EFFECTIVENESS OF INTEGRATED FINANCIAL MANAGEMENT

INFORMATION SYSTEM(IFMIS) STRATEGY

IMPLEMENTATION

JAMES KIILU

D61/73483/2012

SURPERVISOR:

DR J. KAGWE

A RESEARCH PROPOSAL SUBMITTED IN PARTIAL FULFILLMENT OF

THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF
BUSINESS ADMINISTRATION OF THE UNIVERSITY OF NAIROBI, SCHOOL
OF BUSINESS.

JULY, 2018
 TABLE OF CONTENTS

CHAPTER ONE: INTRODUCTION ..............................................................................1

1.1 Background of the Study ............................................................................................1

1.1.1 Strategy Implementation......................................................................................2

1.1.2 The Concept of Effectiveness ..............................................................................3

1.1.3 The Government of Kenya ..................................................................................4

1.1.4 The Kenya National Treasury..............................................................................4

1.2 Research Problem .......................................................................................................5

1.3 Research Objective .....................................................................................................6

1.4 Value of the Study ......................................................................................................6

CHAPTER TWO: LITERATURE REVIEW .................................................................7

2.1 Introduction ................................................................................................................7

2.2 Theoretical Foundation of the Study ..........................................................................7

2.2.1 Open System Theory ...........................................................................................7

2.2.2 Institutional Theory .............................................................................................8

2.2.3 Resource Based Theory .......................................................................................8

2.3 Effectiveness of Strategy Implementation .................................................................9

2.4 Challenges of Strategy Implementation ...................................................................10

2.5 Integrated Financial Management Information System ...........................................11

2.6 Summary of Knowledge Gaps .................................................................................14

CHAPTER THREE: RESEARCH METHODOLOGY ..............................................15

3.1 Introduction ..............................................................................................................15

3.2 Research Design .......................................................................................................15

ii
 3.3 Data Collection .........................................................................................................15

3.4 Data Analysis ...........................................................................................................16

REFERENCES .................................................................................................................17

APPENDICES ..................................................................................................................21

Appendix I: Questionnaire .............................................................................................21

iii
 CHAPTER ONE: INTRODUCTION

1.1Background of the Study

Organizations operate in a volatile environment and to survive and execute their

mandates they are required to make appropriate actions to these dynamics by developing

responsive strategies which calls for planning in anticipation of any uncertainty in future

to enable them survive in the environment they operate in (Beck et al., 2010). This

situation has raised various environmental and leadership challenges to governments and

organizations. To manage and assimilate the environmental dynamics, organization

requires a competent management to approach, and coordinate whole systems in ensuring

proper decision-making is in place and a well-managed communication system (Lavie,

Haunschild & Khanna, 2012). Indeed, for organizations to stay competitive and relevant

over a volatile environment, they must realign themselves to the dynamic changes to the

environment by gradual orientation in response to environment in order to remain

effective and efficient.

The study will be guided by various theories to support it and among them is Institutional

theory, which advanced that Institutionalization entails an adaptive process of adding

value to organization and promoting stability (Chandler, 1962). Using resource-based

theory, it urges that institutionalization is when repeated actions are awarded shared

meanings by the actors and the institution grows stable and durable and realigns strategy

to the institutions of organization such as leadership, policies, structure, culture, systems

and processional neo-institutional. Mc Kinsey 7-S theory posits that organization must

develop a degree of realignment to all the seven Ss, (Peters &Waterman, 1982).

1
Regardless of geographical position and industry, organizations and governments operate

in a turbulent environment. These environmental changes have to be addressed

thoroughly so as to keep a closer evaluation of all the variables that affect the current and

future business operations and performance.

