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THE EFFECT OF IT ON ORGANISATIONAL PERFORMANCE: A CASE OF
CENTENARY BANK
BY
BARASA RICHARD
REG. NO: 06/U/9403/EXT
SUPERVISOR: DR. MUYINDA PAUL B.
A RESEARCH REPORT SUBMITTED TO THE COLLEGE OF EDUCATION AND
EXTERNAL STUDIES IN PARTIAL FULFILLMENT OF THE REQUIREMENTS
FOR THE AWARD OF A DEGREE OF BACHELOR OF COMMERCE
OF MAKERERE UNIVERSITY
SEPTEMBER 2011
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DECLARATION
This dissertation is truly a result of my independent investigations and where it is intended to the
work of others due acknowledgement has been made. It has never been presented for any award
in any other institution.
Signed …………………………… Date ……………………………
BARASA RICHARD
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APPROVAL
I Certify that Mr. Barasa Richard carried out this research under my supervision and is submitted
with my approval.
Signed ………………………… ……………………………………………...
Dr. Muyinda Paul Birevu Date
SUPERVISOR
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DEDICATION
Unto God the father, and the son Jesus Christ and the Holy spirit I give glory, honor and praise,
for the opportunities, strength, courage, wisdom, Health, friendship and provisions that have lead
to the accomplishment of this dissertation.
To my Supervisor and family whose efforts, sacrifice and resources took me this far.
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ACKNOWLEDGEMENT
My special and sincere thanks go to my supervisor Dr. Muyinda Paul B. for his support. I am
indebted to all the academic staff of Makerere University for their support in various capacities.
I am grateful to the management and staff of Centenary Bank for providing the required field
data and all the support throughout the data collection period.
I am deeply indebted to my friends for their support towards this noble endeavor. I thank my
wife and children for their patience for all the time I was away during the course.
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TABLE OF CONTENTS
DECLARATION ....................................................................................................................... i
APPROVAL ............................................................................................................................. ii DEDICATION ......................................................................................................................... iii
ACKNOWLEDGEMENT ........................................................................................................ iv TABLE OF CONTENTS .......................................................................................................... v
LIST OF TABLES .................................................................................................................. vii ACRONYMS / ABBREVIATIONS ....................................................................................... viii
CHAPTER ONE ....................................................................................................................... 1 1.0 INTRODUCTION ............................................................................................................ 1
1.1 Background ......................................................................................................................... 1 1.2 Statement of the Problem .................................................................................................... 2
1.3 Purpose of the Study ......................................................................................................... 3 1.4 Objectives ........................................................................................................................... 3
1.5 Research Questions ............................................................................................................. 3 1.5.0 Scope .............................................................................................................................. 3
1.5.1 Geographical scope .......................................................................................................... 3 1.5.2 Content scope ................................................................................................................... 3
1.5.3 Time scope ....................................................................................................................... 4 1.6 Significance........................................................................................................................ 4
CHAPTER TWO ...................................................................................................................... 5 2.0 LITERATURE REVIEW ................................................................................................. 5
2.1 Introduction ......................................................................................................................... 5 2.2 IT costs and Organizational performance ............................................................................. 5
2.3 Contribution of IT towards organizational performance ....................................................... 8 2.4 Customer satisfaction as a result of IT ................................................................................ 9
CHAPTER THREE ................................................................................................................. 12 3.0 METHODOLOGY ........................................................................................................... 12
3.1 Introduction ...................................................................................................................... 12 3.2 Study Design .................................................................................................................... 12
3.4 Population ........................................................................................................................ 12 3.5 Sample Size and Selection Method .................................................................................. 12
3.6 Data collection Tools / Method .......................................................................................... 13 3.8 Limitations ........................................................................................................................ 14
CHAPTER FOUR ................................................................................................................... 15 4.0 PRESENTATION, INTERPRETATION AND DISCUSSION OF FINDINGS ............... 15
4.1 Introduction ....................................................................................................................... 15
4.2 Demographic characteristics of the respondents ................................................................. 15
Table 1: Sex of respondents..................................................................................................... 15
Table 2: Age of respondents .................................................................................................... 16
Table 3: Education level of respondents .................................................................................. 16
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Table 4: Time spent in Centenary Bank ................................................................................... 17
Table 5: IT application in Centenary Bank .............................................................................. 17
Table 6: IT areas of application in Centenary Bank ................................................................. 18
4.4 Contribution of IT towards organizational performance ..................................................... 19
Table 7: Reason for choice of IT application in Centenary Bank ............................................. 20
Table 8: Existence of the relationship ...................................................................................... 21
Table 9: Kind of existing relationship ...................................................................................... 21
Table 10: IT application in Centenary Bank a good idea .......................................................... 22
4.3 Information Technology and customer satisfaction ............................................................ 22
Table 11: Whether IT has improved the confidence of the customers in the bank .................... 23
Table 12: Whether customers find it easy to make their transactions ....................................... 23
Table 13: Improvement in the daily activities of the bank as a result of IT ............................... 24
Table 14: Whether the customers are increasing as a result of easy banking ............................ 25
Table 15: Whether bank customers feel secure with their money in centenary bank because of the
security and easy access .......................................................................................................... 26
Table 16: Whether IT has improved genuine transaction in the bank ....................................... 26
Table 17: Whether IT saves a lot of time in banking ................................................................ 27
