 MW geothermal power plant), Tsavo(74 MWthermal power plant), Mumias (26MW -Cogeneration), Imenti (900kW Mini-Hydro), and Rabai (90MWThermal power plant). 1.2 Growth in Electricity Demand and Supply in Kenya Strong growth in electricity demand in Kenya is being driven by a combination of normal economic growth, increased efforts towards rural electrification, and reinforcement of the transmission and distribution grids by KPLC. On the supply side, drought conditions in 2006 exacerbated the problem of very low reserve margins by reducing the capability of the hydro-electric plants to produce. This put the spotlight on the high risk of over reliance on hydro-electric power plants to secure power supply to the country. Before 2004, projections for installed capacity against peak demand ranged significantly. Currently, the reserve margin for Kenya falls just above 33%, much of it coming from the private thermal Emergency Power Projects (appendix 4). These are undesirable due to the fact that they are a comparatively expensive source of electricity and their emissions into the atmosphere are against Kyoto protocol (2005). With electricity growth of 8% and installed capacity growth dwindling, the reserve margin is likely to drop significantly to the very dangerous level of 10% by 2017. The reserve margin of electricity for a developing economy like Kenya should be 30% of installed capacity against demand. (Source: IMF, US EIA, World Bank Analysis 2007). KenGen is the primary source of generation of electricity for the country, and will continue to be the most important player in the provision of new generation capacity. The most critical set of activities is to increase supply to the grid and widen the safety margin between demand and supply. Bwire Ogola Albert and Evelyn Datche/ Elixir Org. Behaviour 94 (2016) 40637-40646 40639 This heavily depends on the choice and execution of the appropriate strategy to add cheap and clean energy to the