Ansoff & McDonnell (1990) argued that organizations are environment-serving; they

interact with the environment in such a way that they get inputs from the environment,

process and give back to the environment. The study is very important as it will expound

how the Kenya National Treasury addresses the effectiveness of response measures in

implementing Integrated Financial Management System (IFMIS). It will analyze how the

National Treasury responds to external changes and variables taking place in the

environment. The role of strategy is to position and timely realign any organization in

quest to attain sustainable competitive advantage

1.1.1Strategy Implementation
According to Kotler (1984) strategy implementation is defined as the process of putting

plans into action for the accomplishment of set objectives. It is through implementation

of strategy that an organization can figure out its future and benefit from the opportunities

the future provides. Strategy implementation can also be defined as intervention with

regard to the structures within an organization, the systems and key personnel aimed at

ensuring required standards of performance. Strategy implementation helps an

organization to effectively put in place action plans, policies and programs that helps an

organization to utilize resources in an optimal way possible (Harrington, 2006).

2
Harrington (2006) noted that successful strategy Implementation involves two key

aspects namely operationalization and institutionalization. Operationalization of strategy

refers to developing operational plans and tactics through which an abstract strategy will

be implemented. Operationalization ensures that the organizations daily activities and

work efforts directly relate to the strategy. It is more specific, concrete and short-term in

nature. Institutionalizing strategy is matching strategy to the institutions of the

organizations.

1.1.2 The Concept of Effectiveness

Hendris (2012) defined the effectiveness of strategy lies in the implementation,

operationalization and maintenance of the strategy that it is when organization achieves

its set objectives as expected using the allocated resources within the time plan.

Effectiveness of strategy implementation must be built into organizational institutions

such as, organizational structure, leadership, firm’s culture, support systems, processes

and policies. Strategy implementation in other words can be defined in terms of change.

Thus, analysis of strategy can be done by examining how much an organization will have

to change for its successful implementation. However, strategy implementation can be

challenging if it is not paired with properly designed monitoring and control schemes.

Effectiveness in organization is measured by four areas of approaches: the strategic

constituency approach, the system resource approach, the organizational goal approach

and internal approach. (Balduck & Buelens, 2008). This determines the effectiveness and

efficiency approaches which are contingent upon the rise of any situation during strategy

implementation. Control mechanism must be put in place for continual evaluation of the

strategy to address any deviation from the target objectives.

3
1.1.3 The Government of Kenya
The Kenyan government comprises of the National government and the developed

government. The promulgation of 2010 constitution resulted into devolution hence 47

counties in Kenya. There are four independent arms that sum up the National government

including the Judiciary, Legislature and the Executive (Kenyan Constitution, 2010).

IFMIS supports financial functions and reporting for all these government units. The

executive arm of national government forms the cabinet which is chaired by the President

and is composed of ministries among them is Ministry of Finance which has a department

of National Treasury.

1.1.4 The Kenya National Treasury

In Kenya, the National Treasury is charged with the responsibility of formulation,

implementation and monitoring of macro-economic policies. Proper macroeconomic

policies help in spurring economic growth and development. It works hand in hand with

all other state departments and regulatory bodies including Central Bank of Kenya (CBK)

and the Kenya Revenue Authority (KRA).

The National Treasury supports fiscal and financial relationship between the county and

national governments while assisting them to come up ways of ensuring efficient and

transparent use of public funds. It plays an important role in preparation of the national

budget. It also approves budget estimates and allocations to relevant ministries for

economic growth (Constitution of Kenya 2010).This necessitates this study on strategy

implementation by the National Treasury because the National Treasury is the custodian

of IFMIS and is responsible for its implementation and management across all

government entities.

4
1.2Research Problem

It is generally argued that a successfully implemented IFMIS can result into efficiency

and effectiveness in the use of public resources. When successfully implemented, an

IFMIS can aid financial managers to effectively budget and manage resources for optimal

performance (Rodin-Brown, 2008). Despite the requirement that all government bodies

should fully execute and integrate their functions, this however has not been actualized in

most of the government institutions.

A number of studies have been done on implementation of IFMIS although in different

contexts. In Kenya, Rozner (2008), evaluated how best to implement IFMIS for USAID

funded projects. Wanyoike, Kahariand Gathogo(2015) looked at determinants of

effective IFMIS implementation in the county of Nyandarua. Chumba, Aderoand Odoyo

(2014) examined how IFMIS affects management of cash.

