The Influence of Enterprise Resource Planning System on Organizational Performance: Case Study of Kenyan Engineering Consultancy Firms

A Research Project Report Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement for the Degree of Master of Science in Organizational Development (MOD)Empirical evidence suggest the ERP adoption facilitate organizational processes and activities including sales, billing, marketing, human resource management, quality control and production thus ensuring general performance. However, despite the adoption of ERP systems by Kenyan and Kenyan-based companies in the engineering consultancy industry of ERP system, little academic attention has gone to the assessment of the impacts of ERP adoption in the industry. The lack of academic attention on the effect of ERP on the performance of consultancy impedes scholarly understanding of the relationship between ERP adoption and the performance of engineering consultancy firm. The purpose of the study was to determine the influence of enterprise resource planning (ERP) system on organizational performance. The study sought to answer the following research questions, namely; what is the impact of ERP system on financial performance? What is the impact of the ERP system on organizational learning? What is the impact of the ERP system on internal processes? The study’s research methodology was as follows, it used a descriptive research design. This is design deemed essential and appropriate in describing the relationship between ERP and organizational performance. As such, a descriptive research design permitted the researcher to collect information regarding the ERP system and to describe how it affects the performance of engineering consultancy firms. The population for the study comprised of employees of engineering consultancy firms from which 41 individuals were sampled for participation in the study. It used the stratified random sampling to ensure that every individual in every level of selected engineering consultancy firms’ workforce was represented in the study. Structured questionnaires were used to collect the relevant data over a period of one week. The study results were presented using descriptive statistics while inferential statistics were also used for further analysis of data. The research used Statistical Package for Social Sciences (SPSS) program version 21 for data analysis. The study found that the majority of the respondents thought that ERP systems had a positive impact on the financial performance of the firm. The study found that the respondents thought ERP had a positive outcome for virtually all the aspect of financial performance including the firm’s profitability, the rate of ROI, competitive advantage, the operational costs and the firm’s market share. However, the study found that a few respondents were however not sure of the nature of ERPs impact on rate of ROI and the firm’s market share. The study also determined a greater number of respondents considered ERP to have a positive impact on the firm’s organizational learning processes. It established that decision-making process, business process, productivity, task performance, managerial control and customer satisfaction were all positively affected by the ERP systems in their firms. Nonetheless, a significant number of the respondents revealed that they were not sure of the impact of ERP on customer satisfaction. With regard to the impact of ERP on firms’ internal processes, the study again established that the majority of the respondents thought that the impact of ERP on the internal process was positive. The respondents indicated that ERP systems had a positive impact on the monitoring process, access to information, the process of HRM, internal communication and the accounting process. It concludes by contending that the impact of ERP on the financial performance of the engineering consultancy firms is mostly positive. This is mainly because the vital aspects or measures of financial performance are affected positively by ERP systems. It also argues that the process of organizational learning is a principal beneficiary of the ERP systems in a firm that adopts the system. The impact of ERP systems on the management of information within the firm has direct benefits in the facilitation of task performance, customer satisfaction, decision-making and managerial control. Furthermore, it reiterates that ERP systems, by their nature facilitate the internal process within the organization, which facilitates the efficient and timely performance of tasks. The systems are capable of facilitating information storage, access and transmittal in real time. The study recommends that the management of the engineering consultancy firms in Kenya as well as the firms in other industries in Kenya needs to appreciate the value of ERP systems on organizational performance and adopt the systems as part of their performance strategy. Similarly, as part of their performance strategy they must adopt ERP systems as a strategy of enhancing firm’s overall performance through ERP systems potential for the enhancement of business processes such as decision-making, productivity, task performance and managerial control. The researcher further recommends that firms should adopt ERP systems due to their potential to generate a positive impact on firms’ internal processes. For further research, the researcher recommends that there is need for further research to investigate why despite the relative positive impact that ERP systems have on the performance of the engineering consultancy firms in Kenya, few firms have adopted the systems

Interaction between Financial Risk Management and Value of the Firm among Private Equity Firms in Frontier Markets: A Theoretical Perspective

Purpose: The study attempts to establish a theoretical basis for the interaction between financial risk management and value of the firm among private capital firms. Design and Methodology: The study was based on a theoretical review of the interaction between financial risk management and value of the firm focusing on the applicability of agency theory, trade-off theory and credit metrics model in anchoring capital management risk, liquidity risk and credit risk Findings: The study shows that although private equity firms are not publicly listed, they face financial risks associated with defaults on loans advanced, volatility of interest rates, liquidity management and capital management. The agency theory explains the role of capital management risk and liquidity risk by incurring agency costs to deter the management from engaging in activities hindering achievement of wealth maximization goal. Similarly, companies balance between threat of bankruptcy and tax benefits of debt by finding an understanding between the advantages and the disadvantages that come with debt as outlined in the trade-off theory while credit metrics model help firms to quantify credit risk on loans, fixed income instruments, commercial contracts. Practical Implications: Private equity firms must constantly be engaged in risk mitigation activities by extensively evaluating their financial, legal and business environments. The management of private equity companies must also always try to balance between the threat of bankruptcy and the tax benefits of debt in the formulation of capital structure by finding a compromise between the benefits and costs of raising debt. The management should also carefully consider credit risks during the credit appraisal and credit awarding process by using appropriate credit appraisal models such as credit metrics model. The Significance of the Study: The conclusions reached in this study significantly impacts the perspective of the management with regard to risk management particularly in the banking sector which is predominantly adversely affected by credit risk, liquidity risk and capital management risks. Consequently, the management would be in a better position to manage their risks using appropriate models and improve organizational efficiency and performance