Abstract:
The implementation of Performance Contracting in developing countries such as Kenya has been given a lot of emphasize in both private and public institutions. However, the implementation has been faced with a number of challenges top of this challenges is performance planning. The purpose of this study was to examine the role of planning in performance contracting and its effect on employee performance. Specifically the study aimed at answering the following questions; First, does organization undertake planning in every performance period, Second, what is the level of involvement of employees over the planning period, Third, how does planning make achievement of targets easier and finally, to what extend does planning improve employee performance. The study used the descriptive survey design to collect the views and opinions of respondents. The study area was KENGEN (Okaria) in Naivasha in which 600 employees were the target population and 235 respondents were the sample for the study. Stratified and simple random sampling was used to select the respondent for the study. Primary data was collected using a semi-structured questionnaire, which was accepted at reliability of Cronbach’s Alpha 0.923. Descriptive statistics in which frequencies and percentages were used and inferential statistics were done using spearman’s rank correlation coefficient and linear regression technique.The findings established that there was a strong positive correlation between the independent variable performance planning and the dependent variable employee performance.Regression analysis established that the effect on the dependent variable (employee performance) was explained by the independent variable (planning) by 57.8 %. The study revealed that performance planning was an important component of the PC. The study recommended that managers and employees should be engaged in the planning process at the beginning of the contract period for sustainable employee performance. Further, the resources needed (including training) should be established and provided to enable employees to achieve their targets.