These studies identified challenges that face the implementation of IFMIS and proposed

initiatives to adopt for implementation. However, these Kenyan studies focused on

county governments not the National Treasury and they did not provide an adequate

explanation on the effectiveness of IFMIS strategy adopted by the National Treasury.

This was realized because the study by Kahari, Gathogo & Wanyoike (2015) focused

only on one county on factors affecting implementation, it didn’t focus on the National

Treasury while study done by Odoyo, Adero & Chumba (2014) focused on IFMIS

implementation and cash management in Nyandarua county again focusing on county.

There is inadequate literature on the effectiveness of IFMIS strategy implementation by

the National Treasury of Kenya. This study will go into filling and addressing this gap.

5
The study seeks to find answers to this question: What is the effectiveness of IFMIS

strategy implementation by the National Treasury in Kenya?

1.3 Research Objective

i. To examine the effectiveness of the IFMIS strategy implementation adopted by

the National Treasury of Kenya.

ii. To examine the challenges faced by the National Treasury of Kenya in

implementing IFMIS strategy.

1.4 Value of the Study

The study will be important to a number of stakeholders in formulation of sound policies

of economic concern. The Government of Kenya will have detailed knowledge of the

effectiveness of strategies adopted by the National Treasury to address the challenges

IFMIS implementation. IFMIS consultants for national treasury, ministries and county

governments would find the results of this study particularly useful in addressing

effective strategies for IFMIS implementation.

The study provides insights on the way National Treasury responds strategically to the

challenges and identifies effective responses for further enhancement or adoption as best

practices. The National Treasury would be able to identify the gaps in the strategic

responses that it could exploit in order to cope with the current and future challenges.

Future scholars and academicians will also use the findings to advance more knowledge

on IFMIS. The study will add to theory and practice with regard to IFMIC

implementation. This will increase the available base of knowledge.

6
 CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction

This chapter looks at past studies that relates with the current study. The review is done

using current materials. The review is further done in line with the study objectives.

2.2 Theoretical Foundation of the Study

Three fundamental models will be used as the bases of this study and to explain the

effectiveness of IFMIS strategy implementation. The earliest and relevant theories

considered are the open system theory (Ansoff & McDonnell, 1990) and institutional

based theory by Philip Selznick (1957). Other model is resource base theory by Penrose

(1959). The models are discussed below as follows

2.2.1Open System Theory

The dependence of organization and environment is critical for the success of any

organization in achieving its objectives. An organization does not exist in a vacuum but

rather, within the environment that is made up of forces (either internal or external)

(McDonnell & Ansoff, 1990). This theory suggests that by virtue of existing in an

environment, there must be constant interaction between an organization and the forces

of the environment. This interaction affects the way organizations carry out operations

(Davis & Powell, 1992).

As natural entities, organizations closely interact with other entities in an environment

where they function as open systems. This interaction helps in production and marketing

of products (services). They are then expected to make informed decisions in adopting

effective responses strategies that will realign them and maximize the opportunities the

7
environment offers and correct and adverse effects in order for them to remain

competitive and achieve the intended objectives. According to this theory, it is important

for National Treasury to match the IFMIS strategy implementation processes with the end

users’ requirements and closely monitor and address all deviations in order to achieve the

strategic objective.

2.2.2Institutional Theory
Institutional theory in organizations is associated with the work advanced Philip Selznick,

(1957). An organizational structure according to this theory is an adaptive element that is

created in response to features and commitments of key participants besides the

environmental forces. The theory suggests that all organizations have to undergo a

process of institutionalization.

Institutionalization refers to this adaptive process: "In what is perhaps its most

significant meaning, 'to institutionalize' is to infuse with value beyond the technical

requirements of the task at hand". He also observed the extent of institutionalization

varies across organizations. Institutionalization forms an adaptive organizational structure

base which brings an enabling organizational environment that enables ease in choosing

and implementing effective response strategies. The effectiveness of IFMIS strategy

implementation by National Treasury can only be realized when all the processes and

structures are well institutionalized.

