INFLUENCE OF HUMAN CAPITAL PRACTICES
ON EMPLOYEE PERFORMANCE IN THE
PRIVATE SECURITY INDUSTRY IN KENYA
BUSI 240-Organizational Behavior 1
Liberty University
2022
Background of information
Human capital is the largest component of wealth of nations overall (World Bank, 2018). In a dynamic
business environment, effective human capital practices helps managers attract and retain the best, highly
engaged and talented employees. Human capital refers to the knowledge, expertise, and skill one
accumulates through education and training (Malose & Boris, 2012; Afiouni, 2013; Armstrong & Taylor,
2014; Joshi and Isis, 2015). The emphasis on human capital in organizations reflects the view that market
value depends on human resources and intellectual capital. The intellectual capital model consists of
human capital, customer capital, structural capital, social capital, technological capital and spiritual
capital (Pablos & Tennyson, 2014). The spiritual capital as a new concept in 21st Century helps to
improve mental health of human capital. Developing a solid human capital base is a pre-condition for
industrialization, growth and development in every nation. According to Sahoo and Mohapatra (2015),
the forces of competition, technology, globalization, legislation, consumer empowerment and
implementation of good practices have rendered organizations across the globe to experience a paradigm
shift in understanding their business imperatives, growth perspectives and human capital management.
Therefore, to provide a world class services that creates value, organizations have to transform and focus
on strategic human capital practices while leveraging technology to offer better services and achieve a
competitive advantage (Odhong & Were, 2013).
However, with the globally dynamic business environment, to identify what works; or internal fit, and the
best practice that meets customers’ needs and sustains performance in the 21st Century organizations is a
challenge (Vihari, Singh & Rao, 2016). The report by Economist Corporate Network (ECN), in Central
Africa, human capital challenges makes it costly to do business (ECN, 2015). Nankervis, Comptom,
Baird & Coffey, (2011) defined human capital management is the integrated set of practices through
which organizations manage their human capital, that influence and is influenced by the business strategy,
the organizational context and the socio- economic context. Cania (2014) noted that an important role of
SHRM is about focusing the management of employees as a tool for gaining competitive advantage.
The study, therefore, sought to apply the internal best practices called the drivers, such as employee
engagement, training, talent acquisition, knowledge management and skills development for PSI. The
drivers were adopted by the study to help decision makers focus their efforts on the most critical
organizational issues and practices. This is supported by Nkhwangwa (2014) who stated that the best fit
theory of SHCM, holds that different types of HC strategies will be suitable for different types of
businesses strategies. Nkhwangwa (2014) further stated that HC strategies should be congruent with
context and circumstances of the organization. The study needed internal fit which is the case, when
organization is developing a range of interconnected and mutually reinforcing HCM policies and
practices. According to World Economic Forum (WEF), it is argued, in this respect, that every industry
must re-think its role as a consumer of readymade human capital to proactively seek out, engage and
develop people’s potential in the modern 21st Century (WEF, 2015). In line with the above report by
WEF (2015), Dodaro (2012) argued that Strategic Human Capital Management (SHCM) has to be the
centerpiece of any serious effort to ensure that agencies operate as high-performing organizations. In
addition, Cania (2014) noted that human resource policies and practices that are appropriate can improve
employee performance, and also act as a tool for value creation.
The study identified the human capital practices such as: leadership practices, learning capacity,
workforce optimization, knowledge acquisition and employee engagement as the dependent variables.
The choice of the variable was also supported by Waiganjo, Mukulu & Kahiri (2012) who in their study
sought to establish relationship between strategic human resources management and firm performance,
found that that key theory that emerges in relation to best fit practices is that individual practices cannot
be implemented in isolation.
In addition, the aim of bundling is to achieve coherence which exists when a mutually reinforcing set of
human capital practices have been developed that jointly contribute to the attainment of the organizations
strategies for; for matching resources to organization needs improving performance and quality as well as
achieving competitive advantage. The practices are useful in measuring and predicting performance of an
organization. Wadhwa and Parimoo (2015) asserted that on the basis of a pre-determined set of core
human capital practices developed by international level researchers, the model of human capital was
tested on Indian organizations, and the result of the showed a positive growth towards the long-term
progress of the company.
Study by Jamal (2011) indicated training, development, skills and systems as key indicators that drive
performance, while Varuni and Suresh (2014) in their study noted talent acquisition as a strategic
intervention to gain competitiveness. The reports by (ILO, 2014; World Bank, 2014) revealed that skills
development among the greatest challenges facing countries, enterprises and people all across the world.