CHAPTER FIVE .................................................................................................................... 28
5.0 SUMMARY, RECOMMENDATIONS AND CONCLUSION ........................................ 28 5.1 Introduction ....................................................................................................................... 28
5.2 Summary ........................................................................................................................... 28 5.4 Recommendations ............................................................................................................. 29
5.5 Areas for further research .................................................................................................. 29 APPENDIX 1: QUESTIONNARE FOR CENTENARY BANK EMPLOYEES ...................... 33
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LIST OF TABLES
Table 1: Sex of respondents..................................................................................................... 15
Table 2: Age of respondents .................................................................................................... 16
Table 3: Education level of respondents .................................................................................. 16
Table 4: Time spent in Centenary Bank ................................................................................... 17
Table 5: IT application in Centenary Bank .............................................................................. 17
Table 6: IT areas of application in Centenary Bank ................................................................. 18
Table 7:Reason for choice of IT application in Centenary Bank .............................................. 20
Table 8: Existence of the relationship ...................................................................................... 21
Table 9: Kind of existing relationship ...................................................................................... 21
Table 10: IT application in Centenary Bank a good idea .......................................................... 22
Table 11: Whether IT has improved the confidence of the customers in the bank .................... 23
Table 12: Whether customers find it easy to make their transactions ....................................... 23
Table 13: Improvement in the daily activities of the bank as a result of IT ............................... 24
Table 14: Whether the customers are increasing as a result of easy banking ............................ 25
Table 15: Whether bank customers feel secure with their money in centenary bank because of the
security and easy access .......................................................................................................... 26
Table 16: Whether IT has improved genuine transaction in the bank ....................................... 26
Table 17: Whether IT saves a lot of time in banking ................................................................ 27
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ACRONYMS / ABBREVIATIONS
DBMS- Database Management Systems
DSS- Decision support system
KWS- Knowledge work systems
MIS- Management information systems
OAS-Office Automation System
TPS -Transaction processing system
UBOS-Uganda Bureau of Statistics
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ABSTRACT
A Research Study with the major aim of investigating the effect of IT on organizational
performance was conducted. Of recent, customer satisfaction has increasingly depended on
organizations working smart rather than working hard. Measures like use of IT in organizational
activities have been employed in a bid to improve on performance and whether performance has
increased is a question on debate and hence the study. Centenary Bank was chosen as a case
study from where different data regarding the study subject was gathered.
Questionnaires were used to collect data under a case study research design. Qualitative and
quantitative means were used to analyze the data. It was revealed that there were different ways
in which IT costs affect the performance of the organization including reduction in the
profitability hence poor performance, using a lot of money to train the users of the IT systems
hence reducing profitability and building of more confidence in the customers owing to the
security of the customers and their possessions to increase number of customers who open bank
accounts hence increased profitability of the financial institution.
It was revealed that IT contributes significantly to the performance of the organization through
ability to identify and exploit large number of interdependencies, timely availability of
information as the processing of transactions is very fast, reliability of information assuming the
input data are correct and relationships established are valid, the results are reproducible, lower
costs of human resource training, and the ability to performance of sophisticated and sensitive
analyses.
It was also recommended that financial institutions should look into minimizing costs of
computerization to strike a balance between costs and performance.
More so, Banks should put in an effort to introduce IT or improve on the existing technology to
increase their performance and the government should subsidize on IT equipment such that most
financial institutions adopt the idea for customer satisfaction.
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CHAPTER ONE
1.0 INTRODUCTION
This research is aimed at finding out how IT impacts on the organizational performance that can
be indicated by the level of efficiency in service provision and the level of customer satisfaction.
Employment of IT includes among others: the use of computers in financial transactions, use of
CCTV cameras in customer monitoring and use of modern equipment in customer data storage.
The study is expected to generate valuable information about the relevancy of IT usage towards
organizational performance.
1.1 Background
This is an introductory chapter that highlights the background to the study. The chapter
articulates statement of the problem, objectives of the study, research questions, significance of
the study and the scope of the study.
Modern banking technology began in the 1960s when computer and micro electronics started
their growth (Freeman and Perez, 1988).Information technology is rapidly changing the banking
and financial services industry. Online banking and electronic payments available currently are
all new and the development and diffusion of these technologies by financial institutions is
expected to result into a more efficient banking system. This technology offers institutions an
alternative and better delivery channels through which banking products and services can be
provided to consumers (Mpairwe, 2004).
It is true to note that, Information technology leads to decline in the cost and increase in capacity
of computers, as well as development in communications technology. This does not only alter
the way information is transferred but also the cost of storing and processing information. These
new opportunities and changes have had an important effect on the organization of work;
banking personnel `left routine based and time consuming work to computers and began to
concentrate on the service sector. This was the beginning of a new paradigm “the information
technology paradigm”, and banking was probably the first major service branch which adopted
new information technologies extensively (Wit de, 1990).
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Cockroft (1996) defines performance as the degree of accomplishment of tasks that an employee
is fulfilling the requirements of the job. This can be seen in terms in inputs, what individuals or
groups bring to the job or terms of various outputs often in the form of objectives and targets.
Organizational performance may be assessed before a change is initiated, that is, for
hypothetical future scenarios, using peer appraisal (subjective), cost/benefits analysis(
objective), after the change has been completed, that is for actual past events using biblio-metric
measures (objective), technical review (subjective), Nemes, Günter, Schmidt and Bernus, 2003.
These measures are valid at each end of the scale, but tools to assess on-going activities and
performance have not been well developed except for financial indicators and market analysis.
According to Musenero (2008), performance is defined as the measure of achievement or failure
to achieve the desired results. He further states that for performance to take place, there must be
an intention and an attempt to reach or exceed a particular level of results and that if this is not
the case, then it becomes difficult to gauge how far there has been success or failure. Companies
can always increase sales performance by offering fair prices or increasing its services. This
background leaves a lot desired to assess the effect of Information Technology on organizational
performance, a case of Centenary Bank.
1.2 Statement of the Problem
The 1980s saw the arguments with a vision of how the bank office would look like in the future.
