THE RELATIONSHIP BETWEEN HUMAN CAPITAL AND QUALITY OF DECISIONS MADE BY COMMERCIAL BANKS AND INSURANCE FIRMS IN KENYA

ABSTRACT
An organization’s human capital influences the quality of decisions made. In order to develop an assessment of the decision situation, central decision makers gather most of their information through their direct environment. Strategic decisions have important consequences for organizational performance and are often the result of the involvement of actors both from inside as well as outside the organization (McKenzie et al., 2009). Helping individuals to develop knowledge, skills and competence increases the human capital of the organization. People are better equipped to do their jobs and this is generally of value to the organization (Cunningham, 2002).The purpose of the study was to establish the relationship between human capital and quality of decisions. A census survey was carried out on all the 43 licensed commercial banks and 45 insurance firms in Kenya. Out of the 88 firms that were targeted, 54 responded, constituting a response rate of 61%. The hypothesis was tested using Pearson’s Product Moment Correlation Analysis. Descriptive statistics were computed for organizational data and the main characteristics of the study variables. Data was presented in form of tables. The findings revealed that there was a positive and moderate relationship between human capital and quality of decisions. These findings are consistent with the works of Ripley and Riple (1993) who contend that skills and talents inherent in the employees can be realized and put to work for the benefit of the organization, producing more satisfied customers (Hubrecht and Teare, 1993) and greater profits (Cotton, 1993). This study contributes to understanding the link between human capital and quality of decisions. Organizations can enhance their performance by building their human capital base through rigorous selection procedures and matching the right people with the right jobs. Work experience should be considered alongside academic qualifications during selection. This is because employees with the relevant knowledge, skills and competencies would contribute to high quality decisions and consequently increase an organization’s competitiveness.

Keywords: Human Capital, Quality of Decisions, Commercial Banks, Insurance Firms, Kenya