Effects of Target Setting Practices on Employee Performance in Faulu Microfinance Banks in Kenya

  • Nicholas Odenyo Ouma
  • Linda Kimencu


Globally, employee performance remains a concern to many organizations. Appraisal practices and their effective implementation are a key employee development strategy for organizations and especially microfinance banks. Given the challenges of working in microfinance banks, performance appraisals offer valuable opportunity to recognize and reward staff efforts and performance, detect key barriers and facilitate work practice, identify professional development needs and opportunities. The purpose of this study was to establish the relationship between target setting practices and employee performance of Faulu Microfinance Banks in Nairobi County, Kenya. The study was guided by the following theories; Goal Setting Theory; Expectancy Theory and Social Cognitive Theory. The study adopted the use of a descriptive research design. The target population was 343 and a sample size of 102 respondents. The researcher used a stratified random sampling technique. Questionnaires were used to collect data. A pilot study was carried out to test the reliability and validity of the questionnaires. Descriptive statistics data analysis method was applied to analyse data aided by Statistical Package for Social Sciences (SPSS) to compute responses frequencies, percentage mean and standard deviation results. Finally, Multiple Linear Regression Model was employed to establish the significance of the independent variables on the dependent variable. The findings of the study were presented using tables, pie charts and graphs. The findings of the study indicated that the microfinance bank has mechanism that ensures appraisals are done in a structured way that has clarity to the employees and that when the employees are involved right from the beginning, target setting is aligned to expectations and to employee performance. The findings showed that proper and effective target setting practices will serve to promote a positive culture and environment for employee performance. The study therefore recommended that Faulu Microfinance Bank and other microfinance institutions should seek to ensure that peer to peer or 360 degrees appraisal is adopted so that employees can receive feedback from one another as compared to top-bottom feedback. It also recommended that the organization should not only involve the employees but also seek to incorporate their views in the overall business strategy. This will lead to the ownership of the goals and objectives of both individuals and organization. The study further recommended training for the parties involved in the target setting process so as to develop and promote an attitude that is open and receptive to feedback and change.Key words: Target setting practices, employee performance, Microfinance Banks