Hedberg and Mehlamann (1981) argued that in the 1990s, there would be much higher
technology based machines in the offices and these machines would serve customers. This was
in anticipation that organizational clients would be served better while saving time and space.
Customer satisfaction has increasingly depended on organizations working smart rather than
working hard. Measures like use of IT in organizational activities have been employed in a bid to
improve on performance and whether performance has increased is a question of debate and
hence the study.
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1.3 Purpose of the Study
The purpose of this study was to find out the effect of Information Technology on organizational
performance, a case of Centenary Bank. It is based on the fact that Information Technology is
expected to increase the efficiency of the workers in an organization. Therefore the researcher
intends to understand where IT and performance meet.
1.4 Objectives
The following were the objectives of the study;
1. To establish the effect of IT costs on organizational performance
2. To find out the contribution of IT towards organizational performance
3. Establish the level of customer satisfaction as a result of Information Technology
1.5 Research Questions
The study was guided by the following research questions
1. What is the effect of IT costs on organizational performance?
2. What is the contribution of IT towards organizational performance?
3. What is the level of customer satisfaction as a result of Information Technology?
1.5.0 Scope
1.5.1 Geographical scope
The study was carried out in Centenary Bank Entebbe Road, Kampala. The place has been
selected because it has recently beefed up its Information technology in quest to improve its
performance.
1.5.2 Content scope
The study mainly focused on the effect of Information Technology on organizational
performance. It based on how IT has eased the business transactions in the bank, cost element of
IT hence improved performance.
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1.5.3 Time scope
The study covered the period for the information gathered between 2006 and 2010. It this period
that Centenary bank has increased its networks including inter- branch networking such that
customers can deposit and withdraw money any where any time.
1.6 Significance
The study results are expected to:
i. Provide information for the policy makers to address the IT problems affecting the
Banking industry and devise means of coming up with possible solutions.
ii. More so, the findings are hoped to help the managers of the manufacturing industry on
how to effectively deliver services meant for their customers.
iii. Study findings are expected to provide up to date literature for academicians and other
researchers.
iv. The study may provide the general public with an understanding of IT in the Banking
sector. This will help enhance the understanding of the technicalities and mechanisms of
IT in banking and how to use it in accessing and utilizing IT services offered by Banks in
general and Centenary Bank in particular.
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CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
This chapter focuses on the review of the related literature about Information Technology and
organizational performance. This was done in regard to the objectives of the study where the first
section talks about the costs involved in using IT, the second section talks about the contribution
of IT towards organizational performance and lastly customer satisfaction as a result of IT.
2.2 IT costs and Organizational performance
According to Uganda Bureau of Statistics (2006), it is difficult if not impossible to manage a
modern organization with out at least some knowledge of information systems.
The business environment today has under gone various powerful worldwide changes, which
pose a number of new challenges to business firms and their management and requiring
approaches of computerized systems. Business organizations today need to quickly capture
business data, process it and produce out put or feed back for quick decision making in today’s
competitive business world (Laudon et al, 1998). Using an electronic spread sheet (also called a
ledger sheet or work sheet) one can do a detailed analysis of accounting and financial
information just as on paper. Spreadsheet has rows and columns into which numbers can be
entered and further processed.
However, in an attempt to computerize financial record management, some costs are incurred.
These are costs of computerizing financial records.(Ramez et al ,2000) says that there are a few
situations in which such system may involve un necessary overhead costs that would not be
incurred in traditional (manual) file processing. These costs include; high initial investment in
hardware, software, and training. Generally, that a data base management system provides for
defining and processing data and overheads for providing security, concurrency control, recovery
and integrity functions.
Serenko (2006), notes that today the major types of information systems in organizations
include; The Transaction processing system(TPS) that tracks the flow of daily routine
transactions necessary to conduct business, Office Automation System (OAS) for increasing the
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productivity of data workers, and the Knowledge work systems (KWS) for enhancing the
productivity of knowledge workers. That the management level systems(Management
information systems (MIS) and Decision support system (DSS),provide the management control
level with reports and access to organizations current performance and historical records. TPS
are major sources of data to other systems especially MIS and DSS.
According to Bond et al (2006), providing security to computerized financial record management
is another area of cost to business organizations, that the problems of data security fall into two
categories; accidental and miscellaneous loss or corruption of data. Business enterprises are
advised to take care of the equipment, avoid hostile environment with smoke, magnetic fields or
dust, make back up copies of important data, plan for disaster, use fire proof safes, keep
generations of back up, have alternative sources of power or means by which the system can be
safely shut down in the event of power loss, have duplicated hard ware to continue processing,
have effective systems to extinguish fire, lock away or shred sensitive printouts, destroys old
printer ribbons, not to leave floppy disks lying about, bolt hardware down to prevent its theft, use
passwords, secure rooms with identity cards, avoid fraud by staff, regularly and strictly clean
viruses and avoid copying disks of un known origin and take out insurance against loss or
corruption of data.
As the use of personal computers is spreading so fast, it can be very difficult top keep their use
under control. Some data processing departments are worried that all these computers will be
miss used. The potential of crime, invasion of privacy, fraud, mistakes and lack of security is
very real. Providing security in the above cases is all costly to organizations. (Bigne et al, 2003)
Innis et al (1994) also note that automated systems are so vulnerable to destruction, errors, abuse,
fraud, viruses, and hardware or software failures; such that organizations that become so
dependent on computerized systems must keep special measures to ensure that these systems are
properly controlled. That the effect of disaster in a computerized system can be greater than in a
manual system because all records for particular function or organization can be lost or
destroyed. They add that developing control systems may be so expensive that the system may
be economically or operationally unfeasible; such that some cost-benefit analysis has to be
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performed to determine which control mechanism provides the most effective safe guards
without sacrificing operational efficiency or cost. They add that the major financial and
accounting systems for example payroll system or one that tracks purchases and sales must have
high standard of control than others.
