Analysis of Human Resource Management Practices and Firm Efficiency of Consumer Goods Manufacturing Firms in Kenya

Manufacturing sector is important to the Kenyan economy, employing 13% of total workforce in the formal sector and 1.4 million people in the informal sector. Despite the importance, its contribution to the regional market is low at 7% export and GDP remains stagnant at 10% since 1960s. This has raised the concerns about Kenyan manufacturing sector’s performance in relation to firm efficiency. Previous studies in Kenya have focused on strategic human resource management practices and firm performance. While the HRM practices - firm efficiency relationship may enhance improved productivity, no research has been undertaken in consumer goods manufacturing firms in Kenya. The objective was to establish the relationship between human resource management practices and firm efficiency of consumer goods manufacturing firms in Kenya. Drawing from Resource Based theory, it was conceptualized that the independent and dependent variables are HRM practices and firm efficiency respectively. A cross sectional survey design and population of 65 firms were used. It was a census study with response at 76.9%. The results revealed that there is significant association between HRM practices and firm efficiency with most significant association being on material incentives and firm efficiency with R2 of 66.9% (β=.303, p<0.01), indicating that material incentives account for 30.3% of variance in efficiency. Conclusions are that among the firms, HRM practices predict firm efficiency. It is recommended that the firms’ efforts should be directed on HRM practices in order to enhance firm efficiency. Contrary to prior research, this study has revealed that HRM practices, affect firm efficiency.