2.2.3 Resource Based Theory

The resource-based view-theory, with antecedent to Penrose (1959) but more usually

linked with the work of Barney (2001). The Resource Based Theory of the organization

8
advocates that an organization seizes a sustainable competitive advantage when “it is

implementing a value creating strategy not simultaneously being implemented by any

current or potential competitors”. Generally, organizations input resources that can be

used to realize value creating strategies are categorized into three forms of assets: which

are; organizational capital. Physical capital, human resource capital.

This theory suggests that for sustainable competitive advantage, the resources of an

industry(Barney 2001). The National Treasury of Kenya has to anchor the IFMIS

strategy implementation around its strength, capability and expertise to realize

effective results.

2.3Effectiveness of Strategy Implementation

Effectiveness in organization is anchored around four areas of approaches: the strategic

constituency approach, the system resource approach, the organizational goal approach

and internal approach (Buelens & Balduck, 2008). They determine the effectiveness and

efficiency approaches which are contingent upon the rise of any situation.

In an organizations approach, business entities are displayed as goal seeking, logical and

planned with aim of achieving one or more predefined goals and objectives. Thus,

internal objectives of an organization form the basis for determining efficiency. In view

of the system approach, it is assumed that business entities seek for inputs that are

processes into final outputs. An emphasis on effectiveness is placed on inputs over

outputs. The key focus of internal approach on the other hand is on internal tasks. Here,

efficiency is perceived as an internal strength of an organization. The focus of

9
constituency approach is on the ability of an organization to efficiently attain the

demands from constituents within an environment.

IFMIS strategy implementation requires National Treasury of Kenya to plan ahead on

how to ensure compliance with all four approaches. Effectiveness in implementing a

successful strategy has to fall into all mainstream measurement of strategy effectiveness,

realign the strategy with objectives and again, it has to put corrective measures to address

any dynamics and deviations.

2.4 Challenges of Strategy Implementation

According to Rodin-Brown(2008), the journey to effective implementation of IFMIS is

full of challenges that include resistance to change, inadequate legal and policy

frameworks, inadequate top management support and commitment, shortage of skills,

unethical practices including corruption, poor communication between key stakeholders

and changes in design of systems. Other challenges include shortage of training and

inadequate resources within an organization.

The whole process of implementing IFMIS projects require a lot of resources, it is risky

and it is complicated. The process demands major changes in procedures and systems

within an organization. It requires skilled professionals that are committed and dedicated

to the push for reforms (Chêne, 2009). Implementation of IFMIS require that

organization that is deeply committed to reforms and change. This change could be in

terms of the systems, processes and procedures within an organization, the available

skills set, tasks and responsibilities and the general culture of employees in an

organization (Rodin-Brown, 2008). Given these demanding requirements in

10
implementation of IFMIS, it is therefore important that all stakeholders are fully aware of

degree of the undertaking. However, when fully put in place, the benefits accruing to an

organization with IFMIS are more than what it costed in implementation phase (Chêne,

2009).

Khemani and Diamond (2006) indicated that commitment from top management team

and all functions within an organization is paramount for successful implementation of

IFMIS. Among countries where IFMIS has been successful include Ethiopia, Tanzania,

Slovak Republic and Kosovo. The key driving forces for success of IFMIS in all these

countries is commitment from all stakeholders (Chêne, 2009:4).

2.5 Integrated Financial Management Information System (IFMIS)

An IFMIS is government to government or inter-agency association software. It is the

computerization of the Public Financial Management (PFM) procedures aimed at

increasing efficiency and effectiveness while at the same time reducing fraud and misuse

of public funds (Rodin-Brown, 2008).An IFMIS provides a critical monetary

management resolution for states whose administrative and financial infrastructure is

outdated or has been devastated (Oliver, 2001). Employees counterattack change since

they have to learn something new. Strassman (1985) argues that low acceptance for

change is the fear that staffs will not be able to mature to new skills and actions that are

compulsory to work with IFMIS.