In summary, Laudon et al (1998), notes that there are five key management challenges in
building and using computerized systems in organizations; designing system that are competitive
and efficient, understanding the system requirement of global business environment, creating an
information architecture that supports organizational goals, determining the business value of
automated systems and designing systems that people can understand, control and use in
ethically and socially responsible manner. While explaining why computerized systems are
difficult to build and sustain, they add that not all such systems make profit; they can be
expensive and risky to build. Other firms can easily copy that many systems so that the strategic
advantage is sustainable. Implementing strategic systems often requires extensive organizational
change and transition from one socio-technical level to another. Such changes are called strategic
transitions and are often difficult and pain full to achieve. Because such systems potentially
change important organizational dimensions including the structure, culture, power relationships
and work activities, there is often considerable resistance to these new systems.
Loudon et al (1998), further notes that development of a data base environment requires much
more than a selection of technology. It requires a change in corporation attitude towards
information. The organization must develop data administration function and data planning
methodology, that there are difficult cost-benefit questions and resistance to many key database
concepts.
They add that information systems can also present quality problems because of difficulty in
developing software that capture user specifications accurately, because of high costs of
maintaining software and correcting errors and because software bugs may be impossible to
eliminate.
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2.3 Contribution of IT towards organizational performance
The major disadvantage with manual system is that it is time consuming. Besides as the number
of transactions increases, the recording and processing systems may be affected because of the
errors arising out of over loading. Also because of interdependencies of financial and accounting
variables, small revision or minor change may involve a lot of work. On the other hand,
computerization has the ability to identify and exploit a large number of interdependencies,
timely and reliably generates information as processing of transactions is very fast. (Assuming
the input data is correct). With computer, the results are producible, lower costs are met in terms
of human resource training and the system has the ability to perform sophisticated and sensitive
analysis. Verifications and revisions are simple. (UBOS 2006)
In recent years, computerization of financial functions is no longer restricted to big
organizations; even small organizations can profit from use of small personal computers (UBOS,
2006)
The major advantages of using computerized approach include; The ability to identify and
exploit large number of interdependencies, timely availability of information as the processing of
transactions is very fast, reliability of information assuming the input data are correct and
relationships established are valid, the results are reproducible, lower costs of human resource
training, and the ability to performance of sophisticated and sensitive analyses (FAO, 2006)
While explaining the problems of traditional file environment, Laudon et al, (1998) note that old
files create problems such as data redundancy and inconsistence, program data dependence,
inflexibility, poor security and lack of data sharing, that the database management systems
(DBMS) instead organize information much better. It is these problems that create a need for
computerizing financial record management.
Ramez et al (2000) also believes that capabilities of database management systems include;
controlling redundancy, restricting unauthorized access, providing persistent storage for
programmed objects and data structures, permitting inferences and actions by using rules,
providing multi-user interfaces, representing complex relationship constraints and providing
recovery and back up. He adds that additional advantages of the computerized approach over
traditional file processing include potential for enforcing standards, reduced application
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development time, flexibility, availability of up to date information to all user and economies of
scale
Ralphy (1986) believes that computers are also needed in office automation. That today,
computer has had a profound effect on office procedures and in future, the computer will
revolutionize day to day business activities. We can readily see the dramatic impact. Presently,
many companies are using computers to streamline office operations, perform word processing,
electronically handle mail and messages and handle electronic voice storage and forwarding.
Computerized systems can manipulate process or even find stored data very quickly. Manual
systems are limited in size due to the bulk of paper. There are many large centrally held files by
government, local authorities, and private companies. In such away, applying manual system
would almost be impossible. (www.nothern.ac.uk,2011)
Computers are needed in assessing applicability to treasury departments of business units.
www.himachal.nic.in/nichp/proj-deptts.htm, (2006) explains that the most foremost advantage of
software applications has been reducing the drudgery of treasury staff involved in compilation of
accounts and maintaining related records. In the process, the volume of records is reduced
drastically. The other one is in terms of generating MIS reports required for monitoring purposes
by the finance department which otherwise would not be possible to generate. The reconciliation
process has also become very easy now.
2.4 Customer satisfaction as a result of IT
By definition, customer satisfaction is the degree of overall pleasure or commitment felt by the
customer, resulting from a good or service to fulfill the customers’ desires, expectation and needs
in relation to the good/ service (Oliver 1993). It may also be defined as the degree to which a
consumer’s pre- purchase expectations are fulfilled or surpassed by a product or service
(Christopher, 1992). The latter definition by Peter and Olson details that not only are the
expectations fulfilled but also they may be surpassed leading to delightedness which is the
climax of most organizations.
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Customer satisfaction also depends on the products’ perceived performance relative to buyers’
expectations if the products’ performance falls short of expectations. The customer is
dissatisfied. If performance matches expectations, the customer is satisfied. If performance
exceeds expectations, the customer is highly satisfied or delighted.
To achieve customer satisfaction, Johnston (1991), in his study outlined different variables of
customer service including on time performance, specifications and quality services. Thus
services like on time delivery and quality control play an important role both as part of customer
service activities and as valuable feedback for further customer service improvement. These
customer service activities are in many cases emphasized to ensure that the customers achieve
higher satisfaction levels. However, satisfaction may be achieved if firms use the right personnel
to deliver services.