Jamal (2011) and Ajisafe et al., (2015) concluded that when organization consider their employees as an
asset and invest in their capabilities, the performance of the organization is improved. According to
Ajisafe et al., (2015) developed a system for assessing human capital management in predicting
organizational performance and guiding organizations investment in people. The empirical study
conducted revealed a core set of human capital management drivers namely: leadership practices,
employee engagement, knowledge accessibility, workforce optimization and organizational learning
capacity.
Global Perspective of Employee Performance in Private Security Industry
The global market for private security services is expected to grow at a rate of 7.4 percent annually,
reaching a size of US$244 billion by 2016 with contract guarding making more than half of this market
(Burt & Muller, 2016). According to Upadhyay (2011), the available estimates suggest that eight
countries of the world alone - India, Germany, China, Canada, Russia, the United Kingdom, Australia and
Nigeria have more than 60,000 private security service agencies. In addition, the industry employs
approximately 12 million private security employees, in these countries, who mainly work as security
guards, armed security guards and security supervisors.
In Germany the total turnover by the security industry in 2011 was 35 billion, the average sales growth in
2011 was 3.85%, average assessment of future sales for 2013 was 4.16% and the average mid-term
assessment future sales of (3-5) years was 4.68% and the average assessment growth for Germany
security industry in general was 5.79 (Gummer & Stuchtey, 2014). Gummer and Stuchtecy (2014), also
noted that in Germany, on average, PSCs generate about 24% of their sales in the public sector, 60% in
the industrial sector and about 16% of their turnover is due to sale to private households.
In Japan, Private Security Company employees increased from an estimated 70,000 guards in 1975 to
nearly 460,000 in 2003 in (SAS, 2011). While, in Jamaica, at the end of 2008/2009 fiscal year, there were
13,941 registered guards and by the end of 2013/2014, there were over 21,497 registered guards. This is
54% growth in registered guards over a five year period. Similarly, by the end of 2008/2009 fiscal year
there were approximately 212 companies and by the end of the fiscal year 2013/2014, there were
approximately 332 companies, the growth approximately 56% (MNS, 2015). The registered Private
Security Company employees outnumber police officers in Jamaica as well as being the best regulated
PSI (Burt, 2012; Hill, 2010).
Regional Perspective of Employee Performance in the Private Security Industry
Regardless of regional variations, the overall trend in the PSI has been toward greater market
consolidation in the hands of a dwindling number of firms (Burt & Muller, 2016). South Africa
has the largest private security industry in the world with nearly 9000 registered companies. In
2014, there were 8,144 registered private security companies and 487,058 active registered
security officers, in South Africa (Diphoorn, 2016).
In South Africa, the police service employ private security companies to patrol and safeguard certain
police stations, thereby freeing fully trained police officers to perform their core functions of preventing
and combating crime, but the private security can never replace public police (Mthethwa, 2012). Studies
have shown that South Africa had 257 private security guards for every police employee. In South Africa,
the number of registered security officers are more than tripled in space of 13 years from about 115,000 in
1997 to nearly 390,000 in 2010 (SAS, 2011).
The PSI got into Tanzanian market in the form of private security companies in 1980’s. The private
security industry began in 1990s and prospered in 2000s, the period when the government of Tanzania
carried out extensive reform of the ordained Ujamaa Policy to liberal policy (Shadrack, 2011). Shadrack
(2011) reported that in Tanzania it is estimated that more than 495 PSCs operate all over the country and
have the workforce of not less than 1.7 million people while the police are only 29,918 in 2011.
Local Perspective of Employee Performance in the Private Security Industry
The PSI has been in operation in Kenya since the 1960 and has since grown an exponentially in the last
two decades (Diphoorn, 2016). According to Kenya National Private Security Workers Union
(KNPSWU), the PSI in Kenya is estimated at about 2000 registered companies with about 300,000
security guards (KNPSWU, 2016; SEA, 2016) with G4s having approximately 15,000 employees in
Kenya. There are also a large number of informal private security firms employing many more workers
but these are neither registered nor operate from a recognized office (Omolo, 2011; 2015).
Most of the large and medium sized private security companies are members of the Kenya Security
Industry Association (KSIA) while majority of the small firms are represented by the Protective Security
Industry Association (PSIA). Some of the private security companies may be members of the Kenya
Private Sector Alliance (KEPSA) or the Federation of Kenya Employers (FKE) or both (Omolo, 2015).