Oliver (2001) notes that failure to effectively control IFMIS results into gaps and this

necessitates a control feature on the system. This is because through IFMIS, spending

against announcements from the exchequer is controlled. This can be done in line with

11
the available budgetary limits. By allowing over expenditure against the budget,

resources may be diverted from the crucial areas that were initially targeted by

accounting officers (Diamond & Khemani, 2009). IFMIS was initially developed for

commercial use by companies implying that there was need to modify some modules for

example budgeting.

According to Armstrong (2000) notes that staff training helps in modification of the

behaviors of employees. Training improves the level of knowledge of employees

equipping them with skills on how to handle activities proficiently. Training helps an

organization to achieve the goals, values and mission states. Training is the ability to

capitalize on people in order to allow them to effectively utilize their capabilities and

abilities. Training advance skills of employees in an organization.

Chatterjee (2006) used the term top management to define managerial principles about e-

commerce advantages in firms and input in those initiatives. The findings of Chatterjee et

al. (2006) indicate that extent of incorporation of web-based technologies in activities and

policies of e-commerce is influenced by top management commitment and support.

Managerial output is the ability of a manager to be aware that through e-commerce, an

organization is able to access timely information for better performance (Chatterjee et al.,

2006).

Seifert, (2003) noted that e-government interconnects many legislative matters, including

confidentiality, digital rift, and public access to government info, service provision, and

information safety. Strategy framework advanced to guide it is a significant factor in the

success of the inventiveness. The design of IFMIS should incorporate the controlling and

12
legal frameworks and determine basic changes to the whole outline public financial

management. For IFMIS to be sustainable and therefore successful, implementors need to

address the regulatory and the legal requirements.

An IFMIS must be reinforced by intelligible legal aspects(Chêne,2009). These include

having in place clearly established lawful responsibilities, roles and errands of all firms in

management, regulation and monitoring of budgets. Other roles that require legal

reinforcement include authorization of funds, book keeping practices, supplier

management and asset besides public borrowing and speculations (Rozner, 2008).

13
2.6Summary of Knowledge Gaps

Study Objectives Findings This Study Focuses

on

Kahari, Gathogo & Factors affecting Analysed Kenya National

Wanyoike (2015) IFMIS challenges Treasury IFMIS

implementation in affecting IFMIS strategy

Nyandarua County implementation in implementation

Nyandarua County

Odoyo, Investigation Discussed factors Effectiveness of

Adero&Chumba ofIFMIS and its affecting IFMIS IFMIS strategy

(2014) effect on cash Implementation implementation by

management in and cash effects-in National Treasury of

Eldoret West Eldoret West Kenya

District Treasury District Treasury

14
 CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Introduction

This chapter is the backbone of how the researcher will attain the objectives of the study.

It discusses the various research designs, the study population, techniques of determining

sample size, instruments to be used to collect responses and how these responses will be

analyzed.

3.2 Research Design

A research design is simply a plan that guides the researcher in attaining the study

objectives. A researcher design dictates the methods to collect and analyze data from

respondents(Kothari, 2004). There are three major research designs; Descriptive,

Correlation, Semi-Experimental and others were reviewed for suitability.

Having reviewed several research designs as highlighted above, descriptive research

design is found to be more preferable and justifiable for this study because. The design

will help the researcher to reports on the status of study variables of the study.

3.3 Data Collection

The study will rely on primary data that shall be collected by use of semi-structured

questionnaires. They will be administered through drop and pick later method. The target

population census will be done and shall consist of junior, middle and senior staff from

the National Treasury. The questionnaire shall have four sections: Section A-Respondent

Background Information, Section B-IFMIS Strategy Implementation, and Section C-

15
Effectiveness of Strategy Implementation. The data will be both qualitative and

quantitative.

3.4 Data Analysis

The collected data will undergo the process of cleaning and coding into Statistical

Package for Social Sciences (SPSS). The coded responses will then be analysed using

both descriptive and inferential statistics. Descriptive statistics will include use of means

and standard deviations. To determine interrelationship between the variables of the

study, the researcher will use inferential statistics. The key inferential statistic will be the

correlation analysis. Interpretation will be done at 5% level of significance.