Computerized systems have today created a global market place, where vast array of goods and
services are being advertised, bought, and exchanged world wide with lowered costs for typical
market transactions such as supplier selection, establishing prices, ordering goods and paying
bills.(Malone et al,1987)
Information is now considered strategic resource, and at business level strategy, information
systems can be used to help firms to become the low cost producers, differentiate products or
services, and analyze new markets. At firm level, information systems can be used to achieve
new efficiencies or to enhance services by trying together the operations of desperate business
units so that they can function as a whole. (Laudon et al, 1998)
As stated by Levitt(1992), “A powerful force drives the world towards a converging
commonality, and that force is technology”. From the early beginning of human error,
technology has been one of the most essential and most important factors for development of
mankind. During the last two hundred years, technological change has been often related to the
economic growth in form of new types of goods and services (Coombs et al 1989).The use of
machines was a strength of the capitalist system, because it allowed vast increases in
productivity.
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IT is the cornerstone of self service banking. It gives vending machine convenience to consumers
for deposits and withdrawals of cash transactions that have historically played a key role in bank
branching decisions. The self service machine was installed in mid 1970s in developed countries
consisting of cash dispensers. Towards the end of 1980s, note dispensing cash machines were
joined by self service machines that were capable of paying bills and printing bank statements.
The range of services were have been increased to include exchange of foreign currency and
count and dispense coins.
Today, the network of ITs offers a new alternative way in our daily banking affairs. It is
estimated that over 80% of the bulk services provided daily by banks could be automated or
handled on self service basis. The IT represents an effort by banks to bring their services to the
people. It has value to its consumers through its ability to increase time and space convenience
for the routine function of obtaining cash and making deposits. To the bank the IT offers b a
more cost effective means of delivering these routine functions and frees branch personnel for
selling services with greater return (Wit de 1990). The rapid spread of ITs from which cash can
be drawn round the clock has boosted the use of competitiveness of cash. As a result, of the
expansion of the service outlet network, i.e. combination of traditional bank offices and ITs, it is
estimated that the bank now withdraws smaller sums of money than before from deposit
accounts but at more frequent intervals.
In relation to the Study it is observed that liquid flow rate in the banking industry has greatly
improved and therefore the banks through IT have managed to keep up to date information for
customer consumption hence improved performance (Wit de 1990).
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CHAPTER THREE
3.0 METHODOLOGY
3.1 Introduction
This section explains the research methods that were employed in the bid to achieve the
objectives of the study and the type of data to be collected, its sources, management and analysis.
It includes the study design, Area of study, population and sample selection, tools of data
collection and data management techniques.
3.2 Study Design
A case study research design was used with both quantitative and qualitative methods to access
the respondents. The design was selected because it is a method of investigation in which data is
got from selected samples and records whose response representation respectively gives a clue to
the view of the population.
3.3 Area of Study
The Study was carried out in Centenary Bank Entebbe Road, Kampala. The place was selected
because it had beefed up its Information Technology in quest to improve its performance.
3.4 Population
The study population consisted of the employees and customers of the bank. Centenary Bank
employs employees in different capacities, ranging from cleaners to the Manager.
3.5 Sample Size and Selection Method
A total sample of 25 respondents was purposively selected from the employees of the bank.
The sample size was determined using the framework of Krejcie and Morgan 1970.
To select the respondents, Purposive sampling method will be used to help the researcher get
detailed information for the evaluation of the study and for the inclusion of only those
respondents who hold vital information that the researcher needs. It was important because it
13
gave the researcher freedom to select certain respondents with in-depth knowledge regarding the
issue under investigation.
3.6 Data collection Tools / Method
The researcher sought a letter of introduction from the faculty. Using this letter, the researcher
approached the Bank administration for permission to collect information from their employees.
The authorities then arranged for several employees to be approached to administer to them
questionnaires. Respondents filled the questionnaires with the help of the researcher where there
was need. Questionnaires were then gathered for processing.
To obtain information from the respondents, the researcher used self-administered questionnaires
to the respondents. The questionnaires were used because they save time since many
questionnaires can be filled at the same time. The questionnaires contained both closed and
structured questions.
The main method of data collection was questionnaires. To obtain information from the
respondents, the researcher used self-administered questionnaires to the employees of the bank
3.7 Data Management
3.7.1 Data Processing
Errors and mistakes in the questionnaires were thoroughly checked. This was done during data
processing and before data collection.
Responses to questions were classified into a meaningful category for easy understanding. A
coding frame was developed and then answers to similar questions put together into a similar
category
Qualitative and quantitative techniques of data collection were used. Qualitative data was got
from journals, news papers and the internet. Quantitative data was got from the field from
respective respondents. Raw data was obtained from the field, edited coded and tabulated to
14
output frequency tables for conclusions to be made. This was based on to fulfill the objectives of
the study.
3.8 Limitations
The study is expected was limited by many factors including
1. Limited funds: More funds were solicited from relatives and friends to boost the process.
2. Time: The problem of time was solved by making sure there was no time wasted
3. Confidentiality of the information: Respondents were assured that that the information
obtained was entirely for academic purposes and would be treated with highest level of
confidentiality.
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CHAPTER FOUR
4.0 PRESENTATION, INTERPRETATION AND DISCUSSION OF FINDINGS
4.1 Introduction
In this chapter, data is presented, interpreted and discussed according to research questions.
Findings are presented in statistical tables and percentages. Responses from the respondents were
analyzed and the results are presented in this chapter.
4.2 Demographic characteristics of the respondents
The researcher started by finding out the sex of the respondents. This was thought to be having
something to do with social perspective. This is due to the fact that sex of an individual affects
that individual’s attitude and perception. The responses were thus:
Table 1: Sex of respondents
Sex Frequency Percent
Male 18 72
Female 7 28
Total 25 100
Source: Primary Data
From the table, the majority of respondents (72%) were males while the remaining 28% were
females. This implies that many males were involved in the study than females. This may be due
the employment policy of Centenary Bank to employ more men than women.