The private security industry is estimated to have an annual turnover of Ksh.32.2 billion (Diphoorn,
2016).
The services provided by the PSI, complements national police service (Mthethwa, 2012). The KNCHR
(2014) in their report argued that with the going spate of violence in different parts of the country,
Kenyans cannot say that they live in a safe and secure country. Lending credence arguments by KNCHR
(2014), the number of crimes reported to the police in 2015 was 72,490 compared to 69,376 in 2014. A
significant increase in the number of crimes reported to the police was observed among offences
involving police officers (34.0 per cent and traffic offences (20.0) per cent (RoK, 2016).
The PSI industry in Kenya is a larger tax payer and employer of about 300,000 security guards (Omolo,
2015; KNPSWU, 2016) as compared to public sector with about 42,853 police officers, 19,389 prison
officers and 579 probation officers in 2015 (RoK, 2016). This is not in line with United Nations optimum
requirement of police ratio of 1:450, while Kenya operates at about 1:850 (Murunga, 2015).
According to the report by Plural Security Insights (PSI), Nairobi’s urban settlements offer unique setting
in which to examine the interplay between citizens’ ability to fully meet their needs and opportunities
these creates for powerful private actors. This has led to a context of plural security provision, in which
an array of actors assert claims on the use of force, operating simultaneously and with varying
relationships to the state (PSIs, 2016).
Private Security Industry
The importance of security to humankind cannot be overemphasized because the socio- economic
structure of a given society depends on the security system (Kaguru & Ombui, 2014). No
government has the wherewithal to provide one hundred per cent security for her people, hence the need
for the PSI to complement efforts of state actors in crime prevention (Aderinto & Omotoso, 2012; Dasuki,
2013; Inyang & Abraham, 2014). Mthethwa (2012) argued that Private Security can never replace
National Police hence they can only complement one another. However, Kenya National Commission on
Human Rights (KNCHR) in their 2014 report, noted that crime prevention is a multi-sectoral, multi-
disciplinary and integrated endeavor which comprises strategies that seek to reduce the risk of crimes
(KNCHR, 2014).
Private Security Industry comprises legally registered business entities that provide, on a contractual
basis, security and/or military services, regardless of whether they operate in situations of conflict (SAS,
2015). According to Strom, Berzofsky, Bonnu, Kelle, Crystal and Nicole (2010), a broader definition of
private security includes physical, information, and employment related security is more accurate
representation of the roles and responsibilities of private security as opposed to private police.
For example, private security firms in Kenya offers services such as Radio Alarm Services; Guarding
Services; Access Control Systems; Closed Circuit Television (CCTV); Valuables in Transit/Overnight
Valuable Storage; Vehicle Tracking and Fuel Management; Fire Safety; Background checks;
Employment screening; Vetting services and Emergency Solutions among others. The report by
Secprotect East Africa (SEA) in 2016, classified the services as: Fire protection and rescues; homeland
security and policing; commercial security; Information Technology and Data protection; cyber crime;
disaster management/environment protection and safety and health services (SEA, 2016).
The private security firms recruit, train, employ and supply security guards to their various markets
through outsourcing process. Hence, security guards remain employees of the security firms and they
serve all sectors of the economy (Omolo, 2015). Hence, the impact of their services is felt on the
economy directly. Security can, therefore, defined as a situation that exists as a result of the
establishment of measures for the protection of persons, information and property against hostile
persons, influences and actions (Akpor-Robaro, Achumba & Ighomereho, 2013). It is the existence of
conditions which people in a society can go about their normal daily activities without any threats to
their lives or properties (Akpor-Robaro et al., 2013; Ogunleye, Adewale, Alese & Ogunade, 2011).
Employee Performance in the Private Security Industry
Performance is the process of functioning in a stipulated predetermined manner and achieving the
expected results within its framework and success of every organization (Dubey & Yakkuldevi, 2015).
Performance can be measured in terms of effectiveness and efficiency, personal data such as measures of
accidents, turnover and absence among others. Hence, it can be argued that performance depends on the
quality of human capital among other factors.
The performance of PSI is reflected in Kenya’s economy which is estimated to have expanded by 5.9 per
cent in 2015, compared to a growth of 5.3 per cent in 2014 (RoK, 2016). Mulupi (2014) noted that KK
security holds more than 70% of security contracts for embassies in Kenya and that the PSI is a booming
business. The International Commission for Truth and Justice (ICTJ) reported that the deteriorating
security conditions have been attributed to uneven performance of some of the country’s security
agencies (ICTJ, 2010). Mulupi (2014) reported that Private Security Industry CEOs noted major
challenges such as competition, managing cooperation with public authorities and keeping standards;
improving standards; customer needs have evolved and increasing demand to increase skilled manpower
and install additional equipment increased.