Using these statistics, the study will seek to extract the challenges of implementing

IFMIS and response strategies applied. It will further seek to establish the effectiveness

of these response strategies by the national treasury.

16
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 APPENDICES

Appendix I: Questionnaire

SECTION A: RESPONDENTS BACKGROUND INFORMATION

Instructions
To be filled by staff of the National treasury. Kindly fill in the questionnaire by ticking
the appropriate response. DO NOT indicate your name or the name of your directorate.
1. Position: [1] – Senior staff [2] – Middle- level Manager

2. Gender [1] – Female [2] – Male

3. Age bracket (years): [1] 40 – 44 [2] 45 – 49 [3] 50 – 54 [4] 55 – 59

[5] 60 – 64 [6] 65 – 69 [7] Above 70 years

4. Your area of training: [1] – Science [2] - Liberal Arts [3] - Business
[4] – Others (specify) __________________________________

5. Cumulative number of years you have held top management position in National
treasury
[1] 0 – 4 [2] 5 – 9 [3] 10 – 14 [4] 15 – 19 [5] Above 20 years

SECTION B: IFMIS IMPLEMENTATION STRATEGY

6. Using the scale provided please indicate the extent to which the following

21
Objectives are pursued by your department to meet the objectives of IFMIS

implementation.

(Kindly tick the relevant box for each) [1] – Not at all [2] – To a little extent

[3] – To a moderate extent [4] – To a great extent [5] – To a very great extent

Statements 1 2 3 4 5

Planning

Analysis and evaluation of environment

Establishment of SMART IFMIS objectives

Formulation of appropriate strategies

Implementation of strategic plan

Strategy communication

Engagement of employees with strategy

New management paradigms

Physical facilities for training and learning and

staff welfare

Development of planning premises

Organizing 1 2 3 4 5

Operationalization of the current structures in

National treasury

Design of effective structure

Identification and classification of required

Activities

22
Assignment of work and delegation of

authority to Managers

Operationalization of the treasury as a system

Staffing 1 2 3 4 5

Competition for experienced and competent

staff among other public and private

institutions

Effective staff training policy

Unethical practices among some directorates in

staff appointment

Poor remuneration

Change management

Human resource training and development

Leading/Directing 1 2 3 4 5

Motivation among staff

Leadership skills in middle level management

Result-oriented management

Leadership style in the national treasury

Work environment – machine, equipment and

Materials

Staff unionism

Transformational leadership

23
Control 1 2 3 4 5

Efficiency of control systems

Management control feedback system

Real-time information and control

Control of overall performance

Feed forward or preventive control

Establishment of standards

Measurement of performance against standards

and Plans

Quality assurance

Resource Allocation 1 2 3 4 5

Adequate financial and physical resources in

National Treasury

Adequate technological resources which

promotes efficiency and effectiveness at the

National Treasury

SECTION C: EFFECTIVENESS OF

IFMISSTRATEGYIMPLEMENTATION

7. Using the Likert scale provided please indicate the extent to which the effectiveness of

IFMIS strategy implement is assessed or measured by the National Treasury of Kenya.

24
(Kindly tick the relevant box for each)

[1] – Not at all [2] – To a little extent [3] – To a moderate extent [4] – To a great extent

[5] – To a very great extent

Institutional 1 2 3 4 5

Legal framework is properly anchored into constitution

Business processes: Detailed functions and procedures

Budget and account structure: Coherent information

and unified budget support

Centralized treasury operation: Consolidation of

treasury operations into single system.

Political 1 2 3 4 5

Acceptance by people (No resistance)

Well-designed organizational culture

Technical 1 2 3 4 5

Adequate physical infrastructure and Software

Continuous staff training

Enough application controls

IT security

8. What are some of the challenges that you are experiencing in IFMIS implementation?

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9. Any other comments?

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Thank you for your cooperation

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