It was necessary to establish the age of the respondents since it affects the level of maturity and
understanding. The table below summarizes the results.
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Table 2: Age of respondents
Age in years Frequency Percent
Below 20 3 12
21-30 7 28
31-50 8 32
50 + 7 28
Total 25 100
Source: Primary Data
According to Table 2 above, 32% of the respondents were from 31 to 50 years, 28% were from
21 to 30 years, another 28% were 50 years and above while the remaining 12% were below 20
years.
The education level was also of interest to the researcher as it affects someone’s understanding
of a phenomenon. The researcher inquired and got the following responses.
Table 3: Education level of respondents
Education level Frequency Percent
Not gone to school 5 20
Primary 2 8
Secondary 6 24
Tertiary institution 12 48
Total 25 100
Source: Primary Data
The Table3 above shows that 48% of the respondents had attended tertiary institution, 24% had
reached secondary level, 20% had not gone to school while the remaining 8% had reached
primary level.
17
The researcher also asked the respondents about how long they have been in Centenary Bank.
This affects the level of understanding of the Organization. The table 4 below summarizes the
responses.
Table 4: Time spent in Centenary Bank
Time spent in
Centenary Bank
Frequency Percent
Less than 1 year 16 64
1-4 years ago 6 24
5-9 years ago 3 12
Total 25 100
Source: Primary Data
From the table 4 above, most respondents (64%) had been working in Centenary Bank for less
than one year. 24% had been there for 1 to 4 years while 12% had been there for 5 to 9 years.4.2
4.3 Effect of IT costs on Organizational performance
The respondents were further asked if Centenary Bank applies IT in its day to day running of the
business. The following table shows the results.
Table 5: IT application in Centenary Bank
IT application in the bank Frequency Percent
Yes 21 84
No 4 16
Total 25 100
Source: Primary Data
According to the table5 above, the biggest number of respondents (84%) agreed the application
of IT in the bank while 16% disagreed.
18
Still it was necessary to know the areas in which IT was applied. This was in a bid to find out the
impact it had on the Organization. The following table shows the responses given.
Table 6: IT areas of application in Centenary Bank
IT application Frequency Percent
Financial transaction 5 20
Security 5 20
Telegraphic transfer 8 32
Others 7 28
Total 25 100
Source: Primary Data
From table 6 above, 32% said that IT was applied in telegraphic transfers, 20% said that it was
applied in financial transactions, another 20% said that it was applied in the field of security
while 28% said it was applied in other ways.
Respondents mentioned different ways in which IT costs affect the performance of the
organization. These included but not limited to:
Costs affect performance because the money that would be making profits is now channeled into
purchases of expensive machines and software for the Information Technology. This reduces the
profitability hence poor performance.
Ramez (2000) agrees with findings by stating that in an attempt to computerize financial record
management, some costs are incurred. These are costs of computerizing financial records. He
further says that there are a few situations in which such system may involve unnecessary
overhead costs that would not be incurred in traditional (manual) file processing. These costs
include; high initial investment in hardware, software, and training. Generally, that a data base
management system provides for defining and processing data and overheads for providing
security, concurrency control, recovery and integrity functions.
19
Respondents further stated that the bank uses a lot of money to train the users of the IT systems.
This reduces its profitability in the short run hence poor performance.
Laudon et al (1998) puts the same idea that training costs and wages and salaries for new
employees is also another cost involved in computerizing financial record management. He
further states that normally, there is always resistance to these new systems and to change in
general. Some managers have perceived these new systems as creating jobs and role
uncertainties and ambiguities, changing the relationship between top, middle and lower level
managers, increasing job pressures and job complexity. Much as computerization created a large
number of jobs (programmers, analysts, data preparation staff as well as the people required to
build the computers and jobs in the computer leisure industry), it has been estimated that since
1978, the introduction of computers has cost 100,000 jobs in India, in many factories, but also
some in clerical areas (Himachal, 2006). This has led to redundancy and the need for training as
they have changed the nature of many jobs. However, others argue that computer may allow
companies to take on more staff as they increase productivity.
On the other hand, the employment and use of information Technology builds more confidence
in the customers owing to the security of the customers and their possessions. In this case there is
an increased number of customers who open bank accounts hence increased profitability of the
financial institution.
This is in line with Laudon et all (1998) that business organizations today need to quickly
capture business data, process it and produce out put or feed back for quick decision making in
today’s competitive business world.
The results imply that IT costs affect the performance of the organization as shown above.
4.4 Contribution of IT towards organizational performance
To achieve this objective, the researcher subjected the respondents to different questions in line
with the objective.
The researcher asked the respondents the reason that could have led the bank to choose to use IT.
The following responses were given.
20
Table 7: Reason for choice of IT application in Centenary Bank
Reason for using IT Frequency Percent
It is cheap financially 2 8
Transactions to manage are many 8 32
It is quick in processing business
transactions
4 16
It doesn’t make many mistakes like
humans
11 44
Total 25 100
Source: Primary Data
According to Table7 above, 44% said that IT does not make many mistakes like humans, 32%
said that transactions to manage are many, 16% said it is quick in processing business
transactions while the remaining 8% said it is cheap financially.
According to Northern (2011), the computerized systems can manipulate process or even find
stored data very quickly. Annual systems are limited in size due to the bulk of paper. There are
many large centrally held files by government, local authorities, and private companies. In such
away, applying manual system would almost be impossible.
