Relationship between Outsourcing and Operational Performance of Kenya’s Energy Sector: A Case Study of Kenya Power

The purpose of the study was to investigate the relationship between outsourcing and operational performance of Kenya’s energy sector, with specific reference to Kenya Power. Specifically the study sought to determine the relationship between the key outsourced services, that is, administrative support outsourcing, finance outsourcing, resourcing outsourcing and technical outsourcing and operational performance. The specific objectives were to investigate whether outsourcing some functions individually and collectively influence operational performance of Kenya’s energy sector. The research design used for this study was descriptive case study design. The study used both primary and secondary data. Primary data was collected through a structured questionnaire with questions anchored on a five (5) point likert type ranking scale and secondary data was collected from published annual reports and financial statements. Data was analyzed mainly by use of descriptive and inferential statistics. Descriptive statistics included frequencies, line charts and percentages. Correlation analysis was the main inferential statistics technique adopted. The findings indicated that there has been improvement in profitability over the years with the financial year between July 2008 and June 2009 reporting the highest increase in profits of 75% which was linked to outsourcing. Connection of new customers to the national grid has maintained a steady growth with the financial year between July 2009 and June 2010 registering the highest growth of 16%. The study findings revealed that outsourcing of services at Kenya Power had led to reduced operational costs and had also resulted in operational efficiency. The study concludes that there was a positive and significant relationship between administration, financial, resourcing and technical outsourcing services with operational performance. This has leads to effectiveness in service delivery, promotes efficiency and effective allocation of resources in addressing customer needs. The study recommends that, the management should keenly monitor the sources of their contractors’ products so as to have an overall picture about the service delivery process. This will ensure that the vendors do not use low quality materials or workmanship which might lead to low quality services to the customers leading to losses.