Individuals, organizations and nations have invested in knowledge, skills and competence as essential to
sustainable security (Ogunade, 2011). Vihari, Singh and Rao (2016) argued that to identify most efficient
and effective HCM practice which could sustain the growth prospects of an organization has been a great
challenge. A survey conducted in Germany by Gummer and Stuchtecy (2014) also revealed that 64% of
private security companies noted they have difficulties in finding suitably qualified candidates.
Nairobi County
Nairobi County is one of the 47 Counties in Kenya. Nairobi is Kenya’s capital city, commonly referred to
as a Green City in the Sun and a premier city in Africa with outstanding performance in financial,
business, transport, communication, education, health and security management. According to the 2018
data provided by the World Population Review(WPR) in 2018, Nairobi has a population of 4,385,853,
growth rate of 3.8%, and growth of 472, 341. In Nairobi County most private security industries are
registered by Kenya Security Industry Association (KSIA) with 30 registered companies, representing
large and medium size companies, while Private Security Industry Association(PSIA) having about 82
registered companies, representing small companies (PSIA and KSIA, 2016). Therefore, the target
population was 150,000 PSGs who are estimated to be in Nairobi by 2016 (KNPSWU, 2016).
Statement of the Problem
Performance of the security sector is considered to be a key pillar for achieving rapid and sustained
economic growth of at least 10% per annum to the year 2030 as envisaged in the Kenya Vision 2030 and
the Medium Term Plan II (2013-2017). Security is also critical for national productivity, competitiveness
and employment creation. For Kenya to achieve the intended growth of GDP contribution from the
current 9.2% to 15% by 2025, major steps needs to be taken (KAM 2018). The significance attached to
security is also seen in the budgetary allocation to the sector. In 2016/2017 fiscal year, for example, the
Government of Kenya, allocated Ksh.264.64 billion to strengthen national security (RoK, 2016). This
was 18.2% above the 2015/2016 allocation of Ksh.223.9 billion.
However, according to African Development Bank (2014), Kenya’s competiveness is held back by
security challenges (AfDB, 2014). Goldman (2014) and Ouma (2014) reported that the guards and cash
heists, is a problem of professionalism. Mulupi (2016) reported that major retailers were losing about
Ksh.3.5 billion every year through theft. In addition, a survey by KAM in 2012 also showed that 33% of
Kenya’s firms reported crime as a serious problem, accounting for losses of nearly 4% on annual sales
and businesses allocates about 3% of their operating budgets to private security services and security
upgrade annually (KPMG, 2012).
The report by World Bank Enterprise Survey (WBES) of 2013 also indicated that 1.3% of 781 firms in
Kenya who responded, experience losses of properties due to theft and robbery as well as loss of lives
(WBES, 2013). Human capital forms only 40% of the wealth in low income countries, compared to 65%
in high-income countries (World Bank, 2017). According to (Omolo, 2015; Murunga, 2015; Wekesa,
2013; and Oanda, 2013), PSI face fierce competition while the PSGs face challenges such as inadequate
training, no training institution providing standardized training; critical skills shortages; job
insecurity; poor recruitment strategies; externalization; precarious work and poor remuneration, affecting
employee performance. In addition, Kasuli (2012) also noted risks of violent attacks while on duty. This
is in contrary to the provisions of Decent Work Agenda, and Article 41 of Kenya’s Constitution which
confers every worker the right to fair labour practices and reasonable working conditions (RoK, 2010).
Research shows that companies with lower employee engagement see the biggest financial loss in their
stakeholders return at 8 per cent (Cox, 2015). In addition, Nassazi (2013) found that 92.5% of employees
link training to their improved performance, while Poddar (2016) found that best talent acquisition
methods leads to 30-40% increase in employee performance. Yasir et al., (2013) also noted that
knowledge management improves performance by 45.7%. Delloite (2017) and ILO (2011) reported that
skills gap exists in many countries. In addition, Odhong and Were (2013), posited that the major
challenge is adoption of good HCM practices and how to transit to a cost effective service delivery
model, while leveraging technology to enhance employee performance. Hence, the study sought to
establish the influence of Human Capital Practices on employee performance in the PSI in Kenya.
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