The information from Himachal (2006) retrieved on 3rd
June 2011 explains that the most
foremost advantage of software applications has been reducing the drudgery of treasury staff
involved in compilation of accounts and maintaining related records. In the process, the volume
of records is reduced drastically. The other one is in terms of generating MIS reports required for
monitoring purposes by the finance department which otherwise would not be possible to
generate. The reconciliation process has also become very easy now.
The respondents were further asked whether there is a relationship between use of IT and
organizational performance and they gave the following responses.
21
Table 8: Existence of the relationship
Existence of relationship Frequency Percent
Yes 22 88
No 3 12
Total 25 100
Source: Primary Data
According to Table 8 above, most respondents (88%) agreed while the remaining 12% disagreed.
It was also necessary to find out the kind of relationship that exists and when the respondents
were asked, they gave the following responses.
Table 9: Kind of existing relationship
Kind of relationship Frequency Percent
Strongly positive 11 44
Strongly negative 7 28
Positive 3 12
Negative 4 16
Total 25 100
Source: Primary Data
Table 9 above indicates that 44% of the respondents said the relationship is strongly positive.
28% said it was strongly negative, 16% said it was negative and the remaining 12% said the
relationship was positive.
When the researcher asked the respondents whether they generally considered use of IT in banks
a good idea, the following responses were given.
22
Table 10: IT application in Centenary Bank a good idea
IT application a good idea Frequency Percent
Yes 24 96
No 1 4
Total 25 100
Source: Primary Data
From Table 10 above, the biggest number of respondents (96%) agreed that IT use in a bank was
a good idea while the remaining 4% disagreed.
The responses above indicate that IT contributes significantly to the performance of the
organization.
This agrees with the findings in the FAO report of 2006 that the major advantages of using
computerized approach include; The ability to identify and exploit large number of
interdependencies, timely availability of information as the processing of transactions is very
fast, reliability of information assuming the input data are correct and relationships established
are valid, the results are reproducible, lower costs of human resource training, and the ability to
performance of sophisticated and sensitive analyses.
4.3 Information Technology and customer satisfaction
This formed the responses for the third objective in which the researcher sought the different
ways how customers were satisfied as a result of Information Technology.
The respondents were asked whether IT has improved the confidence of the customers in the
bank and the following table shows the responses.
23
Table 11: Whether IT has improved the confidence of the customers in the bank
Improved confidence Frequency Percent
Strongly agree 5 20
Agree 12 48
Not sure 3 12
Disagree 4 16
Strongly disagree 1 4
Total 25 100
Source: Primary Data
48% of the respondents agreed, 20% strongly agreed, 16% disagreed, 12% were not sure while
4% strongly disagreed.
Responding to whether customers find it easy to make their transactions, the respondents gave
the following responses.
Table 12: Whether customers find it easy to make their transactions
Ease to make transactions Frequency Percent
Strongly agree 11 44
Agree 4 16
Not sure 4 16
Disagree 5 20
Strongly disagree 1 4
Total 25 100
Source: Primary Data
The results summarized in Table12 above shows that 44% of the respondents strongly agreed,
20% disagreed, 16% agreed and this was the same percentage as those who were not sure while
4% strongly disagreed.
Johnston (1991) agrees with the findings in his study outlined different variables of customer
service including on time performance, specifications and quality services. Thus services like on
24
time delivery and quality control play an important role both as part of customer service
activities and as valuable feedback for further customer service improvement. These customer
service activities are in many cases emphasized to ensure that the customers achieve higher
satisfaction levels. However, satisfaction may be achieved if firms use the right personnel to
deliver services.
The researcher further asked the respondents whether there is a lot of improvement in the daily
activities of the bank as a result of IT, the following responses were given.
Table 13: Improvement in the daily activities of the bank as a result of IT
Improvement in daily
activities
Frequency Percent
Strongly agree 6 24
Agree 12 48
Not sure 5 20
Disagree 2 8
Total 25 100
Source: Primary Data
Table 13 above shows that 48% of the respondents agreed. 24% strongly agreed, 20% were not
sure while the remaining 8% disagreed.
The respondents were also asked whether the customers are increasing as a result of easy
banking. They had the following responses.
25
Table 14: Whether the customers are increasing as a result of easy banking
Increase in customers Frequency Percent
Strongly agree 8 32
Agree 9 36
Not sure 4 16
Disagree 2 8
Strongly disagree 2 8
Total 25 100
Source: Primary Data
Table 14 above summarizes the responses as 36% having agreed, 32% having strongly agreed,
16% being not sure while those disagreeing and strongly disagreeing being equal and taking up
8% each.
In agreement Levitt (1992), states that “A powerful force drives the world towards a converging
commonality, and that force is technology”. From the early beginning of human error,
technology has been one of the most essential and most important factors for development of
mankind. During the last two hundred years, technological change has been often related to the
economic growth in form of new types of goods and services. The use of machines was a
strength of the capitalist system, because it allowed vast increases in productivity.
IT is the cornerstone of self service banking. It gives vending machine convenience to consumers
for deposits and withdrawals of cash transactions that have historically played a key role in bank
branching decisions. The self service machine was installed in mid 1970s in developed countries
consisting of cash dispensers. Towards the end of 1980s, note dispensing cash machine were
joined by self service machines that were capable of paying bills and printing bank statements.
The range of services were have been increased to include exchange of foreign currency and
count and dispense coins.
In trying to respond to whether bank customers feel secure with their money in centenary bank
because of the security and easy access, the respondents gave the responses that follow.
26
Table 15: Whether bank customers feel secure with their money in centenary bank because
of the security and easy access
Customer security Frequency Percent
Strongly agree 5 20
Agree 11 44
Not sure 9 36
Total 25 100
Source: Primary Data
According to the table above, 44% agreed followed by 36% who were not sure and 20% who
were not sure.
Respondents were also asked if IT has improved genuine transaction in the bank. They
responded as in the following table.
