INNOVATIVE COMPENSATION STRATEGY AND TALENT ATTRACTION IN THE BANKING INDUSTRY IN KENYA

Abstract

Organizations with innovative compensation strategy have a competitive edge in attracting and retaining high quality talents. Compensation is characterized as the aggregate sum of the financial and non-financial pay given to an employee by an employer as an end-result of work executed as required. Hence the purpose of this study was to examine the influence of innovative compensation strategy on talent attraction in the banking industry in Kenya. The study was anchored on Resource Based View and Job Choice Theory. It adopted cross-sectional and descriptive research design. The study was conducted in 43 commercial banks in Nairobi City County, Kenya with target population drawn from 2216 Operations Managers, Human Resource Managers, Marketing Managers, Supervisors and Tellers. A sample size of 339 was selected using purposive, random and proportionate stratified random sampling. Data was collected using closed and open-ended questionnaires.  Reliability was established by piloting 34 questionnaires. A Cronbach’s Alpha value of 0.882 was computed, which was greater than 0.7 and thus considered appropriate for the study. Validity was ensured by expert review in the field of human resources and review of related literature.  Questionnaires were developed as per the study objectives and simple language which respondents could easily understand. Data was analysed using descriptive and inferential statistics. The results indicated that a moderate relationship exists between innovative compensation and talent attraction (r=0.353, p<0.01). The model coefficient was found to be significantly different from zero (t=6.517, p< 0.001). This implies innovative compensation explains (0.353²) 12.46 % of the variation in talent attraction. Further analysis showed that innovative compensation had a lower significant effect on talent attraction (β = 0.143, P = 0.000). However, both innovative compensation and talent attraction mechanism combined have a greater significant effect on talent attraction (β = 0.233, P=0.000). Thus, talent attraction mechanism had a significant moderating effect on innovative compensation and talent attraction in the banking industry in Kenya. The study recommends that banks should seek to have a strategy of communicating innovative compensation systems to potential talents so that they have access to such information that affects talent attraction.