Table 16: Whether IT has improved genuine transaction in the bank
Improved genuine
transaction
Frequency Percent
Strongly agree 16 64
Agree 5 20
Not sure 3 12
Disagree 1 4
Total 25 100
Source: Primary Data
From the table, majority of the respondents (64%) strongly agreed, 20% agreed, 12% were not
sure while 4% disagreed.
Lastly the respondents were asked whether IT saves a lot of time in banking and the table below
summarizes their responses.
27
Table 17: Whether IT saves a lot of time in banking
Frequency Percent
Strongly agree 9 36
Agree 14 56
Not sure 2 8
Total 25 100
Source: Primary Data
According to the table, most respondents (56%) agreed, 36% strongly agreed, and the remaining
8% were not sure.
The responses above indicate that customers were satisfied as the result of IT use in Centenary
Bank.
28
CHAPTER FIVE
5.0 SUMMARY, RECOMMENDATIONS AND CONCLUSION
5.1 Introduction
This chapter presents interpretation and discussions of the research about the findings of the
study themes. The discussions are presented according to the objectives of the study.
5.2 Summary
The study sought to investigate the effect of IT on organizational performance. Centenary Bank
was taken as a case study from where different data relating to the study subject was gathered.
It was revealed that there were different ways in which IT costs affect the performance of the
organization including reduction in profitability hence poor performance, using a lot of money to
train the users of the IT systems hence reducing profitability and building of more confidence in
the customers owing to the security of the customers and their possessions to increase the
number of customers who open bank accounts hence increased profitability of this financial
institution.
It was further revealed that IT contributes significantly to the performance of the organization.
Through ability to identify and exploit large number of interdependencies, timely availability of
information as the processing of transactions is very fast, reliability of information assuming the
input data are correct and relationships established are valid, the results are reproducible, lower
costs of human resource training, and the ability to performance of sophisticated and sensitive
analyses.
More so, results show that customers were satisfied regarding service delivery including on time
performance, specifications and quality services. Thus services like on time delivery and quality
control play an important role both as part of customer service activities and as valuable
feedback for further customer service improvement. These customer service activities are in
many cases emphasized to ensure that the customers achieve higher satisfaction levels.
29
5.3 Conclusions
It was concluded that IT costs affect the organizational performance as shown above.
The responses above indicate that IT contributes significantly to the performance of the
organization.
More so, the customers were satisfied as the result of IT use in Centenary Bank.
5.4 Recommendations
In view of the various observations and finding, the following were recommended:
Financial institutions should look into minimizing costs of computerization to strike a balance
between costs and performance.
More so, Banks should put in an effort to introduce IT or improve on the existing technology to
increase their performance.
Government should subsidize on IT equipment such that most financial institutions adopt the
idea for customer satisfaction.
5.5 Areas for further research
There is need for more study into the analysis of other issues neglected in the process of IT
development in organizations.
30
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33
APPENDIX 1: QUESTIONNARE FOR CENTENARY BANK EMPLOYEES
Dear respondent, the questions contained here in are meant to generate some information
concerning the effect of Information Technology on organizational performance. The
information generated is purely meant for academic purposes and will therefore be kept with the
highest degree of confidentiality. Please answer the questions as honest as possible.
Barasa Richard,
Researcher
SECTOIN 1: BACK GROUND INFORMATION
1. Sex
a) Male
b) Female
2. Age
a) Below 20
b) 21-30
c) 31-50
d) 50 and above
3. Level of Education
a) Not gone to school
b) Primary
c) Secondary
d) Tertiary institution
e) University
4. For how long have you been in Centenary Bank?
a) Less than 1 year ago
b) 1-4 years ago
34
c) 5-9 years ago
d) 10 and more years ago
SECTION A: EFFECT OF IT COSTS ON ORGANIZATIONAL PERFORMANCE
10. Do you agree that Centenary Bank uses IT in the day to day running of its activities?
a) Yes
b) No
11. If yes, in which way is IT used outside and inside the bank?
a) Financial transaction
b) security
c) Telegraphic fund transfer
d) Other (Please specify) ………………………………………………………………………
13. In your opinion what is the effect of IT cost on the performance of Centenary Bank?
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
SECTION B CONTRIBUTION OF IT TOWARDS ORGANIZATIONAL
PERFORMANCE
12. What could be the reason why Centenary Bank chose to use IT?
a) It is cheap financially
b) Transactions to manage are many
c) It is quick in processing business transactions
d) It does not make many mistakes like humans
e) Others (Please specify) ………………………………………………………….
35
14. Does there exist a relationship between Information use and organizational performance?
a) Yes
b) No
c) Don’t know
15. If the answer in 14 is yes, what relationship does exist?
a) Strongly positive
b) Positive
c) Negative
d) Strongly negative
16. Is IT usein banks a good idea?
a) Yes
b) No
17. If yes in 16, what has IT contributed to the Banks performance?
………………………………………………………………………………………………………
………………………………………………………………………………………………………
………………………………………………………………………………………………………
…………………………………………………………………………………………………….
36
SECTION C: INFORMATION TECHNOLOGY AND CUSTOMER SATISFACTION
Please tick or circle the appropriate using the following keys
1=strongly agree 2= Agree 3= Not sure 4= Disagree 5= strongly disagree
S/N Statement 1 2 3 4 5
1. IT has improved the confidence of customer in the bank
2 Customers find it easy to make their transactions
3. There is a lot of improvement in the daily activities of
the bank as a result of IT
4. Customers are increasing as a result of easy banking
5. Bank customers feel secure with their money in
centenary bank
6 IT has improved business transaction in the bank
7 IT saves a lot of time in banking
Thank you.